
Identifying Challenges Of Malaysia’s Floating Price System
Lately, there have been clear signs that the Malaysian government is moving towards a floating price system, particularly evident in the case of chicken prices implemented last November. There is a significant possibility that more prices will be floated in the future by the government. But is the floating price system good for the people of Malaysia?
What is the Floating Price System?

The floating price system is a mechanism in which the prices of goods are determined by market conditions, supply, and demand. This means that prices can change based on market changes, either increasing or decreasing depending on economic factors. The current system of price controls and subsidies has been quite effective in helping people obtain goods at lower prices. However, this system also has its weaknesses and problems that may worsen if continued in the long term.
One major issue is the price control mechanism, which has forced producers to release goods at lower prices, causing maintenance costs to rise. This puts pressure, especially on producers who import raw materials from abroad. For example, the sugar industry faced significant losses due to the increase in the world’s sugar prices.
Advantages of the Floating Price System
- Stabilizing Prices in the Long Run: This system helps stabilize the prices of goods in the long run. Although there are concerns that prices may increase, in the long term, the system helps prevent sudden and uncontrolled hikes.
- Encouraging Competition: The system encourages more producers to enter the market and compete healthily. This helps create beneficial competition for consumers, including more competitive prices and better quality.
- Reducing Subsidy Allocations: With the floating price, the government can reduce subsidy allocations, saving up to 30 billion annually. The saved funds can be redirected to assist those in need through more efficient subsidy methods like cash transfers.
- Saving Funds for Future Generations: The system allows the country to save funds for future generations. Through this approach, we can generate savings for future use, emulating the example of countries like Norway, which has successfully saved significant funds from their oil revenues.
Challenges Of Price Control And Subsidy Systems
- Smuggling Costs and Increased Production Costs: The price control system forces producers to sell goods at lower prices, increasing smuggling costs and production expenses. This can lead to business closures and disruptions in the supply of goods.
- Global Competitiveness: Subsidized goods may be sold at lower prices than neighboring countries, encouraging export activities. This can cause problems with domestic supply stability and damage international trade relations.
Towards a Sustainable Future
Although these changes do not come without challenges, they are necessary steps to ensure long-term economic stability and the well-being of our nation. Therefore, let’s collectively support these changes for a better future for Malaysia.