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Monday, June 16, 2025

Creating Anwar’s legacy — basic income

 The first part of a mini-series on possibilities for Prime Minister Anwar Ibrahim to create a legacy and set Ekonomi Madani as the bedrock of the next stage of Malaysia’s development.

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The Malaysian economy has performed well under the unity government. Strong and sustainable growth, low inflation and a stable financial system provide the macroeconomic fundamentals for economic development.

But the biggest economic challenge remains — low-income, even for those in full-time employment.

This structural problem can be partly alleviated by a Malaysian basic income (MBI) initiative — a guaranteed cash credit, transferred directly and unconditionally to every man, woman and child each month.

At RM100 per month a MBI for every individual would cost around RM36 billion per year. This means a household of four people would get RM400 per month.

A single person would get RM100 per month compared with the equivalent of RM50 per month under the current Sumbangan Tunai Rahmah (STR), or cash contribution, scheme.

The possibilities for funding a MBI must be fully evaluated but are likely to be perfectly affordable either from existing spending or from other sources.

It is estimated that subsidy rationalisation will save the country RM19.5 billion — RM7.5 billion from diesel, RM8 billion from RON95 and RM4 billion from electricity tariff reform.

The combined STR and Sumbangan Asas Rahmah (Sara), which is a cash contribution to the hardcore poor, already costs RM13 billion.

So just combining these existing funds raises RM32.5 billion which would cover 85% of Malaysians.

Alternatively, a 1% electronic payments tax (EPT) can raise RM28.8 billion or a Malaysian Superfund could raise RM50 billion, both of which would pay for the MBI without disturbing current spending plans.

The MBI is a transfer of spending on existing programmes or saved from subsidy rationalisation. So, it is a wise use of government resources which raises incomes, directly boosting spending ahead of an expected economic slowdown next year.

It also supports growth by putting more money into the hands of consumers who often spend it in local shops, which boosts growth at community level and has a multiplier effect overall.

The MBI can increase labour force participation by covering transport costs, enabling people to travel to better-paying jobs further from their homes. It can cover part of childcare costs, empowering women to work.

The MBI is not designed to replace wages. It provides a small monthly income guarantee that pilot studies show unleashes human potential and motivates people to improve their lives.

In many case studies a basic income has boosted micro-enterprises by providing stable seed money and helping with cash flows. This creates better income opportunities for people who run micro-enterprises.

The persistence of cash transfer programmes despite the numerous changes in administration over the past decade demonstrates the appetite of the rakyat for robust cash transfer programmes. MBI would simply make these programmes far more efficient and far less polarising by being periodic and universal.

Many Malaysians are already working in informal, unstable, or underpaid jobs without adequate protection or dignity. A basic income does not remove the incentive to work, it removes desperation and it provides the security to seek better opportunities, improve skills, care for others, or build something of their own.

International evidence from the WorkFREE UBI+ pilot in Hyderabad, India, supports this perspective. Participants there used the income to reduce financial stress, invest in education and explore alternative livelihoods.

The pilot demonstrated that the MBI can empower individuals to make meaningful changes in their lives, rather than fostering dependency.

There is already healthy curiosity about basic income in Malaysia which is uniting people from diverse political backgrounds in active discussion on the issue.

Implementing an MBI requires three things which Malaysia already has. First, a consensus that cash transfers make a positive impact on lives. Second, a payment system like MyKad to ensure cash transfers directly to every eligible recipient. Third, a bold politician committed to reforms that will leave a major legacy to be remembered by future. - FMT

The views expressed are those of the writer and do not necessarily reflect those of MMKtT.

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