Malaysia's economy: stronger but eroding purchasing power

The story is the same everywhere – the rising cost of living has not been accompanied by an increase in wages.

HERE we go again – another set of impressive growth figures. Bank Negara has announced Malaysia’s latest economic growth at a commendable 6.2% in the third quarter of 2017.

The pace of economic growth for the three months up to September was faster than the 5.8% registered in the second quarter of the year.

This growth rate was the fastest since June 2014.

On a quarter-on-quarter seasonally adjusted basis, the Malaysian economy posted a growth of 1.8% against 1.3% in the preceding quarter, according to the Statistics Department.

Malaysia’s robust economic growth has been attributed to private-sector spending and a continued strong performance in exports.

To quote Bank Negara governor Tan Sri Muhammad Ibrahim last Friday: “Expansion was seen across all economic sectors.”

But try explaining this impressive economic growth rate to the average salaried worker struggling to pay his monthly household bills.

Stretching the ringgit is especially great for those living in urban areas, and Malaysia is increasingly becoming urbanised.

The story is the same everywhere – the rising cost of living has not been accompanied by an increase in wages.

Compounding matters is the depreciation of the ringgit, reducing the purchasing power of the ordinary folk. They can’t buy the same amount of food as they used to previously.

Employers are being forced to cut operating costs to match declining profits.

Job security is becoming paramount. Many are fearful of losing their jobs, as companies cut cost to cope with the challenging business landscape.

And the reality is that many companies are not hiring, as evident from the unemployment rate of 3.4%.

The Malaysian Employers Federation (MEF) has cautioned that more people would be out of a job this year due to the current economic challenges.

Apart from the challenging landscape, technology has disrupted several brick-and-mortar businesses, forcing them to change their way of doing business.

According to MEF executive director Datuk Shamsuddin Bardan, economic challenges will compel bosses to review their workers’ requirements.

While official statistics show that the economy is charting a strong growth path, the trickle-down effect is not being felt.

Why is the sentiment on the ground different from what the politicians and officials are telling us? Why is there a disconnect in the economy?

Are the figures released by the government officials more accurate and authoritative compared with the loud grumblings on the ground that are anecdotical in nature devoid of proper findings?

We hear reports of supermarkets and hypermarkets closing down, but could that be because their business model no longer works as more Malaysians turn to online shopping, with e-commerce companies announcing huge jumps in traffic?

It is the same with the malls – retail outlets are reporting lower sales and this is compounded by the fact that there is an oversupply of malls.

International restaurant chains such as Hong Kong’s dim sum outlet Tim Ho Wan and South Korean bakery Tous Les Jours and South Korean barbeque restaurant Bulgogi Brothers have ceased operations.

But then again, it could be that their offerings and prices had failed to compete effectively against the local choices.

According to the central bank, demand is anchored in private-sector spending.

“On the supply side, the services and manufacturing sectors remain the key drivers of growth,” Muhammad said.

Looking ahead, the governor said that the economy this year is poised to register strong growth and likely to hit the upper end of the official target of 5.2%-5.7%.

The trickle-down effect is not being felt simply because there is uneven growth in the various sectors of the economy.

The property sector, which provides the biggest multiplier effect, continues to be in the doldrums.

The weak ringgit has had a big impact on the price of food, especially processed food and beverages that make up 74.3% of Malaysian household spending.

It was reported that Malaysia had imported a whopping RM38bil worth of food between January and October last year.

In recent weeks, the ringgit has strengthened to about RM4.16 against the US dollar. But it is still far from RM3.80 to the dollar and the outlook of the currency remains uncertain.

We can’t even hold our heads up against the Thai baht and Indonesian rupiah – two currencies that have appreciated against the ringgit.

The headline economic numbers are showing good growth, but Malaysians’ purchasing power has dropped and our living standards have eroded. That is the bottom line. We are living in denial if we do not admit this.

This column first appeared in StarBiz Premium.

Source: On the beat by Wong Chun Hai, TheStaronline

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GEORGE TOWN: The state has been told to explain the financial status of Penang Development Corporation (PDC) over its alleged mounting debts.

Datuk Dr Muhamad Farid Saad (BN-Pulau Betong) said PDC received a RM600mil loan last year from Budget 2017, while in Budget 2018 the loan to PDC was approximately RM300mil.

Questioning if the debts indicate that PDC was not on stable financial ground, he asked if PDC would be able to pay back the huge sum to the state.

“Both loans are huge. How is PDC going to pay it all back?

“What has happened to the revenue of PDC in recent years? We would like some answers to the whereabouts of the expenditure on whether the sum was used for investment or loan to a third party.

“Is the PDC today not on stable financial ground until there were some who said that PDC has to take a bank loan to give out salaries,” he said when debating the Supply Bill and Budget 2018 at the state assembly sitting yesterday.

State Opposition Leader Datuk Jahara Hamid (BN-Telok Air Tawar) also raised her concern if PDC “was in the red”, considering that it was among the corporations in the past which had developed Bayan Baru and Seberang Jaya.

“PDC has also contributed to numerous state funds. But now, it is the opposite. PDC is borrowing money from the state government,” she said.

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“Leaders who don’t listen will eventually be surrounded by people who have nothing to say.”

MY family home in Kampung Melayu, Air Itam in Penang, is more than 56 years old. That’s about my age, and it has never been hit by floods. Not once!

But last week, my parents – dad is 92 years old and mum, 86, – had their sleep rudely interrupted sometime after 1am by water gushing into their home.

