Malaysia’s economy looks rosy but are Malaysians feeling it?

Malaysia’s recent economic numbers are undoubtedly encouraging. Second-quarter growth at 5.9 per cent, unemployment at less than 3 per cent – which counts as full employment – and inflation at not even 2 per cent are all encouraging figures.

Foreign Direct Investments (FDIs) promised to the country have also never been higher. In other words, all the numbers suggest the country’s economy is in good shape. In fact, the strengthening of the ringgit is another positive sign, silencing weak ringgit critics. It is fast heading towards RM4 to the US dollar.

But do people on the ground feel the good news?

A recent public lecture on the economy shared compelling evidence that ordinary folk may not feel the good news.

Hosted by Universiti Malaya’s Ungku Aziz Centre, the lecture was delivered by Tan Sri Professor Dr Noor Azlan Ghazali, a prominent economist. Titled “Humanising Development: Exiting from Legacy,” the lecture was indeed thought-provoking.

He shared an analysis of the clear disconnect between economic numbers, such as gross domestic product (GDP) growth, and the real-life situation on the ground. We clearly need to develop better economic indicators and measurements.

If we were to ask a tailor in Kuala Krai, a farmer in Baling, or a street food vendor in Sabah whether they are even aware of this good news, the answer would most likely be no. Though inflation is reportedly low, to them, the cost of living remains high.

Though there is full employment, many graduates remain underemployed. So much so that many are no longer keen to pursue higher education.

Even robust export growth is not much felt by the common man. The benefits go to big businesses, especially multinationals.

The analysis suggests that the legacy or traditional way of reporting economic progress does not fully reflect the economic realities on the ground.

Malaysia has a good track record of GDP growth. Though hit by crises occasionally, these were all externally driven. But looking inside the population, the reported numbers do not mean much for the common people.

Take Malaysia’s GDP, for example. Close to 70 per cent of the national GDP comes from only four relatively rich states in the country – Selangor, Penang, Johor, and Kuala Lumpur. The remaining low-income states do not feel the averaged-out growth, some with growth lower than the national average.

On the aspiration to achieve high income, though we have narrowed down the gap from 55 per cent to 11 per cent, this is not reflected in the income of the common people.

From the Employees’ Provident Fund (EPF) data, less than half enjoy a liveable income. In Kota Bharu, Kelantan, where the median income is RM4,330, a family of two would need RM5,520 to live comfortably.

Therefore, only about half of the households there are achieving a liveable income. More than 50 per cent are not enjoying a quality standard of living.

The real issue is the quality of living. Becoming a high-income nation has no meaning for the majority, with 60 per cent of graduates earning less than RM2,000 a month. Visitors may view Malaysia as a low-cost destination where living is relatively cheap – but not for the locals.

The reality is that our wages have not kept pace with inflation. Compared to many countries, businesses allocate a lower percentage of their revenue to wages.

Employers have always maintained that wages should only increase with productivity. But a recent Bank Negara study concluded that improved productivity is not always rewarded here.

The recent salary adjustment by the government is a signal for private businesses to follow suit. Price control is clearly not a sustainable solution. Inflation cannot be zero if there is to be growth. The remedy should be raising income in tandem with inflation.

There is concern that FDIs are also not equally distributed between states and districts. We need a whole-of-nation approach here.

States and districts should have their own economic plans. The legacy of macro-economic planning may need serious rethinking. The emergence of big data can empower micro-planning. But most importantly, the way we measure economic performance needs to change. GDP, unemployment, and inflation numbers should not just be averaged out.

The numbers must reflect the true experience of the common people.

The views expressed here are the author’s own and do not necessarily reflect those of Twentytwo13.