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

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.