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Focus on the poor before checking welfare of T20 'eligible' for targeted subsidies, govt told

The spending habits of the upper income bracket need to be scrutinised more closely, says one expert.

3 minute read
Although PADU is touted as a tool to ensure only the poor and needy get subsidies, the government says high-income earners too may be eligible for aid.
Although PADU is touted as a tool to ensure only the poor and needy get subsidies, the government says high-income earners too may be eligible for aid.

Putrajaya should prioritise vulnerable groups in the distribution of government subsidies before turning to high-income earners with many dependents, an economist says in response to a recent statement by the economy ministry.

In an effort to encourage public registration for the government's latest data hub, Padu, the ministry said middle-income (M40) and high-income (T20) individuals would be eligible to receive subsidies, taking into account their household expenditure.

It gave the example of a person in the T20 category with an income of RM15,000, whom it said could be categorised as M40 if he or she had eight children.

However, economist Anuwar Ali said the main objective of targeted subsidies was to ensure that the assistance is given to those who really need it.

He pointed to the over two million Malaysian workers whose salaries are less than RM2,000.

"There are a huge number of people who fall in the B40 category, including the hardcore poor who have fallen out of the system, such as the Orang Asli and people in rural areas.

"The government must take care of these groups first. The T20s can come later," Anuwar, a member of the National Salary Consultative Council, told MalaysiaNow.

He said those who belong to the T20 group are likely to have other financial resources, including savings and hefty contributions to the Employees' Provident Fund.

He said if they were to be considered at all, their finances would have to be scrutinised, taking into account various factors.

"For example, did he buy a house or a car that was too expensive?

"The question is, what measures or indicators need to be applied to the T20 before you classify them as eligible? If the person does not fulfil these indicators, the aid should be refused.

"We cannot allow certain people to abuse the system. Complete information must be provided," Anuwar said.

Last year, government subsidies for oil, electricity and food totalled RM81 billion.

The government has claimed that its plan to move to targeted subsidies will ensure that only the poor receive assistance and not the "super rich".

Government leaders have touted Padu, promoted by Economy Minister Rafizi Ramli, as a "game changer" in identifying those who deserve help in the form of subsidies.

Launching the initiative earlier this year, Prime Minister Anwar Ibrahim said that with Padu, foreigners, the wealthy and high-income people would no longer receive subsidies as the system would be able to identify them.

Rafizi, however, is embroiled in a debate over the credibility of Padu, mainly related to concern over the security of personal data.

Anuwar said one concern was how effective the implementation of targeted subsidies would be for those in the low-income group, or B40, who are not in Padu's sights.

He said that in the spirit of transparency, the economy ministry could disclose the percentage of hardcore poor who are registered in the system.

Economist Madeline Berma said giving subsidies to middle- and high-income groups was a tricky issue as it violated the principle of equity and the money could be channelled to the poor.

However, there are many factors and variables that play a role in more accurately determining a household's financial situation, she said.

"Targeted subsidies are based on the principle of need and are not usage-based. It is hoped that they are more comprehensive to ensure that they reach the target group and that there are no shortfalls or leakage in the distribution of subsidies," she added.

Meanwhile, Universiti Tun Razak analyst Barjoyai Bardai said concern over the effectiveness of targeted subsidies was more about the middle-income or M40 category.

He said there were not many among the T20 who had so many dependents that they needed subsidies.

"I am more concerned about the middle class because they are a vulnerable group. Their income may be slightly higher than the B40, but they have more obligations. So the government should focus on this M40 group," he said.