PAKATAN Harapan’s new economic agenda has challenging targets, admits one of its architects, but Malaysians must strive to meet them if they want an economy that truly serves both the rich and poor.

Among the eye-catching goals in the Shared Prosperity Vision 2030 (SPV2030) handbook is ensuring B40 households get a monthly income of RM5,800.

The Statistics Department’s latest income survey puts the median salary for these households at RM3,000 per month.

SPV2030 also aims to increase employee compensation to gross domestic product to 48% from 35.7%, meaning for every ringgit the economy makes, 48 sen goes to workers.

To do this, the economy must maintain a GDP growth rate of 4.7% in real prices or 7% in nominal prices for every year till 2030, said Mohd Nizam Mashar, CEO of Institut Masa Depan Malaysia (Institut Masa).

He said the high GDP target is necessary as Malaysia must generate enough high-value economic output to boost workers’ incomes and reduce wealth gaps between communities and regions.

According to SPV2030, Malaysia’s history has shown that income disparity threatens national unity and peace.

Nizam said the agenda’s targets are achievable only if the government has the political will to restructure the economy from its low-value, low-wage and low-skill model.

“It’s also on the private sector to trust this direction. Now, at least, there is clarity on what industries to focus on and the commitment of the government to provide a better ecosystem,” he told The Malaysian Insight.

“Also, it’s an opportunity for the people to move up the value chain. Like what the prime minister said, the ownership of shared prosperity goes back to the people as a whole.

“If you want to make it happen, you need to believe that it can be done.”

Growth to manage disparity

SPV2030, launched by Prime Minister Dr Mahathir Mohamad on October 5, is PH’s 10-year economic plan.

Institut Masa is a think-tank that helped craft the agenda, together with the Economic Affairs Ministry.

SPV2030’s three aims are to restructure the economy; address wealth and income inequality between ethnic communities, regions and classes; and, build a united, prosperous nation that is a regional powerhouse.

Its guiding principles state that its targets will be achieved through seven strategic thrusts, including restructuring the business and industry ecosystem, boosting key economic growth activities and developing human capital.

The plan has identified 15 key growth areas, among them Islamic Finance 2.0, the digital economy, halal food, renewable energy, green technology and precision agriculture.

One goal is for 30% of all small and medium enterprises (SMEs) to use high technology to produce high-value services and products.

Nizam said SMEs affect household incomes as they employ two-thirds of all workers in Malaysia and contribute 37% to GDP.

“When SMEs produce high-value products and services, they will have to pay higher wages, and this will increase household incomes.

“We need to achieve these numbers so that we can manage (income) disparity, or else, SPV2030’s impact will be minimal.”

According to the plan, the income gap between T20 and B40 households widened by 10 times between 1989 and 2016.

Disparities between Bumiputera, Chinese and Indian households, too, have widened in the past 23 years, despite the billions used by the former Barisan Nasional government to boost incomes.

For example, for every ringgit the average Chinese household earns, its Bumiputera counterpart makes 77 sen. Between the average Chinese and Indian households, the gap ratio is 1:83.

In terms of region, the wealth disparity between the richest states, such as Kuala Lumpur and Selangor, and the poorest, like Kelantan and Sabah, grew sixfold over 27 years.

Kuala Lumpur and Selangor contributed 40% of GDP. In comparison, the five poorest states, namely Kelantan, Kedah, Pahang, Sabah and Sarawak, recorded a combined contribution of just 25%.

“So, we need to have growth to ensure distribution, to ensure that people have better incomes that will elevate their lives,” said Nizam. – October 23, 2019.