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Post GE-15: Malaysia’s Economic Challenges

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The post-electoral coalition between Pakatan Harapan (PH) and Barisan Nasional (BN), along with Gabungan Parti Sarawak and Gabungan Rakyat Sabah, has vividly shown us what “politics as the art of the possible” really means. But what about Malaysia’s economic challenges?

After all, who would have thought BN, whose legitimacy has been relentlessly challenged since Datuk Seri Anwar Ibrahim’s fall from grace in 1998, would eventually erode when it lost a two-thirds majority in 2008 and the popular vote in 2013 to the Anwar-led Barisan Alternatif. BN’s reign ended with the power shift to PH in 2018.

At least for now, the seemingly strong coalition with two-thirds majority seats masks a critical fact: nearly two-thirds of Malay voters believe in Perikatan Nasional (PN) as a reliable political party after UMNO when it comes to protecting their interests. Many of them are young, semi-skilled, and reside in rural areas.

However, whether the shifting landscape of Malay votes is purely ideological and political remains to be observed. Its economic roots should not be taken lightly. Of all the economic dissatisfactions capable of shaping voting preferences, nothing can be more personal and consequential than the low, nearly stagnant, and relatively unfair wage progress.

Let’s chart out a few hypotheticals.

Malaysia’s Economic Challenges

A beautiful shot of the Kuala Lumpur buildings under a cloudy sky at Malaysia

Let us take an honest, hard look at what Malaysia’s economic challenges mean. Suppose we take 2010 as the year of comparison. In 2021, gross national income expanded by 71%, or 6.45% on average each year since. Going at this speed, the national income would have doubled every 11 years.

At the same time, half of the wage earners in Malaysia witnessed the purchasing power of their income stall at 22%. It is, at most, better than the individuals in the same income group were 11 years ago.

Compared to 2010, when the B50 earned RM1,000, their standard of living has only gone up by RM220, or RM22 per year. To double B50’s monthly income after adjusting for the cost of living will take 35 years or more.

The truth becomes even more obnoxious if we go down the demographic road. Look at the purchasing power of the income for B50, aged 30 to 34 years old, and it is just 11% better over the same period of time, or 1% on average each year.

In other words, it takes 70 years for a B50 in this age cohort to live one time better than the older generations. Unfortunately, the gross national income is already 64 times higher by then!

The worst is for those in the younger age cohort. The income of people aged 25 to 29 in 2021 was 4% less than that of the same age group in 2010. This means that they have less money to spend, and this is one of the main issues when it comes to Malaysia’s economic challenges.

Malaysia’s Economic Challenges: Of Regions And Skill

Turning to the perspective of regions and skill level, it is perhaps unsurprising to find out that rural and semi-skilled median wage earners, which constitute more than half of our labour force, benefit the least in their categories from the growing economic prosperity.

Source: DOSM; Author’s own calculation

Rural residents are 14% better, while semi-skilled workers are 20% better. What’s more surprising is that race doesn’t matter as much as we used to believe. Actual salaries and wages for Bumiputera B50 in 2019 were 65% greater than that of the 2010 cohort, outperforming the 44% advancement for Chinese B50.

Bumiputera B50, on the other hand, was hit the hardest by the pandemic and had been getting better more slowly. Putting all this together, the lesson is straightforward: not all Malaysians prosper equally. And when they don’t, it instigates a sense of unfairness.

As economic anxiety and discontent mobilises voters, it must be more than just a coincidence that rural residents, semi-skilled workers, and young voters identified along the racial line, who are losing out in the horse race of prosperity and suffering the most in the pandemic, happen to be bowling with Perikatan Nasional in the most recent general election.

Against this backdrop, addressing economic anxiety and discontent makes the economic slogan ‘shared prosperity’ meaningful. Perhaps more importantly, it works to break down electoral divisions based on ethnicity, geography, and occupation without using racial rhetoric.

Bolstering economic growth, though necessary, is no longer sufficient to lift the living standard of the majority. The trickle-down effect of growth is long dead. For this, the Anwar government and cabinet need a paradigm shift in their policy-making philosophy.

Growth policies shouldn’t stop looking for new growth sectors. Instead, they should make existing products and sectors more complicated. That means investment policies cannot be satisfied by bringing in more foreign direct investment. It will be done by strengthening ties between domestic and foreign companies and giving domestic companies more ways to work with the rest of the world and export.

That means labor policies shall not be bound by the traditional domain of labor issues when laborers go through the gig economy route and become entrepreneurs. The employer-employee social contract is evolving.

Welfare policies will be more than just a one-time cash transfer and financial aid for marginalised communities and poor families. It is, in fact, a way for all Malaysians to get automatic protection against risk and a way to share returns. This is done by coordinating cash transfers, tax rebates, unemployment insurance, subsidies, and other programs.

That also means that government functions shouldn’t be put in separate boxes and that policies should be thought about, designed, and put into place in a way that doesn’t divide them up. It’s true that politics is the art of the possible, the attainable, and the best.

But don’t get it wrong. A power play for the possible and attainable without pivoting to the economic needs of the people only ends with pushing voters to their next best option.

“Good politics is the art of bringing the possible and the attainable to the people.”

I hope the new Malaysian government will take a severe look at Malaysia’s economic challenges and take the right step towards addressing them.

About the Author

Wong Chin Yoong is a professor of economics in Universiti Tunku Abdul Rahman, and an external consultant to Max Wealth Group. This article is in collaboration with Max Wealth Education Sdn Bhd, an approved Education Provider for the CFP Certification Program.

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