Daim considers basic income fund

Tun Daim Zainuddin. -Star filepic

KUALA LUMPUR: A top adviser to Prime Minister Mahathir Mohamad is considering an overhaul to Malaysia’s social safety net by setting up a fund that pays out basic income to the poor.

Last year alone, the government spent about 37 billion ringgit ($9.3 billion) on subsidies, various kinds of aid, and cash handouts known as BR1M, said Daim Zainuddin, 80, who leads Mahathir’s handful of inner-circle advisers known as the Council of Eminent Persons. 

That money could instead be channeled to the fund that will then invest in assets where returns are distributed as basic income each month instead of one-time payouts, he said.

“Every year, it is wasted, whereas this one continues,” he said in an interview on Sunday in Kuala Lumpur. “If we invest properly, I think there’s sufficient income to take care of the needs of all these people.”

Former Prime Minister Najib Razak had come under criticism from then-opposition leaders who said his pledges for bigger BR1M handouts were a way to win political support. 

The new government under Mahathir has said it will replace the program, which gives annual cash payments to those who qualify, with cost-of-living aid instead.

More than 7 million people have been approved to receive the BR1M handout in 2018, amounting to 6.12 billion ringgit of state spending, according to the finance ministry.

High-Income Nation

Mahathir’s coalition won a shock victory in the election one month ago, ending the six-decade rule of Barisan Nasional coalition. Najib had faced public anger over a goods-and-services tax that boosted prices and a multibillion-dollar money laundering scandal surrounding 1MDB.

Mahathir warns that some handouts, including cash bonuses and paid Hajj pilgrimages, may be scrapped as the government reforms its public aid system to ensure help goes only to those who need it, he said in a speech to Malaysians in Tokyo on Sunday.

“We don’t call it BR1M of course, we call it by some other name because we don’t want to inherit their bad habits,” he said, referring to the previous administration.

The council Daim leads is focused on ways to create inclusive and sustainable growth rather than chasing the goal of becoming a high-income nation, according to the former finance minister when Mahathir was premier.

“There’s no point in saying high income when 7 million of them depend on BR1M,” he said. “What we want is a developed nation status where everyone can climb the social and economic ladder. This entails introducing policies which encourage businesses while at the same time ensuring the welfare of the people.” - Bloomberg