It’s not the economy, stupid
A
foreign fund manager asked me this question last month – “What exactly
are Malaysians unhappy with?” After all, the country grew by 5.6% in
2012 compared to a lethargic 1.2% for Singapore for the same year.
Investment, measured by gross fixed capital formation grew by an
astounding 25% in 2012 compared to a lacklustre 10.2% in 2011.
As a proportion of gross domestic product (GDP – sum of
goods and services produced in a year), investment was approximately 26%
in 2012 compared to only 18% in 2009. Foreign direct investment in 2012
reached RM34.8 billion, a significant improvement on the abysmal RM5.0
billion in 2009.
The government seems to have a clear plan of action in
putting the country back on track via the Economic and Government
Transformation Plans (ETP and GTP). The shopping malls and hotels are
bustling in Kuala Lumpur. New buildings and hotels are sprouting up all
around the Klang Valley area.
The LRT and MRT projects will address the congestion
problems in the Greater KL area and increase property values and
development opportunities around their vicinity. Malaysia also had the
2nd and 3rd largest public listing in the world after Facebook via Felda
Global Ventures Holding (FGVH) and IHH Healthcare.
Things seem to be looking pretty good for the country. But
why is there still talk of the Barisan Nasional losing power in the
upcoming general election?
A similar puzzle confronted George Bush Senior in the run
up to his 1992 presidential campaign. He enjoyed approval ratings
exceeding 90% during the successful Operation Desert Storm in 1991 where
Saddam Hussein’s troops were routed after trying to invade Kuwait. A
year later, his approval ratings tanked over the perception that he was
mishandling the economy which led to Bill Clinton’s now infamous tagline
“It’s the economy, stupid”.
Najib Abdul Razak
In Malaysia, Prime Minister Najib Abdul Razak is facing a
similar quandary. Except that in his case, it doesn’t seem to be the
economic performance of the country that is holding him back. In fact,
the string of seemingly positive economic news that would have raised
the popularity of a national leader in any other country seems to have
almost no effect on his approval ratings which registered a 2% dip in
the latest Merdeka Survey polls in February 2013. What gives? Have
Malaysians suddenly gone mad?
I would like to propose that there are perfectly rational
and logical reasons for the lack of responsiveness on the part of the
average Malaysian to all this positive economic news.
Firstly, economic growth is not filtering down to the man on the street.
Our gross national income per capita has grown
impressively, in nominal terms, from RM24,879 in 2009 to RM30,809 in
2012, a 24% increase. If this growth is equally distributed between
corporations and wage earners and also within all wage earners, each
working adult should be earning at least 25% more today compared to 3
years ago.
But the economic growth figures sit uneasily with the
number of people who have successfully applied for BR1M (Bantuan Rakyat 1
Malaysia – a government scheme which awards cash to the poor) 1.0 and
are currently applying for BR1M 2.0.
A total of RM2.6 billion was distributed in 2012 to 5.2
million households even though the budget initially projected for only
RM1.8 billion to be distributed to 3.4 million households. This means
that 80% of the 6.4 million households in Malaysia were earning less
than RM3,000 a month rather than the initially estimated 3.4 million
households (or 53%).
This
stands in marked contrast to the RM30,809 GNI per capita in 2012 or
RM2,567 per month per person or RM10,270 a month for a household of
four. Clearly the economic output in the country isn’t being distributed
in a manner that is being enjoyed by a majority of Malaysians.
The BR1M 2.0 figures are even more astounding. RM3 billion
was set aside in the 2013 budget for an estimated 4.3m households
earning less than RM3,000 a month and 2.7m single unmarried individuals
earning less than RM2,000 a month for a total of seven million handouts.
In other words, even as GDP grew by 5.6% last year and GDP per capita
increased to RM32,000, there are going to be MORE people applying for
BR1M compared to a year ago.
If the anticipated ‘trickle-down effect’ to the man on the
street arising from healthy economic growth has not been felt, then the
big headline numbers – record investments, higher growth, higher GDP per
capita, more Entry Point Projects (EPPs) under the ETP – which have
been incessantly announced and highlighted by Najib’s economic team
would mean little to most of the voting public.
Secondly, real wages have stagnated over the past 10 years
especially for those at the bottom. In addition, the problem of
underemployment seems to plague many fresh graduates.
Even if economic growth was not evenly distributed, as is
often the case, its positive impact would be felt more if those at the
bottom of the economic ladder saw increases in their real wages and
purchasing power. But in the last 10 years, the World Bank estimated
that the average increase in wages in Malaysia was approximately 2.6%
which is lower than the average inflation rate of 2.8%. In other words,
average real wages have decreased over the past 10 years.
