The Malaysian Institute of Economic Research (MIER) has urged the government to stop handing out money as a measure to narrow the gap between rich and poor.

MIER executive director Zakariah Abdul Rashid said with Bantuan Rakyat 1Malaysia (BR1M) rising to record levels, it will only fuel inflation and do nothing for productivity.

"Our income does not grow fast enough, our productivity is rising... this creates a mismatch," the MIER economist said at the institute’s quarterly briefing today.

"That's why BR1M is only an ad hoc measure and not a solution," Zakariah ( left ) said, adding that Malaysian workers were in a precarious spot, not able to climb up the value chain.

He said that on paper, Malaysia looks like a roaring economy, with only 3.3 percent unemployment but a closer look reveals serious structural problems.

Foreign workers, who unofficially accounted for up to a third of the national workforce, kept wages tied down, but contribute to most of the new productivity.

In his report, Zakariah said, with more and more Malaysians receiving the BR1M payment, this populist measure would just be like a "helicopter rain of money".

The BN government has been handing out BR1M for three years since 2012.

RM3.37 billion handed out  last month

Under the latest instalment handed out  last month, a total of 6.48 million individuals received a total of  RM3.37 billion, the government said.

Dubbed BR1M 3.0, it was extended to those with a monthly household income of between RM3,000 and RM4,000.

More BR1M money is slated to be given out next year as compensation for the implementation of the goods and services tax (GST).

Elaborating on his criticism of BR1M, Zakariah pointed out that the real problem was that Malaysians now expected welfare because they could not earn more.

They generally earned more than the highest pay for the cheapest foreign worker, but could not match the lowest pay for the highly-paid foreign worker, he said.

"Reform needs to be done to increase the productivity for the lower income group (based on studies) but there is a political side to this as the move may not be popular for some... but the message is that the government have to be serious about this," Zakariah said.

At the same time, he also noted that Malaysia could not simply chase foreign workers away as they made up more than 90 percent of the construction and plantation workers in the country.

"Without them, nobody will harvest the fruits," he said.

MIER cited a Bank Negara Malaysia report that showed inflation has been "persistently rising" since August last year and in March this year, the Consumer Price Index (CPI) grew at 3.5 percent. For 2012, it was mostly below two percent.

"Most worrying, these direct cash transfers come from federal coffers, obtained from taxpayers’ money...

"They provide minimal economic multiplier effects on the real side of the economy, except pushing consumer prices to higher levels," Zakariah said, in an executive summary of MIER's quarterly economic outlook that was presented at the Park Royal Hotel in Kuala Lumpur today.

Other than a dozen reporters, about 20 people attended the talk that they had to pay for - mostly economists, academicians and government officers.