PETALING JAYA: Discussions on the cost of living in urban areas are getting many Malaysians all worked up this week following the publication of an official guide on how much families should pay for their monthly groceries.
On July 12, netizens debated whether an infographic publicised by the Community Communications Department was realistic as it stated a family of four would only need RM391 per month for groceries, with items on the list including rice, chicken, bread, eggs, cooking oil and cooking gas.
According to another budgeting guide for Malaysians put forth by the Employees Provident Fund (EPF), a single person in the Klang Valley would require a monthly budget of between RM1,930 and RM2,600 to survive, whereas a married couple without children would require RM4,630, those who have a child would require RM5,980, and those who have two children will require RM6,890.
The guide suggests that singles should allocate RM610 for their monthly grocery budget while married couples without children should plan to spend RM960 on food each month.
For couples with one child, the monthly allocation for food should be RM1,420 while those with two children can cap it at RM1,690.
EPF stated that these were merely guides to assist their contributors in budgeting wisely, in accordance with their locations.
Checks on the ground showed that many income earners are trying to stretch the ringgit by buying cheaper meats such as chicken instead of seafood and shopping at cheaper places.
For mother of four Norlaili Aryati, 48, who lives at the Intan Baiduri People’s Housing Project (PPR) in Kuala Lumpur, the Community Communications Department’s suggestion of RM391 would barely cover essential food items for her household.“My household would need about 10 chickens per month as the children do not like to eat fish, and chicken is also cheaper than fish. One chicken can be priced at RM20.
“Just the food – both wet and dry items – would easily come to about RM1,000. My household income is now RM5,000 as three of my children are working and only one is still schooling,” said Norlaili, who makes a living babysitting for her neighbours.
She said that her grocery bill is her largest expense, so she has decided to reduce her spending on school transport and instead rely on the free bus services offered by the Kuala Lumpur City Council.
Lower middle income earner and portal sub-editor Khayrana Pilus, 49, from Seremban, said that eggs and chicken are her mainstay for her household with four children.
Khayrana, whose household income is about RM7,000, said at least two chickens are consumed in her house every week.
“I do not cook much vegetables as the children would not eat them, and it would just be for me and my husband. I would buy milk and cereal on pay day.
“I don’t buy cheese or butter, as they are too expensive. RM1,000 is what I spend on food every month. Luckily, I work from home, and this allows me to cook and skip eating out,” said Khayrana.
Housewife and mother of three, Prema Pekasam, 52, of Petaling Jaya, said she still watches her bills even though her household income may be in the top tier.
She said that her children, aged between 17 and 23, are still studying, and much of her household income goes for their education.
“I make sure that my grocery bill does not exceed RM2,000 every month. I cook almost every day as my children, even though they are in their early 20s, still bring packed lunches to college.
“Fresh items and groceries alone would come to between RM1,300 and RM1,500. My family also consumes about 15kg of rice a month.
“I go to wholesale marts such as NSK to buy my chicken as it is cheaper there. While supermarkets elsewhere may sell chickens for RM11 or more per kg, it is only RM8 per kg at these wholesale outlets.
“Every month, I would buy four whole chickens and also chicken parts. A supermarket trip would cost me about RM300 for a full trolley,” said Prema.
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The message from Tanjung Piai is really quite simple and straightforward.
The Malays are willing to vote for BN, MCA, PH or PPBM. To them, which party or coalition to vote for is secondary. Increasingly, they want a government that can work for them, not just good in hoodwinking.
Some pundits claimed that it was Umno-PAS union that pulled the Malay votes for BN. I would prefer to think that it is the “push factors” to vote against PPBM and Pakatan Harapan that caused the swing.
Frankly, I think most are quite fed-up with the PH government by now. Many must have paused to ask themselves which aspect of their life has become better since May 9, 2018.
Maybe they couldn’t find any other than the continued intrigues and infighting within PH component parties.
The Chinese, too, can vote for different candidates and different coalitions at different times. To them, it does not matter if it is PPBM, PH, BN or MCA. It shows Chinese Malaysians are not racist. They just want to be treated fairly; it does not matter which race represents them in the government.
PPBM, Amanah and PKR need to be reminded that the Chinese are not leftovers; they are productive citizens.
