Building an inclusive economy

 

From Shamsul Nazir

An inclusive economy is a necessary objective for any country. This is of special significance in Malaysia which is made up of diverse groups and communities.

Special attention must always be given to the most vulnerable communities. The philosopher John Rawls stressed that a just society should always give due consideration to the least advantaged sections of society.

The 2024 budget had sought exactly that in order to bring the least advantaged society within the purview of mainstream policy.

There are two aspects to building an inclusive economy. The first aspect is the social aspect, which means ensuring that all sections of society are not ignored. This is necessary on moral grounds.

The second aspect is built on the economic argument. Aggregate demand for goods and services is based on the demand that arises from all groups.

Low demand for goods and services from certain groups meant that if these groups were given more resources they could then contribute more to aggregate demand. When certain groups are ignored, aggregate demand is not at its best.

In that sense, the 2024 budget showcased Malaysia’s unflagging commitment to fostering an inclusive economy.

Budget 2024 made significant efforts to uplift the nation’s most vulnerable communities, particularly the B40 and M40 income groups.

Two key initiatives in this respect are the Sumbangan Tunai Rahmah (STR) and Sumbangan Asas Rahmah (SARA).

It is noteworthy that STR and SARA were designed not only to alleviate short-term financial pressures but also to ensure that there is sustainable economic inclusion.

STR gives direct cash transfers to low-income households, specifically targeting the B40 group which has limited resources and needs the support of the government. It is easy to say that they should become entrepreneurs, but with little to no resources, such ventures are beyond their reach.

In 2024, the maximum benefit under STR increased to RM3,700, up from RM3,100 last year. The increase was to keep abreast with the higher living costs and to compensate for inflation.

Budget 2024 allocated RM10 billion under this scheme to help the targeted groups meet their essential living costs as far as food, education and healthcare were concerned. The high allocation was also reflective of the government’s commitment to provide financial aid to vulnerable groups.

The SARA is meant to complement the STR. SARA is a cash assistance programme designed for poor and low-income families, credited via their identification cards (IC), enabling them to purchase essential goods at selected supermarkets and grocery stores across the country.

The government had also allocated RM200 million to continue the implementation of the Payung Rahmah initiative, including the implementation of Rahmah Sales and Pasar Rahmah.

Under these programmes, incentives were provided to 1.2 million wholesale market, night market and farmers market operators.

Both STR and SARA have provided much-needed support for the most financially vulnerable groups. It has helped them overcome the burden of rising living costs through direct cash relief and the extension of essential goods subsidies.

The government has been sensitive to the needs of the B40. Out of its compassion, the government raised the handout under SARA from RM600 to RM1,200.

Not only is RM1,200 a more reasonable sum in today’s circumstances, it also does more to alleviate the struggles faced by the B40.

These initiatives have also created opportunities for upward mobility through education and entrepreneurship. This is clearly seen in the Payung Rahmah, Rahmah Sales and Pasar Rahmah schemes, which get the B40 and M40 involved in small businesses and as micro entrepreneurs.

The handouts and the incomes generated from businesses help people send their children to schools and to pursue technical and vocational education and training programmes that have been provided for upward mobility. Only long-term solutions could make possible sustainable pathways to a better life.

STR and SARA are primarily focused on the B40 group, with the lower half of the M40 category also entitled to the former. As 60% of Malaysian adults are covered under these cash assistance programmes, the majority of Malaysians are given a leg-up in their spending power, and that can effectively boost aggregate demand.

This will have a ripple effect, the benefits of which will be felt by those in the M40. Higher consumption by the B40 will sustain employment, which will be to the benefit of the M40 who are employed in sectors that produce output that the B40 buys.

Overall, the strategies that have been created to build an inclusive economy are useful in progressing towards a more equitable and just society.

The immediate effects of these programmes will be to alleviate the negative effects of the high cost of living, but the longer-term effects will be to reduce income inequality, create opportunities for upward mobility and help achieve long-term prosperity. - FMT

Shamsul Nazir is an FMT reader.

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