MALAYSIA has made significant progress in many aspects of development since independence but several persistent issues need to be addressed to further improve the people’s quality of life, particularly for low-income groups, said a prominent economist.

Former United Nations assistant secretary-general Jomo Kwame Sundaram told a forum in Kuala Lumpur today most Malaysians have completed secondary school, and ethnic segregation based on profession have almost disappeared.

At the same time, the Malaysian economy has transformed from one highly dependent on rubber and tin export to a more diversified, industrialised economy.

“It is undeniable our economy has transformed. We are less dependent on agriculture, even though it is still an important industry.

“Our manufacturing industry has grown but it has been struggling, so we are now reliant on the service sector for growth, particularly traditional services rather than modern services,” said Jomo at an economic forum organised by the Islamic Renaissance Front in Concorde Hotel.

“The ratio of household income among races has also narrowed,” he said.

For instance, the household income gap between Chinese and Malay has declined significantly from 2.29 in 1970 to 1.40 in 2016 (see below).

1970 – 2009 – 2016
Chinese-Malay: 2.29 - 1.31 - 1.40
Chinese-Indian: 1.30 - 1.25 - 1.22
Indian-Malay:     1.78 - 1.04 - 1.14
Urban-Rural:      2.14 - 1.85 - 1.76 

Malaysia is also highly urbanised, from 19% in 1957 to 73.5% in 2015.

However, Jomo said wages remain depressed due to the prevalence of low-skill, cheap foreign labour and Malaysia’s household debt is still one of the highest in Asia.

Malaysia increased the minimum wage for the Peninsular to RM1,000 and RM920 for Sabah and Sarawak last year but critics said it is still too low.

Jomo said it is worrying the majority of Malaysians cannot afford to retire.

When asked whether subsidies for the poor are bad for the economy, Jomo said the government also provide subsidies for the rich but they are called incentives.

“Even Hong Kong, one of the most advanced capitalist economies, provide subsidies and incentives. The question is not whether subsidies are (inherently) bad but whether they are abused,” he said.

In 2010, Prime Minister Najib Razak’s administration phased out subsidies for petrol, diesel, liquefied petroleum gas, and essential food items such as sugar, flour and cooking oil.

The Malaysian Insight had previously reported the removal of subsidies and the introduction of the goods and services tax (GST) in April 2015 have been a bane for low-income households in rural and urban areas.

Jomo said the government slashed the amount it spent on subsidies from RM43.3 billion in 2013 to RM24.6 billion in 2016 but the savings channelled to 1Malaysia People’s Aid (BR1M) paled in comparison. – February 25, 2018.