BR1M- to give or not to give?

……. it depends on how you look at it.

Of course everyone loves money- especially free money. Those who doesn’t must be something wrong. And it will be equally wrong for the government if they don’t give any form of handouts to its people.

Like any form of subsidy, BR1M also has its pro and con.

RM4,5 billion per year is a lot of money. Soon it will be RM9 billion annually. If the saving from the rationalisation of subsidy is lower than the amount of BR1M given, then we can kiss goodbye to our effort in reducing fiscal deficits.

Otherwise, our economy has to grow tremendously. And to achieve that we have to be creative in terms of how to get optimum multiplier effects from that handouts.

Currently, the cash handouts increase domestic consumption. The immediate effect is it will translate into greater investments into the country where the overall consumer spending goes up and when businesses do well, salaries go up, corporate tax will go up. So in total, with all that spending, the government can get back the money, more or less.

This is much better than giving the subsidies by the billions to GLCs who later on spend the money investing in London’s property.

After all, not only it eases the burden of poorer families, BR1M is also transparent. No one can deny BR1M’s political expediency. The most defensive argument made by the opposition in regards to BR1M is ‘to take the money but vote for us.’

Unfortunately BR1M doesn’t really help in terms of vote during the election. Maybe it did the biggest favour in some rural areas where the blanket subsidy doesn’t reach them.

Be it politically or economically, the cash handouts can’t last forever. BR1M can only bring the optimum multiplier effects  during financial crisis when the private spending is decrease. The Government as the largest spender need to spend in order to stimulate the economy. But today we are slowly recovering from 2008 financial crisis.

So when Tun Dr Mahathir voiced disapproval over the implementation of the aid, he was merely stating the fact that we have a Government that facing deficits and shouldering huge debts.

We must understand Tun M is an industrial man. Give him RM800 million, he creates an automotive industry from scratch- not only producing Proton, but up until a complete value chain; vendors, spare parts, designs, after sales, insurances,etc.

He steered our Oil and Gas industry via Petronas just to become a renowned international player.

With few billions ringgit, he started a multimedia super corridor where today has produced several multi-million start-up companies and powerful animation like Upin Ipin.

Not to mention his daringness in pushing several infrastructure projects which all helps to intensify economic activities. In short, Tun M likes to create a whole new industry that produce jobs, increase technology and ultimately contribute to the government’s coffer.

Only by looking at these things we can understand why the industrial man is advocating the end of BR1M. Its simple- the money is better spent on something else.

It is worth to mention that cash handouts, just like any form of subsdiy, is like an ‘opium’ if not carefully managed. To give is easy but to take it back is a suicide mission. If the removal of 20 sen sugar subsidy can cause a lot of trouble for the government, imagine what RM1,200 BR1M money can do.

Alternatively the Government can consider to set the amount of BR1M based on economic performance. Maybe in that way people can be motivated to increase their productivity.

Whatever, the government has to be ‘creative’ in generating economic wealth.

MatRodi

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3 thoughts on “BR1M- to give or not to give?

  1. RMF Shahnan says:

    BR1M was never designed to be perpetual. It was designed to relieve the stress of blanket subsidies if favour of direct assistance.

    Blanket subsidies strain the economy worse than most other activities, esp with the growing number of abuses, diesel smugglers massively profiting from our subsidies.

    TDM, brought Petronas to heights never thought possible, being listed as a Fortune 500 company. The only Malaysian company listed I believe.

    At its original design, subsidies were meant to assist ALL folk, at a time when things were simpler. Both to spur the country’s growth and elevate the people’s style of living. This is no longer the case, hence blanket subsidies are no longer relevant.

  2. Giggs says:

    Funny article

    Only third world country government feels wrong if they don’t give any form of handouts to its people.

    ‘Currently, the cash handouts increase domestic consumption. The immediate effect is it will translate into greater investments into the country where the overall consumer spending goes up and when businesses do well, salaries go up, corporate tax will go up. So in total, with all that spending, the government can get back the money’
    You missed out the GST part of the entire gimmick.

    The European Modernist said ‘Less is More’. The postmodernist counter philosophy argued ‘Less is a Bore’. But in Malaysia…’more or less’ lahhh.

    ‘This is much better than giving the subsidies by the billions to GLCs who later on spend the money investing in London’s property.’ That’s a very strong sentiment of disapproval of YTL, Berjaya & SpSetia here.

    ‘Unfortunately BR1M doesn’t really help in terms of vote during the election. Maybe it did the biggest favour in some rural areas where the blanket subsidy doesn’t reach them.’ Your line reconfirm and reinforce 52% of Malaysian’s common sense that ‘BR1M is bribery’.

    RM800 million isnt a scratch for me. That is my money. And I sweared everyday Proton close shop faster because I couldnt stand driving poor quality car and how the national automotive industry force people to buy their car while set price of foreign car way too expensive. We need our right and freedom back. We arent Korean.

    ‘He steered our Oil and Gas industry via Petronas just to become a renowned international player.’
    Petronas? That’s lame taking that as an example. Everybody know oil and gas is the gold mine for any country who has it. U dont need rocket science to earn big buck from selling increasingly precious fossil fuel. Look at the lazy Arabs and Brunei. They did nil.

    ‘powerful animation like Upin Ipin.’??? I do not know what’s that. Edible? MSC? I think the project has lost in radar. My Singaporean office mates always make fun of me when I say Malaysia got its own californian style ‘Silicon Valley’.

    Arhh. so much of Mahathir. Ahh i know who is he. The patron of Protectionism, cronyism and the father of a bunch of billionaire useless Princelings. And last the criminal who issue illegal IC to millions of BN macai in Sabah who dont need to know what the Malay word ‘Malu’ means literally.

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