INSTITUTIONAL reforms coupled with a progressive welfare system and sustainable social protection network are essential if the government wants to tackle poverty effectively, said experts.

They said the government’s new poverty eradication efforts must also include more help for those with lesser income, which meant help for those in the B40 and M40 categories.

They told The Malaysian Insight the government must also establish a database so that those in need can be identified as soon as possible, especially during a pandemic, referring to the government’s establishment of a ‘Poverty Circle’ to discuss and formulate best strategies to tackle poverty, particularly during the Covid-19 pandemic.

The Poverty Circle will comprise representatives from the government, private sector, civil society groups and academics, and will be administered by the Economic Planning Unit (EPU).

Universiti Tunku Abdul Rahman economics assistant professor Wong Chin Yoong said the issue of poverty could be addressed with institutional reforms including on taxation and on how aid is distributed.

He said some of the models that can be considered included considering a progressive welfare system.

That means more help for those with lesser income instead of the current way of distributing aid according to the B40 and M40 categories.

He gave an example that subsidies can be handed out based on monthly incomes, with more subsidies for those with lower income.

“This will also encourage everyone to pay and file taxes. The entire tax plan will be more complete and we can also have more detailed information.

“During the review process, they will know where they are when it comes to qualify for financial aid.”

He also pointed out that assistance should not be just one-off or occasional.

He proposed another method that was similar to the negative income tax model in the United States, which will not have the effect of “encouraging people not to work”.

“The Americans need to pay taxes as long as there is an income, but it will give rebates to help low-income earners and to encourage work.”

“We can follow suit, but maybe we can also have our own way,” Wong said.

The related assistance and welfare system may be linked to the tax system, including reference to the consumption tax rebate system of other countries, he added.

Wong said if the government’s consumption tax revenue in a certain year was higher than targeted, it can be refunded to the people, and part of it will be enough to make up for the consumption tax they have paid.

However, he also called for transparency if the system is to be implemented. People should know that the aid is linked to national wealth and will return to the people.

A detailed database

Meanwhile, Wan Ya Shin, acting research director of the Institute for Democracy and Economic Affairs (Ideas), said the government should establish a database to identify groups that are in real need and that aid reaches them swiftly.

Pointing to the current pandemic, she said the government had focused on providing rapid response at the beginning of last year when the pandemic started.

However, one year later, assistance to the poor and vulnerable groups should be more targeted and extensive, Wan said.

“Targeting requires a good database to identify those who are poor and vulnerable.

“For those who have fallen into poverty because of the pandemic, we need to assist them as soon as possible.”

She also explained that poverty was a multi-faceted problem that went beyond just income, including issues revolving around education, medical needs, and the living environment.

Wan urged the government to address the two major issues, which are education and social security.

She said the pandemic has seriously affected the quality of education in the country.

“The pandemic has also shown that Malaysia needs a co-ordinated social security system that can function as a social protection network in times of crisis.

“It’s time to move away from social security that focuses on employment and build a co-ordinated social security system to prepare for future crises,” Wan said.

Malaysia also needs policies to help create job opportunities, technology upgrades, and training programmes to assist the unemployed during the pandemic, she said.

Social protection network

ISIS Malaysia fellow Dr Juita Mohamad said Malaysia needs to formalise a sustainable social protection network to assist the poor and the unemployed.

“The funding of such a plan is the key, and the government needs to explore various sources of funding, especially when we look forward to becoming a high-income country.

“Developed countries around the world have a strong social protection network to help vulnerable groups tide over the difficulties, no matter with or without a pandemic,” she said.

She also urged the government to review the poverty line income (PLI) from time to time so that the threshold should take into account the cost of living, inflation and other factors.

She said in the current situation of limited resources, the government would focus on the B40 group, which is classified as a more vulnerable group because of their poverty.

“It is as shocking as the pandemic. If they are fired by their employers, they will be pushed into deeper poverty, which may also drive them and their families out of the house they are currently living in.

“This will lead to other social and health problems afterwards, and this is why more efforts are focused on this group.”

She said that the pandemic has pushed the low-and-income groups into poverty because Malaysia’s unemployment rate was increasing and there was a lack of skills and job opportunities that do not require technology. – June 29, 2021.