Stop helping the poor!

 

The poor are always with us and our well-intended attempts to help them often pave the road to perdition.

I already described how Menu Rahmah does not target the poor, would cost RM927 million annually, benefits companies not the rakyat, distorts the market and makes money for someone other than the target group.

Now we have the People’s Income Initiative (Inisiatif Pendapatan Rakyat or IPR) which aims to create micro-enterprises generating RM2,00 to RM2,500 per month. There are three modules, the Agro Entrepreneur Initiative (Intan), the Services Operator Initiative (Ikhsan) and the Food Entrepreneur Initiative (Insan), with one example promoting nasi lemak sales through vending machines at RM2 per pack.

IPR admittedly does try to target the poor but costs RM750 million, benefits middlemen not the rakyat, distorts the market and makes money for someone other than the target group – “the collaboration of the government and several strategic partners” – as the euphemism goes. Sounds familiar?

The middlemen who benefit are the consultants paid to design the scheme, the public relations firms paid to push the scheme, vending machine manufacturers and salespeople, logistics companies, equipment and ingredient providers, training providers to “enhance skills” and agents to source the participants and monitor them for 24 months. The list goes on but this is where the RM750 million is going, at least in part.

By contrast transferring the RM750 million set aside for this scheme through social protection in the form of a universal basic income would be worth RM494 per month for each hardcore poor household with no middlemen.

IPR targets 100,000 to 150,000 people with the RM750 million but there are 126,372 hard-core poor households under the eKasih system and 2.91 million households in the B40. If each household has two adults only 2% of that six million people will benefit.

The RM750 million is around RM5,000 each which could just as well be given to them directly or as a RM420 monthly income supplement. But then of course there would be no middlemen and no-one other than the recipient would get paid, so why would a consultant recommend that?

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So the IPR scheme is not a full solution and the scheme itself along with its outputs and impact must be communicated better. As it is, it looks like a typical ad-hoc project rather than part of a holistic, structural reform.

It is true that past cash handouts were designed arbitrarily beginning with the original BR1M format. They were very small and issued only once or twice per year just before major holidays such as Raya. They were politically motivated and populist.

Often they were spent immediately and had no long-term impact. So they were largely ineffective in helping to relieve hardcore poverty.

Nonetheless if they were reformulated into monthly cash transfers they would be more effective in changing behaviour and they would not be a disincentive to work and enterprise because they are too low.

The IPR will not replace cash handouts unless the income generated is high and the take-up is wide. It is likely that the income will be relatively low and will still need to be topped up. It will also be unlikely that all the people in this target group will take part.

So the IPR may only be part of the solution which at best might reduce but not eliminate the need for cash transfers. This is why we need a full welfare reform leading to a universal basic income.

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As it is, the government still lacks a systematic reform agenda and the communication of reforms is terrible. This needs to be addressed urgently otherwise the policies lack credibility. - FMT

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