BR1M–Is It Good Or Bad For Malaysia?

Updated 23 Aug 2017 – By Loanstreet


BR1M is a scheme for direct cash assistance distributed by the Malaysian government to households in need. Since it was first announced and implemented in 2012, there has been both vocal support and opposition from the public for BR1M. But really, is BR1M as wonderful or as disastrous for the nation as some claim? To answer that question, we must first acknowledge that BR1M’s goal is singular – To redistribute wealth (welfare) to the more needy sections of society. Only with that established can BR1M be assessed objectively.

1. Is BR1M’s Objective Right?

This question is essentially only answerable in a personal capacity -- Where do you stand on the issue of welfare and government intervention in wealth transfer?

There are arguments that any government welfare breeds dependence and laziness over time. Some believe that upward mobility should be attained only via merit on a level playing field, a modern twist on survival of the fittest. On the other hand, there are proponents of more inclusive and egalitarian governments. This belief is primarily centered on attaining equality in society via government intervention.

BR1M–Is It Good Or Bad For Malaysia?-Equity vs Status Quo

If you do not believe in welfare and government assisted wealth transfer towards equality, then by extension, BR1M is the wrong policy for Malaysia because its objective is not one you agree with.

2. Are There Better Things To Do With The Allocated Money?

Governments have many different goals to achieve, but limited resources. As such, governments must choose between objectives, or more pragmatically, to balance them. BR1M is one among many other programs and policies being implemented concurrently by the government.

Since priorities are always debatable, this question can only be answered from a personal standpoint.

3. Was The Categorization Of Recipients Judicious?

This again can only be answered from a personal standpoint. How one views this rides mainly on 2 factors:

  1. The “ME” factor – Do you stand to benefit from it?
  2. Generosity – Who do you deem deserving of welfare?

The table below shows the beneficiaries of each year’s BR1M, and the total allocation from the budget.

beneficiaries of each year’s BR1M

4. Are There Better Options For Welfare Than Direct Cash Assistance

This is a question on if there are better methods to distributing welfare. Better can be objectively measured in various ways:

Efficiency – Direct handouts are the most efficient form of transfer. It is instant, and barring fraud, goes directly to the intended recipients.

Utility to the recipient – Comparatively, cash is the most versatile form of assistance. It can go towards any expense the recipient chooses. However, the same versatility causes concern among detractors, since cash can also go towards what some would deem non-essential or non-value building expenses.

Economic Multiplier Effect / Value building– A common critique about cash handouts is that compared against other forms of assistance (E.g. book vouchers, education scholarships), cash handouts may not build value over the long term (E.g. Solve the underlying causes of poverty), and is highly dependent on the individual’s usage of the money. But this is again a question of priorities and highly debatable. Is it more important to feed a malnourished child now, or to provide them with a world-class education?

Social Corrosiveness – Handouts are commonly demonized for breeding laziness and dependence. In this case, unless the allocation for BR1M is significantly increased to a level that allows for subsistence (e.g. equivalent to minimum wage), it should not have a corrosive effect on a person’s productivity.

5. How Much Was The Implementation Of BR1M Influenced By Politics?

BR1M is considered a populist move by the government. It does not help that BR1M – a federally funded scheme – is being branded under the banner of a political party. Naturally, many of its detractors question the motives behind such a scheme. Was it implemented chiefly to score points politically?

The dark influence of politics in BR1M is undeniable. But one should not make the mistake of muddling both issues. Political influence does not automatically preclude an effort from being good / effective. It should still be assessed on its own merits.

Conclusion

The ramifications of having BR1M may not be as dramatic for Malaysia as many fear. The amounts given are too little so as to make a person lazy. At worst, certain segments of society will indirectly be forced to give handouts, and other budget items would have less money allocated to it.

Conversely, from the perspective of certain struggling households, the ramifications of not having financial assistance could be monumental. This especially when the nation braces for unusual inflation due to GST implementation and petrol-subsidy removal in 2015. It is doubtful that wages would immediately keep up.

In conclusion, BR1M would bring some financial relief to the more vulnerable segments of society without bringing significant harm to the country. It may (or may not) be “Good” policy. But it most certainly isn’t “Bad” policy.

Continue reading...