The impacts of fuel subsidy reform on producers and households in Malaysia: A Computable General Equilibrium (CGE) assessment

High fiscal deficit and rising national debt in Malaysia have set the fuel subsidy removal in motion, largely because they constitute a major government expenditure. Nonetheless, this initiative posed a risk for producers and households regarding the high price level especially during the transition...

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Main Author:	Loo, Sze Ying
Format:	Thesis
Language:	eng eng
Published:	2020
Subjects:	HB Economic Theory
Online Access:	https://etd.uum.edu.my/10353/1/permission%20to%20deposit-grant%20the%20permission-900058.pdf https://etd.uum.edu.my/10353/2/s900058_01.pdf
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spelling	my-uum-etd.103532023-03-01T04:22:31Z The impacts of fuel subsidy reform on producers and households in Malaysia: A Computable General Equilibrium (CGE) assessment 2020 Loo, Sze Ying Harun, Mukaramah Ahmed, Elgilany Abdelhafeez School of Economics, Finance & Banking School of Economics, Finance and Banking HB Economic Theory High fiscal deficit and rising national debt in Malaysia have set the fuel subsidy removal in motion, largely because they constitute a major government expenditure. Nonetheless, this initiative posed a risk for producers and households regarding the high price level especially during the transition period. A strategically placed mitigating measure became critical to deal with those possible distorting effects brought by the removal. Otherwise, the government’s attempt to reach sustainable economic growth with the removal might have been unachievable. This thesis focused on the impact of the fuel subsidy removal on producers and households, with particular attention to two selected saving reallocations to preserve control of the situation. A static International Food Policy Research (IFPRI)-based computable general equilibrium (CGE) model was deployed in conjunction with a constructed Malaysian social accounting matrix (SAM) and input-output (IO) tables benchmarked to 2010. The complex mathematical functions in the model were then solved using the GAMS software. The findings showed that the magnitude of the impacts differed between sectors under the subsidy removal. Producers with high reliance on petroleum products for fuelling plants and equipment in production operations were greatly hit, affecting their level of production and producer prices. Sectors with falling growth rates of production reduced their import demand which, in turn, had an impact on its output allocation. All income groups of households were badly hurt due to substantial losses of consumption expenditure, together with falling real incomes. With the direct cash transfer targeting the vulnerable, it was going well with improvement in consumption expenditure; yet it made no effort to promote domestic production. In contrast, the additional funds directed to the agricultural sector had the merits of rising domestic production and improving the overall consumption loss of the households. The ultimate results can serve as a useful guideline for the redesigning and the upgrading of the existing subsidy reform. 2020 Thesis https://etd.uum.edu.my/10353/ https://etd.uum.edu.my/10353/1/permission%20to%20deposit-grant%20the%20permission-900058.pdf text eng staffonly https://etd.uum.edu.my/10353/2/s900058_01.pdf text eng public other doctoral Universiti Utara Malaysia
institution	Universiti Utara Malaysia
collection	UUM ETD
language	eng eng
advisor	Harun, Mukaramah Ahmed, Elgilany Abdelhafeez
topic	HB Economic Theory
spellingShingle	HB Economic Theory Loo, Sze Ying The impacts of fuel subsidy reform on producers and households in Malaysia: A Computable General Equilibrium (CGE) assessment
description	High fiscal deficit and rising national debt in Malaysia have set the fuel subsidy removal in motion, largely because they constitute a major government expenditure. Nonetheless, this initiative posed a risk for producers and households regarding the high price level especially during the transition period. A strategically placed mitigating measure became critical to deal with those possible distorting effects brought by the removal. Otherwise, the government’s attempt to reach sustainable economic growth with the removal might have been unachievable. This thesis focused on the impact of the fuel subsidy removal on producers and households, with particular attention to two selected saving reallocations to preserve control of the situation. A static International Food Policy Research (IFPRI)-based computable general equilibrium (CGE) model was deployed in conjunction with a constructed Malaysian social accounting matrix (SAM) and input-output (IO) tables benchmarked to 2010. The complex mathematical functions in the model were then solved using the GAMS software. The findings showed that the magnitude of the impacts differed between sectors under the subsidy removal. Producers with high reliance on petroleum products for fuelling plants and equipment in production operations were greatly hit, affecting their level of production and producer prices. Sectors with falling growth rates of production reduced their import demand which, in turn, had an impact on its output allocation. All income groups of households were badly hurt due to substantial losses of consumption expenditure, together with falling real incomes. With the direct cash transfer targeting the vulnerable, it was going well with improvement in consumption expenditure; yet it made no effort to promote domestic production. In contrast, the additional funds directed to the agricultural sector had the merits of rising domestic production and improving the overall consumption loss of the households. The ultimate results can serve as a useful guideline for the redesigning and the upgrading of the existing subsidy reform.
format	Thesis
qualification_name	other
qualification_level	Doctorate
author	Loo, Sze Ying
author_facet	Loo, Sze Ying
author_sort	Loo, Sze Ying
title	The impacts of fuel subsidy reform on producers and households in Malaysia: A Computable General Equilibrium (CGE) assessment
title_short	The impacts of fuel subsidy reform on producers and households in Malaysia: A Computable General Equilibrium (CGE) assessment
title_full	The impacts of fuel subsidy reform on producers and households in Malaysia: A Computable General Equilibrium (CGE) assessment
title_fullStr	The impacts of fuel subsidy reform on producers and households in Malaysia: A Computable General Equilibrium (CGE) assessment
title_full_unstemmed	The impacts of fuel subsidy reform on producers and households in Malaysia: A Computable General Equilibrium (CGE) assessment
title_sort	impacts of fuel subsidy reform on producers and households in malaysia: a computable general equilibrium (cge) assessment
granting_institution	Universiti Utara Malaysia
granting_department	School of Economics, Finance & Banking
publishDate	2020
url	https://etd.uum.edu.my/10353/1/permission%20to%20deposit-grant%20the%20permission-900058.pdf https://etd.uum.edu.my/10353/2/s900058_01.pdf
_version_	1776103798163374080

The impacts of fuel subsidy reform on producers and households in Malaysia: A Computable General Equilibrium (CGE) assessment

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