Grow­ing Back­wards

The cost of liv­ing is con­stantly on the rise in Malaysia whereas the econ­omy is not ex­pand­ing in the same pro­por­tion. The is­sue needs ur­gent solutions and the Malaysian gov­ern­ment must act soon.

Southasia - - CONTENTS - By Asna Ali

Malaysia is a for­ward-look­ing na­tion but its econ­omy is go­ing


The ris­ing cost of liv­ing in con­junc­tion with stag­nat­ing wages has been ad­versely im­pact­ing pop­u­la­tions around the world. Coun­tries that are far apart in ge­o­graph­i­cal terms but closely linked due to trade ties and re­liance on the same scarce re­sources are feel­ing the ef­fects of shrink­ing in­comes. Malaysia, which is of­ten cited as an ex­am­ple of the kind of econ­omy a de­vel­op­ing coun­try can aspire for, is also fac­ing the is­sue of the mid­dle class be­ing squeezed by these con­straints.

There are in­creas­ing dis­cus­sions in the Malaysian press re­gard­ing what is viewed as a se­ri­ous prob­lem and a bar­rier to the coun­try’s over­all growth. Be­neath the out­ward sur­face of pros­per­ity, the Malaysian econ­omy is fac­ing a mul­ti­tude of is­sues which are lead­ing to stag­nat­ing wages and price hikes. Busi­nesses in Malaysia are not see­ing any sig­nif­i­cant growth in prof­its and are in turn forced to pass on their costs to con­sumers while be­ing un­able to of­fer in­cre­ments in salary to their em­ploy­ees. This cre­ates a vi­cious cy­cle since the em­ploy­ees are un­able to pur­chase higher priced items as con­sumers be­cause of their low in­comes which leads to slow busi­ness growth. Ac­cord­ing to the De­part­ment of Sta­tis­tics, wage in­creases af­ter ad­just­ing for in­fla­tion, have been mi­nus­cule over the past few years. In ur­ban ar­eas, where the cost of liv­ing is al­ready higher, this lack of in­come growth leads to big­ger prob­lems.

How­ever, the is­sue is not wholly due to slow growth of busi­nesses or their un­will­ing­ness to in­crease wages but also the way in­come is gen­er­ated and dis­trib­uted in the Malaysian econ­omy. Like other coun­tries re­liant on the man­u­fac­tur­ing busi­nesses, Malaysia is feel­ing the pinch of job re­dun­dan­cies in the face of grow­ing au­to­ma­tion. The jobs on of­fer in the man­u­fac­tur­ing sec­tor are gen­er­ally labour in­ten­sive and at­tract low-skilled in­di­vid­u­als. In or­der to save costs, labour is of­ten hired from amongst im­mi­grants who de­mand lesser pay than Malaysian na­tion­als. This too has be­come a thorn in the side of peo­ple who are see­ing their in­comes and op­por­tu­ni­ties shrink while jobs con­tinue to be of­fered to for­eign

work­ers. In ad­di­tion, em­ploy­ees get a lesser share of busi­ness prof­its as their in­come as com­pared to Malaysia’s neigh­bour­ing coun­tries. For ev­ery ring­git (the lo­cal cur­rency) earned by a busi­ness, em­ploy­ees re­ceived only 35 cents on av­er­age as their wages. It is also worth not­ing here that Malaysia does not have a strong sys­tem of union­iza­tion which has left em­ploy­ees with­out the power to col­lec­tively bar­gain for more pay and ben­e­fits.

There is also the is­sue of in­di­rect tax­a­tion. The in­crease in cost of liv­ing is widely at­trib­uted to the gov­ern­ment’s im­po­si­tion of the Goods and Ser­vices Tax. Ac­cord­ing to ex­perts, the im­pact of GST could have been borne with ease had wage growth con­tin­ued. How­ever, since in­comes have al­ready be­come sta­ble at a cer­tain point, ris­ing costs through im­po­si­tion of in­di­rect taxes is an ad­di­tional bur­den on con­sumers.

All these fac­tors com­bine with a dis­trust of a sys­tem which seems rigged against or­di­nary Malaysians. There is talk in the me­dia of shady busi­ness prac­tices through which favoured in­di­vid­u­als may re­ceive much higher salaries be­cause of crony­ism while those with­out any­one to give them a leg up are stuck in dead-end po­si­tions. Whether this par­tic­u­lar claim is true or not, the per­cep­tion of the is­sue is caus­ing dis­sat­is­fac­tion in the Malaysian pub­lic.