No one wishes to be insulted, so let no one tell the Chinese to go back to China again. This is totally unacceptable.
The Chinese value their children’s education very much because they know they can’t depend on the government for jobs. So, forums and congresses threatening to shut down certain schools should stop.
They want multilingual education for their children, so stop telling them what language they can or cannot learn. If the government cannot protect the minority, it does not deserve support, period.
Finally, all Malaysians – Malays, Chinese, Indians and others – hate an incompetent government. So stop talking about flying cars, third national car, crooked bridge, Kulim Airport which is a stone’s throw from Penang, and endless plans for Penang.
The Pakatan government has little choice nor time to check the slide on its popularity and goodwill from voters.
WHAT a difference a year makes. In a week, the Pakatan Harapan government will mark its first year in power but in stark contrast to the height of popularity it enjoyed then, support for the coalition has plunged.
A recent poll by the Merdeka Centre showed that the administration’s approval rating sank to 39% in March, a drastic drop from 79% recorded in May 31 last year.
Tun Dr Mahathir Mohamad’s performance approval rating as Prime Minister declined too – from 71% in August 2018 to 46% last month.
The survey firm polled 1,204 registered voters in March to gauge their opinions on the country’s economy, leadership and current issues.
Pakatan’s descent in popularity was attributed to the state of the economy as felt by consumers, the perceived strength of the government, anxieties over Malay rights and privileges and the treatment of other races in the country.
According to the findings, public satisfaction in Pakatan’s administration of the economy fell from 60% to 40% with voters largely unhappy with the rise in the cost of living.
The majority of respondents also disagreed with policies such as the move to abolish the death penalty while many were also against the scrapping of exams for Primary 1 to 3 and the plan to impose taxes on sugary drinks. Only 34% of voters polled were of the view that the country was headed in the right direction, with Malay respondents weighing in lower at 24%.
The survey showed that the main concern of Malaysians was the economy at 63%, followed by race-related issues and the flip-flop on decisions such as the government’s decision to withdraw from ratifying the International Convention on the Elimination of All Forms of Racial Discrimination (Icerd).
On the plus side, worries over corruption declined to 23% from 33% while 67% of respondents agreed that the government should be given more time to fulfil its election promises.
Its support rating may have dropped but to be fair, the Pakatan government has not done too badly since taking over, considering the state of the economy and the massive debts that it inherited from the previous disgraced administration.
Of course, there is much more to do, like addressing the cost of living, fulfilling housing needs and providing sustainable healthcare but the government has already fulfilled nearly a third of its pledges, improved its overall financial position and has made significant moves to tackle corruption in the civil service.
Ironically, the freer media landscape today is contributing to the perception that the Pakatan government is performing poorly or unable to handle issues raised by the opposition, especially those related to race and religion.
Malaysia has risen 22 places to rank 123 out of 180 countries in the latest World Press Freedom Index compiled by Reporters Without Borders (RSF). It now tops countries in South-East Asia – above Indonesia (124), the Philippines (134), Thailand (136), Myanmar (138), Cambodia (143), Singapore (151), Brunei (152), Laos (171) and Vietnam (176).
Unlike in the past, opposition parties now get unfettered coverage in the media and the welcome change has led to the diffusion of a more diverse range of views.
However, the new government has been rather inept in conveying its message on a wide range of issues in the print, online and social media since taking over Putrajaya.
It is also guilty of being sluggish in countering negative reactions or stemming news designed to elicit racial or religious sentiments, as could be seen in the cases of ratification of the Icerd, the Rome Statute and the Seafield Sri Maha Mariamman temple riots.
Opposition politicians and their supporters have been quick to exploit this weakness to manipulate opinion in the freer media environment.
A recent example is lawyer Tan Sri Muhammad Shafee Abdullah’s briefings to the media in the ongoing trial of former prime minister Datuk Seri Najib Razak over funds worth RM42mil from SRC International Sdn Bhd. It is clear that he is using the media to advocate the defence’s contention that Najib’s bank account was misused by people who were unauthorised, including Jho Low, as well as some rogue bankers.
In statements designed to strike a chord with those who may find it tedious to follow the proceedings, he claimed that the former PM would most likely turn out as a “victim” in the end.
