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Cash aid cannot eradicate poverty

Former Prime Minister Tun Dr Mahathir Mohamads remarks have always been highly
controversial. However, his comments on the 1Malaysia Peoles !id "#$1M% cash handout
rogramme, saying that it is costly &or a government &acing de&icits and shouldering huge
debts, is thought'rovoking.
The government has imlemented a number o& measures to rationalise subsidies, such as
increasing $()*+ &uel by ,- sen to save the government $M... billion o& subsidy, while
abolishing the sugar subsidies has saved $M++1.,+ million. However, the sum is not enough
to cover the $M/.0 billion needed &or #$1M this year.
Moreover, the #) government has romised to gradually increase the amount o& #$1M &rom
$M+-- to $M1,,-- in &ive years and thus, the sum will also increase year by year. 1t would
increase to $M*./ billion &our years later, based on the calculation o& 2.* million households.
3nless i& the government &urther reduces the subsidies &or other necessities or the #$1M
distribution would only worsen the governments &inancial situation. There&ore, Mahathirs
criticism is not indiscriminate.
However, the key is, could the #$1M really hel the oor4 3niversity o& Malayas 5entre &or
Poverty and Develoment 6tudies Director !ssoc. Pro& Fatimah 7ari oined that the
government should gradually abolish the #$1M as in the long run, it would not hel to
eradicate overty.
1ndeed, a one'o&& $M0+- cash aid cannot hel much. !&ter the money is sent, the household
income would remain low and the #$1M could only meet their immediate need, but not a
long'term overty eradication rogramme.
Moreover, the $M0+- cash aid would be sent &aster under the recent trend o& rice hikes.
For instance, a&ter the ad8ustment o& medical &ees in rivate clinic and hositals, the
consultation &ees &or general ractitioner increased &rom the range o& $M1-'$M.+ to a new
range o& $M.-'$M1,+. The oor can no longer coe with the skyroketed cost o& living.
!ccording to a research o& the 5entre &or Poverty and Develoment 6tudies, energy subsidy
rationalisation would bring in&lation and increase the income ga between urban and rural
residents o& all races, it could even backslide to the level o& the 1*2-s.
1& the ga backslides to the level o& the 1*2-s, the governments social restructuring e&&orts
over the years would be wasted.
(riginally, subsidy rationalisation was meant to avoid the rich en8oy the subsidies and to turn
the generalised subsidies into targeted #$1M aid. However, the rich &eel nothing &or the ,-
sen increase o& &uel rice, but the oor are crying in ain.
1& the government &ails to control goods rices, the oor would then get oorer, widening the
ga between the rich and the oor, as well as e9acerbating social con&licts.
:conomy is the key &or olitical stability and i& the ublic misery inde9 rises, it could lead to
street demonstrations.
There&ore, the government should temorarily sto the subsidy rationalising measures and
consider adoting other ways to reduce de&icit and debt, including cutting administrative
sending; reducing waste and &raud; and stoing losses &aced by government agencies and
government'related comanies.
1n terms o& cutting administrative sending, to avoid dissatis&action o& civil servants, the
government has been a&raid o& taking drastic measures to reduce e9enditure. Meanwhile, the
authorities have also &ailed to curb waste and &raud. For instance, !ttorney'<eneral Tan 6ri
!bdul <hani Patail said that nine investigation aers related to misaroriation o& &unds
listed in ,-1, !uditor'<enerals $eort have been returned to the Malaysian !nti'5orrution
5ommission "M!55%, suggesting the 5ommission to close the &iles while another seven
aers need &urther in&ormation and additional documents.
The !ttorney <enerals (&&ice lacks su&&icient evidence to charge the involved o&&icials or
individuals and thus, suggested that discilinary actions should be taken. How are they going
to ensure similar incidents will not be reeated ne9t year4
The losses &aced by government agencies and government'linked comanies have continued
to rise. For instance, the highly rotected Malaysia !irlines su&&ered another $M1.12 billion
last year. 1n &oreign countries, the management o& the comany should have been dismissed
but in Malaysia, they continue to receive high ays.
1n addition, due to mismanagement, a number o& organisations under the Malacca state
government have su&&ered accumulated losses o& u to $M.0- million.
1& the government continues to cover the black hole caused by losses, the move o& cutting
more subsidies would not hel in curbing the rise o& national debt.
<overnment &unding &or develoment has indeed been eroded by a variety o& e9enses and
subsidies, casting a silhouette over the countrys economy.
The :conomic Trans&ormation Programme ":TP% lacking in motivation has been insu&&icient
to rescue the rising debt, surging rices, heavy burden o& the oor, low incomes o& the eole
and the &all o& the country into the middle'income light. =hat the country needs is a drastic
change in olicy to enhance the management and cometitiveness in all areas.
6ubsidy rationalisation is not a anacea, articularly when the oor is under a great ressure.