The Fruits Of Economic Reform And A Universal Basic Income

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The three economic reform leaders in Malaysia namely Prime Minister Anwar Ibrahim, economic affairs minister Rafizi Ramli and finance minister II Amir Hamzah were out in force last week with an impressive economic message.
Anwar set the agenda clearly: Malaysia will adopt a pluralist economic strategy within new multilateral partnerships focusing on social and moral agendas.
Rafizi continued this theme, adding that Malaysia will leverage its demographic and economic profile, its commitment to free trade and its political and policy stability. He described Asean, which Malaysia will chair this year, as “young, digital, and middle class” with economic growth above global trends and stressed the need to take advantage of these opportunities.
Finally he emphasised that Malaysia must not fear competition but must become more competitive in the global stage in the face of protectionism from big economic players. He stressed the need to innovate and set the perfectly achievable aim for Malaysia to create opportunities from renewable energy, microchip design and data centre infrastructure.
For me the best news was the announcement by Amir that diesel subsidy rationalisation will raise RM7.5 billion per year, almost twice the original estimate and in line with my prediction that diesel subsidy reform would raise more than expected.
MoF was right to be conservative until the full programme was rolled out but it is clear that diesel subsidy rationalisation has proved very successful. Lessons can be learned for the forthcoming RON95 petrol subsidy rationalisation which is estimated to save RM8 billion. Hopefully this will also prove to be a conservative estimate and more can be saved.
Taken together the diesel and petrol subsidy savings added to RM4 billion in electricity subsidy savings and around RM1.5 billion on other subsidy rationalisation, including chicken prices, will save around RM20 billion at least.
This could be used in general government spending priorities on health, education and social protection so that there is a direct link between subsidy rationalisation and improved social infrastructure.
Adding the RM20 billion to the existing RM13 billion for Sumbangan Tunai Rahmah (STR) would be a better option. This would create a fund of RM33 billion which can be redistributed to every Malaysian as a universal basic income (UBI).
Targeting 85% of individuals would provide around RM100 for every adult and child. A family of four would get RM400 per month or RM4,800 per year which is more than the STR payment currently.
This should be paid directly to individuals, on a monthly basis, in cash credits to individual accounts and should be unconditional, not based on race, gender, age, employment or other criteria.
It can be paid through MyKad for those not working or through LHDN for those who are working or even deposited into EPF to help pension saving where a part can be accessed through Akaun Fleksibel.
To make such a scheme universal the T15 could be given a tax cut equivalent to RM100 per month so that they do not feel ill-treated. This will help ensure everyone supports the UBI scheme.
Existing Social Welfare Department funds could continue under this scheme to help those who need support on a specific basis such as OKU or the hardcore poor.
This would fulfil the Ekonomi Madani principles of a just and socially equitable way of raising incomes as restated by the prime minister at the Malaysian Economic Forum.
The biggest barrier to a UBI is now falling as subsidy savings reach the level required to fund it. It is important that these savings are not just swallowed up by general spending but are used for social protection and income support for everyone. - FMT
The views expressed are those of the writer and do not necessarily reflect those of MMKtT.

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