As for getting away with untrue claims in the media, one such example was a supposedly secret “side agreement” for the East Coast Rail Link (ECRL) to enable a trade-off of 4,500 acres of land to China Communications Construction Company Ltd (CCCC). It was based on a non-legally binding Memorandum of Understanding (MoU) under which the Malaysian Investment Development Authority (Mida) was supposed to assist local companies to cooperate with CCCC to create special purpose companies for development of the economic accelerator projects worth RM10bil over 10 years.
Instead of clarifying the matter immediately, the media handlers of the Transport Ministry and Mida left it to Dr Mahathir’s special envoy to China, Tun Daim Zainuddin, to respond instead.
Ineffective communication teams in the various ministries and the lack of media coordination among them are the main reasons why Pakatan appears to be losing control of its narratives on performance and service.
What Pakatan needs is expertise and a clear media strategy to re-establish political credibility and trust among the people, especially the now disillusioned voters who had pinned their hopes on a better “New Malaysia”. Instead of just leaving the ministries to handle their own issues, the approach should be on keeping to the same page, through synchronisation of information and making better use of social media to enable agencies to engage directly with citizens.
With Malaysians having higher expectations and lower levels of patience, the Pakatan government has little choice nor time to check the slide on its popularity and improve on its public relations.
Along the Watchtower by M.Veera Pandiyan
Media consultant M. Veera Pandiyan likes this quote by George Bernard Shaw: The single biggest problem in communication is the illusion that it has taken place.
Most workers not paid enough to achieve minimum acceptable living standard
Wages too low, says Bank Negara - Survey: most workers not paid enough to achieve minimum acceptable living standard
ALTHOUGH the income levels of Malaysians have increased significantly over the years, voices of discontent are mounting over the decline in purchasing power.
Low and depressed salaries are among the grouses of executives and non-executives amid the apparent lifestyle changes of Malaysians.
With the rising cost of living, they lament that there is now less room for long-term savings and investments.
According to the Employees Job Happiness Index 2017 survey by JobStreet.com, one in three Malaysian employees want a pay rise, with rewards constituting 52% of the domestic workforce’s motivation to work.
In its 2017 Annual Report, Bank Negara points out that the expenditure of the bottom 40% (B40) of Malaysian households has expanded at a faster pace compared with their income.
From 2014 to 2016, the average B40 income level grew by 5.8% annually, marginally lower than the 6% growth in the B40 household spending in the same period.
It is also worth noting that half of working Malaysians only earned less than the national median of RM1,703 in 2016.
The central bank, in consideration of the low-wage conundrum, has recently recommended that employers use a “living wage” as a guideline to compensate their employees for their labour.
Essentially, the living wage refers to the income level needed to achieve a minimum acceptable standard of living, depending on the geographical location.
Citing Kuala Lumpur as an example, Bank Negara estimates that the living wage in the city two years ago was about RM2,700 for a single adult. The living wage estimate for a couple without a child was RM4,500, while for a couple with two children, the living wage was RM6,500.
As much as Malaysians support higher wages, which can outgrow escalating living cost, the bigger question is whether their employers are willing to increase wages significantly.
Also, is it realistic for employers to pay higher salaries in line with the suggested living wage?
Speaking to StarBizWeek, Malaysian Employers Federation (MEF) executive director Datuk Shamsuddin Bardan says that the living wage is unsuitable for adoption in Malaysia – for now.
He believes that the living wage will turn out to be damaging to the domestic labour market, given the rising cost of doing business in recent times.
<< Shamsuddin: While employers in Malaysia are more than happy to compensate workers for their work, people must also understand that they are bogged down by escalating costs.
Shamsuddin: While employers in Malaysia are more than happy to compensate workers for their work, people must also understand that they are bogged down by escalating costs.
“The living wage concept is unrealistic in Malaysia for the time being. While employers in Malaysia are more than happy to compensate workers for their work, people must also understand that they are bogged down by escalating costs.
“However, if the workers are proactive and upskill themselves to increase their productivity, then I do not see any reason for employers to refrain from offering higher pay packages.
“The Government on its part, should not micro-manage the economy to the extent of telling the employers how much to pay their workers. Instead, the Government can provide various incentives to the employers to bring down costs, which will translate into higher salaries or even exempt the employees’ bonuses from tax,” he says.
