Economic incentives are incredibly difficult to conceptualise and implement — even if all you want to do is to give something for free.

YOU would think it would be a good thing to get something for free, but the recent announcement of the smartphone rebates seems to be a source of complaints.

The Prime Minister announced in last year’s Budget in September that Malaysians between 21 and 30 who earned under RM3,000 a month could get a rebate of RM200 on handphones (RM200 rebate for smartphones worth not more than RM500 next year, Nation, Dec 28, 2012; tinyurl.com/aotdge9).

When details first emerged that the rebate would only apply to handphones priced under RM500, many argued that the cap was too low, despite there being more than 20 models available at that price point at this time.

The Government has since removed that limit, but it goes to show that economic incentives are incredibly difficult to conceptualise and implement – even if, in essence, all you want to do is to give something for free.

The organisation I was working for faced this sort of quandary when trying to improve the Returning Expert Programme (REP).

The objective of the REP was to help Malaysians returning to work in Malaysia. Moving from one country to another can be a costly affair, and they were probably taking a salary cut on top of that, so it was important to lower the barrier to entry as much as possible.

In it’s original form, one of its benefits was to allow returning Malaysians to import their cars tax-free. This could be a large advantage because, depending on how luxurious your car was, you could save up to a few hundred thousand ringgit.

However, analysis showed that some on the REP were bringing in extremely high-value cars (in fact, sometimes more than one of the same make and type) although they were relatively young and inexperienced in the workplace. This meant the benefit they received was not commensurate with the talent they were bringing to local industry.

As a result, the REP was tweaked and the tax exemption on imported cars was removed. Apart from that, a new benefit was introduced, giving returning Malaysians the option to have a flat income tax rate of 15% for five years (to be exact: the rate is fixed at 15% from the first ringgit earned, which is quite different from the usual way of calculating income tax).

Removing the ability to import cars tax-free addressed the problem of people bringing in cars way above their pay grade. (REP participants could also buy locally-assembled “Completely Knocked Down”, ie CKD, cars tax free if they wanted.)

Furthermore, the income tax benefit meant that one had to work in Malaysia and not just be a transitory visitor in order to take advantage of the tax benefit. On top of that, the way the tax incentive was constructed meant that you had to be in a high-paying job for it to be really worth something.

Thus, an old system that had loopholes which didn’t guarantee that people ended up working in Malaysia was replaced with one that benefited only people who contributed in high-value jobs.

What was not expected was the backlash from Malaysians (in Malaysia) who were angry that breaks were being given to “traitors” who had left the country, while the ones who were loyal to Malaysia got nothing at all in recognition.

On the other hand, some Malaysians abroad said that the older scheme was more attractive, as they would save more money if they didn’t have to sell their existing car and buy a new one in Malaysia (even if it was tax-free).

It was difficult to communicate the reasoning to the two parties who both thought they had lost out. Although the good of the many outweigh those of the few, you don’t see it that way when you are part of the few that lose out.

And even when you keep in mind the end goal to get more talent into Malaysia, it is difficult to ascertain how successful the scheme has been. Although the rate of people joining the programme has effectively increased by a factor of 10 over the last two years, a key question is how many of them would have returned anyway without the need for the incentive.

I personally believe that, at the very least, the REP benefits provide a starting point for further conversations about opportunities in Malaysia, and returning becomes an option to be considered. I also believe that it is now easier to try and bridge those returning Malaysians with local industry as a result of the programme.

Yes, it is easy to criticise a programme like the REP, yet it is rare to hear of constructive input that takes into account the big picture of trying to improve Malaysian industry as a whole. The best thing I can say about it at the moment is that it is still a work in progress.

In comparison, the handphone rebate seems much more straightforward. The objective is to increase mobile Internet use among the young.

According to the Hand Phone Users Survey 2011 published by the MCMC, 89.6% of handphone users polled earn less than RM3,000 while 87.3% handphone users surveyed are still using normal phones without smartphone capabilities.

So the objective is to get people who don’t own a smartphone to buy one. At least the response seems to be encouraging – the registration website has been down since earlier this week, presumably due to high traffic. The fact that there is a quota of 1.5 million applicants for this round must have made the demand more acute.

Yet the fundamental question about this rebate remains: are those who manage to register the ones who will most benefit from the scheme? It seems ironic that to participate in a programme to get better access to the Internet you need to be able to use the Internet.

And, like with the REP, I would be interested to know how many people who buy smartphones under this scheme would have done so anyway without the RM200 rebate.

That’s why I thought the RM500 limit was a good idea, since people who already own better phones would not have participated in the programme for themselves. Otherwise, they would just buy a new phone and upgrade.

After all, who doesn’t want something for free?

■ Logic is the antithesis of emotion but mathematician-turned-scriptwriter Dzof Azmi’s theory is that people need both to make sense of life’s vagaries and contradictions.

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