A difficult year ahead – but opportunities lie waiting

Dec 11, 2014

By Anil Netto
A local business weekly has raised concern that shopping malls in the Klang Valley are recording lower sales, especially in non-essential items, apart from F & B.

This is probably the result of people tightening their belts after the recent fuel price hikes (despite a subsequent small decrease) while bracing for the implementation of GST.

Not only that, household debt had already doubled from 47 per cent of GDP in 2000 to 83 per cent of GDP in 2012 with housing loans making up half the debt figure. And the public is expected to feel the burden even more with GST.

But not everyone will be equally affected. The lower income group is likely to feel the burden the most.

Indeed, income and wealth inequality continues to be a serious problem. For instance, recent published figures show that the top 0.2 per cent of Amanah Saham Bumiputera unit holders had an average investment of RM692,087 — that is, 1,132 times more than the bottom 74 per cent.

Another manifestation of this inequality: the top 40 richest tycoons in Malaysia had wealth equivalent to 22 per cent of GDP, which is much higher than the top 40 richest persons in the United States, Singapore and Thailand.

At the other end of the scale, about, 62 per cent of EPF contributors have a monthly income less than RM2,000.

The economy as a whole faces uncertainty after the recent slump in global oil prices. With 30 per cent of government revenue coming from Petronas, it is clear that the government faces a serious challenge in trying to keep the fiscal deficit under control.

A glut in commercial property space and high-end residential housing is not helping. And, despite the fall in demand, there are plans to open a string of new shopping malls in the Klang Valley in 2015! One wonders where all the new consumers are going to come from, with so many people in debt or tightening their budgets.

What is cause for concern is that, like in 1987 and 1998 especially, political instability may accompany growing economic uncertainty or recession. And repressive action may follow. We have already seen a series of arrests under sedition and other similar laws. Now, the Sedition Act, which was supposed to be repealed, is not only to be retained but strengthened.

Let us hope there is no repeat of the past repression, even though some groups have raised divisive ethno-religous issues in recent months. These groups have played up their pet concerns, which wittingly or unwittingly, have diverted some attention away from the economic problems facing the country.

Despite the challenging year ahead, there is a ray of hope shining amidst the uncertainty and gloom.

First, Malaysians may be forced to reassess our model of development, to see whether it is sustainable and in the best interests of the ordinary people, including workers. Should we rely on a speculative property development-led model of economic growth?

Is the financialisation of the economy through cheap credit that reaps large profits for financial institutions — but leaves many indebted — the best way forward? Are the big infrastracture projects really the optimum way to improve the quality of life of the ordinary people?

Can we afford the rampant corruption that is draining the nation of its financial resources? Should we conserve our natural resources, like oil, for future generations? Is there a more sustainable and equitable model of economic development that would provide essential services such as education and health care that is more affordable, without compromising on quality?

Is GST the best way forward? Or should we think of a more progressive taxation system, including a tax on capital to reduce the wide wealth inequality?

The other opportunity we should seize is to build bridges among the various ethnic and religious groups in the country. People who believe in justice, fairness and moderation should seize the upper hand from the extreme groups which are making life miserable for many Malaysians through their divisive rhetoric and intent to impose their narrow religious conservatism on the rest of the country.

It is encouraging to see prominent Muslim writers and women’s groups challenging the discourse put forward by the right-wing ethno-religious groups.

A letter by 25 prominent Malays reasserting the supremacy of the Federal Constitution is evidence that people are standing up to be counted: “The Federal Constitution is the supreme law of the land and any law enacted, including Islamic laws, cannot violate the Constitution, in particular the provisions on fundamental liberties, federal-state division of powers and legislative procedures. All Acts, Enactments and subsidiary legislations, including fatwa, are bound by constitutional limits and are open to judicial review,” said their letter.

So while the coming year is one full of uncertainty, we should seize the opportunites that come along to point to a new way forward — towards a more sustainable and just economy and a more inclusive legal framework based on the supremacy of the Constitution.