Socio Economic Research Centre executive director Lee Heng Guie welcomes Bank Negara’s living wage guideline “to prevent a wage employee from the deprivation of a decent standard of living”.
In order to push for the acceptance of a living wage in Malaysia, Lee recommends that government-linked companies (GLCs) adopt the concept gradually.
“The enforcement of commitments toward the living wage is a complex and costly issue, and more importantly, should be paid voluntarily by the employers.
“This would require extensive consultations and engagements with the stakeholders.
“Perhaps, as one of the largest employers in the country, GLCs can incorporate the living wage clause in their suppliers’ procurement contracts,” he says.
Concerns about Malaysia’s low-wage environment are not only centred on the low-skilled workers but across-the-board, as even executives lament about being lowly-compensated.
Are Malaysians being paid enough?
Based on data from the Statistics Department’s Salaries and Wages Survey Report 2016, most Malaysian workers are still paid significantly lower than the desired amount to achieve “minimum acceptable living standard”, at least in Kuala Lumpur.
Nearly 50% of working adults in Kuala Lumpur earned less than RM2,500 per month in 2016, notably lower than the RM2,700 living wage as suggested by Bank Negara.
In fact, up to 27% of households in Kuala Lumpur earned below the estimated living wage in 2016.
While wage growth has exceeded inflation over the years, real wage growth has been largely subtle. Real wage refers to income adjusted for inflation.
According to the MEF’s website, the salaries of executives were expected to grow by 5.55% in 2017, compared with 6.31% in 2013. As for non-executives, the average salary was anticipated to increase by 5.44% in 2017, down from 6.78% in 2013.
Given the 3.7% headline inflation registered in 2017, executives’ salaries may have just inched up by 1.85% on average, after factoring in inflation.
As for non-executives, their real wage could have grown by 1.74%, lesser than the executives in Malaysia.
While a slight moderation in headline inflation is expected this year, the purchasing power of Malaysians is unlikely to improve significantly.
In an earlier report by StarBiz, Shamsuddin described 2018 as a “bad year for employees and employers”, and projected Malaysians’ average salary increment to be lower than last year.
He blamed several new policies and measures introduced by the government such as the mandatory requirement for employers to defray levy for their foreign workers and the introduction of the Employment Insurance System, which would increase the costs borne by domestic businesses.
“It will be difficult for employers to raise salaries after this, given such dampeners,” he was reported as saying.
The biggest challenge now is to strike a balance between the market’s ability to compensate a worker and the worker’s required income level to achieve a minimum acceptable standard of living.
Sunway University Business School professor of economics Yeah Kim Leng says that more efforts have to be made to enhance the business and investment climate, in order to entice existing firms to expand and upgrade while new firms and start-ups emerge to create more high-paying jobs.
<< Yeah: A good quality and inclusive education system coupled with sound economic policies and effective implementation have enabled the two countries to sustain growth.
Yeah: A good quality and inclusive education system coupled with sound economic policies and effective implementation have enabled the two countries to sustain growth.
He also calls upon business owners and employees to forge appropriate wage-setting mechanisms, which are benchmarked against the productivity of the workers.
“The Government should consider additional fiscal incentives for firms that provide worker benefits to meet the living wage standard. For example, double tax deduction for transport allowance and other cost of living adjustments for the lower-salaried employees,” states Yeah.
Meanwhile, Lee opines that employees should be given a higher share of the profit generated by their employers moving forward, in line with the practice in many high-income nations abroad.
“It is actually reasonable for Malaysian employers to allocate a larger chunk of their profits to reward their workers and motivate them,” he says.
In 2016, the compensation of employees to gross domestic product (CE-to-GDP) ratio in Malaysia improved to 35.3%. The CE-to-GDP ratio shows the workers’ share in the profits made by business owners.
For every RM1 generated in 2016, 35.3 sen was paid to the employee and 59.5 sen went to corporate earnings, while five sen was given to the government in the form of taxes.
In its 11th Malaysia Plan, the Government aspires to increase the CE-to-GDP ratio substantially to 40%, from 34% in 2013.
While Malaysia’s CE-to-GDP ratio has continued to improve over the years, it is notably lower than several other high and middle-income countries.
