Monday, May 21, 2018

BR1M: Good Or Bad?

Loanstreet has an article on the pros and cons of BR1M (excerpt):

Will BR1M Destroy Malaysia from Within?

Since BR1M was implemented in 2012, it's been heavily criticised by many sections of the public. Many view it as nothing more than vote buying from the marginalised in society. Its harshest critics even claim that such careless use of public funds will run the country to ruin.

We believe that politics aside, the merits of BR1M should be assessed on its own. Is it really such terrible policy? Will it ruin the country as some claim?

Because we ourselves did not know how to feel about it, we decided to thoroughly examine the issues surrounding BR1M to find out if it is actually good policy, or one that could lead Malaysia to ruin.

The “road to ruin” narrative might be a little over the top, but the article covers most of the essential points. This came out before GE14, so a rebrand is probably apposite – my vote would be for Dividend Rakyat.

Two things I would add to the articles points are:

  1. Cash transfers actually do address the root causes of poverty - for the next generation. Poverty should be seen not just in terms of the current poor, but the impact that poverty has on the chances for social mobility of their children. Meritocracy only works under the unspoken assumption that initial conditions for all children are the same, which under most circumstances they are not. It's not enough to provide a good education, since this ignores the importance of for example social capital. Studies on child development also point to the importance of education in the 0-5 age range in terms of soft skills development, which even universal pre-school will not fully address.
  2. BR1M was explicitly funded by the savings from the reduction in petrol subsidies. In fact, initially, they even shared the same account code in the government's books. The way government finance works in Malaysia, BR1M would be classified as operating expenditure, so it can ONLY be funded by revenues, and not by borrowing.


  1. The same goes for cash transfers under DSW, and there is no good reason for BR1M to exist in its current disbursement and management structure.

    It should be pointed out that BR1M is a cash allowance targeting the B40 group while DSW's monthly financial assistance targets the poor and hardcore poor. The rationale is that it bridges the gap between poverty and the group that is yet to qualify for benefits from tax returns but are denied welfare aid.

    Both BR1M and other cash transfer programmes need strong case management and currently this is a major deficiency. Some argue that unconditional cash transfer is better, but we need empirical evidence.

    With calls for UBI and a basic social protection floor, our national approach lacks sophistication and imagination.

    1. @anon

      DSW (I prefer JKM) is underfunded, undermanned, and has limited reach.

      Both BR1M and JKM programmes are unconditional (being poor is not a "condition"). There's also plenty of empirical evidence that both conditional and unconditional cash transfers are preferable to other forms of assistance. I think what you're really referring to here is means testing, for which the empirical evidence is less supportive.

      The basic problem for both BR1M and JKM programmes is identification/targeting, but we simply don't have enough visibility on the target population. That's not going to change any time soon.

    2. DSW is definitely all that you say, and they serve about half a million cash transfer beneficiaries, not counting everything else that they do. So, if we do our maths, how is LHDN really managing 7 million BR1M recipients?

      We need to step up our social work capacity and case management of welfare recipients, and explore possibilities of conditional cash transfers because what we are doing now is grossly inadequate in lifting families / households out of poverty. I don't think there is a scenario where means testing will disappear completely (except UBI perhaps), but aid must be targeted.

      I concur identification is an issue, but since the past government is drunk in its confidence with eKasih, I doubt major reforms will happen on that front because we have a system of local government that does not directly partake in the health and social welfare of its residents.

    3. I am one of the BR1M recipients. Indeed I would say, BR1M really help me to reduce my financial burden. With a salary of RM 2,100, I am currently living with my wife (housewife) and my mother in law in KL area. Having an additional income (BR1M) of RM 900 at least help us to pay for our food.

      Nevertheless, I agree with Encik Hisham with regard to the identification/targeting. BR1M is a social security measures to help those who are poor, low-income and vulnerable towards any potential shock that could affect them. With regards to social security/social protection, there should be some exit clause for BR1M. A conditional BR1M (linked to education, healthcare etc) to improve human capital/living quality is a key to promote (pillars of social protection) these vulnerable groups.

    4. @anon 1.12

      I've been toying with the idea of starting a separate blog on social protection issues in Malaysia. Want to join?

      I can't remember if LHDN is accessing eKasih, but back end verification of incomes is through LHDN's own files, EPF, JPJ, and also state Land Offices I think. So a proto-means testing system is roughly in place, though I suspect leakage remains high.

    5. @anon 1.23

      If we're going to make things complicated, there's no reason why BR1M can't be tiered - an unconditional basic transfer, with additional conditional transfers on top (children in school, health screening etc).

    6. Yup. Would love to. From my observation, we don't really discuss about social protection issues in Malaysia. The idea itself also quite blurry and not many of us (citizens) really know about it.

    7. Daim mulling basic income fund. Might be the social protection floor we are looking for. Dr. Khalid and Prof. Jomo must have a hand in this. Note quite UBI, but targeting issues remain.

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