On track towards targeted social assistance

IN 2023, about RM63.8bil or 3% of gross domestic product (GDP) was allocated for subsidies and social assistance. Almost 60% of that is used for broad-based fuel and electricity subsidies while the rest for Sumbangan Tunai Rahman.

This is targeted at the hardcore poor, who are considered eligible based on the poverty line index.

Although spending on subsidies and social assistance rises every year, its share from 2020-2022 is considered small at 2.2%.

In comparison, the Organisation for Economic Co-operation and Development nations typically spend 10% of GDP on cash benefits only.

For that, Malaysia received a social assistance score of 2.1.

It lags significantly behind its Asean peers such as Singapore (100), Thailand (54.3), Vietnam (24.6), The Philippines (22.4) and Indonesia (16.5), according to Bank Negara’s Economic Outlook 2024 Report.

Despite the current gaps in Malaysia’s cash transfer programme, its effectiveness cannot be overlooked as social assistance has positive spillover effects beyond economic stability.

Malaysia’s development journey began in 1957 and it has since made significant progress with several programmes.

The most recent, Malaysia Madani, will see the country making headway in achieving its goal of becoming an high-income and inclusive economy.

The report said Malaysia’s current cash transfer programme is focused more on charity-based models, which can leave certain segments of the population without adequate coverage.

It is therefore necessary to transition from narrowly-targeted and stigmatising approaches to a more comprehensive development programme.

Focus has to be given on addressing underlying vulnerabilities instead of explicitly targeting poverty, it added.

Risk associated with life cycles such as childhood, maternity and old age, coupled with risk of disability can be targeted with a more holistic cash transfer programme.

Moving forward, a potential developmental model consisting of a combination of income-tested as well as categorically-based programmes can be an optimal solution in addressing valuable groups, it said.

This should include allowances for the hardcore poor, low income, child, old persons, maternity and people with disability.

For that, it is crucial to relook, reform and redesign the delivery of social assistance, in particular cash transfer to ensure inclusive and equitable protection.

This includes introducing an overarching act to oversee social protection as a whole for social assistance, social insurance and labour market intervention. Without this act, accountability of social assistance programmes in particular will continue to remain ambiguous and thus impacting effective implementation including cash transfer programmes, the report said.

It added that the implementation of the cash transfer programme can be centralised under a single existing agency to address fragmentation issues, reduce implementation cost and standardised eligibility criteria for income tested aid. For successful implementation, an autonomous data management approach is needed.

The government is dedicated to ensuring that every segment of society benefits from the nation’s economic prosperity irrespective of gender, ethnicity, social economic status or geographical location.

Therefore, Budget 2024 will prioritise initiatives that nurture future generations and improve standard of living. This entails focusing on efficiency in the implementation of initiative and programs though empowering good governance and fostering an agile public service delivery.

Collectively, adopting a whole-of-nation approach will elevate the overall competitiveness and safeguard the nation’s wealth, ultimately enhancing the wellbeing of the rakyat towards sustainable, prospectus and high income nations, it added.