The nation’s economic figures released yesterday were as anticipated. The growth of 8.9% in the second quarter and 10.1% in the first quarter, while commendable, came on the back of a contraction of 1.7% in 2009.  Compared to Indonesia and Singapore, our half year economic growth provides a glimpse of our comparative prosperity vis-a-vis our neighbours’ in the future, if reforms are not carried out immediately.

Singapore is expected to grow at 13% to 15% for 2010, compared to Malaysia’s growth forecast of 6% to 7% by the end of the year. On the other hand, Indonesia is anticipated to register a growth of above 6% for 2010, continuing a 4.6% growth in 2009 when Malaysia was in recession.

FIGURES MASK GRIM REALITIES

The disconnect between an announcement of stellar economic performance and realities on the ground is symptomatic of an economic management that is unable to eradicate income inequality in society. The adage that in Malaysia the rich get richer and the poor become poorer comes to mind each time the economic disparity in our society is discussed.

There is not going to be much celebration on the streets as the economic reality for the majority of Malaysian households is different, especially when they have had to put up with a few price hikes in the last two years. This remains a key concern for Pakatan Rakyat, that while cost of living continues to rise, 2.4 million families or 40% of the households earn less than RM2,300 per month. They form the poorest section of our society and 75% of this group are Malay/bumiputra families.

Low wages continue to put pressure on Malaysians as they grapple with steadily rising cost of living. The majority of graduates entering the job market struggle to pay for the bills, let alone to save.

The Economic Transformation Programme (ETP) released by the Prime Minister’s Department on 17 August 2010 did not indicate a roadmap to close this disparity. It promises massive improvement to the economy, tripling the Gross National Income to RM1.7 trillion in 2020 from RM600 billion in 2009. It claims that this will translate to an income per capita of RM49,500 by 2020 – on the back of 3.3 million new jobs to be created.

ETP TARGETS UNATTAINABLE

This sounds credible as a plan, similar to other plans previously unveiled by Barisan Nasional. It has become standard modus operandi that the Federal Government throws a lot of big numbers and hides behind assumptions and premises that eventually are proven wrong.

In order to achieve these targets, Malaysia requires RM2.2 trillion new investments, 92% of which is expected to come from private sectors. 75% of this 92% is projected to come from domestic direct investments while the rest is from FDI.

This is where the projections and assumptions are not grounded on reality. Announcing a set of ambitious economic targets to be built almost entirely on private investments is irresponsible to say the least, when Malaysia has been relying on pump priming for the past 12 years and private investment growth was minimal. This is akin to planning for the impossible and ignoring past track records for the sake of an announcement.

Similarly, a promise of 3.3 million new jobs and income per capita of RM49,500 by 2020 is detached from the hardship of the people for the last 10 years. The reality is 34% of our workforce earns below the poverty line (less than RM700 per month) and the average salary increase for the last one decade is only at 2.6% (compared to 10% for Indonesia in between 2007 to 2009).

The act of perpetually throwing new numbers to distract the public’s attention from economic realities on the ground perpetuates the habitual refusal to address the root cause of the problems. I am confident that the public will quickly conclude that ETP is another instance in a long line of public relations gestures meant to delude the public when the realities on the ground hardly changes over the past two years.

PR TARGET OF RM4,000 FOR EACH FAMILY

That is why I have always emphasised economic programmes that can alleviate the poverty of the people such that there is no disconnect between the supposedly good performance of the economy with the realities on the ground.

A staggering two-thirds of our population survive on a household income of below RM4,000 a month. These four million families will continue to face hardship due to the rising cost of living, unless priorities are given to increase their income level drastically and quickly.

Therefore, after a series of consultations and studies, Keadilan has agreed to set a target of RM4,000 minimum household income within the first five years of Pakatan Rakyat’s federal administration as our flagship economic target . This policy proposal will be brought to Pakatan Rakyat’s leadership council for further deliberation.

Keadilan will work with its partners within the framework of Pakatan Rakyat government to implement a series of policies to step change the level of wages in the country to achieve a minimum household income of RM4,000. These policies include strong commitment to plug leakages, determination and honesty to fight corruption, reforms of the judiciary and public institutions to bring back the credibility and promoting transparency and accountability to attract new FDIs.

The country must move away from concepts and economic promises that had never been achieved or translated well to benefit the public. The 30% equity promise by Umno remains unfulfilled and hardly has any effect on Malay families grappling with low wages and high cost of living. Yet it is bandied as a cornerstone of gift from Umno to the public.

