Monday 24 February 2014

Malaysia to boost cash handouts to the poor

But critics say the $1.7b scheme drains govt coffers, creates culture of dependency
By Yong Yen Nie, The Sunday Times, 23 Feb 2014

Malaysia is increasing its annual cash handouts to lower-income groups over the next few years under a scheme that the government says will help them cope with higher costs of living, but which is panned by critics as one that will drain government coffers and raise a culture of dependency.

The People's Aid 1Malaysia scheme, known by its Malay acronym BR1M, will cost the government RM4.6 billion (S$1.7 billion) to help 7.9 million people this year.

This year's one-off payout ranges from RM250 to RM650 per person or per household - depending on income.

The recipients include singles earning less than RM2,000 a month and households with monthly incomes below RM4,000.

The payout will be raised progressively to RM1,200 a year per eligible household by 2019, Prime Minister Najib Razak said.

He also said the blanket subsidy system of the past had benefited the rich more. For example, those driving big cars get more of the fuel subsidy every time they fill up their tanks, compared to the poor who use small cars.

"People driving big cars get RM2,400 (annual) subsidy, while those driving small cars get only RM900. Is that fair?" he asked 3,000 BR1M recipients at a ceremony yesterday.

"The government will change the policy on subsidy, which is from bulk subsidy to targeted subsidy to ensure that the implementation of the subsidy is fair," he said.

Mr Asri Salleh, a political analyst at Universiti Teknologi Mara Terengganu, said the scheme is still seen as an effective tool to win support, especially among rural voters who form the bulk of the lower-income group.

"The rural votes remain as Mr Najib's backbone of support and so, he has to be careful not to be seen as overlooking their needs while implementing fiscal reforms," he told The Sunday Times yesterday.

Datuk Seri Najib is facing a tough balancing act between economic prudence and political expediency, as the government faces pressure from rating agencies to address its budget deficit and ballooning public debt, or get a ratings downgrade.

Former premier Mahathir Mohamad said the BR1M scheme would make people become dependent on handouts. "We rarely appreciate the things we get for free, including the BR1M," he said in October.

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