Unless if you are in oil-rich states like Saudi Arabia and Venezuela, gone are the days when oil was cheaper than water. Driven by economic uncertainty, geopolitical instability and scarcity of resources, it is a long-disputed issue if it is economically viable for States to continue subsidising oil to minimise living cost impact on the citizens. In the bid to win political security, governments everywhere alike began scrambling for the right remedy to appease the people while sustaining the economy.
Unfortunately, we are no Saudi Arabia, neither do we have a small population akin to the neighbouring Brunei.
On that note however, Malaysians do enjoy considerable social benefits such as an almost-free healthcare, free education, highly-subsidised goods, low electricity and water tariff, and not forgetting various other welfare assistances to the needy.
The comfort zone of Malaysians has not been shaken by the fluctuating world market, until the Government eventually decided that rationalisation of subsidies is necessary to progress towards becoming a developed nation by 2020.
The unpopulist measure of increasing the fuel prices did not go too well with the public rapport, hence the Government decided to introduce a series of direct cash assistance; Bantuan Rakyat 1Malaysia (BR1M) to lessen the direct impact of subsidy rationalisation.
It is with this assumption that BR1M is extended to include more categories of working class, with the most recent suggestion being those earning RM 5,000/month and below.
While the intention is noble on the surface, the cost-effectivity of such financial exercise remains in doubt, especially when we are trying to make the most out of taxpayers’ money.
According to our Deputy Finance Minister, Datuk Seri Ahmad Maslan, the BR1M increase to RM1,200 will only help cover household expenses for two months. The people will need to find their own means for the remaining 10 months.
Our longest-serving Prime Minister, Tun Mahathir highlighted his worry when he said:
“BR1M has led to a breed of Malaysians who are dependent on the government and lack personal initiative to lift their financial status. Better if we train them with some skills, so they can earn by themselves.”
No matter the amount of money that BR1M wishes to provide to a targeted individual, there will be no end solution to fluctuation of market prices (which will only get higher) as it’s only worth the paper value it is deemed to be. For example, a university student who enjoys a RM300 BR1M book rebate can only exhaust its use at one particular time, and he might not be able to afford RM300 worth of books again as the status quo remains. In fact, the same amount of books that he bought for RM300 might cost more by the time the next BR1M is distributed! So long as there are no incentives for individual add-value i.e new skills, and for the industry to open up more opportunities, the cycle of non-affordability will continue despite the extra RM1,200 in hands.
Contrary to the voucher system, there is no check-and-balance that the cash given would be fully utilised to minimise the impact of rising cost of living. The context of aforesaid ‘cost of living’ must be first understood, as it’s not possible for the Government to circumvent the effect of fuel price hike in every each of our daily transaction.
For example, the rationalisation of fuel subsidy may affect those in the fisheries, poultry and agriculture industry differently in comparison to a teacher, even though all may fit within the same category of BR1M beneficiaries. A father of 4 children who sells vegetables at a local market might feel the impact of fuel hike more than a recent graduate who earns a fixed RM 4,000 from working at a local bank, but under this policy, both will be entitled to BR1M assistance. As the assistance given is not need-based, but income-based, such half-baked policy would send a mixed signal to the market, as businesses would not feel insentivised to observe the ceiling price for goods and services on the assumption that people can still afford it, thanks to the extra RM1,200.
Over the past two cash distribution exercise under BR1M, it is not a matter of coincidence that goods’ prices increase in tandem, despite the strict practice of ceiling price.
The question then remains if the loophole that exists in BR1M has led to more wastages, and whether its existence only happens to be a mere feel-good factor.
BR1M will not help to solve the long-term problem that we will be facing.The Government has to start considering to re-structure our economy and cost of living practice for the best benefit of targeted citizens. It is unwise to generalise a solution on the assumption that everyone within the same income bracket suffers from similar setbacks. Looking at a bigger picture, there are reasons why Malaysia has been running on deficit for 15 consecutive years with 83% household debt to Gross Domestic Product (GDP), which is second highest in Asia.
BR1M distribution is not the best practice for both the people and economic sustainability as it does not create wealth, nor opportunities for us to progress as a developed nation by 2020.