Speech by Anwar Ibrahim at the Economic Agenda Forum & Iftar on July 16, 2014 at the Menteri Besar Selangor’s Official Residence
In the run up to the last general elections, the rakyat were treated to a barrage of proposed economic reforms that looked good on paper and even more impressive through media campaigns which cost millions of ringgit of the tax payers’ money. All kinds of promises and pledges were made.
However, among the first actions taken by the government immediately after the general elections was to raise the price of petrol and sugar. Since then, it’s been one after another round of price increases while the promised reforms turned out to be mere sound bites.
In our case, despite winning the popular vote of 52%, we were denied our legitimate right to rule. But our conviction for change has not dissipated, our hope still very much alive and our will still firm and resolute.
Today, let me share with you our road map to a new economic agenda for Malaysia as we go forward towards 2018.
Rising cost of living, mounting household debt
The problem of inflation causes hardship to the people. When the rate of growth in monthly incomes for the working people lags behind the rate of inflation, hardship follows.
Many are finding it hard to make ends meet. Many have to look for other sources of income. Even more have to resort to borrowing. Household debt builds up. At 86.6% percent of the GDP, our household debt is one of the highest in the world.There is indeed a clear and present danger of the rising tide of household debt inundating us.
Widening gap between rich and poor
The gap between the rich and the poor is getting bigger. At a high Gini coefficient of around 0.46, the top 20% of households own more than half of the Gross National Income while the bottom 40% own less than one sixth.
Just two days ago, the nation was presented with a set of numbers that purported to show how well we are doing in terms of our overall economy: as compared to last year, it seems, our growth is more robust, foreign investment is doing well, we are more competitive at the international level and the process towards a high income economy is on track.
But let us set the record straight.
Foreign owned debt and overheating
Our GDP for 2013 stood at USD 312.44 billion or close to RM 1trillion (RM 999.8bn). According to BNM, as at November, 2013, almost 45% of our local sovereign bond market is foreign held.
Our economy is exhibiting classic signs of overheating, including credit growth that is racing ahead of GDP growth and incomes and a currency that has seen sustained appreciation notwithstanding recent volatility.
Govt debt to GDP ratio is at 54.8%, inching closer to the 55% ceiling, household debt is at an all time high of around 86.6% GDP and corporate debt is approaching 96% of GDP.
The reality is that many workers may have jobs and incomes today but may lose them all in a year or two or even a few months. We do not have a comprehensive social safety net. This breeds unrest and an overall lack of economic confidence.
We saw how such a situation blew up in the face of unbridled American free market capitalism in the wake of the 2007 sub-prime crisis. We have witnessed the riots in Greece and Spain and other European cities essentially as a result of the hardship of workers losing their jobs. And do not forget that it happened in spite of a better social safety net than ours.
Detractors have said that we should not complain about highway projects such as KIDEX if we want better transport. But they are missing the point. KIDEX is not the best answer to the people’s need for good and cheap public transport. There is moral culpability here in both the Federal and State governments when in the face of a rising chorus of opposition from the people, they choose not to hear but instead ride roughshod over their pleas.
To further promote a pro-Rakyat administration, we will fix a time line for government bodies that own highway concessions to transfer them to the government so that tolls will be abolished.
There must be public consultation on major development projects before giving concessions or conditional approvals or exercising powers under the Land Acquisition Act.
There must be transparency in the process and documents should be allowed for public viewing.
There must be a proper balance between development needs and the intrinsic needs of the people. For example, failure to respect Native Customary Rights would only stir conflict and lead to injustice as we have witnessed in several major instances in Sarawak. Nevertheless, we laud the recent landmark court decisions in favour of the people.
Prescription for going forward
We will pursue a growth strategy coupled with equality of opportunity, supported by three policy pillars:
1. Sustained growth to create productive jobs for a wide section of the population;
2. Social inclusion to equalize access to opportunity; and
3. Social safety nets to mitigate vulnerability and risks and prevent extreme poverty.
Labour market reforms
To address the time bomb of the rising household debt, we must raise the incomes of the labouring poor through a mix of measures centering on labour market reforms, allowing legitimate unions to rise, changing the public-private sector mix in the provision of social goods and services, improvements in the quality of education and good governance.