They have been sleeping on the ground floor for years now because they are too old to climb the stairs to their bedroom.

The water that flowed into their room almost touched the top of their bed but fortunately, one of my nephews and his wife from Kuala Lumpur were staying over that night.

It was so fortunate that they were there to calm my anxious parents down and assure them all would be fine. They managed to comfort my stunned folks, who had never experienced such an unpleasant situation before. My father had to be carried to the room upstairs as the house remained flooded throughout the early morning.

Our home was filled with layers of mud the next day and the cars parked outside were all damaged. They sadly look like write-offs.

My father’s pride and joy, his first-generation Proton Saga car – which he bought in 1985 – is now unusable.

A week on, my brothers and nieces are still cleaning up the mess from the massive flood. They haven’t had the time or mood to even assess the financial losses.

And bound by a common sentiment as Penangites, they are tired of the blame game, a trade the state’s politicians have plied to near-perfection.

How many times can the finger be pointed at the previous government, with the incumbent almost 10 years in power? And how many more times can we blame it on torrential rain, which came from Vietnam – or wherever? Worst of all is, when discussions are mooted on flood issues, the voices of the people are swiftly silenced.

It appears that even to talk about hillslope development, one would have to contest in the elections, or be perceived to be challenging the state government, or more extremely, be some kind of lackey in cahoots with the Federal Government.

Blaming everyone else except oneself is simply a way of covering up one’s weaknesses. But the discerning public, in a maturing democracy with heightened transparency and a huge middle class like Penang, will not tolerate such short-term manoeuvring for long.

Suddenly, civil society – a buzzword among politicians – has vanished, with NGOs now regarded as irritants and an affront to the state establishment. Politics is apparently the monopoly of politicians now.

As the National Human Rights Society aptly puts it, “With the benefit of hindsight, we are sure that the Penang government now realises that they should not so readily malign civil society, howsoever obliquely – for the legitimate and well-founded articulation of matters of great concern to civil society.

“This is because it undermines the fundamental values of a functioning democracy and the fundamental human rights of the populace at large.”

Perhaps, the state political elites, many of whom aren’t pure blood Penangites, don’t realise the state is the home of a vibrant civil society, with many active NGOs and activists who are respected influencers of society.

Having walked through the corridors of power and appreciated power’s pleasures, perks and the adulation it brings, maybe it is becoming much harder for people to take criticism. This is, in fact, a reflection of the arrogance of power.

Many have developed thin skin now, with little tolerance for the slightest form of criticism. If anyone even dares raise their voice, an army of cybertroopers, hiding behind anonymity, are unleashed to attack them.

Freedom of speech, it seems, is only the domain of the opposition, with some media (regarded as unfriendly) unceremoniously ridiculed and questioned for their attendance at press conferences.

There are politicians from the Federal Government, too, who are shamelessly cashing in on the flood situation in Penang.

Their relief work must be splashed across news pages, and they have to be seen wading through the flood waters for dramatic purpose. Phua Chu Kang’s iconic yellow boots could likely be the hottest item in the state, as politicians bask in the media’s glare.

Ridiculous remarks have also been passed, one even blaming the state government, saying it has earned the wrath of God.

The rain and floods will go away, eventually. Penangites are stakeholders in the state, and they don’t only make up politicians. The state doesn’t belong to the state government or the opposition.

Caught up in the thick of the action, we seem to have forgotten that the hills are crumbling even without rain. As a stern reminder, just last month, a landslide buried some people in Tanjung Bungah. Investigations on that tragedy are still ongoing.

Basically, the trees – which act as sponge on the hills – are gone. We don’t need to be soil experts to know that.

The grumblings are growing louder because the hills have been progressively going bald in recent years. But the voice of discontent has fallen on deaf ears.

Penangites are alarmed at what they are seeing, and they don’t like it one bit, as much as they understand that land is scarce on the island and property developers need to source some to build homes on.

While it’s easy to hang the Penang state government out to dry for its follies, it’s difficult to ignore how the floods in the east coast states have become annual affairs, too. So, what effective flood mitigation plans have been put in place there?

Kelantan has suffered senselessly, and after more than a year of having been subjected to Mother Nature’s havoc, many victims have yet to recover from their losses. Flooding is obviously nothing exclusive and doesn’t discriminate. Every state has, unfortunately, experienced it in some shape or form.

So, irrespective of location, when life returns to normal, you can expect the politicians to resume their old denying ways.

If there’s a thread that binds our politicians – regardless of which side of the political divide they come from – it is their inability to apologise for their mistakes, despite waxing lyrical about accountability.

Don’t expect them to say sorry, because an apology would be admission of guilt, or worse, a sign of weakness in their realm of inflated egos.

And to put things into perspective, perhaps we could learn a lesson from a quote by prominent American pastor Andy Stanley – “Leaders who don’t listen will eventually be surrounded by people who have nothing to say.”


On the beat Wong Chun Wai

Wong Chun Wai began his career as a journalist in Penang, and has served The Star for over 27 years in various capacities and roles. He is now the group's managing director/chief executive officer and formerly the group chief editor.

On The Beat made its debut on Feb 23 1997 and Chun Wai has penned the column weekly without a break, except for the occasional press holiday when the paper was not published. In May 2011, a compilation of selected articles of On The Beat was published as a book and launched in conjunction with his 50th birthday. Chun Wai also comments on current issues in The Star.

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