Malaysians are increasing becoming indebted over the years. Generally the debt repayment of 30% (1/3) of household income is acceptable. The Malaysian household debt service ratio was 9.1% in 2006 and rose to 49.0% in 2009 but dropped slightly to 47.8% in 2010. This means that on average almost half (50%) of a household’s income goes to repaying debts. Thus after paying off debt there is not much left to spend on food, transport, education, and for emergencies. Should any problem arise to the income earner or lose his job, the family will find it hard to make ends meet and loans may be defaulted. Malaysians have become very vulnerable to any slight changes to their income.
The ratio of household debt to disposable income is 140.4 % for Malaysia, one of the highest in the world; above that of Singapore at 105.3 %, USA at 123.3 % and Thailand at 52.7% in 2009. This means that the loans taken by each household in Malaysia is on average 1.4 times more than its household income. These figures indicate that Malaysian poor are at higher risk of not being able to service loan obligations. Increasingly more Malaysians are spending using borrowed funds. 34% of Malaysian workers earn below Rm720 which is below poverty level. Why have Malaysians become poorer despite the economic growth in the 80s and 90s and Malaysia being resource rich?
- Wages in Malaysia grew at the rate of 2.6% per annum for the past 10 years while inflation which is much higher even though the official average inflation rate is 2.77%. The household debt is rising yearly at the rate of 11.1% annually. Therefore, unless there is a rise in productivity, wages, and household incomes, this trend is not sustainable and can end up in a debt bubble like what happened in the U.S. 40% of Malaysian workforce are made of foreigners and their presence here depresses and stagnates wages of low income householders. Malaysia is one the few counties which do not have minimum wages.
- Malaysian government has privatized all essential service like toll highways, electricity, water, medical, postal service etc to UMNO cronies thus increasing the cost of service. Collapse of public transportation forced many to purchase cars which forced people take loans. Abandoned housing projects with developers going scot free made many indebted with loan to pay. No public housing policy for the poor. All policies are to enrich the developers and UMNO cronies.
- The BN government has hijacked the NEP to enrich the cronies and made the rich richer and poor poorer. Billions spent on failed projects like NFC, PKFZ, Tuna port Batu Maung and grants to built highways. Ttax payer’s money used to save cronies from bankruptcy which are all written off. It is said that during Mahathir’s era itself 100 billion of government money spent for cronies. RMI trillion take out of the country in the last 10 years. No investigation made public. Government spends taxpayer’s money without any accountability, transparency and due diligence. Billions and billions burnt without any effective results. Poor and weak Malaysians have to take care of themselves. Bribery and corruption increases cost of living.
- Government policies protect the rich employers and victimize the poor workers. Labor policies amended to remove workers rights and job security. The BN government is non consultative, biased against the poor and favors the rich. Unions were weakened and workers bargain power reduced. Racial segregation and cronyism deprived good workers opportunities and rewarded apple polishers. Illegal migrant workers flooded the country competing with unskilled Malaysian workers. Earnings remain stagnant.
- Spending beyond their means by people was encouraged and banks made credit easy. People became poorer and banks and MNC/GLCs richer. Nation building and cultivation of positive habits by Malaysians was never the policy and priority of BN government. Bulk of government subsidies goes to Independent power producers, toll concessioners and cronies and not the poor.
As of 2011, the household debt-to-GDP ratio stood at 77.6 percent, according to Bank Negara Malaysia. That roughly translates into a household debt of RM662 billion. Malaysians need new thinking and better governance to save Malaysia and its people. It’s Time to change and make a difference for the present and future.
Senator S. Ramakrishnan