Livelihood of yours and mine: how can the country helps itself and its people

I once came across a Taiwanese comic where the father chided the whole family, “Our bills have gone out of control! We will have a family meeting now and you all should examine yourselves!” The mother, son and daughter huddled together and after a quick discussion, shot back, “we have identified the root of the problem dad, you simply do not earn enough!”

Malaysians have been facing livelihood issues for decades. In my humble opinion, there are 2 sides of the issue – high cost of living and unfair distribution of income resulting in certain quarters not earning enough.
Here is my 2 cents worth on the first part, i.e. high cost of living.

I suppose most of us would view the prices we pay for goods and services comprise of cost of production plus the profit element to the business. In Malaysia, there is every possibility that the price we pay for consist of cost of production, cost of inefficiency, cost of corruption, normal profits and super normal profits hence the phenomenon of significant price increases we see every day.

I remembered back in the mid 1990’s, a plate of mixed rice near my office cost me RM1.80 but now I am lucky if I can pay RM4.00 to get something similar. That is a whopping 122% increase over some 15 years and a simple average of 8% per annum. Talk to the hawkers and their living standard might not differ too much from 15 years ago except for hand phones and Astro. Where did our money go?

Modern business modules advocate shorter supply chain, which would guarantee freshness, lower prices and shorter delivery time. One thing that is not transparent to all and sundry is the supply chain in Malaysia. I hope the Domestic Trade Ministry can make public the supply chain of common goods and services. We can then see how many times the goods changed hands from producers, distributors, deals, retailers and eventually to you and me.

The Malaysian defense ministry needs a consultant to assist it to deal with French submarine manufacturers and this makes me wonder if this sort of practice is the norm rather than the exception. (By the way, how much experience Razak has with submarines?) The public has the right to know the make up of our supply chain while the government of the day who issues the relevant licenses must justify the existence of the various parties in the link.

Free and intense competition promotes better and more creative deals hence lower prices for the consumers. Take a trip down to Singapore and see what I mean. I have come across deals such as free KFC vouchers if you top up your handset’s prepaid top-up, free hand phone if you sign up for particular mobile phone network, further discounts on discounts if you are a Robinson’s card member etc. I am not much of a shopper even I can’t miss out on the fact that there are much more better deals in Singapore than in Malaysia. If there are more businesses competing with each other, there will be more job opportunities and better options for consumers.

Those in the know might agree with me that to get a business license in Malaysia is not a quick process. There are many unlicensed hawkers around KL and a few of them I spoke to mention how difficult it is for them to get their license. On the other hand, I also heard of many licenses been granted to certain individuals who would make a tidy rent-seekers’ profit. Was there not a case of the son of someone important with the Police who was involved in the Ramadan temporary license incident a few years ago?

Then of course, the old chest nut about corruption. Need I say more? Businesses have no other way then to re-coup their cost from the consumers. Another thing is the funny structures Malaysian business have evolved into, thanks to Mahathir’s mutated privatization programmes. Theoretically privatization is meant to lower tax rate, allow more the efficient private sector to take over the provision of public services that would allow consumers to get better and cheaper services.

In the toll concessionaire companies, the above fundamental reasons for privatization has been completed turned over. Not only there was no tendering process to get the most economically justified candidate (back in 1982, YB Lim Kit Siang questioned why UEM was given the contract when its quotation was the highest of the 3 received), the fact that there is a contractual guarantee of profits would negate the incentive for the concessionaire to be efficient and cost conscious. In fact, we can see that uncontrolled cost overruns are being paid for by the tax payers in one way or the other. It would be interesting to examine the directors’ and staff remuneration schemes and their procurement process for everything from tar to pencil case.

In a recent seminar, YB Teo Nie Ching spoke of a contract can be void if the person signing it was of unsound mind. Any administrator of public money agreeing to the profit guarantee terms is either of unsound mind or sense of fair play. It is also my understanding that a contract can be voidable should there be a fundamental breach of terms and conditions. Recently, Tan Seri Khalid spoke about breach of a condition pertaining to tendering process by Syabas……

Our weak ringgit has resulted in imported inflation or causing import items to be out of reach of many. One way to bring down prices is to have a stronger ringgit that will cause the price of imported raw materials and finished goods to be lower in ringgit terms. I am no foreign currency expert but I believe the strength of the currency can be determined by the demand for it. The biggest and most obvious stumbling block to foreign investors are the capital requirement regulation in Malaysia. The huge number of foreign workers here, I imagine, would dump more ringgit in exchange for their home currency when they repatriate home their wages.

Lastly, mis-implementation of the NEP has resulted in Malaysia becoming an “anti-talent” destination. In his memoir, Lee Kuan Yew spoke of Tun Razak’s interpretation of “talent drain” as “trouble drain”. God knows how many brilliant entrepreneurs, business managers, research and development experts, professionals and keen workers we lost over the years. I believe they would have come up with creative and effective business modules, practice good work ethnics, leadership that would have made Malaysia a more vibrant and competitive business environment.
It is perhaps time for us to allow talent, domestic and foreign, to flourish in Malaysia. If the government is worried about uncompetitive people lagging behind, they can either 1) strengthen the welfare department with money wasted on unwanted submarines and jets or 2) allow an environment whereby Malaysians are hardened by rigorous competition from both domestic and foreign circles as there are no running away from it. In this way, any inefficiency and complacency in Malaysians nurtured by a protective shell can be stripped away hence a more competitive work culture will ensure to the long term benefit and survival of the nation.