Keadilan’s gift is more straight-forward and easily translatable to dollars and sens to the public. Under a Pakatan Rakyat government, there will not be a family which earns below RM4,000 within the first five years of our administration.

YB DATO’ SERI ANWAR IBRAHIM

LEADER OF OPPOSITION

19 AUGUST 2010

(My column in The Edge Financial Daily published on  17 August 2010. The actual article in the print could contain some editorial changes)

Ordering food in some restaurants in the capital can be tricky nowadays. The best way is to point to a menu – you will get exactly what you ordered. The worst way is to give instructions on how you want your drink made – you are bound to meet with some frustration. With more and more foreign workers taking up waitressing job in restaurants, communication problem should be expected.

A friend once moaned why not many locals want to take up these jobs. Most people know the pay is not attractive enough for locals, hence the influx of foreign workers over the last two decades to take over these jobs from Malaysians.

What we don’t know however is the extent of the problem – how low the wages are; how many people are being paid these low wages and how this phenomenon will have a severe impact in the long run on the economy.

That riddle was partly answered last week when the Ministry of Human Resource released a set of figures that shows 34% out of 1.3 million workers in this country earn below RM700 a month. The statistics may not be of any consequence, if not for the fact that the national poverty line is at RM720 monthly household income.

The revelation is startling – a third of our workforce earn below the poverty line. One has to wonder how our citizens who do not have a steady job survive at all when a third of those in employment earn below the poverty line.

Much has been written about the need to go into higher income economy, the rising cost of living, the dependency on foreign workers and a plethora of other economic problems we are facing. All this relates to one common problem faced by our workers – low wages.

Thus, the discourses on elevating the level of income for our workers and the necessary steps to achieve this immediately and harmoniously (for all parties involved) should take the centre stage as a national agenda and not confined to a small circle of economists and administrators.

The truth is we have been addicted too much to low wages to the point that we attribute our comparative prosperity to this policy. We give too much credit to the habit of keeping low wages as a key competitive edge, so much so we overlooked that it is easily replicable by competitors.

A recent study by World Bank exemplified Malaysia’s addiction and dependency on low wages. As we face more rigorous competition from our neighbours, it is as if we resort to suppressing wages to keep our cost structure competitive.

This premise is supported by the World Bank’s data that puts the average annual salary increase in Malaysia for the last 10 years at an abysmal 2.6%. Contrast this with Indonesia which has seen an average of 10% salary increase for three consecutive years in between 2007 to 2009.

It is unsurprising that Malaysian employers are finding it difficult to get Indonesian workers to work here. It is no longer economically advantageous for skilled Indonesian workers to work in Malaysia when wages in Indonesia are steadily rising to match what we offer to them.

If this continues unabated, the prediction that one day our sisters and daughters may end up working as maids in Indonesia is not far-fetched after all.

Therefore, the introduction of minimum wage should no longer be viewed as an anti-merchant agenda brought by political parties and trade unions. It is true that a promise of minimum wage featured in Pakatan Rakyat’s manifesto for the last general election (and will continue to become one of its top agenda going to the next general election), but the debate on minimum wage is a lot bigger than the political divide.

Minimum wage is still one of the most practical and pragmatic solutions that can resolve quickly the few economic problems the country faces. One big challenge is to manage potential inflationary impact of the introduction of minimum wage; but given Malaysia’s stated aim to become a high income nation by 2015 the threat of inflation is an issue that we have to manage with or without minimum wage. Perhaps a bigger challenge is to convince the employers that it is not a zero sum game – rationalisation that may take place to contain cost due to the introduction of minimum wage can lead to higher automation, better system or even entrance into higher value industries.

Unfortunately the public’s understanding of the pros and cons of minimum wage on the economy and their livelihood is still relatively low. The responses I get on minimum wage range from emotional condemnation of minimum wage as a tool to oppress consumers, to great concerns on the inflationary pressure it might create; and the extreme of complete ignorance of what is the concept of minimum wage. What is more obvious to me is the likelihood that a majority of our workers do not understand that an introduction of minimum wage should cause an upward revision of salary across the board for all sectors in order to maintain the hierarchy of earning levels. Many seem to think that a minimum wage policy will only affect the plantation workers, labourers, operators at factories or pump attendants.

This is where the politicians, activists and unionists should strive more to explain the concept and impact of minimum wage on the economy to the public. It may be one policy that can be debated on bi-partisan basis because our economy is at a stage that requires it to go through the motion.

In my reading, the political grouping that can best explain and champion the issue of minimum wage may have the edge with the voting public in the next election. It will be interesting to see which group can acquire this grouping first.