Over The Brim With BR1M.

A man walked into our jewellery store this morning. He had an old stone ring made of either silver or some cheap alloy. He wanted to redo the stone ring in suasa (9 Karat gold). We checked the prices, the estimated weight and worked out a figure close to RM900-RM1000. The poor guy was shocked. It was way above his capacity. He just walked out. I could see the disappointment on his face. It is terrible to be poor. Prices have moved up. This is reality. And people need added skills and productivity to keep up with the ever increasing cost of living.

Once again Tun Dr Mahathir has criticised the PM's BR1M program. I notice that plenty of statements are being made by other people as well with little knowledge or regard to basic economics. 

OK Dr Mahathir first. He said the following :

2. BRIM is bribe especially when given just before elections. It is the same as giving people placards to raise when you pass. It does not really reflect their feelings or sentiments. 

3. Failure to understand public sentiments would be disastrous for politicians. Self-delusion is even worse.

• 4.   BRIM is costly for a Government facing deficits 
• at RM500 cost the Government RM3.5 billion  
• at RM1,200/- cost would be RM8.4 billion  
• still a lot of very poor people in the country. 
• they are not happy ..even with BRIM. 
• Find out why they are not happy..you will know what you should do.

5. I must admit that I disagree with quite a few things the government is doing.

This is the PM's reply :

• Najib defended his cash aid programme 
• cash payment was a targeted subsidy 
• would help propel domestic economy
• decrease lump sum subsidy and turn to targeted subsidy
• over 7 million households (received BR1M) RM4.6 billion.
• “The first day, many went to Sogo, many went to the weekly markets,” Najib said
• Our economic theory, decreasing subsidies, allocate more for development.
• If debt continues to rise, the economy will crash,” said Najib
• side effects on living costs .. .were temporary.
• "..for one or two days there will be increase in living costs… we are sensitive."
• “..prices have stabilised again.."

My comments : Well Dato Sri the increase in living costs is not for just one or two days. The increase is permanent. Prices do not exactly stabilise. After one or two days HIGHER prices become a fact of life. HIGHER prices cause a lot of instability in peoples' lives.

About targeted subsidies, well my view is like this. When you cut lump sum subsidies across the board, prices shoot up and consumption will definitely decrease. There will be a dip in consumption. Now you give back some BR1M in targeted subsidies. It will merely replace some of the lump sum subsidies you already cut earlier.  At best it is back to square one. 

Let me use some numbers. Say last time the lump sum subsidies paid also amounted to RM500 per person. 10 people got it. This cost the gomen RM5000. Now you pay BR1M of RM500 each. However only 7 people get it. RM3500. This means less money to propel the domestic economy. So the "propel the economy" argument does not jive too well.  

Yes the gomen saves RM1500. But does the gomen use that savings to create higher income jobs? Do read on.

Going to Sogo and the weekly markets with the BR1M money does not add to peoples' ability to generate higher income. (Remember we want to become a higher income nation). It just increases 'makan gaji buta' lah. This consumption counts as dissaving, because it is financed by gomen borrowings or using up gomen's reserves. Taxpayers' funds. People will spend the BR1M money buying items they can easily do without. There is nothing in Sogo that life depends upon.

Yes if you pay less subsidies you have more money for development. If you spend wisely (minus wastage, leakage, corruption and cronyism - WLCC) you will have even more money to spend. Countries that have less subsidies cannot develop their economies if they cannot avoid WLCC.

Countries that pay a lot of subsidies can still develop their economies if they avoid or reduce WLCC. Under Tun Dr Mahathir oil was USD40 per barrel. The economy was much smaller. There were plenty of subsidies. Yet 8% to 9% economic growth was quite normal. Mega projects was a phrase coined during Dr Mahathir.

Since 2003 we pay hundreds of millions in compensation for uncompleted projects. The crooked bridge comes to mind. Now we pay RM400 million compensation to the toll operators for NOT raising the toll. The taxpayer still pays. Its our money. 

AES is claiming RM360 Million compensation. That is taxpayers money too. How does that reduce the gomen deficit? Some mystery there.

So there are very few or no economic arguments to justify the BR1M. You cannot even say it is sedekah or charity because it is the peoples' money. Taxpayers money. 

Comments like 'give them cash they will be happy' not only go around quickly but they show an inability to raise the income levels of the people.  

People do not need BR1M. They need economic opportunities, a freer market economy, less controls in the economy, less gomen wastage, more prudent spending by gomen, more useful development projects (AES and toll compensation are doubtful spending).

We need solid business opportunities. This means basic things like cleaning up the streets in KL of illegal hawkers who create jams, rat infestations, disease and lower the quality of life. However corruption seems to defeat us at every step of the way.

We need to free up the economy. Did you know that someone holds an AP to import Christmas turkeys. I am trying to get the name. The GLCs need to get out of property development, paper shuffling and stick to technology creation. 

An entire batch of JPA scholars (entire batch about 14 kids) who returned with engineering degrees from the US have not been able to get a job. Some are teaching tuition. 

The country is too messed up. The education system is going down, down and down.

"..give them cash they will be happy.."?? I dont think so. People are not that dumb.