The 11th Malaysia Plan document stated that the country’s CE-to-GDP ratio was lower than Australia (47.8%), South Korea (43.2%) and even South Africa (45.9%).
In an earlier media report, however, Malaysian Institute of Economic Research executive director Zakariah Abdul Rashid hinted that Malaysia was unlikely to reach its CE-to-GDP ratio target by 2020.
This was mainly as a result of Malaysia’s lower-than-expected productivity growth.
Low-wage conundrum
According to Bank Negara, the main underlying cause of Malaysia’s low-wage environment is the high numbers of cheap foreign workers.
Governor Tan Sri Muhammad Ibrahim says that the country should cut back on its foreign worker dependency to drive higher wages for Malaysians across-the-board.
“In Malaysia, our salaries and wages are low, as half of the working Malaysians earn less than RM1,700 per month and the average starting salary of a diploma graduate is only about RM350 above the minimum wage.
“It is high time to reform our labour market by creating high-quality, good-paying jobs for Malaysians,” he says.
Echoing a similar stance, Yeah says that the continuing reliance on foreign workers has resulted in a predominantly low wage-low productivity-low value economy, with many features of a middle-income trap.
“On one end of the wage-skill spectrum, the low-skilled jobs are being substituted by easy availability of unskilled foreign workers, thereby keeping the blue-collar wages from rising.
“At the other end, skilled job wages are being depressed by insufficient high-wage job creation, weak firm profitability amid rising market competition and excess capacity, industry consolidations and other factors resulting in a slack labour market,” he says.
<< Lee: The enforcement of commitments toward the living wage is a complex and costly issue, and more importantly, should be paid voluntarily by the employers.
Lee: The enforcement of commitments toward the living wage is a complex and costly issue, and more importantly, should be paid voluntarily by the employers.
It is worth noting that the share of high-skilled jobs has reduced to 37% in the period from 2011 to 2017, as compared to 45% from 2002 to 2010.
Malaysia has come a long way since its independence, transforming itself from a largely rural agragrian country to a regional economic powerhouse, which is driven by its strong services and manufacturing sectors.
While industrialisation and automation have grown robustly since the 1990s, economists feel that the country has not managed to substantially move up the value chain compared with other countries such as Singapore.
The lack of a high-skilled workforce, low productivity, employment opportunities to cater to high-skilled professionals and the presence of cheap foreign workers have all weighed down on the Malaysian economy, particularly the income levels of Malaysians.
Citing the examples of Singapore and Australia, which are successful in raising wages historically, Yeah says that structural reforms should be undertaken in Malaysia to reverse the low-wage conundrum.
“A good quality and inclusive education system coupled with sound economic policies and effective implementation have enabled the two countries to sustain growth, raise productivity and wages and shift to higher-value activities,” he says.
Sources: by Ganeshwaran Kana, The Star
Economist: Manage labour issues to achieve high-income economy
Cheap manpower: While Malaysia has clearly
benefitted from the presence of foreign workers, the role that foreign
workers play in the Malaysian economy must keep up with the times.
WHY are wages still low in Malaysia?
Well, there are six words to describe the main reason for this – “high dependence on low-skilled foreign workers”.
The issue of Malaysia’s huge reliance on low-skilled foreign labour has been raised time and again, but only moderate progress has been made in alleviating the situation.
Low-skilled foreign labour remains a prevalent feature of Malaysia’s economy, and according to Bank Negara, it is a major factor suppressing local wages and impeding the country’s progress towards a high-productivity nation.
As the central bank governor Tan Sri Muhammad Ibrahim puts it, Malaysia is currently weighed down by a low-wage, low-productivity trap, with the contributing factor being the prolonged reliance on low-skilled foreign workers.
While their existence may benefit individual firms in the short term, they could impose high macroeconomic costs to the economy over the longer term.
“Easy availability of cheap low-skilled foreign workers blunts the need for productivity improvement and automation. Employers keep wages low to maintain margins,” Muhammad says.
“Unfortunately, this depresses wages for local workers. The hiring of low-skilled foreign workers also promotes the creation of low-skilled jobs,” he adds.
From 2011 to 2017, the share of low-skilled jobs in Malaysia increased significantly to 16%, compared with only 8% in the period of 2002 to 2010. Apart from that, local economic sectors that rely on foreign workers such as agriculture, construction and manufacturing also suffer from low productivity.
