Timely call for social protection reform

TO be blunt, Prime Minister Tan Sri Muhyiddin Yassin's call for a single, cross-agency social protection database (PDPS) is most likely going to end up as another flawed greater e-Kasih in the making, "'Social protection database vital'" (The Star, June 9).

Malaysia already has a national registration system. With some minor tweaks to the Inland Revenue's approach to income tax filings and Bantuan Sara Hidup recipients, we are not too far away from a fully digitised household registry system like the Kartu Keluarga (Indonesia), Tabien Baan (Thailand), Ho Khau (Vietnam) and Hukou (China).

The household registration system is a vital tool not just for population control, taxation or conscription, but its modern application can also bring about serious reforms in social welfare targeting, automatic voter registration, and energy efficiency subsidies, to name a few.

Its possibilities are also practically endless as a health, education and labour policy tool, with the added advantage of geo-localised Big Data insights.

If properly done, it can empower local government planning, improve public access to essential services, and promote decentralisation, not to mention the potential savings from expensive national censuses and (many redundant) surveys.

As a case in point, the Inland Revenue Board handled nearly seven million tax filings in 2019. Since definitions of poverty are usually household-based and the labour force is about 15 million strong, every working adult should be encouraged to register and open an income tax account. That way, people below a certain income level can receive money from the government in the form of a negative income tax. But this can only work if we have a proper household registry system.

Over time, the family registry data can help policymakers understand the problems surrounding low lifetime earners or households, thus enabling proper, evidence-based interventions. Our current model of cash transfers, as rightly pointed out by the PM, is no longer adequate since handouts are not sustainable as a poverty alleviation strategy.

If we are serious about social protection reforms, we must start with low-hanging fruits that can make our society a fairer and more just place to live in. The two key ingredients missing from our social protection system are redistribution (reducing inequalities in income, opportunities and access) and risk-pooling (sharing of risks on the principle of solidarity).

There is a gross public misunderstanding of what it takes for Malaysia to put in place an equitable and sustainable pension system for older persons without having to choose between the extremities of a welfare state and laissez-faire capitalism.

For example, without a contribution ceiling, the EPF is just working very hard to enrich people who do not need the help when the dividend returns are differentiated by Shariah compliance instead of socioeconomic or demographic considerations. Setting a cap for those earning more than RM24,000 a month would improve flow of excess funds to the financial market, including the Private Retirement Schemes.

However, precautions are needed to protect the rest against property speculation (e.g. higher stamp duty charges for high net-worth individuals purchasing low- or medium-cost properties). In addition, the EPF technically provides zero replacement rate as it is disbursed on a lump sum basis.

The government must also square-up on its pension responsibilities by increasing its contributions to the Retirement Fund (KWAP) from the current 5% to 17.5% as is required for statutory bodies so that the true cost of employing 1.7 million civil servants is properly reflected in the current federal expenditure.

If the government is serious in helping families help their own, aid disbursement should be based on household situation and not individual characteristics. Poverty is transient, and it is sheer folly to imagine that at any one time we would be able to have information on all the poor nicely (or timely) in a national database.

What we can do instead is to have a national household registry system that tracks the well-being of our family units over time. This is the digital foundation befitting the Internet age where it should not be difficult for us to store, access and update our household information through the web.

If the Covid-19 pandemic taught us anything, it is that digitalisation is the future we needed yesterday.

It is important to note that any social protection reforms must happen hand in hand with population mindset change. There is so much work to be done and debates to be had on the kind of incentives we want to put in place. The time is now for the masses to realise that there are many policy tools that can be had to make Malaysia a better country, but we do not have enough serious discussions on the details.


Seri Kembangan, Selangor
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