Bank Negara: Include exit mechanism to make BR1M effective

 |Mar 5, 2018

KUALA LUMPUR: Continuous refinements are necessary to enable 1Malaysia People’s Aid to function efficiently, says Bank Negara Malaysia.

At the entry level, the cash transfers must be prioritised for the rightful groups, and equally important is for the BR1M beneficiaries to evolve out of the lower-income bracket over time.

“The sustainability of BR1M would depend on mobilising the lower income groups to break the vicious inter-generational poverty cycle and moving up the income ladder.

“To do so, BR1M could be enhanced by ensuring there is an exit mechanism, by linking it to promotional programmes to enhance human capital and productivity,” Bank Negara said.

It cited that in other countries, such as the United States and Latin America, some forms of conditionalities on schooling and healthcare were attached to social transfers.

“Given structural changes (such as aging population, changing nature of jobs due to technology and shifts in the social fabric) already taking place in our society, we need to ensure a comprehensive social protection framework for the future.”

In the long term, any cash assistance programmes should only form one part of a more comprehensive national social security system, it said.

“Critically, the social security system must not engender an over-reliance on state welfare or stigmatise the poor, but rather empower and build the capacity of households,” the central bank said.

Broader fiscal, structural and social policies, including on the labour market and education, were key in shaping the adequate level and coverage of the social protection framework, it added.

Bank Negara said a holistic framework for national social security system would rest on three key pillars – protection, prevention and promotion.

At the very least, for protection, there should be what is known as “social protection floor”, which includes BR1M or any other form of income security targeting the poor, lower income and other vulnerable groups.

In terms of prevention, which focuses on social insurance (including pension and unemployment insurance), the recently introduced Employment Insurance Sys­tem is a step in the right direction.

“Of importance is to complement the income support with the promotional aspect, that is, tools and opportunities for Malaysians to have access to quality jobs, better livelihoods and higher standard of living.

“Ultimately, these steps towards a more comprehensive social security system would require a strong fiscal position and management,” it added. — Bernama