Economic philosophies at war

in The Edge Financial Daily, Tuesday Jan 18, 2011

“The philosophical basis of PR’s policies is that by genuinely addressing the economic concerns of the bottom 60% of the population, the rest of the nation will be better off in a “rising tide” that lifts all boats.”

Race is a factor in political contestations in Malaysia probably ever since the birth of electoral politics in the country. But while ethnicity may still matter, debates over economic philosophies and policies will likely play a major part in deciding the outcomes of the next general election.

Two unique features distinguish the next election from the previous ones.

First, for the first time, the opposition can claim to have some experiences in government as a coalition and beyond the fringe states. Before the collapse of the Perak state government, Pakatan Rakyat (PR) coalition partners govern five states with about 60% of the country’s population.

Surviving one blow after another from a seemingly “hostile” federal government, inheriting a less than satisfactory civil service, and constrained by the lack of resources and authorities, the PR states are still alive and kicking, to say the least.

Second, while the 1990 and 1999 elections saw some forms of opposition coalition, PR is entering the next election not as an ad hoc arrangement like its predecessors.

Collaborations of PR parties exist not only at national level but had extended to state and local levels for nearly three years now.

This co-operation has survived a sustained pressure on issues that could have broken up the coalition — the Malay unity talk promoted by Umno, various religious issues aimed at eroding PAS support and not to mention the numerous attacks on Datuk Seri Anwar Ibrahim and PKR and constant flaying of Lim Guan Eng and DAP by vernacular newspaper controlled by Umno.

Indeed, not only that PR did not disintegrate as its opponent wishes, the opposition coalition has released major policy documents in the forms of Common Policy Framework in December 2009 and PR’s Agenda in December 2010. Not in Malaysia’s electoral history that manifestos of sort are released years ahead of expiry date of parliamentary terms.

The hotly debated “100-day programme” is but a small portion of the actual documents.

The real challenge posed by the nascent opposition coalition to Umno/Barisan Nasional, one of the world’s oldest elected ruling party that is still in office, lies in their contrasting perceptions of economic realities facing the people and the ensuring prescriptions to remedy them.

It’s the economic philosophies at war.

The government’s Economic Transformation Programme is a resemblance of Mahathirnomics. It is all about first world infrastructure without serious attempt to remedy the third world mentality.

The assumption is that capital investment alone is sufficient to solve Malaysia’s economic malaise and bring the economy to the next level.

Students of economics would know that growth comes from various factors of production which include capital investment, technological upgrade (or some would call innovation), labour (or human capital).

A holistic view is needed. PR understands the economic realities which elude the government’s latest programme: that many still have low income despite working hard due to an archaic policy belief that wages must be kept low to keep jobs and many are self-employed in the informal sectors (think about the hawkers, petty traders and taxi drivers) with very little financial security because formal jobs do not pay enough.

Many are also heavily indebted with monthly instalments such as cars, houses and consumer products like television, refrigerators and furniture.

According to the New Economic Model documents, the bottom 40% of Malaysian households are living with a monthly average income of RM1,500 (and three-quarters of them are bumiputera) while 60% of the households (of four persons averagely) live with a less than RM3,000 income, which is near subsistence if one lives in the cities.

It is worth noting that an estimated 68% of Malaysia’s population lives in urban settings (cities and towns with population more than 10,000) in 2010, a huge increase from 33% in 1970.

A World Bank report on Malaysia in November 2010 has the following findings:

• Income inequality in Malaysia is among the highest in Asia and resembles that of Latin America’s — the bottom 40% of the population earn 14.3% of the total income while the top 20% earn nearly 50% of the total income;

• Wages are low — 66% of all formal workers in the manufacturing and construction sectors earn less than RM900 per month;

• A huge informal sector — 35% of household heads are classified as self-employed informal workers.

It has also been reported that household debts are mounting and has reached 77% of GDP.

While many among the young urban poor and lower income groups are not registered as voters and the electoral system is disproportionally skewed in favour of those in the rural sectors, it is suffice to conclude that the economically struggling households are electorally potent.

The philosophical basis of PR’s policies is that by genuinely addressing the economic concerns of the bottom 60% of the population, the rest of the nation will be better off in a “rising tide” that lifts all boats.

We need a new way of looking at the economy. Distribution and growth are not mutually exclusive and actually works hand-in-hand.

As a start, PR proposes to improve the disposable income of Malaysians through better provisions of public goods such as the “buy-back” of tolled roads with an aim of eventually removing tolls, re-channelling of subsidies from independent power producers to other more needy causes and cheaper broadband access.

A better public transport system, an affordable and decent healthcare, and a new look at housing policies, deserves further attention notably to cater for those in the low and mid- dle income groups.

When ordinary folks do not have to pay for basic services like tolled roads, they will have more cash in hand to improve their standards of living and to pay for the education and skill upgrade of themselves and their children.

Wage structure is another area in which a new paradigm is needed to save Malaysia from the vicious cycle of low wage, low skill and low productivity. PR is committed to implement a minimum wage system.

A more holistic view of the economy is where PR begins its quest for better alternative policies for Malaysia. These policies will surely be an important part of the political debate in anticipation of the next general election.

by Liew Chin Tong
Member of Parliament for Bukit Bendera
Democratic Action Party (DAP)