Nevertheless, it is an undeniable fact that foreign workers do contribute somewhat to Malaysia’s economic growth.
The World Bank, in its study about three years ago noted that immigrant labour both high and low-skilled, continued to play a crucial role in Malaysia’s economic development, and would still be needed for the country to achieve high-income status by 2020.
The global institution’s econometric modeling suggested that a 10% net increase in low-skilled foreign workers could increase Malaysia’s gross domestic product (GDP) by as much as 1.1%. For every 10 new immigrant workers in a given state and sector, up to five new jobs may be created for Malaysians in that state and sector, it said.
Even so, the World Bank acknowledged that the influx of foreign labour did have a negative impact on the wages of some groups.
Its study found a 10% increase in immigration flow would reduce wages of the least-educated Malaysians, which represents 14% of the total labour force, by 0.74%. Overall, a 10% increase in immigration flow would slightly increase the wages of Malaysians by 0.14%.
According to Muhammad, while some argue that foreign employment creates economic activities, which consequently create jobs for local employment, it is neither the most efficient nor the desired route to create more mid-to-high-skilled jobs.
“Compared with local employment, foreign workers repatriate a large share of their incomes, which limits the spillover or multiplier effect on the domestic economy,” he explains.
Total outward remittances in 2017 stood at RM35.3bil, of which the bulk was accounted for by foreign workers.
In addition, Muhammad says high dependence on low-skilled foreign workers will also have an adverse effect of shaping Malaysia’s reputation as a low-skilled, labour-intensive destination.
Bank Negara says while Malaysia has clearly benefitted from the presence of foreign workers, the role that foreign workers play in the Malaysian economy must keep up with the times.
The central bank believes critical reforms to the country’s labour market are very much within its reach, and it should continue to gradually wean its dependence on foreign workers.
Malaysia should seize the opportunity now to set itself on a more productive, sophisticated and sustainable economic growth path, it says.
According to Muhammad, cutting back on foreign worker dependency can help to drive higher wages for Malaysians across-the-board.
The Government’s efforts in reducing the country’s dependency on low-skilled foreign workers have been ongoing since the implementation of the 8th Malaysia Plan (2001-2005), with greater clarity and a renewed focus to resolve the issue at hand upon the implementation of the 11th Malaysia Plan.
This has resulted in the steady decline in the share of documented foreign workers from 16.1% in 2013 to 12.0% of the labour force in 2017.
More can be done to build on the progress made, Bank Negara says, while proposing a five-pronged approach to managing foreign workers in Malaysia.
Firstly, it says, there must be a clear stance on the role of low-skilled foreign workers in Malaysia’s economic narrative. Secondly, policy implementation and changes must be gradual and clearly communicated to the industry.
Thirdly, existing demand-management tools (such as quotas, dependency ceilings and levies) can be reformed to be more market-driven, while incentivising the outcomes that are in line with Malaysia’s economic objectives.
Fourthly, there is room to ensure better treatment of foreign workers, be it improvements in working conditions or ensuring that foreign workers are paid as agreed. Lastly, it is also important to note that the proposed reforms must be complemented with effective monitoring and enforcement on the ground, particularly with respect to undocumented foreign workers.
An economist tells StarBizWeek that addressing the high reliance on foreign workers is pertinent for Malaysia’s transition into a high-income economy.
“Malaysia needs to shift its focus from importing cheap labour to managing labour flow that can maximise growth and facilitate its structural adjustment towards a higher income economy,” he says.
“It has been far too long for our economy to be swamped with foreign workers who are unskilled, or have low skill sets that could not contribute meaningfully to Malaysia’s aspiration of becoming a high-income economy,” he adds.
Apr 6, 2016 ... So if both the US and Malaysian Governments couldn't stem the fat tide in their
respective countries, who can? ... Putrajaya the obese-city!
The story is the same everywhere – the rising cost of living has not been accompanied by an increase in wages.
HERE we go again – another set of impressive growth figures. Bank Negara has announced Malaysia’s latest economic growth at a commendable 6.2% in the third quarter of 2017.
The pace of economic growth for the three months up to September was faster than the 5.8% registered in the second quarter of the year.
