The Khazanah Research Institute (KRI), the Khazanah leaders and the managing director of KRI, Charon Mokhzani, should be commended and not criticised for presenting us with the professional report entitled ‘State of Households 11'.
From its insightful findings, we get the clear impression that all is not well in the state of Malaysia. In fact it appears that our wealth and incomes are still badly inequitable, after 59 years of Merdeka. The hard evidence in the ‘State of Households’ report also shows that our economic model and its implementation has perhaps become - skewed?
A. What has happened?
How is it that our households earning less thatn RM3,000 per month have such severe debt problems? How come they borrow about seven times their incomes in order to keep their heads above water? This lifestyle would make them very desperate as they will surely be living well beyond their means. They will therefore become almost permanently indebted to moneylenders, loan sharks and banks and will be at their mercy.
This is not only a skewed situation but indeed a pathetic way of life, that no one would want to face.
Why is this so? Have our five-year plans and our annual budgets not provided enough basic needs like housing, health, transport and education for the poor and low-income earners? Have their salaries been overly depressed and has inflation gradually made it so difficult to sustain themselves?
Ironically, at the same time we keep lauding our reasonably high economic growth rates of 4-5 percent per annum. But where, we can ask, has all the high economic growth been going? Has it mostly been accumulated by the rich and powerful and at the expense of the poor?
The KRI shows that only about 10.8 percent of urban households are resilient to shocks such as unemployment, accidents, death, interest rate changes and economic and financial slowdowns.
So what will happen to the vast majority of 89.2 percent of Malaysians who will be badly hit by economic and financial uncertainty and even recessionary and inflationary developments? They will surely suffer from new and severe hardships and will find it extremely difficult to make ends meet.
Worse still, if we do not urgently address these issues in the coming Budget and in future economic planning, there could be greater risks of social tensions, and even social unrest, sooner than later.
B. What can be done?
The solutions could be to -
1. Review and revise our current economic model and to make it more competitive, efficient and productive. Phase out the protectionism and preferences embedded in the economy. Khazanah could take the lead by becoming more open, less protected, more competitive and more productive.
Protection and privileges that are provided and enjoyed at the top echelons of our society do deny the full benefits of competition and higher productivity that would definitely benefit the poor and the less privileged. The proposed new economic model has to restructure our outmoded New Economic Policy (NEP) model to improve economic growth and provide better income distribution.
2. Increase food supplies and thus reduce the cost of living. This can be done by opening up more land for food and fish cultivation to all enterprising farmers and fishermen on a more equitable basis. Similarly, licences, permits, tenders and contracts, etc, could be made more competitive, so that production and productivity are encouraged rather than stymied.
3. Reduce drastically the high corruption and public expenditure wastage
If greater political will is shown to catch the really big corrupted fish, the present inefficiencies and distortions in the economy would be dramatically reduced. The impressive large government expenditures incurred every year, for so many years since Merdeka, could have resulted in more benefits to the poor and low -income groups, if there was less leakage through corruption, wastage and inefficiencies.
Budget 2017
4. For the longer term, we need a major restructuring in our economic plans and annual budgets. Budget 2017, that is due next month, could reallocate much more funds for the bottom 40 percent of our people. This could be done by providing far more funding for basic needs, like housing, transport, health, and even higher wages, that can be related to productivity and performance.
5. The necessary economic structural changes will also mean a better tax structure that will raise taxes from the higher income groups through more estate duties and wealth taxes.
Most importantly, the whole education system must be revamped and made much more relevant to our economic growth and especially our income distribution and income equity challenges. Graduate unemployment which is rising, should be reduced by increasing science and technical training and with the greater use of English.
A better education system will also certainly arrest the debilitating brain drain and capital outflows that are stifling and will continue to stifle economic growth, employment and higher incomes and keep us caught in the middle income trap.
C. Conclusion
The above proposed solutions are by no means exhaustive. But they represent some of my ideas on the essential need to innovate more in our economic plans and in better preparing our annual Budgets more innovatively and differently from the past. It cannot any longer be just ‘business as usual’, when the world is changing so fast.
We have to change or we will be changed from a relatively successful developing economy to a declining nation, with more hardships and poorer prospects for the bottom 40 percent of all Malaysians.
The Budget 2017 has to change the direction and depth of our transformation in our somewhat now skewed economic model and its implementation.
I hope the government realises the grave significance of the Khazanah State of Households report and boldly addresses and arrests the seriously skewed socio-economic distortions currently taking place in our beloved Malaysia.
Please act judiciously for the sake of our dear country and rakyat, before it’s too late.
RAMON NAVARATNAM is chairperson of Asli/Centre of Public Policy Studies.