  1. Good job on the article. However, I think you missed an important point. Inflation is also an innate feature of capitalism. To spur economic growth, central banks have no qualms in flushing liquidity into the market, thus causing inflation and economic cycles. Now, policy makers would like to think that this liquidity would eventually trickle down to the lowest echelon of society, but reality shows that most of this wealth is being hoarded at the top, as indicated in the ever increasing gini coefficient across most capitalist countries. Do bear in mind that most societies do not have any minimum wage laws, and those at the bottom are usually paid only a subsistence salary. In the face of liquidity induced inflation which is beyond their control, they end up being the biggest losers because they simply are incapable of accumulating wealth. To me, the whole system is fundamentally wrong. You don't need corruption and inefficiency to bring hardship to the poor, the system naturally favors those who possesses the means to invest. Over time, the bottom layer of society will just eat dust. You are right in advocating more welfare to alleviate some of this imbalances. But I hope we're here to put in a system that is socially, economically and environmentally sustainable.

    Anyway, I think you can't say that the increase of RM1.8 to RM4 over 15 years is equivalent to 8% per year. It is actually 5.5% per year because you need to compute inflation like compound interest. :-)

  2. Hi mate, thanks for the valid additional point. I mentioned in my second paragraph, distribution of income is another dimension to the problem. I hope to write the second part in the coming days.

    Inflation is inevitable but is the quantum fair? Prices of goods and services has skyrocketed due to land speculation, excessive credit card usage, intangible money generated by share market speculation and derivative are those that society can do without.

    You are right about the compound bit. Over the weekend, I am a bit lazy with the math and qualified myself with the term "simple average". Well spotted.

  3. To be fair, Bank Negara did refrain from raising interest rates since July 2006; and even inflation was at its 26-year high somewhere in August 2009, interest rates stay put. This kind of monetary policy is really against the book- if you look at how other central banks in ASEAN have increased interest rates to fight inflation. By standing firm on interest rates, Bank Negara prevented a housing loan crisis (like what happened 10 years ago).
    The advantages of establishing one self as a financial hub (ie Singapore, HK) is that it provides far greater employment opportunities to its people. As financial hub, most offices and operations there are REGIONAL meaning the control over activities in Malaysia, Indonesia, Vietnam, China, and other SEA countries.

    Also Malaysia came this far in decadence also because the total lack of transparency and accountability.

  4. While you talk about prices of necessities going up - one thing hasn't changed. Salary. If what I understand is right, 15 years ago a fresh grad would also earn about RM1,500 a month. Nothing's changed has it?

  5. Sadly wages have not moved upwards much especially for uni grads at entry level. Some companies offer lower than RM1.5K, others equivalent, but not many companies offer much more unless the person is 'special'.

    If anyone notices, wages are the most controllable cost (if the company actually wants to control it) on the p&l- if you can't cut overheads, variable operating costs, the only option left is to cut wages as a matter of company survival.

  6. I have split my writing into 2 parts, the first part was about cost and the other is about purchasing power hence salaries. I hope I have the answers to your question in part 2

    10 years ago, world economy was at a high and the KLSE index was 1,300 points. there were a lot of hot money around and I remember back in 1995, a graduating student was telling me he had an offer of RM1,500 but he is holding out for a RM1,800.

  7. "Inflation is inevitable..." Is that so? I know we are all brought up on a capitalist economy, where GDP growth is the be all and end all of the purpose of a nation. And to meet this target, central banks often resort to pumping liquidity into the system.

    Can we stop and think about the recklessness of this approach? In addition to stripping the earth of every resources there is due to rapid industrial expansion, this approach also exacerbate class division through the mechanism outlined above.

    I know it sounds like I'm going kookoo in the head, but shouldn't the 'real' and sustainable solution be to replace GDP growth with something similar to Human Development Index as the primary goal of the nation? Should that not DIRECTLY address the problems of the poor as well as the development of talent?

  8. Hou, inflation is inevitable because it has happened and is going to happen. It is as dependable as death and taxation.

    The past 2 decades have seen quantum leap in terms of financial instruments and derivatives being invited, marketed, exploited and celebrated.

    Share options, margin financing, futures, options, hedge funds etc has multiplied the multiplier effect from traditional credit creation hence we are spending money we have not earned, raking up debts that we would still be paying when we retire

    The greed of men have landed us in the present predicament. How are we going to unwind this?

    In a way, our relatively unimaginative and under-developed financial market has insulated Malaysian from some of the credit crunch.

  9. Can do one. All we need to do is to change the economy model from profit-based to need-based.

    OK that is probably impossible, judging from everybody's inclination to try to 'beat the system', rather than genuinely trying to rehabilitate it.

    My point is this: if we don't unwind this, we're going to inherit an earth that will be inhospitable to life. If that is inevitable, what is the point in trying to improve on the system? The outcomes from both a corrupted and a clean systems are the same. Only difference is that for the former, the shit will hit the fan quicker.

    OK, I'm moving further and further from the main topic. I just want to say that inflation can be eliminated theoretically, if the rakyat chooses to do so. But since you mentioned greed as hindrance, well, then, we truly deserve the hardship of this economic recession.

  10. workers get pay rise , so how do bosses recover the cost of pay rise ? raise the price of goods & services to recover pay rise given to workers from consumers.

    GST/VAT implemented in other countries also contribute to the high cost of living.

    country's weak currency also 1 of the factor to high cost of living.

    protectionism of trade also make us uncompetitive.

    lack of training for our workforce makes us unproductive / un-innovative / less-skilled / less-knowledgable.

    redtape/language/political stability/inconsistencies of policy/lack of incentives make investors think twice or thrice before throwing in their money to invest , although we had cheap land & labour to supply.

  11. well said, anom.

    what we need in economic leadership is not a tweak here and a twist there. We need paradigm shift, blue sea strategies, structural changes, shedding away bigotry and inflexible thinking.

    Tony P's suggestion on the toll buy back is 1 such example