As ba­sic ne­ces­si­ties be­come more and more un­af­ford­able, life is chang­ing in Malaysia for those at the start of their ca­reers and also those nearing the age of re­tire­ment. Fresh grad­u­ates are find­ing that there are fewer places to work in, the jobs on of­fer don’t of­fer much growth or in­come and their fu­ture life plans now have to be more mod­est and have longer time­lines. In­creased prop­erty prices mean that like in many other coun­tries around the world, the dream of own­ing a house may not come true for many young Malaysians. Mean­while, older em­ploy­ees are hav­ing to de­fer their re­tire­ments in or­der to make ends meet.

Econ­o­mists and ex­perts both in Malaysia and abroad of­fer sev­eral solutions to the eco­nomic is­sues which are cur­rently plagu­ing the coun­try. How­ever, the im­ple­men­ta­tion of these would re­quire the gov­ern­ment to first ac­knowl­edge the ex­is­tence of a sys­temic prob­lem. Thus far, the strat­egy has largely been to lay the blame on busi­nesses and on cit­i­zens them­selves. When the Malaysian Prime Min­is­ter, Na­jeeb Razak spoke on the is­sue he was quick to de­fend the GST while also stat­ing that the is­sue of low in­comes was caused by low aca­demic qual­i­fi­ca­tions which barred peo­ple from be­ing of­fered higher pay­ing jobs. While there may be some truth to this state­ment, it re­fuses to ac­count for the fact that a gov­ern­ment’s re­spon­si­bil­ity is to en­sure that all peo­ple in a coun­try, re­gard­less of their ed­u­ca­tion level, are able to earn enough to sus­tain them­selves.

More re­cently, the gov­ern­ment has started look­ing into ways to re­duce the cost of liv­ing af­ter the is­sue has been raised con­sis­tently on a num­ber of fo­rums. The Do­mes­tic Trade, Co­op­er­a­tives and Con­sumerism Min­istry has an­nounced mea­sures which aim to pro­mote fair pric­ing and sub­si­dized sup­ply of cer­tain prod­ucts to re­duce the bur­den on end con­sumers. Though this is a pos­i­tive step, its ef­fects on help­ing Malaysians bal­ance their house­hold bud­gets re­main to be seen.

Apart from such stop­gap mea­sures, there is a need to con­duct a deep, coun­try­wide anal­y­sis to find out the root causes of this multi-lay­ered is­sue. The com­ing years point to an over­all slow­ing down of the world econ­omy, par­tic­u­larly in man­u­fac­tur­ing in­dus­tries which rely on low skilled labour. In­stead of see­ing this as an op­por­tu­nity to re­vamp their eco­nomic model and point­ing the work­force in a new di­rec­tion for the fu­ture, most gov­ern­ments are look­ing back­wards by promis­ing to kick out im­mi­grants and bring back fac­to­ries. The Malaysian gov­ern­ment should not fol­low this ex­am­ple and should in­stead change the course of the coun­try’s econ­omy by in­vest­ing in those en­ter­prises that are ex­pected to grow in the fu­ture. Not all jobs are go­ing to dis­ap­pear in the kind of tech­nol­ogy rich world which will ex­ist a decade or two from now. But the na­ture of work i.e. the amount and kind of work to be done will change dras­ti­cally. In such cir­cum­stances only those economies will man­age to suc­ceed which po­si­tion them­selves in the right di­rec­tion to­day.

The Malaysian gov­ern­ment would do well to lis­ten to econ­o­mists who, in­stead of of­fer­ing quick band-aid solutions, are urg­ing pol­i­cy­mak­ers to have an in-depth look at the is­sues. Wage stag­na­tion and cost of liv­ing in­creases are putting un­due pres­sures on the mid­dle class, lead­ing to the cre­ation of economies in which only the rich and poor ex­ist. Such a sit­u­a­tion is un­ten­able and can only have a se­verely neg­a­tive im­pact on Malaysia’s de­vel­op­ment goals and its stand­ing in the world as a mod­ern, well-de­vel­oped coun­try. Only fore­sight­ed­ness and a sound de­ci­sion­mak­ing abil­ity can lift the Malaysian econ­omy out of the quag­mire. The ur­gency of the is­sue and its far-reach­ing im­pact should be un­der­stood by the Malaysian gov­ern­ment be­fore it is too late. The writer is a busi­ness grad­u­ate. She has an in­ter­est in po­lit­i­cal and so­cial is­sues.

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