Putrajaya’s 1Malaysia People’s Aid (BR1M) directly benefits recipients by giving them immediate cash and indirectly spurs the local economy, according to a Finance Ministry report.
“The immediate impact of BR1M is reflected by an increase in household disposable income of the B40, which in turn translates into higher purchase of essential items such as food and housing,” it said referring to the lowest 40 per cent of households by income.
“This can indirectly spur the domestic economic activities through an increase in production of consumer goods,” it said in its Malaysia Economic Report 2016/2017 that was released publicly today.
Started in 2012 as a one-off cash aid to families earning below RM3,000 monthly, the BR1M scheme has been extended to cover single individuals aged over 21 years old and earning below RM2,000, as well as households with monthly income of between RM3,000 and RM4,000.
In its report, the ministry asserted that the implementation of BR1M “has partly contributed to the reduction” in the proportion of low-income households in Malaysia.
Citing statistics from the Economic Planning Unit (EPU), the ministry pointed out that the proportion of low-income households earning below RM3,000 dropped from 52.7 per cent in 2009 to 24.3 per cent in 2014.
It noted that the higher-income household with an income of between RM3,000 to RM5,000 monthly had in the same period rose “significantly” from 23.1 per cent to 30.6 per cent.
The ministry highlighted that the incidence of poverty fell as household income rose, showing EPU statistics where the incidence of poverty went down from 3.8 per cent in 2009 to 1.7 per cent in 2012 and 0.6 per cent in 2014.
Income inequality also narrowed in the same period, with the measurement of income distribution or Gini Coefficient going down from 0.441 (2009) to 0.431 (2012) and 0.401 (2014).
And all this through a total disbursement of BR1M payments of around RM14 billion, excluding a total RM5.4 billion amount this year for 7.3 million recipients — 4.2 million households and 3.1 million unmarried individuals.
Prime Minister Datuk Seri Najib Razak announced today that the government is allocating RM6.8 billion for BR1M in 2017, which he said is expected to benefit seven million recipients.
As for how private consumption is positively impacted by BR1M, the ministry points out that low-income households have a higher tendency to spend and would contribute to the growth of consumption when their income levels go up.
It noted that a Bank Negara Malaysia study in 2013 had shown that households with below RM1,000 monthly income would on average spend RM0.81 out of their additional income, while households earning over RM10,000 per month would only spend RM0.18.
“As such, between 2012 and 2015 BR1M has resulted in an increase in private consumption by 7.1 per cent on average compared with 6.8 per cent without the cash transfer,” the ministry said.
The ministry showed its own estimates of private consumption growing by 8.3 per cent with BR1M as opposed to 8.2 per cent without BR1M in 2012, which was followed by growth estimates of 7.2 per versus 6.9 per cent (2013), 7.0 per cent versus 6.6 per cent (2014) and 6.0 per cent versus 5.5 per cent (2015).
According to the same report, BR1M is part of the government’s two-pronged approach under Budget 2017 to enhance Malaysians’ living standards by the introduction of measures to boost income and manage the rising living costs.
While the total BR1M amount being disbursed has risen progressively over the years as more Malaysians received the cash aid, Malaysia has repeatedly showed resolve to cut down the public’s reliance on subsidies as part of its economic reforms and in order to stick to its budget deficit.
According to the Economic Report’s data, its spending under its operating expenditure on subsidies and social assistance has gone down over the years, from RM43.35 billion in 2013 to RM39.7 billion in 2014, RM27.27 billion in 2015, a revised estimate of RM24.64 billion in 2016 and an estimate of RM22.43 billion for next year.
It is unknown how long the BR1M policy would continue, as the Barisan Nasional’s election manifesto in 2013 had only set targets for the handout amount until 2018.
In an interview published in Mingguan Malaysia on November 23, 2014, Prime Minister Datuk Seri Najib Razak had said the BR1M was a form of targeted subsidy that could avoid wastages as a result of broad-based subsidies that did not take into account of income levels, such as fuel subsidies — which has since been abolished.
He also reportedly indicated then that Malaysians would one day no longer need BR1M when their income levels have increased.
Source : The Malay Mail Online