We are locked in at the low value-added, high volume and low wage stage of the value-added chain in manufacturing and services. The dependence on migrant workers discourages entrepreneurs to shift to more capital and knowledge-intensive methods of production. This has to stop.
A minimum wage that provides for a decent living standard for the workers must be enforced. During the transition, assistance in the form of financial grants and productivity boosting measures may have to be given to small firms that have difficulty in implementing the minimum wage.
GST a weapon of injustice
Regressive tax measures such as GST are morally wrong. The greatest negative impact of the GST is not that it will be taxing all consumers as such but in doing so, the greatest burden of the rise in prices will fall on the middle 40%. On the other hand, the top 20% of income earners will experience the least impact as a proportion of their income.
Without effective creation of employment opportunities that improve both productivity and take-home incomes, the bottom 40% will struggle to graduate to the middle, and the heavily-squeezed middle will struggle to foot the new tax bill.
Crony capitalism and subsidy rationalisation
Subsidy rationalisation is not morally wrong in itself, but if subsidies are cut whilst cronies are awarded with overvalued highway concessions, allowed to monopolise key industries, or given fat contracts without competitive tender – then it is unjust and oppressive.
Why should the poor and the middle class have to tighten their belts while the rich loosen theirs? Occcasional BR1M payments are not enough to help families escape the low-income trap. It only perpetuates the rakyat in a state of economic vulnerability and dependency on government handouts.
In our strategy, however, this injustice and oppression will be removed for we will maintain subsidies for the poor and ensure that those for the rich and powerful will be withdrawn.
Promote inclusive growth
To promote inclusive growth, sectors currently under crony domination need to be opened up. This should be a managed process that allows new entrepreneurs to introduce greater competition while being fair to the employees of existing industries.
Secondly, emphasis should be given to opportunities for low-income households to take up job opportunities. Re-skilling programmes can be further implemented. There should be better guarantee of employee rights and women, in particular, should not be penalised in terms of wages.
Thirdly, collective bargaining should be protected. Government, employers and employees all have to work together to reduce inequality at a pace acceptable to all. Fair and transparent dialogue within a clear framework is the basis for this.
Fourthly, to support inclusive growth,BNM should introduce a counter-cyclical monetary policy that would reduce volatility and increase the ability of poor households to accumulate productive assets.
Social justice agenda
In our social justice agenda, our humane economy will place priorty on better and more accessible health care. We see the mushrooming of private hospitals particularly in the urban areas while the needs of the poor are often neglected.
Privatization of health care must be stopped. Instead there should be good and better state provision of health care services. A universal health care program encompassing all aspects such as public access, palliative and curative medicine and the infrastructure development of public hospitals and clinics must be introduced.
Housing for the poor
In the case of housing, a National Housing Development Board should be set up. Build affordable houses for workers and even executives in the industrial and services sub-sectors. Given the scarcity of land in many urban areas, this board should consider constructing affordable houses and to provide free transport to the central business districts.
Democratisation of access to education
The mushrooming of private schools and international schools catering mostly only to the rich is a trend that runs counter to the democratization of access to quality education. It is contrary to the basic principles of social mobility. There must be funding for educational institutions at all levels and for academic, technical and vocational streams in order to expand access to Malaysians of all walks of life. Free and quality education is a fundamental liberty.
Strengthening domestic economic resilience
We need to implement more small-scale public infrastructural projects that can be outsourced to small time contractors. Their technical and financial capacities can be enhanced. Such small-scale projects have a larger multiplier effect as they are less dependent on imports for their supplies of inputs.
Women and youth
There is a need for support systems to retain women in the work force and greater efforts to increase their participation. This includes better, possibly subsidised childcare and elderly care services, flexible work arrangements, and family friendly employment policies.
The youth make up about 60 per cent of the total unemployed, with those in the 20-24 age group being the largest proportion at 40%. What we need urgently are social programmes and skills training for their empowerment to reduce their sense of marginalisation and alienation.
In the coming years, we will enhance our pro-rakyat approach as outlined above while pursuing the best practices in governance with specific growth oriented and pro-rakyat steps to be introduced at all levels.