This growth rate was the fastest since June 2014.
On a quarter-on-quarter seasonally adjusted basis, the Malaysian economy posted a growth of 1.8% against 1.3% in the preceding quarter, according to the Statistics Department.
Malaysia’s robust economic growth has been attributed to private-sector spending and a continued strong performance in exports.
To quote Bank Negara governor Tan Sri Muhammad Ibrahim last Friday: “Expansion was seen across all economic sectors.”
But try explaining this impressive economic growth rate to the average salaried worker struggling to pay his monthly household bills.
Stretching the ringgit is especially great for those living in urban areas, and Malaysia is increasingly becoming urbanised.
The story is the same everywhere – the rising cost of living has not been accompanied by an increase in wages.
Compounding matters is the depreciation of the ringgit, reducing the purchasing power of the ordinary folk. They can’t buy the same amount of food as they used to previously.
Employers are being forced to cut operating costs to match declining profits.
Job security is becoming paramount. Many are fearful of losing their jobs, as companies cut cost to cope with the challenging business landscape.
And the reality is that many companies are not hiring, as evident from the unemployment rate of 3.4%.
The Malaysian Employers Federation (MEF) has cautioned that more people would be out of a job this year due to the current economic challenges.
Apart from the challenging landscape, technology has disrupted several brick-and-mortar businesses, forcing them to change their way of doing business.
According to MEF executive director Datuk Shamsuddin Bardan, economic challenges will compel bosses to review their workers’ requirements.
While official statistics show that the economy is charting a strong growth path, the trickle-down effect is not being felt.
Why is the sentiment on the ground different from what the politicians and officials are telling us? Why is there a disconnect in the economy?
Are the figures released by the government officials more accurate and authoritative compared with the loud grumblings on the ground that are anecdotical in nature devoid of proper findings?
We hear reports of supermarkets and hypermarkets closing down, but could that be because their business model no longer works as more Malaysians turn to online shopping, with e-commerce companies announcing huge jumps in traffic?
It is the same with the malls – retail outlets are reporting lower sales and this is compounded by the fact that there is an oversupply of malls.
International restaurant chains such as Hong Kong’s dim sum outlet Tim Ho Wan and South Korean bakery Tous Les Jours and South Korean barbeque restaurant Bulgogi Brothers have ceased operations.
But then again, it could be that their offerings and prices had failed to compete effectively against the local choices.
According to the central bank, demand is anchored in private-sector spending.
“On the supply side, the services and manufacturing sectors remain the key drivers of growth,” Muhammad said.
Looking ahead, the governor said that the economy this year is poised to register strong growth and likely to hit the upper end of the official target of 5.2%-5.7%.
The trickle-down effect is not being felt simply because there is uneven growth in the various sectors of the economy.
The property sector, which provides the biggest multiplier effect, continues to be in the doldrums.
The weak ringgit has had a big impact on the price of food, especially processed food and beverages that make up 74.3% of Malaysian household spending.
It was reported that Malaysia had imported a whopping RM38bil worth of food between January and October last year.
In recent weeks, the ringgit has strengthened to about RM4.16 against the US dollar. But it is still far from RM3.80 to the dollar and the outlook of the currency remains uncertain.
We can’t even hold our heads up against the Thai baht and Indonesian rupiah – two currencies that have appreciated against the ringgit.
The headline economic numbers are showing good growth, but Malaysians’ purchasing power has dropped and our living standards have eroded. That is the bottom line. We are living in denial if we do not admit this.
This column first appeared in StarBiz Premium.
Source: On the beat by Wong Chun Hai, TheStaronline
THE biggest concern among Malaysians, as we head towards the general election, is the cost of living. It’s as simple as that.
There have been plenty of political and religious side shows, but for many Malaysians, regardless of race, settling the many bills each month is what worries them the most.
Although Malaysia remains one of the cheapest countries to live in, its citizens have been spoilt for too long.
We are so used to having so many food items subsidised, including sugar, at one time, to the point that some of us have had difficulties adjusting ourselves.
Our neighbours still come to Malaysia to buy petrol, because ours is still cheaper than theirs.
But, as in any elections, politicians will always promise the heavens to get our votes. One of the promises, we have already heard, is the abolishment of the Goods and Services Tax.
