Economists give thumbs up for 'annual BR1M'

The economists also believed that the annual cash handouts would not burden the government's budget.

"Those who say that BR1M would not spur the economy were not looking at the big picture.

“Yes there’s some concern that by giving this to the people you are not doing much to the economy, and straining the budget but that’s compartmentalising the issue.

“If this is done annually or on a monthly basis, you are going to see spending taking place,” said MIDF Investment Bank chief economist Anthony Dass when contacted by AstroAwani.

He said that the multiplying effects of increased consumption would translate into greater investments into the country.

“Where there is a demand, there must be a supply from somewhere. So you are actually creating business. Overall consumer spending goes up and we would see some positive catalyst growing,” he said.

Dass added when businesses do well, salaries go up, corporate tax will go up. Consumers will also be paying more sales and service tax.

“So in total, with all that spending, the government can get back the money, more or less.”

“From the social point of view, it is something that helps the lower and middle income household spending. You are easing the burden of poorer families and it helps improve disposable income.”

He said that this would offset the ‘hurt’ the poor would feel as cost of living goes up when the government start rationalising subsidies.

However, Dass noted that the government’s end goal, would be to migrate people out from poverty level and BR1M would not be a permanent measure.

“I don’t see this going on forever, when it goes into higher standards, eventually the government can stop providing all that,” he said, adding that making it an open ended policy was a good move.

Prime Minister Datuk Seri Najib Razak announced on Tuesday that BR1M would be a yearly affair, promising the RM500 cash aid for low-income households would be given out under the BN administration.

For the first round of BR1M last year involved an allocation of RM2.6 billion while another RM3 billion was allocated for BR1M 2.0.

Meanwhile economic analyst Chin Yew Sin said BR1M was an economic measure to redistribute wealth, which was successfully done in Taiwan and Singapore in the past.

“I think the government has thought carefully before this plan was put into action,” said Chin, who is also the Federation of Chinese Association Malaysia (Huazhong) deputy secretary-general.

“With the new collection of revenue (in taxes), this can be done as an annual affair,” he said, adding that the tax collection last year was ‘very good’ and ‘even better’ was expected this year.

Chin also noted that BR1M was not something new as the government has always allocated budget to uplift the standard of living of the poor. He said those with household income below RM3, 000 make up more than 50% of the population.

“It’s just that now it is not in terms of benefit but cash in hand. With cash, they can help poor people in need of money, and increase domestic consumption,” he said.

Chin noted that in Malaysia, domestic consumption contributes more than 50% to the total Growth Domestic Product (GDP) of the country.

“Government spending contributes about 20-25% to GDP, export about 10-15% of GDP and another one is foreign and local investments at 10-15%.”