The government should dismantle subsidies and continue with Bantuan Rakyat 1Malaysia (BR1M) cash handouts, a report by Khazanah Research Institute said.

The institute said this would avoid businesses benefiting, instead of households.

According to 'The State of Households' report released today, it is estimated that in 2013, less than 23.8 percent (RM5.6 billion) of the entire fuel subsidy (RM23.5 billion) went to households.

The remaining RM17.9 billion or more went to businesses, corporations and elsewhere.

The report stated that less than 20 percent (RM4 billion) of the gas subsidy (RM20.1 billion), through Petronas, went to households whereas the remaining RM16 billion or more went to businesses, corporations and elsewhere.

The report pointed out that “only 22 percent of the entire energy subsidy went to households” in 2013.

"We need to do more, but in a targeted, progressive way... blanket subsidies are regressive. The rich enjoy more. We should replace these with cash transfers, like BR1M," it stressed.

The report was presented by Khazanah Research Institute managing director Charon Mokhzani and launched by Khazanah Nasional Bhd deputy chairperson Nor Mohammed Yakcop.

 
It pointed out that each household, on the average, receives an annual subsidy of RM625 per year for electricity and RM885 per year for fuel, but most of this is enjoyed by the high-income households, which get about 80 percent of the subsidies.
 
For example, Charon ( right ) said that a motorcyclist with a Honda EX5 only enjoyed RM5 of petrol subsidy for every 1,000km he travelled but a rich person who rode a luxury car like the BMW 318, enjoyed a RM22.50 subsidy with the same distance travelled.
 
He opined that subsidy is not an efficient way of helping the poor people and the mechanism needed to be more targeted.
 
Echoing Charon, Nor Mohammed said, during the question and answer session, that there was no need to subsidise international companies in this country.
 
“There are international companies, they are doing international businesses and earning international profits, they should not add subsidy to that,” he added.
 
However, Nor Mohammed said that the most important thing was to provide education and skills to the people to earn higher incomes and then subsidies become less important.
 
Although the report noted that the productivity of the Malaysian workforce had increased, wages did not increase in tandem.
 
It showed that only 32.9 percent of the Malaysa GDP went to salaries and wages in 2011.
 
In 2013, the report stated, that the median monthly salaries and wages per month for individual was RM1,700.
 
During the same period, the Employees Provident Fund (EPF) data on individual incomes showed that 96 percent of the active members earned less than RM6,000 a month.
 
Meanwhile, 85 percent and 62 percent of the members earned less than RM4,000 and RM2,000 per month respectively.
 
“The savings of the top 17,061 (EPF) members are greater than the total savings of the entire bottom 44 percent, which comprises 2,854,419 members,” the report stated, pointing out the inequality of incomes.
 
Although the proportion of tertiary educated workers had increased from 1982 to 2012, out of the 24 percent of the total workforce, only 10.4 percent were degree holders.
 
“This lack of education of the overwhelming majority of our workforce is one of the most important causes of our low wages and low household income,” it stated.
 
However, the report justified the need of migrant workers, claiming that it helped create more jobs for the natives.
 
“Theory predicts that migrant labour has a substitution effect (it displaces native workers) and a scale effect (with more migrant workers output expands, thus creating jobs for natives).
 
“Overall, migrant workers have been good for creating jobs for native workers. The exception to this however are native workers who only have primary education or lower, who are then displaced by unskilled migrant workers,” it added.