No doubt that doing away with GST would appeal to voters, but seriously, even the opposition politicians calling for this are aware that it is a counter-productive move.
In the words of Tan Sri Mohd Sheriff Mohd Kassim, a highly-respected retired government servant, “it is too much of a fairy tale.”
The danger, of course, is that populist electoral pledges are always appealing, even if they are not rational.
Malaysia cannot depend on just about two million tax payers to foot the bill in a country of over 30 million people. It is unfair and unsustainable.
Taxing consumption gives more stability to revenue because income tax is regarded as highly volatile, as it depends very much on the ups and downs of businesses, according to Mohd Sheriff. When the market is soft, revenue collection always sees a dip.
For the government, which has already been criticised for having such a huge civil service, without GST, it could even mean its workers may not get paid when there is a downturn in the economy.
In the case of Malaysia, we have lost a substantial amount of revenue following the drop in oil price.
So, when politicians make promises, claiming plugging leakages is sufficient to end GST, it is really far-fetched and irresponsible.
The Malaysian tax system needs to continue to be more consumption-oriented to make it recession-proof, and, more importantly, the tax net just has to be widened. The bottom line is that, it is grossly unfair for two million people to shoulder the burden.
The government has done the right thing by widening the tax base and narrowing the fiscal deficit. The move to implement GST, introduced in 2014, has been proven right.
GST is needed to provide a strong substitute as a tax consumption capable of off-setting revenue loss from personal and corporate tax.
Beginning next month, India will join nearly 160 countries, including Malaysia, in introducing GST. Like Malaysia, when GST was first introduced, plenty of loud grumblings and doubts have rolled out.
Unlike Malaysia’s flat 6% across the board, India is introducing a more complicated four-tier GST tax structure of 5%, 12%, 18% and 28%, with lower rates for essential items and highest for luxury and demerits goods that would also attract additional cess.
In Singapore, GST was introduced on April 1, 1994, at 3%. The rate was increased to 4% in 2003, then 5% in 2004. It was raised to 7% on July 1, 2007.
Some politicians came under fire recently for purportedly calling for the abolishment of GST, however, some others clarified that they had merely called for a reduction in the tax’s percentage.
Another top opposition politician has come out as the strongest opponent of GST, reportedly saying the claim that Malaysia needs GST is false.
Some other politicians have described GST as regressive, but have not come out with clear ideas on how it should be tackled.
Nonetheless, the ruling party should not make light of these electoral promises.
For many in the urban middle class, they feel the squeeze the most.
They have struggled against the rising cost of living, paying house and car loans, and earning deep levels of debt, as one report aptly put.
The middle class, consisting of over 40% of Malaysians, is also in the income tax bracket, it must be noted.
Last year, an economist was quoted saying that 2016 was a year of a shrinking urban middle class and a happy upper class.
Shankar Chelliah, an associate professor at Universiti Sains Malaysia, said that the Malaysian middle class shrank in metropolitan centres across the country, and that most of its members would end the year almost 40% poorer than they were in 2015.
He said this would be due to the withdrawal of cooking oil and sugar subsidies, depreciation of the ringgit, decrease in foreign inflows and increase in outflows, among other factors.
For many in this middle class range who do not qualify for BR1M handouts, the government clearly has to come up with a range of programmes which can relieve them of these burdens.
It isn’t race or religious issues that will appeal to voters – they want to know how they can lead better lives, and if the opposition thinks contentious issues will translate into votes, they will be in for a surprise.
It is true that the heartland will continue to deliver the crucial votes, and the ruling party will benefit from this, but Malaysia has also become more urban and more connected.
At the end of the day, it is the bread and butter issues that matter most. Let’s hear some solid ideas and programmes which will reduce the burden of Malaysians.
By Wong Chun Wai On the beat, The Star
Wong Chun Wai began his career as a journalist in Penang, and has served The Star for over 27 years in various capacities and roles. He is now the group's managing director/chief executive officer and formerly the group chief editor.
On The Beat made its debut on Feb 23 1997 and Chun Wai has penned the column weekly without a break, except for the occasional press holiday when the paper was not published. In May 2011, a compilation of selected articles of On The Beat was published as a book and launched in conjunction with his 50th birthday. Chun Wai also comments on current issues in The Star.
