Equitable shared prosperity from the bottom up — Rais Hussin

DECEMBER 29 — Malaysia is in need of a serious economic revamp, not that is has failed completely, but the world is moving at warp speed.

Since the dawn of the internet age in mid 1990s, Malaysia has tried to catch up with the introduction of the Multimedia Super Corridor (MSC) — signature move that Jack Ma of Alibaba claims to have inspired his own foray into internet commerce.

However, whereas the November 11 singles day sale invented by China can hit close to US$50 billion a day, the total e-commerce in Asean remains US$35 billion last year according to McKinsey Global Institute; this despite an internet or telephony penetration of nearly 40-45 per cent across the region. In Malaysia alone, such penetration rates have reached 80 per cent.

While comparing Malaysia and China are not totally analogous and compatible, one can see how China has come along. From its economic reforms and Open Door Policy in 1978, China has had 40 years of non-stop pulsating growth.

It has even given President Xi Jin Ping to introduce policies like the China Dream and more importantly Made in China 2025, where China will try to prevail in electronics, artificial intelligence, algorithm, automation, biological breakthroughs, robotics, metallurgy, precision engineering, 3-D printing, satellite imagery, big data and more.

Little wonder the West, especially the US, has seen China as a “major threat,” to its technological preponderance. 

While there are doubts if China can leverage on what Evans Feigenbaum called “technology nationalism,” to become a major power, the scale of its ambition is vast and sophisticated to say the least 

Malaysia is not a sub set of China. It cannot do what China does whole sale. But Malaysia has a Look East policy that tries to learn from China, Japan and South Korea.

If Malaysia focuses too excessively on racial distribution of wealth, as as provided by the National Economic Policy, where Bumiputeras are entitled to 30 per cent of the corporate stakes, then this document may not lead us right to the watering hole, when so many breakthroughs and economic disruptions are happening at exceptional speed.

If anything, Malaysia needs to put more spending on research and development (R and D) with the focus to create equity shares economy (ESP). ESP is needed to assuage the demography of Malaysia and the delicate racial balance. 

With 65 per cent of the demography being Malays, any achievement in science and technology in Malaysia or through foreign direct investment, has to be consistent with the spirit of ensuring the ability of the Malays, the largest ethnic groups in Malaysia, to be a key stakeholder — not to dominate or stick it’s hand into the economic pie at all time but to grow together.

As this is written, for example, Malaysia is a mere 4 years away from becoming an aging society. 15 per cent of the multi-racial population in Malaysia will be above the age of 60 by 2023.

By the standards of the United Nations, Malaysia would have entered the aging process then. Close to 60 per cent of Malaysians would also not be able to retire at the age of 60 with any pensions at all.

In fact, close to 113,000 settlers in Felda across all 54 parliamentary constituencies are not doing great, with close to 1/3 of them needing financial assistance to the tune of RM 800-1000 a month.

Only a pro-growth economic agenda based on Equity Shared Prosperity can redeem Malaysia by allowing the state and private sector to work closely.

Barring a strategic and philosophical economic framework of sharing wealth across all races, Malaysia can yet regress into its own racial silos.

Between 1990 and 2018, Malaysians on the whole gained little, except the very rich.

Income from the manufacturing sector, for example, has been on the decline, which may be due to the overreliance on cheap foreign labour — with an estimated 5.5 million migrant workers in the country — which further depresses the cycle of Malaysian wages.

As things stand, more than 90 per cent of each ethnic group does not have any liquid savings, and would not be able to survive more than few months in case they lose their source of income or employment.

This is not a very pleasant picture, even if it is colour blind. Why? The danger lies in the ticking time bomb that cuts across all races and groups.

When the income chasm widens, people tend to blame one another for their problems, which in turn accentuates social, political, religious and racial tensions.

While democracy can ameliorate the tensions, it cannot overcome them completely. 

What democracy cannot structurally and systematically solve, groups of all religious and ideological fancies might rise to plug the policy gaps. When they do so, inter— and intra-ideological or religious pressures will only become more acute.

When political parties refuse to have elections, or postpone them indefinitely, they become blindsided by what the people want, which in turn hastens their own demise, as witnessed with the death and decline of Umno and Barisan Nasional (BN).

A bad economy will skew a political party’s fate, including Parti Pribumi Bersatu Malaysia (PPBM), especially if it morphs into some kind of Umno II that is well-larded with cash, corruption and connections. 

When the infamous trickle-down economics, for the lack of a better word, isn’t happening then there is no shared equity and prosperity.

In fact it didn’t happen during the watch of Abdullah Badawi and Najib Razak at all. That’s (more than) a loss decade from 2004 mid 2018.

In any case, widespread disempowerment is a phenomenon that should not be happening — if the state and the market, as is the case in Malaysia through Smart Partnership — have vouched to work in tandem to help the poor; as reflected in the National Economic Policy and its derivatives. 

Thus there is a need to focus on the strengths and flaws of NEP with the goal to produce Equity Shared Prosperity scheme across the country.

But although Malaysia as a whole was becoming richer, the income differentials of Malaysians is growing wider. The lethal brew of myriad income determinants and gangly systems of income distribution have conspired to render the middle and working classes disempowered.

As Muhammed Khalid, the Economic advisor to Tun Dr Mahathir, puts it: “(As of 2012), the top 20 per cent held more than 52.1 per cent of all wealth, while the bottom 40 per cent held less than eight per cent.

The distribution of liquid assets was very extreme — the top 20 per cent had 95 per cent of all financial wealth, while the bottom 80 per cent had only five per cent.” This shouldn’t be happening

This process of economic emasculation should not be happening, especially not after 61 years of independence.

In 1958, there were only 3,000 Malay taxpayers out of the overall of 33,000 taxpayers. 

A decade later, of the 1,488 students in Universiti Malaya — the only university in the country at the time — who graduated with a BSc, only 69 were Malays. Only four of the 408 who graduated with an engineering degree were Malays.

“During the same period,” Muhammad added only 12 Malays graduated from the medical faculty, representing less than 10 per cent of the total medical faculty graduates.”

But while the number of Malay graduates, technocrats and universities between 1970-2018 have risen dramatically, the chasm between rich and poor continues to stay the same, if not widened.

Statistics from the Employees Provident Fund (EPF) show that 92 per cent of the people are earning less than RM 6,000 a month; four out of 10 Malaysians have no pensions at all; close to 40 per cent earn less than RM3,000 per month; 25 per cent of Malaysians have no properties to their names; and the money that pilgrims save for the hajj is spent entirely on the hajj, leaving their children with nothing to draw on. Indeed, half of Malaysians earn below RM 2000 a month (source: The Edge, April 30, 2018).

More importantly, it is estimated that there were only 150,000 inter (-racial) marriages in Malaysia, a small figure in a population of 28 million. 

Wealth, or, the lack of it, tends to have the same clustering effects in one group and one race when there is no inter racial marriages or inter racial unity.

This is why Equity Shared Prosperity must have an inter-racial structure of distribution driven into it.

* Rais Hussin is Parti Pribumi Bersatu Malaysia chief strategist.

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