The Malaysian Insight

NOTHING short of an overhaul of the economy would do if the Pakatan Harapan government wants to achieve the targets of its shared prosperity vision (WKB), said economists.

That there are major flaws in the economy now is indicated in such developments as engineering graduates having to work as food delivery riders and that the bulk of the new jobs created are unskilled and semi-skilled positions.

It is also reflected in the poor distribution of wealth, Prof Barjoyai Bardai of Universiti Kebangsaan Malaysia told The Malaysian Insight.

RM200 billion of the country’s wealth are in the hands of the 50 richest families, leaving RM50 billion to be shared among 30 million Malaysians, he said.

These stark disparities are what the PH administration wants to end with its new shared prosperity vision, which is essentially an economic road map for the next 10 years, and which will be launched by Prime Minister Dr Mahathir Mohamad this morning.

Economist Assoc Prof Mohd Yusof Saari said the vision would only succeed if PH is willing to overhaul the economy the way a mechanic overhauls a car engine.  

Yusof told The Malaysian Insight this overhaul must include the labour market, where youth produced by the country’s schools and universities are not equipped with the skills demanded by employers; the supply chain of goods and food which cartels are monopolising and setting the prices; the imbalance in development between industries in urban areas and industries in rural areas such as agriculture and fisheries; and a regressive tax system.

“In order to be successful, the shared prosperity vision must overhaul the entire economy and not just bits and pieces because everything is inter-connected,” Yusof of Universiti Putra Malaysia.  

Low-tech, low value

It has been reported that the agenda’s core focus is to reduce income disparities between regions and between the rich and working classes.

The vision will also be the core pillar of the five-year 12th and 13th Malaysia Plans and elements of it will also be in Budget 2020.

UKM’s Barjoyai said much of the country’s economic growth in the last 60 years has benefited the big companies and the  owners of capital.

According to government data on which the vision plan is based, more than 60% of industries, from manufacturing to services to commodities, remain low-tech and low value.

Coupled with easy access to cheap foreign labour, these have kept wages low for Malaysian semi-skilled and unskilled workers.

The effect of these factors can be seen in the average household income, said Barjoyai.

Slightly more than half of Malaysian households earn an average income of RM2,000 per month even though Malaysia is considered an economic success compared to its Southeast Asian neighbours, he said.  

“A real living wage for a family of four in Malaysia today should be around RM2,500 per month,” said Barjoyai, referring to a 2017 Bank Negara study on wages and cost of living.    

“This 50% who earn RM2,000 per month also have little or no savings.”

Besides getting Malaysian industries to move up the value chain, UPM’s Yusof said the administration must take a holistic approach in planning the economy.

In the past, the government used piecemeal measures to help different communities without looking at how they lived and worked in the larger economy.

“A simple example is when the government gives incentives to farmers to plant vegetables to increase their income,” said Yusuf.

“But it does not complement this by ensuring that they can market their produce and sell to consumers. So in the end, the farmers are left out of the market.

Another example is giving Bumiputera students the opportunity to study in the university yet when they graduate, they end up working in another field, Yusuf said.  

“This is an example of how we only focus on getting degrees without taking into consideration whether what they are studying is needed by industries and the labour market”. – October 5, 2019.