MOST Malaysian households and companies saw little of the stellar economic growth of 2017, said economists, even as the government played up these numbers as proof the country is doing well.

Much of the growth benefitted the country’s richest who saw their incomes rise the most compared with that of the middle (M40) and working (B40) classes going by trends in a latest survey.  

At the same time, multinational companies, which make up 2% of all businesses in Malaysia, profited the most in 2017, said Universiti Putra Malaysia economist Dr Mohd Yusof Saari. 

Klang MP Charles Santiago said the “other Malaysia”, which is populated by the B40, struggle to buy more expensive food and pay their bills while the economy expanded by up to 5.8% last year.

The Najib administration’s narrative of a thriving economy also hides stories of deprivation, such as those felt by children living in low-cost flats, said Santiago.

The Malaysian economy is predicted to have grown between 5.5% and 5.8% in 2017, a rate which the Najib administration and some economists have said exceeded expectations.

“It is likely growth in GDP (gross domestic product) in Malaysia is driven by the growth in (business) profits,” said Yusof of UPM’s Faculty of Economics and Management.  

“This is because businesses claimed positive profits for the year 2017.”

Although small and medium enterprises (SME) make up 98% of all business in the economy, they only contribute about one third of the country’s total economic activity as measured in GDP terms.

Multinational firms (MNCs), which are a minority compared with local businesses, contributed two-thirds of GDP, said Yusof.

“On average, from the total value added generated by the sectors, only about 35% to 38% are attributed to labour income while the rest of 62% to 65% is attributed to profits.”

Meaning for every RM1 that a sector makes, 35-38 sen goes to workers while 62-65 sen goes to investor and company owner profits.

Rich getting richer

Last year’s growth rate surpassed many estimates and is taken by the Najib administration as proof that it is managing the economy well.

The latest figures for 2017 showed that in the last quarter, the economy expanded by 5.9% buoyed by growth in the services (6.2% growth), manufacturing (5.4%) and agricultural sectors (10.7%).

Prime Minister Najib Razak said the growth rate is a sign that the country’s wealth is being shared among Malaysians.

Santiago disputed that assertion, saying that data from the 2016 household income and basic amenities survey showed an “other Malaysia” that received little from the country’s growth.

On average, between 2014 and 2016, the income of a B40 family went up by RM275 while the salaries of the T20 went up by nearly RM1,800, said Santiago.

The jump in income for the T20 is close to double the minimum wage in Malaysia.

“In fact, the increase in income for the top 20% was also more than double of the income increase for the Malaysian middle class,” said Santiago.

“The beneficiaries of this growth are only the rich,” said Santiago, a trained economist.

Although this a trend in the 2016 survey, it is not expected to significantly change in one year, said UPM’s Yusof.

“Growth in labour income has lower impacts on household groups in the M40 and B40 categories.”

Salary raises not enough

Although incomes from the M40 and B40 households have grown, they are not enough to offset the increase in the prices of food, housing and fuel, said Yusof.

“These products in recent years show significant increase in prices. For these products, prices increase more than the increase in salaries and wages.”

Last year saw some of the highest rates of inflation which averaged about 4% nationally. In November, the prices of food in five states rose at a higher rate than the national average.

In contrast, salaries grew by an average of 1.3%, said the Korn Ferry Hay Group (Korn Ferry), according to several reports.

Another problem is that there is a mismatch between the qualifications of workers and types of jobs they have, said Yusof thus slowing the growth in their incomes.

“We observe that there is a large number of workers with diploma and above who hold clerical positions. This explains why these group could not benefit from the income growth.”

And although the government has introduced a minimum wage and cash aid, such as the 1Malaysia People’s Aid (BR1M), their impact is questionable. 

“No enforcement is carried to ensure that all firms pay minimum wage.

“BR1M, meanwhile, has marginal impact as it does not adjust for family sizes and it indirectly contributes to the growth in prices.”

And all that growth has not led to more money for the government to spend on public services either, said Santiago.

For example, the Klang Public Works Department has not received any fund for 2018. In 2017, it received RM3.5 million, just 10% of its request for RM35 million.  

“These numbers clearly show that the country suffers from a huge inequality between the rich and the ‘Other Malaysia’,” he said.

So when it comes to GDP, said Yusof, it is claimed to be unsustainable if high growth is associated with high cost of living.

“What we want is the quality of growth and not the quantity of growth.” – March 2, 2018.