BN's handout mentality at the expenses of tax payers money

Election must be so very near now, judging by the intensification of handout announcements. Just this week, our esteemed Deputy Prime Minister pledged to continue with the BR1M scheme to handout of RM500 if BN wins the coming election.

He even suggested that the handout may be raised to RM1,000 per family if the government’s annual income exceeds a certain amount. This is clever politics. Having sensed the popularity of the two rounds of BR1M, to now promise that this will continue, and possibly bettered, if BN is re-elected, is surely vote buying at its most effective.

The poorer segment of our society of course needs all the help it can get, given the escalating cost of living that is now more keenly felt by Malaysians than at any other time in our history. But is this an effective form of helping our less fortunate fellow Malaysians?

Malaysia has always been a country of subsidies.On the one hand, subsidies have made the nation a relatively cheap place to live.This is good.On the other, they have also made us complacent and addicted to the subsidy crutches.

We have been a lucky country, blessed with more than our fair share of good climate, fertile land,and in more recent history, rich off-shore oil and gas reserves.All of these have combined to finance the subsidies we enjoy and continue to enjoy. But, the most impactful of these resources, our oil and gas reserves, are about to run out.

The obvious question must be: Are our subsidies sustainable? The United Arab Emirates also have rich oil and gas reserves. Theirs are also about to run out. They are doing something about it by investing – albeit not entirely wisely to many – in real estate infrastructure, ostensibly to attract economic activities to sustain themselves when their oil and gas reserves are exhausted.

What has Malaysia done with its oil and gas wealth? Not much, by all reckoning. So our subsidies are doomed to end. It is in times like these that an enlightened government should look warily at introducing any new subsidies; or should at least make sure that new subsidies are effective and economically sensible.
Instead, political expediency drove our BN government to give us BR1M, not once, but twice, and perhaps many more to come! Not only does BR1M perpetuate our addiction to subsidy, it is also rather feeble when it comes to provide the proverbial bang for the buck for our economy.

At the risk of being accused of uncaring to the poor of our country, I want to suggest that there is a better way that will not only go towards weaning us off subsidies but also create multiplier effects in the economy that will see the subsidies repaying themselves. All subsidies must in the end do that, or they will be like throwing good money after bad.

Ultimately, unless the Malaysian economy gets on the right track, the poor of our country will get poorer, even though they may occasionally experience the ephemeral relief of a miserly dose of financial assistance…when election rolls around.

One such way to move us away from the subsidy addiction would be to introduce a scheme to top up salaries and wages (ST1M or Skim Topup 1 Malaysia) to assist Malaysians who work full time but earn less than RM1,500 per month. The top up amount should be a fixed amount of say, RM150 per month, for those full time employees earning at or above the minimum wage.

For those who are paid below the minimum wage, but above a certain cut-off wage (to prevent manipulation of the scheme) the top up amount will guarantee that minimum wage is received.
ST1M has the following effects:
  • The additional income will relieve financial hardship in many low income families.
  • It will remove the resistance of employers to any upward adjustment of minimum wage (as is happening right now) and with it, minimise employers’ reluctance to employ Malaysians.
  • It will also encourage Malaysians to contribute to the economy of the country by seeking full time employment as it is intended to reward those who are prepared to work and not those who do not.
  • The additional income will stimulate internal consumption, the multiplier effect of which is a key element in generating and sustaining economic growth.
  • By confining SK1M to apply only to Malaysian citizen, it will encourage us to employ local workforce in preference to foreign workforce. This will go some way to wean us off foreign workforce, an emerging social dilemma, with the added bonus that the money will continue to circulate in Malaysia rather than be repatriated to foreign lands.
Would this not put a dent in Malaysia’s financial position? Of course, all subsidies do. But, with prudent and honest management leading to the elimination of unnecessary wastes in the public service and the rooting out of corruption, which together must constitute the largest drain on our nation’s coffers, we are at least part of the way to funding ST1M.

We can of course also pare back some of the subsidies that are currently in place, such as the sugar and fuel subsidies, and put them to better use in ST1M.

The ST1M is not without some hair. It is not my job to do the sums to come up with the perfect plan. But it does indicate that we need to be more creative in how we help our poor. De-politicising the subsidy initiative will go a long way to open our minds to better solutions in this regard.

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