Universiti Tun Abdul Razak’s Barjoyai Bardai said such a scheme, mooted by former finance minister Daim Zainuddin, should be part of an overall subsidy plan.
Daim, who is now chairman of the advisory Council of Eminent Persons, said last year that the government spent about RM37 billion (US$9.3 billion) on subsidies and various kinds of aid, including cash handouts under the 1Malaysia People’s Aid (BR1M) programme.
He reportedly said last week that the money could instead be channelled to the fund which would then invest in assets, with the returns distributed as basic income each month instead of one-time payouts.
Barjoyai said Daim’s idea would take time to generate returns.
“Generally, such funds can only generate a maximum return of 10% per year. The idea is to let the fund grow so you won’t necessarily use the 10%,” he told FMT.
Barjoyai said if money meant for subsidies, BR1M and other forms of aid was channelled to the fund, the government would not have the same amounts it does now for the programmes.
“Those who need such aid will be screaming,” he added.
Barjoyai also said that on paper, the government could eliminate the need to budget for subsidies and rely on the returns from the fund after channelling the RM37 billion there – provided that the returns were at a rate of 10% a year for 10 years.
However, he said, in reality it might take longer especially since returns from endowment funds tended to be less than 10%, even when managed by some of the world’s best fund managers.
For example, Harvard University, which has an endowment fund worth US$37 billion, managed returns of 8.1% in 2017.
However, Barjoyai said this did not mean Daim’s idea should be ruled out.
He said it could perhaps be viewed as a way to fund local universities so that students need not rely on National Higher Education Fund Corporation (PTPTN) loans.
“In Turkey, universities are funded by endowment funds, though they started years ago. If our universities can be funded by endowment funds, then they can afford to charge students less,” he said.
In the shorter term, Barjoyai said the government could reduce its subsidies bill by better targeting direct subsidies.
“Perhaps the government can find a way to ensure only those who need subsidies receive them where petrol and gas tanks for cooking are concerned,” he said.
More importantly, Barjoyai said, the government could introduce new ways to help families earn better incomes rather than rely on subsidies.
He said one way was to boost the knowledge and skills of lower income families so they could earn income on the side or at home.
Dr M’s top adviser Daim considers basic income fund for poor