2018 from 2003: What is in store for Tun Dr. Mahathir as the 8th Prime Minister of Malaysia?

How much has Malaysia changed from October 2003, when Tun Dr. Mahathir retired from the position of the Prime Minister to today in 2018, after he resumed the position of the Prime Minister once again? 

Fifteen years is not a short time, many changes had occurred. Malaysia that Tun Dr. Mahathir see today, is far from what he saw fifteen to twenty years ago. The “bull” had grown to be of another creature, as some would say. Holding this “bull” by the horn is what’s required if any real changes to the country’s economic direction are to be altered. Change requires the understanding of the root causes and effects. We say that the lifestyles of Malaysian had changed to be consumer-based society, and yet to be highly dependent on subsidies and help from the government. On the other hand, consuming lifestyle changes should follow hand in hand with productivity growth. The imbalance between the two leads to higher needs of subsidies and handouts.

Could Tun Dr. Mahathir (and the PH government) change these trends?

General Demographics and Economic Indicators

Malaysian population had grown from 24.6 million (in 2003) to about 32 million, forecasted to grow to 38 million in ten years time. Largest growing ethnics is the Bumiputera, which now consist of about 70% of the population, and still growing. The urbanization of Malaysia continues from 65% (in 2003) to 76% and forecasted to grow up to about 85% in ten years time.

Household income per capita stood at about US5,100 today, as compared to US2,200 in 2003. GDP per capita had grown from US4,764 (in 2003) to US9,813. The inflation rate was averaging about 1.5% then, to about 3% these days. Ringgit exchange rates of 3.8 per US dollar plunged to 4.15.

By most accounts, generally one could say that Malaysia prospered reasonably well after the hiatus of 15 years by Tun Dr. Mahathir. For this reason, the reviews and ratings of the world community on his successors, Tun Abdullah Badawi and Dato’ Seri Najib Razak, had been fairly generous. And for that, Malaysia seemingly had prospered post-Tun Dr. Mahathir, so why there is a need for change?

What’s the Problem? 

If there are no problems emerged, and things are going well, then why there are calls and need for a change of government? Calling corrupt government and practices is one thing, but has the underlying had changed and requires massive redirection of the country’s economic and political landscapes? These are natural logical questions to be asked.

Is the direction of our economic growth faulty? There is no easy answer to this question since the foundations of growth were set early on in the 1990s (during Tun Dr. Mahathir’s era) and continued by the successors.

To delve further into this issue, we need to look at few examples of what had changed over the years: The total primary energy production of Malaysia increased from 2.03 quadrillion BTUs in 1990 up to 3.96 quadrillions BTUs today. The road density had increased from 20 km/100 sq. kilometer to 47 km/100 sq. Kilometer today. The number of registered vehicles per 1000 population increased from 456 (in 2000) to 843 today. The number of air transport passengers increased from 10 million/ year (in 1990) to about 60 million/year today. The percentage of the population which uses the Internet, was 21% (in 2000) and today, it stood at about 80%; and the number of mobile subscriptions grew from 5 million (in 2000) to 44 million today. On consumption level, we used to consume 46 billion heads of poultry per year (in 1990), and today it is about 350 billion heads per year (an increase of 8 times in about 30 years). Furthermore, out of the 32 million population, more than 50% are aged 40 and below. All of these examples pointing out to one key changes: the lifestyles of Malaysian had changed tremendously – we are a consuming society.

The share of education spending as a percentage of GDP had been consistent at about 5% over the years, and on the healthcare as a percentage of GDP, it grew from 2.4% (in 2000) to 4.0% today. Furthermore, total subsidies for food, petroleum products, and other basic items had been growing as well over the period. These figures pointing out to another issue – not only we are increasingly becoming a consumer society, the consumption is heavily subsidized.

If by consuming higher and more (which is important for the lifestyles), and yet we demand subsidies and giveaways – would it be something that is sustainable for the long haul? The only way for reverting to sustainable growth (and development) is to gradually balanced consumption with productivities, through jobs and income creations. But if, jobs are mainly coming from the government (for the Bumiputera in particular), how the productivity of the country be increased?

What’s new in Malaysia Baru?

The scenario explained, is the New Malaysia. First, we need to understand that as Malaysia, we had changed a lot in the last 30 years or so (the first 30 years after independence is the earlier phase). We had emerged as a country, mired with modern day living and lifestyles. We are urbanized and followed pretty much the path of other developing countries, at least in terms of lifestyles, but had we follow the same path when comes to productivities?

Let us first talk about lifestyles. Lifestyles, as explained, is becoming life’s necessities. For example, we can’t live without the Internet, the cars or private transport, we need water and electricity, we need homes to live in, of course, we need quality food, and we need to travel around. None of these items are dispensable. The costs of having these basic items would consume more than 70% of disposable income for any household. The balance is left for education and healthcare. As the costs of these items are on increasing trend, would the disposable income increase in tandem with them? Past indicators suggest that is not true; the only thing left to be studied is, by how far and how much?

Productivities is not an easy subject to be measured, as an increase in wages is not the indication of productivity increment. We need to get the proper measure of real wages, that is the net effect of the increase in wages against all other factors taken into account. Unfortunately, in my survey, to get hold of this number is hard. We do not have proper tracking and studies, to provide a reliable view of the subject matter.

Based on the above discussions – we want to ask, what’s new that the PH government, under Tun Dr. Mahathir want to offer (for this so-called Malaysia Baru)?

Popular policies would be to continue and further promotes the same lifestyle trends and subsidizing these trends even more. As an example, calls for Toll abolitions or reductions, is to encourage more travels on the roads (as the number of vehicles are large, and the road densities to match that). Abolition of GST (and replacement with SST) will not change the trends. Education and healthcare subsidies are critical to being continued, and possibly needed to be even further expanded (as part of the election promises). BRIM and support programs like MARA, TEKUN, entrepreneurship need to continue.

Unpopular policies are to take the bull by the horn and start to reverse the trends, by encouraging people to live within their means. To increase taxes, which could be done realistically by widening the tax base, hence would hit lower income people more than higher income people. To reduce subsidies and dependencies on the government budgets. To encourage economic growth driven by the markets and less by the government. The list could go on and on, and it points out only to one major theme – unpopular policy direction, by holding the bull by the horns.

The only question left is, does Tun Dr. Mahathir, after 15 years of hiatus, facing the current “bull” which is much larger than the one he left in 2003, is up to it? This remains to be seen and observed.

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