Tag Archives: Cash Handouts

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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