Causality Analysis of Cooking Oil Subsidy Reform in Malaysia: A Conceptual Framework from System Dynamic Approach

Jing Jing Liu, Norlida Hanim Mohd Salleh, Hasimah Sapiri and Norazura Ahmad
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Jing Jing Liu: School of International Studies, Wenzhou Business College, Zhejiang, China Faculty of Economics and Management, National University of Malaysia (UKM), Malaysia
Norlida Hanim Mohd Salleh: Faculty of Economics and Management, National University of Malaysia (UKM), Malaysia
Hasimah Sapiri: Institute of Strategic Industrial Decision Making, School of Quantitative Sciences, Northern University of Malaysia (UUM), Malaysia
Norazura Ahmad: Institute of Strategic Industrial Decision Making, School of Quantitative Sciences, Northern University of Malaysia (UUM), Malaysia

International Journal of Research and Innovation in Social Science, 2025, vol. 9, issue 2, 3844-3851

Abstract: This study utilizes a system dynamics approach to analyse the impacts of cooking oil subsidy reforms in Malaysia. Using a causal loop diagram, this paper explores four reform scenarios: the full removal of subsidies and three recycling strategies, where the saved revenue is allocated to household compensation, investment in the oil palm industry, and education funding. The results suggest that while complete subsidy removal could negatively impact households and potentially slow down the economy, recycling schemes could mitigate these adverse effects. The study emphasizes the importance of considering long-term economic growth and the potential benefits of targeted investments in human capital and strategic industries.

Date: 2025
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