Time to review the plan
The Khazanah Research Institute (KRI), Khazanah leaders and managing director Datuk Charon Mokhzani should be commended for presenting us with its professional report titled State of Households II.
From its insightful findings, we get the clear impression that not all is well in the State of Malaysia. In fact, it appears that our wealth and incomes are still badly inequitable after 59 years of independence. The hard evidence in the report also shows that our economic model and its implementation has perhaps become skewed.
How is it that our households earning less that RM3,000 per month have such severe debt problems? How come they borrow about seven times their incomes in order to keep their head 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 money lenders, loan sharks and banks. This is not only a skewed situation but indeed a pathetic way of life.
Have our five-year plans and 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 made it so difficult for them to sustain themselves?
Ironically, at the same time we keep lauding our reasonably high economic growth rates of 4% to 5% per annum. But where 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 report shows that only about 10.8% 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 89.2% 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 tension and even social unrest.
What can be done? The solutions could be to:
1. Review and revise our current economic model and 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 enjoyed by 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 NEP to improve economic growth and provide better income distribution.
2. Increase food supply 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, contracts etc, could be made more competitive so that production and productivity are encouraged.
3. Reduce drastically the high corruption and public expenditure wastage. If greater political will is shown to catch the really big corrupt fish, the present inefficiencies and distortions in the economy would be dramatically reduced.
The impressive government expenditures incurred every year for so many years since Merdeka could have resulted in more benefits for the poor and low income groups if there was less leakage through corruption, wastage and inefficiencies.
4. For the longer term, we need a major restructuring in our economic plans and annual budgets. Budget 2017 which is due next month could reallocate more funds for the bottom 40% 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.
More importantly, the whole education system must be revamped to make it 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 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 stifle economic growth, employment and higher incomes and keep us caught in the middle income trap.
These 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.
It can no 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% of all Malaysians.
I hope the Government realises the grave significance of the Khazanah State of Households II report and boldly addresses and arrests the socio-economic distortions currently taking place in our beloved Malaysia!
Please act judiciously for the sake of our dear country.
Article published in The Star.