In the prime minister’s budget revision in January last year, one of the most hot button topics was the scaling down of four Jabatan Perkhidmatan Awam (JPA) scholarship programmes — the National Scholarship Programme; the Special Engineering Programme to study in France, Germany, Japan or South Korea; the Bursary Programme; and the First Degree Programme. The response to the reduction of government expenditure on these programmes was, unsurprisingly, scathing. After all, scholarships are meant to develop human capital for the future of Malaysia, and reducing them would mean a more shallow talent pool in the future.

I have argued in a previous article in this newspaper, titled “Empathy and Policymaking”, that that particular criticism of this move by the government required a bit more nuance. Economics is the study of the distribution of scarce resources to unlimited wants. As such, if some provision is made for scholarships, there is still an argument to be made on how one would choose to allocate them. In the circumstance of limited resources, can we not envisage a way to stretch the JPA scholarship allocation further? Could we not get more bang for our scholarship buck?

Before I tackle that question, I think it is appropriate to share a short anecdote. I am a (very grateful) JPA scholar. I obtained my scholarship 13 years ago, in 2004. At that time, to obtain a JPA scholarship, a student was required to attend an interview. I was hanging around at JPA with my friends, waiting for the interview to begin, and another friend, let’s call him C, was dropped off by his father, whom I had known for a reasonably long time. C’s father asked me outright, in public, in front of everyone else, “Your father makes good money, why are you applying for a scholarship?”

I fully admit that I was lost for words. People were staring — and let’s not forget, my receipt of a scholarship would mean one less scholarship for everyone else. So, these were my competitors in a way and I was a flummoxed 16-year-old. I did not respond to C’s father but I did reflect on it later. I remember feeling defensive — while it was true that my father was a successful SME businessman, a scholarship is supposed to be based on merit; if I deserved the scholarship because I was better qualified than others, then I should receive it over those others.

I have since reflected on that experience many times. As I have grown older, my view has, unsurprisingly, become more nuanced. On the one hand, I still believe that scholarships need to be merit-based and that high-calibre students should have the right to compete for them regardless of their family’s household income. On the other hand, I have also seen truckloads of Economics studies showing that key life outcome variables, such as educational attainment, school performance and personal income, are significantly correlated to family income. In short, richer children are almost universally associated with better scholastic performance. This makes sense — their parents can afford special tuition fees, provide a more conducive environment for learning, live in better neighbourhoods with better schools and teachers, and spare the children the burden of working to support the family income.

Therefore, when we hand out scholarships, are we actually handing out scholarships that in fact reward a student’s superior household income? Of course, not all rich students achieve scholastic brilliance, but, in studies, the correlation is very strong. Should we not, therefore, include some function of household income into the scholarship allocation decision? As my boss says, looking at company revenue is important, but we should look more closely at the company’s return on equity. In other words, there are significantly more challenges for a poor student to achieve straight A+s in the SPM vis-à-vis a rich student. Furthermore, a poor student who achieved even straight As in the SPM may have overachieved for her starting point in life compared to a rich student who achieved straight A+s.

I should be careful to note here that I am not suggesting that we give scholarships only to high-performing poor students at the expense of high-performing rich students. Rather, I propose the following. Suppose you have a set amount of scholarship expenditure to give each student. What if, instead of giving rich student R and poor student P the same scholarship amount, RMXX, we say, “R and P, because you are both outstanding students, we want to give you both scholarships. However, R, since you are rich, we will fund half of RMXX for you. P, since you are poor, we will grant you the full RMXX.” It does not have to be half or full either. It should be a spectrum, beginning from RMXX, with the allocation reducing as a student’s household income increases to, in this example, half of RMXX as the minimum allocation on pure merit to students from high-income households.

With this, the government can achieve two objectives. First, its expenditure on scholarships can go further, covering more students as not every student gets the full RMXX. This can also be done for bursaries and other such programmes. Second, I firmly believe one of the government’s main roles is to remove the arbitrary advantages some citizens may have over others. The rich child did not choose to be born into a rich family and, likewise, the poor child did not choose to be born into a poor family. Those are just the circumstances of their lives, and like everyone, they should try to make the most of what they have. The government, on the other hand, should work to reduce, as much as possible, arbitrary advantages that different citizens enjoy. Thus, agencies that provide scholarships, such as JPA, can help to increase social mobility and improve B40 life outcomes with such a measure.

One can argue that merit is merit and to deny a super-talented student a full scholarship just because he happens to be born into a rich family is discriminatory. Point well taken, except for the fact that household income is strongly correlated to scholastic performance. Did the student do well because he is outstanding in and of himself, or did he do well because his family happens to be wealthy? It could be both, of course, hence the need to have a minimum scholarship just for pure merit. This practice, by the way, is common in most elite private universities in the US. For example, Harvard College provides full financial aid to students whose annual household income is US$65,000 and below, with the financial aid reducing as household income increases. I would recommend that JPA consider such a policy to ensure that as many outstanding students as possible get to obtain a scholarship for their education, regardless of cost pressures or family circumstances.

 Nicholas Khaw is an economist with the Khazanah Research and Investment Strategy Division

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