NOVEMBER 21 — In a report by Khazanah Research Institute (KriS), based on the nominal GDP per person, Malaysia is currently a high middle-income country, but the disparity between the rich and the poor is serious. Households in west Peninsula earn RM4,000 and above, while those in Perlis and east coast of Peninsula earn only about RM2,000. Moreover, high-income earners have also paid far lesser than low-income earners when purchasing consumer goods like household appliances.

Similar situation occurred, as high-income earners are able to pay in cash while low-income earners have to pay in instalment with interests, causing them to pay more for the same item. Take cars for instance, high-income earners can afford imported luxury cars, but low-income earners are able to purchase only domestic cars, and still, they have to pay a higher interest rate. It is the crux of high household debt problem.

Instalment payment is getting easier nowadays and although it might improve the quality of life of most families, it could at the same time lead to reduction in household savings. In the face of soaring prices and increasing interest rates, it could lead to more problems.

From the Employee Provident Fund (EPF) deposit amount, we can see that most members earning low incomes have far lesser deposit amounts compared to those earning high incomes, showing a phenomenon of unequal wealth distribution. Low deposit amounts would cause families to fall into a crisis when facing unemployment, sickness and death. And low deposit amounts for retirees might also affect their lives after retirement. Indirectly, it showed the importance of financial management.

Since many consumers do not really understand the difference between “instalment” and “loan”, many have actually paid more for an item when borrowing money or use credit cards to pay. It is necessary for the government to strengthen the public’s financial management knowledge to avoid consumers from falling into financial difficulties.

At the same time, high house prices are also worrisome. Reasonable house prices should be 3 times the annual median income but Malaysian houses cost 5.5 times more than the annual median income, making them even more expensive than Singapore, the US, and UK. Booming high-end industry has driven market activities, but those who just wish to own a house could only sigh. We cannot help but ask, how many people’s needs have actually been met by the affordable houses?

The survey report reflected the current economic situation of Malaysia. The report recommended that the government should improve the subsidy system, including BR1M, to help low-income earners. However, as “give a man a fish and you feed him for a day; teach a man to fish and you feed him for a lifetime”, similar subsidies are not a long-run solution. What the government should do is, teach the people how to spend and save MONEY, to achieve the goal of improving the people’s economic situation.

Overall, the revenue growth of the majority is lagging behind inflation as on one hand, some are earning relatively low incomes; on the other hand, some are having poor financial management skills and educational backgrounds. Unless if these problems are properly addressed, or the wealth disparity problem in the country will continue and might even affect the country’s goal of becoming a high-income economy.

* This is the personal opinion of the writer or organisation and does not necessarily represent the views of Malay Mail Online.