The Padu database can be a game-changer

 

The new Central Database Hub or Padu is potentially the most important economic policy change that I have seen in 20 years of living in Malaysia.

I have long advocated this approach and economy minister Rafizi Ramli is showing real leadership in championing this potentially game-changing initiative.

Collecting individual data will help differentiate those from the B40 from the M40 and T20 categories and allow welfare support to be targeted directly to anyone eligible on income-based need rather than household composition, age, gender, race, religion or any other discriminatory basis.

The main benefit is that it will help target welfare support more directly and provide data-driven analytics for a wide set of economic policies. This will improve overall economic policy design and delivery.

It can also form the basis of a universal basic income (UBI) in which a minimum threshold income is fixed, for example using the Belanjawanku estimates from EPF, the living wage estimates from Bank Negara or the poverty line estimates from the statistics department.

People who fall below the minimum net disposable income, after all statutory deductions and welfare payments, can receive help in the form of direct cash assistance.

Those above that level can get on with life as normal.

This is a cash transfer, reverse income tax or negative income tax form of a UBI and is the most effective way to address economic and income inequality.

Giving cash directly to individuals means they can spend it themselves on whatever they need.

This is more empowering and for example makes sure that mothers get the money they need directly.

Currently social assistance is often given to men as head of households and as a consequence women often do not get direct access to it.

It can also replace all other forms of welfare from multiple sources, making applications easier for those in need and help cut out wastage, leakages and corruption which saves money to be reallocated to those in need.

So it will not necessarily cut the overall welfare bill but will provide more help to those who need it using savings from those who can do without it.

From an economic perspective the Padu database will be helpful in ensuring that subsidies and social assistance reach their intended target groups more efficiently.

Currently subsidies go to companies, not to the rakyat, directly. We then have to rely on the companies to pass on the benefits to consumers which they often do not do.

More generally subsidies on goods and services are expensive, the rich benefit too much, they distort market prices and they are a major source of corruption as we have seen in many cases.

The Padu system of allowing a switch to direct cash transfers cuts out all of these problems.

The Padu database will give us the most accurate data on income and income inequality across every demographic.

So in addition to targeted subsidies it can be used more widely for economic policy analysis, targeting groups and locations more accurately.

Of course there will be teething problems in setting up the system but everyone has an incentive to help make it work by updating their data quickly and accurately.

If they are dishonest there should be swift penalties, this will make sure people provide accurate data and keep it updated.

The Padu system is central to changing policy to target subsidies and welfare support which will transform the broader socio-economic landscape, help to reduce income inequality and eliminate hardcore poverty.

In the long-term these changes will help to improve the economic outcomes for everyone especially in raising incomes and taking people out of absolute and relative poverty. - FMT

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