High-income Malaysia to deepen rich-poor gap

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In an analysis lambasting Prime Minister Najib Razak’s push for Malaysia to become a high-income nation, an Astro Awani writer said the obsession will divide the country into the very rich few against 80 of low wage earners.

The writer, Anas Alam Faizli, takes the government to task on a policy that he says appears to be far-fetched and unsustainable.

Anas said the high-income nation policy will fail due to the ever widening gap between the various classes in Malaysia, as it will lift the rich to become richer.

And, needless to say, it will suppress the poor, to become poorer.

He said it appears the country’s policies in place to reach the high-income nation is sacrificing locals for cheap foreign labour, while the rich have placed higher profit targets ahead of their national duties.

Saying that noble intentions have failed he cited the affirmative action plan under the National Economic Plan (NEP) for example.

The radio station’s portal writer, full of sarcasm, pointed out how the NEP) turned into a rich man, poor man battle that has set the stage for the widening gap between the top earners and the bottom earners.

Instead of eradicating poverty, and restructure the society to give the bottom level earners – mostly the Bumiputera – a chance to earn more and own a larger share of the economy, the NEP he said created an elite few who failed to pass down their windfall gains to the bottom level.

Trickling down to a disaster
With the trickle down effect failing to work, it perpetuated high inequality amongst Malaysians.

The country then saw another missed target, that is to create a bigger middle class.
Najib has set a new target to achieve a per capita income of US$15,000 by the year 2020, which means the Gross National Income (GNI) – a measure of the country’s production adjusted with net incomes from overseas – divided by the country’s population must equal to US$15,000, the writer said.

Achievable by 2017-2018, the current per capita income of Malaysia is $US 9,970 but behind the official target, the article said, is the possibility this may be met if the income of about 100 of the richest people in the country were to rise.

But at what price?
The high-income target is measured in US dollar which is already problematic, as researchers and economists expressed concern over the weakness of the ringgit versus the dollar.

“But even if we put this currency issue aside, the $US 15,000 per capita income target cannot be that headline “dream” we can congratulate ourselves on when achieved.”

Why is this ‘dream’ a fallacy?
Firstly, about 90% of the income of Malaysian households are attributed to wage and salary, including self-employment.

Official figures shows the gross domestic product (GDP) breakdown by income is as follows: 28% is from wages, 67% of business profits, and 5% from taxes/subsidies.

For the past 15 years, the contribution of wages and salaries to the Malaysian GDP has fluctuated between 26 to 32% and the only reason it hiked up to 32% was due to the decline of corporate profit during the recession in 2008.

In Singapore, this number is already as high as 42% in 1997. (He meant the wages contribution to the GDP).

In other developed countries such as Korea, Canada, the UK and Japan, the corresponding number is 46%, 51%, 55% and 52%, respectively.

Malaysians are not getting the bulk of the country’s production into their pockets, while wages contribution is set to decline to 21% under Najib’s government targets, the writer said.

“In fact, for the past 15 years as well, the salaries of Malaysian workers have been lagging behind our productivity.

Productivity growth rates were in line with rates of growth of salary circa 1998, but it has been slowly lagging thereon.

As of last year, the productivity in the manufacturing sector is 45% above salaries, which he said roughly translates into the fact that workers are underpaid by at least 45%.

On top of that, the national workers retirement fund called the EPF reported that 78.6% of its contributor’s database earn RM3,000 monthly or less.

This is another illustration of how low the majority of the Malaysian people’s incomes are at the individual level.

So what is this High Income Nation?
Anas said a graduate in Malaysia now earns only 2.5 times higher than a graduate in 1980.

A graduate in 1980 would be able to afford a car and a house with a combination of 12 months and 56 months of the salary, but today, a graduate has to fork about 71 months of his salary for a descent car and 140 months for a house far outside Kuala Lumpur.

The cost of living has spiralled viciously upwards and the purchasing power of the average salary earner has slumped.

Income growth measured from 1970 have shown that the Top 20% households so far overtake that of the Middle 40% and the Bottom 40% households, while the income gap between them on average is widening.

73% of households earn less than RM5,000, with an average of 2 income earners or workers per household.

“Malaysian dream?” he asked.
“If we plan to have one, we cannot leave the average salary man behind, the man that forms more than 80% of the Malaysian population,” he said.

The high-income nation agenda is part of the Wawasan 2020 which was set by former Prime Minister Tun Mahathir Mohamad.

Najib is now seen rushing to accomplish this dream, a dream Mahathir said Najib will not be able to deliver.