To put this another way, the starting salary of a graduate
in 1978 was approximately RM1,100 a month. In 2010, this has increased
to an average of RM2,500. But in 1978, it would have taken 56 months of a
starting salary (or slightly less than 5 years) to buy a 2-storey house
in Taman Tun Dr Ismail (a KL suburb) for RM62,000. In 2010, it would
take 140 months of a starting salary (or about 12 years) to buy a
RM350,000 2-storey house in Nilai, Negeri Sembilan.
Despite the current 3% unemployment rate, other survey data
reveal a deeper underlying problem of underemployment among many
Malaysians including our graduates.
In
a 2011 study done by the Ministry of Higher Education on graduates
within 6 months of their graduation, it was found that 25% of degree
holders, 24% of diploma holders and 36% of certificate holders still had
not started working yet. And even among those who are working, only 64%
had permanent jobs while 19.6% were on contract and 14% were holding
temporary jobs. This survey also revealed that 70% of fresh graduates
earned less than RM2,500 a month with the largest group (29%) earning
less than RM1,500 a month.
The only sector of the economy which seemed to have
experienced a steady increase in real wages is the public sector. The
average wage rate in Wilayah Perseketuan Putrajaya is RM6,746 a month in
2009 compared to RM5,962 a month for the next highest state which is
Selangor.
Small wonder that it was reported earlier this year that
the Public Service Commission received over 1.1 million job applications
out of a possible 46,000 appointments for public service jobs. And this
is 1.1 million applications out of a labor force of approximately 13
million people!
For these underemployed graduates with salaries below
RM2,500 a month, not to mention those without degrees who are earning
much less than these graduates, any talk of a growing GDP and the ETP
hitting nearly all of its targets would ring hollow.
Thirdly, increased expectations as well as increased scepticism are working against the BN administration.
The
BN government was able to stave off the prediction of modernisation
theory – which says that development would bring about greater demands
for democracy by an increasingly sophisticated electorate – because it
was able to generate gravity defying economic growth during the 1990s.
It was undoubtedly helped by the presence of repressive
laws, restrictions in the dissemination of information and a fragmented
opposition. Even the 1998 Asian economic crisis was not sufficient to
overturn BN’s electorate advantage. The 2008 general elections changed
the political landscape and political equation for good.
Increased access to information, denser communication
networks especially through social media, and higher levels of education
mean that it would take much more than just good economic news to
convince the Malaysian electorate that the country is on the right
track. It seems that all it takes these days is for another ‘Cowgate’
scandal or accusations of a RM24m ring to undermine whatever positive
publicity that may have been generated from the multitude of KPIs (key
performance indicators) being achieved under the GTP or the ETP.
The experiences of many a voter, amplified by social media,
makes them very sceptical of the positive reports being generated by
the government that crime and corruption are being effectively tackled.
Hence, despite enjoying a popularity rating that is over
60%, Najib cannot escape from the much lower ratings enjoyed by his
government and by the BN, which failed to even break the 50% mark,
according to the latest polls by the Merdeka Centre.
In many ways, Najib is seen as carrying too much baggage –
his own and more importantly, the accumulated baggage of BN’s 56 years
in power. The desire for what political scientists have termed
‘self-expression values’ over and above that of immediate economic
benefits has proven too strong for the BN government to resist. The
historic Bersih 3.0 gathering, numbering more than 200,000 people,
according to some estimates, exemplifies this desire for greater
self-expression.
After being in power for almost 60 years, the Institutional
Revolutionary Party (PRI) in Mexico won a bitterly contested and some
said stolen, presidential election in 1988. The gradual political
reforms that were forced on the PRI by opposition parties would
subsequently pave the way for the opposition National Action Party (PAN)
to win the 2000 presidential elections. This was despite outgoing PRI
president, Ernesto Zedillo, presiding over a country that grew by an
average of 3.7% from 1996 to 2000 after averaging a sickly 2% from 1989
to 1994 under Carlos Salinas.
Taiwan had its first popularly elected President in Lee
Teng Hui of the long ruling Kuomintang in 1996 and he presided over an
increasingly democratic Taiwan which grew by an average of 4.8% from
1996 to 2000. In a three-cornered fight in the 2000 presidential
election, opposition candidate Chen Shui Bian defeated Kuomintang’s Lien
Chen and former KMT leader James Soong ushering in a peaceful
democratic transition of power in this state.
It remains to be seen if Malaysia will experience a similar
peaceful democratic transition in the upcoming general election. But
one thing is for certain, “it’s no longer only about the economy,
stupid…”
Ong Kian Ming is the DAP’s election strategist. He can be reached at im.ok.man@gmail.com.
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