6.2PC OF GDP: Our social spending pales in comparison with the 18pc to 22pc in OECD countries, according to finance ministry data
RECENTLY, the chief executive officer of the Institute of Democracy Economic and Social Affairs (Ideas) Wan Saiful Wan Jan argued that Malaysia is fast becoming a welfare state.
He raised an alarm that if we don't cut our welfare spending, we will have a big crisis down the road. Unfortunately, his claim - which is not backed by any analysis or data - is not correct on several counts.
First of all, let's see how much we have spent on welfare.
Quick calculations using data from the Ministry of Finance show that in 2012, our welfare spending - which in-cludes energy subsidies, social services (housing, education, health) and direct wel-fare is equivalent to 6.2 per cent of the gross domestic product (GDP). If we exclude the energy subsidies and social services, the spending on direct wel-fare is less than 0.04 per cent of GDP. This is peanuts compared with other countries.
The social spending of the Organisation for Economic Cooperation and Development (OECD) countries ranges between 18 per cent and 22 per cent of GDP, much higher than Malaysia's.
Yes, welfare spending has increased slightly since 2000, but to claim that Malaysia is fast becoming a welfare state is a bit far-fetched.
Is it wrong to spend on programmes to help farmers and fisherman increase their production? Is it wrong to spend on educational assistance programmes, which include nutrition programmes, transport and allowances for poor pre-school and school children? Is it also wrong to give financial assistance to the poor, senior citizens, the disabled, Orang Asli and other vulnerable groups?
Second, using Greece and the United Kingdom as examples for "on the verge of bankruptcy" due to welfare policies is again blatantly ignoring economic evidence.
Yes, Greece was one of worst affected countries during the sovereign-debt crisis but this is due to decades-long twin deficits, while in the UK it was due to a bailout of their weak banking sector. In both countries, welfare spending is NOT the source of the crisis.
Even if we assume that huge welfare spending is the reason for the crisis, then we would expect those countries that spent the most on welfare to be the hardest hit or in crisis.
The top five social spenders - France, Denmark, Sweden, Belgium and Finland - are not on the verge of bankruptcy.
Iceland, a country which did default in 2008, is not even in the Top 25 list. Neither Greece nor the UK are among the top 10 spenders in Europe.
It is therefore important for the author to clarify what he meant by welfare state because the countries he had chosen as examples to undermine welfare poli-cies are not the biggest social spenders in Europe.
He also argued that welfare is bad because it rarely breeds competitiveness. That is again wrong and not supported by empirical evidence.
If welfare rarely breeds competitiveness, then why have European welfare states such as Norway, Finland, Sweden and Denmark always been highly ranked in the Global Competitiveness Index by the World Economic Forum? These are countries that have maintained their positions as top competitive countries, despite high public social spending.
Simply taking an ideological stance against welfare spending without considering real-world evidence seems disingenuous, especially since Wan Saiful heads a "research" institute.
While ideology may appear to be principled, overzealousness can lead to misuse or misrepre-sentation of data to suit the convictions of their advo-cates.
It is also puzzling that he is against the assistance for the poor and disadvan-taged considering that the political party of which he is a life-time member is a strong proponent of "Negara Kebajikan"!
One wonders then whether the output of such an insti-tute can have the intellectual rigour and honesty to be trusted.
But what is certain is that it is totally irresponsible to argue for the reduction of already low welfare spending, as this will expose the vulnerable to economic shocks over which they have no control to change or mitigate.
Even the Asian Development Bank in a report in July suggests that middle-income status countries in Asia Pacific should strengthen their systems of social protec-tion.
Our middling income per capita, rising costs of living and astronomical increase in housing prices have created an urgent need for social assistance for the poor, nee-dy and middle-income class citizens - who are slowly but surely falling through the cracks.
To simply ignore them and the human cost of such disregard because of rigid adherence to dogma is indeed a great injustice.