A growing economy but shrinking incomes?

By Sheridan Mahavera

July 21, 2010

For the average Malaysian, figures like the 10.1 per cent GDP growth remain an abstract. — file pic

KUALA LUMPUR, July 21 — Noraishah Abu Bakar has heard that the economy is growing. By how much, she cannot remember. But she is fairly confident that it is as she hears it on the nightly news.

Yet she says this with a hesitant tone.

“Ya lah, kita dengar… tapi … (Yes, I heard about it, but)” And it is what comes after that is most telling about how she really feels.

“... Kita tak rasa (we don’t feel it)”.

This last sentiment does not usually follow those rosy announcements of 10.1 per cent economic growth in the mainstream media by government officials.

Neither is the real-world context presented when those same ministers boast about Malaysia moving up the competitiveness scale. For what does “being more competitive” really mean to the millions of ordinary Malaysians trying to make a living?

For Noraishah, these announcements are accepted at face value but what really matters to her is how she and her 40-year-old husband are struggling to make ends meet.

Their combined RM3,300 income is not going as far as it once did about a year ago, and they are worried about providing for their three school-going kids.

“Prices for food and clothes keep going up every six months and now I hear that fuel is going to go up because they are cutting subsidies,” laments the 38-year-old clerk.

Many of the shoppers at a morning market in the working-class neighbourhood of Section 6, Shah
Alam expressed the same concern — that their monthly incomes are barely keeping them afloat.

There apparently is a disconnect between the buoyant announcements coming out of Putrajaya and the furrowed looks of Malaysians earning less than RM3,000 a month.

For if the economy is steaming ahead, then why are families not feeling it?

People are yet to feel the effects of Malaysia’s economic growth.

Statistics “lie”

Figures like growth rates and gross domestic product (GDP) numbers are actually bird’s eye views of the economy, explains Datuk Paul Selva Raj.

“They measure things like the total goods a country produces, its total exports, how much cash and debts it has.

“They do not explain how people are doing financially and how they feel about the economy,” says Selva Raj, of the Federation of Malaysian Consumer Associations (Fomca).

It will take time for such numbers to have an actual effect for the man on the street, in terms how much their salaries can buy and whether the wages themselves will go up, he explains.

Though the noises coming out of Putrajaya may seem buoyant, public sentiment is still cautious.

This, even when there has been a lot of talk lately that Malaysians are becoming more confident in the Najib administration’s stewardship of the country.

A widely-quoted poll conducted by the independent Merdeka Center in May showed that 52 per cent of the Malaysians surveyed felt that the country was moving in the right direction. This was an increase from a March 2009 poll, when only 29 per cent of respondents thought the same.

Of those who thought that things were better, 21 per cent said it was because of the “economy turning better and the increase in people’s quality of life”.

Worsening racial relations was the main reason given by the 34 per cent who thought the country was heading in the wrong direction.

As with the big economic numbers, says Merdeka Center director Ibrahim Suffian, the poll results in themselves do not tell the whole story.

“We’re not out of the woods yet”

Pollster Ibrahim says despite the positive numbers, public sentiment remains shaky.

“Right direction,” Ibrahim says, is more of a feeling of relief rather than being cheerful about economic conditions.

“If you look at the details of how people feel about the economy, it’s not that strong.”

They are relieved that the economy did not tank like many countries during the recession, Ibrahim says, but a lot of them are still finding it tough to make ends meet.

Only 50 per cent of those surveyed felt the economy was doing favourably. About 52 per cent were unsatisfied with job opportunities.

But the most telling is the 75 per cent who said the prices of goods and services were unfavourable.

A 2007 study by the Statistics Department, says Ibrahim, showed that 62.1 per cent of Malaysian households were earning less than RM3,000 a month.

Of that number, 41 per cent earn below RM2,000 monthly according to the 2007 statistics.

“For a couple with two kids, a house and a car earning RM3,000, there’s not much left over in month after they spend it all on the basics, such as food, water, clothing and rent.”

It is difficult to imagine how households earning RM2,000 a month are staying afloat. For Center for Policy Initiatives researcher Jayanath Appudurai, there is an urgent need for the way we measure poverty.

Currently, only households earning below RM763 in the Peninsula are considered to be living below the poverty line, otherwise known as Poverty Income Line (PLI). The PLIs for Sabah and Sarawak are RM1,048 and RM912, respectively.

The question is whether RM763 is realistic. Under the government’s definition, this amount is sufficient to meet eight basic needs for a household. It includes food, utilities, clothing and rent.

“But what about RM900, RM1,000 or even RM1,500? Can a family of four be expected to live on that for a month in Malaysia?” asks Jayanath.

Honesty is the only policy

It is well and good to present a rosy picture to foreign investors about the country’s GDP and growth rate.

But those investors are not the ones who are going to suffer once the government cuts subsidies.

That the massive RM24.5 billion subsidy bill has to be cut is certain — and the government has already begun doing so. Problem is those same subsidies may be keeping the 40 per cent of Malaysians at the bottom of the income scale from starvation and homelessness.

“Everyone knows that subsidies are not properly targeted. They are supposed to be for the poor,” says Fomca’s Selva Raj.

The biggest beneficiaries are the SUV-driving crowd that still gets subsidised petrol and buys sugar at rock-bottom prices. Yet they are the ones who complain loudest when the government talks of removing subsidies.

Before the government does trim subsidies, a system to help the poor directly — such as cash payouts and food aid — must be in place, says Selva Raj.

Again, to do this, there must be a realistic measure on who should be termed “poor”.

At the same time, the Competition Act must be passed and enforced to break monopolies in the market that keep prices artificially high, he says.

“The Malaysian consumer must also realise that they cannot always blame high prices on the government. Prices should be determined by markets.

“If sugar is expensive, then put les sugar in your Nescafe.
In essence, the only way we’ll get an accurate pulse of the economy is through honesty — in assessing poverty, having a more open market and paying for what we consume.