Rethinking Subsidy Programmes: A Needs-Based Approach
PETALING JAYA: The targeted subsidy programme should refocus on needs, as originally planned under the Central Database Hub (Padu), rather than income level so that the benefit reaches those who require it most, according to experts.
The Case for Needs-Based Subsidies
Two economists and the head of a consumer group told FMT that a needs-based approach would ensure that those who face the greatest economic challenges are given the necessary assistance, however much they earn. As economist and policy specialist Geoffrey Williams pointed out, a household with a family member requiring 24-hour care due to disability or illness would clearly be in need of subsidies for healthcare even if they happen to fall under the T15 category. "That alone shows that above a minimum income threshold, needs-based subsidies are clearly better than income-based ones," he said.
Challenges with Income-Based Subsidies
There is an ongoing debate on whether categorising households into two groups based on their earning capacity to determine who receives subsidies is the right way to go. This debate stems from an earlier announcement by the government that the 15% of households that have the highest income will no longer benefit from the subsidy programme. However, this is despite the fact that the plan was to begin giving subsidies based on need rather than income level, and eligibility for subsidy would be determined based on data collected for Padu.
The Importance of a Needs-Based Framework
CEO of the Federation of Malaysian Consumer Associations (Fomca) T Saravanan said a needs-based subsidy programme will better align with the varying realities of households. He noted that while dividing earning capacity into B40, M40 and T20 categories offers a broad picture of income distribution, it often fails to reflect the true financial burden faced by each household. "Income alone, therefore, is not a reliable indicator of financial needs," he added.
Rationalising the Subsidy Programme
Bank Muamalat Bhd chief economist Afzanizam Rashid said the rationalisation of the subsidy programme will ensure that the savings can be redirected to those who need it most. "This can be dispensed through cash transfers," he said. Afzanizam added that such optimisation will also ensure that more money can be redirected to critical areas such as education and healthcare for the lower income group, apart from infrastructure development and security for the country.
Conclusion
In conclusion, a needs-based approach to subsidy programmes is more strategic and effective in targeting those who require assistance the most. By prioritising needs over income level, the government can ensure that the benefits of the subsidy programme reach those who need it most, rather than just those who are fortunate enough to be in the top 15% of earners.
Frequently Asked Questions
Q: What is the current approach to subsidy programmes in Malaysia?
A: The current approach is based on income level, with the 15% of households with the highest income set to no longer benefit from the subsidy programme.
Q: What is the alternative approach proposed by experts?
A: Experts propose a needs-based approach, where the focus is on the needs of each household rather than their income level.
Q: How would a needs-based approach benefit households?
A: A needs-based approach would ensure that households are assessed based on their specific financial needs, rather than just their income level. This would result in more targeted support for those who need it most.
Q: What are the potential benefits of a needs-based approach?
A: A needs-based approach could lead to more effective use of resources, reduced fiscal deficits, and a more equitable distribution of benefits.