Even though Malaysia’s economy expanded by over five percent in Q1 2017, an expert revealed that the wage gap between average workers and affluent people remains wide, reported The Malaysian Insight.
There is also fewer people who own property and financial instruments than those without, said economist Dr Muhammed Abdul Khalid, who is also the author of the 2014 local English best seller, “The Colour of Inequality”.
He explained that inequality in salary and assets are due to labour and fiscal policies that gives an advantage to investors over the typical worker.
“So even though there is all this good news about the economy, there is still the perception among the average Malaysian worker, that they are not feeling any benefits.”
Based on data from the economic planning unit (EPU), inequality in household income as gauged by the Gini co-efficient declined to 0.40 in 2014 from 0.44 in 2007. A number nearer to zero indicates less inequality, while a figure closer to one means the opposite.
But Muhammed noted that this does not accurately show the entire picture, as it only accounts for total household income, which include government handouts like the People’s Aid Scheme (BR1M).
For instance, the Gini co-efficient in the Employee Provident Fund (EPF) savings between those average wage earners and those with high salaries showed that inequality increased from 0.652 in 2009 to 0.658 in 2014.
In terms of assets like Amanah Saham Bumiputera (ASB) unit trust, the inequality between different types of owners is more obvious. “The Gini coefficient for ASB holdings in 2014 is 0.836, much higher compared with 0.658 for EPF, and 0.401 for household income,” he explained.
The 2014 ASB annual report revealed that the bottom 72 percent of ASB unit holders only had savings of RM536 on average, while the top 0.2 percent have average savings of about RM745,038.
“In the longer term, assets are far more important than income as they can be transferred between a parent and child thus ensuring that the latter gains a tool to move up the social ladder.”
Muhammed also pointed that it is unfair for average Malaysians that there is no tax on capital gains, such as the proceeds from disposing stocks or real estate.
“We apply taxes to income and consumption such as the GST (goods and services tax) where everyone is taxed. But we don’t tax earnings equally between the poor, the average worker and the rich.”
Meanwhile, DAP lawmaker Tony Pua refuted Second Finance Minister Johari Abdul Ghani’s claim that 1MDB has never received government funds to help repay its loans.
“The finance ministry had, on so many occasions, came to the rescue of 1MDB over the past two years and it involved billions of ringgit of taxpayers’ monies.”
“Among the most clear-cut examples were the RM800 million loan from Socso and another RM2.4 billion Bandar Malaysia sukuk bond, which the finance ministry has now assumed as a result of taking over TRX City Sdn Bhd and Bandar Malaysia Sdn Bhd,” he said.
To back his claim, Pua cited the Auditor-General’s report that showed almost all of the 1MDB’s borrowings for TRX City and Bandar Malaysia were never utilised for these two developments.
“Hence, when the finance ministry agreed to take over the property projects and assumed the liabilities, it had effectively ‘settled’ 1MDB’s RM3.2 billion debt problem.”
Another proof that 1MDB was really bailed out by the government can be seen in the recently scrapped sale of Bandar Malaysia, noted Pua, who is also the MP for Petaling Jaya Utara.
“When 1MDB had originally sold a 60 percent stake in Bandar Malaysia to an Iskandar Waterfront Holdings (IWH) Sdn Bhd-led consortium, 1MDB collected the RM741 million deposit which had been paid upon the signing of the sale and purchase agreement in December 2015.”
“However, when the finance ministry terminated the sale due to IWH’s payment defaults, it was the ministry who coughed up the RM741 million to refund the deposit paid by the consortium,” Pua pointed out.
He added that 1MDB should have been the one to refund the deposit, not Malaysian tax-payers.
Image sourced from The Malaysian Insight
This article was edited by the editorial team of PropertyGuru. To contact them about this or other stories email Editorial-MY@propertyguru.com.my
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