21 Dec 2022 10:59AM
THE Federation of Malaysian Consumers Association (Fomca) would like to express its gratitude to the prime minister for ensuring no increase in electricity tariffs and efforts to address chicken and egg shortages.
Beyond these, what is needed is a holistic approach to the cost of living agenda. It encompasses issues of income and social protection, food availability and affordability, affordable housing, reliable public transport, accessible healthcare, affordable childcare services, and affordable internet services. It must also include the empowerment of consumers. Next, to ensure that the efforts and actions taken are actually having a positive impact on the people, we need to monitor their perceptions and their subjective wellbeing. Finally, we need to find a new way to move forward to ensure the effective implementation and monitoring of policies and programmes.
Income and social protection
Incomes in Malaysia are low. The living wage as proposed by Bank Negara Malaysia (BNM) is RM2,600 for a single adult. Yet, according to a World Bank Report in 2018, six million workers in Malaysia earned less than RM2,160. That was before the pandemic. Currently it has been reported that due to job loss and fall in income levels, coupled with the significant rise in cost of living, 20% of M40 have fallen into the B40 group.
Many Malaysians, especially in urban areas, feel their income is insufficient to raise their living standards. As at 2018, nearly 30% of Malaysians felt they did not have enough money for food and 23% reported they did not have adequate money for shelter. According to BNM, cost of living has been increasing across all households, but more significantly for lower income households in urbanised states.
Social protection includes policies, programmes and measures aimed at ensuring a basic standard of living for a nation’s people and protecting people against major shocks such as serious illnesses, injury and unemployment. The workers most affected by lack of social protection are those in the informal sector, micro-businesses, small businesses as well as gig economy workers.
Safety nets are crucial to ensure vulnerable families achieve some level of support for a minimum standard of living. Yet, the BNM report, “A Vision for Social Protection in Malaysia”, states that safety net programmes are less than effective as they are managed by multiple agencies. It states for example that despite the sizeable expenditure of RM17.1 billion (1.1% of GDP), the payout amounts under each programme tends to be small and insufficient to ensure that the most vulnerable households were able to meet minimum income and living standards.
There must be some form of basic universal income to ensure that Malaysians are able to enjoy at least a minimum standard of living.
Food availability and affordability
The price of food items is exorbitant. Malaysians in the B40 group spend 48% of household expenditure on food. Certainly the poor will be more affected as a greater percentage of their income is spent on basic food items.
Why is food so expensive? Firstly, food production in Malaysia is low. Out of the eight million hectares of agricultural land, just 12% of agricultural land is for food production. In 2017, Malaysia imported RM51.3 billion of agricultural and food products for local consumption. When food is imported, prices would largely be influenced by global factors, including our currency value, monopolistic practices as well climate change effects in food-producing countries. We need to boost food production in Malaysia.
The second reason for high food prices in Malaysia is price manipulation and monopolistic practices along the supply chain.
The Malaysia Competition Commission (MyCC) in their report on the food supply chain identified multiple causes of the exorbitant food price in the market – market manipulation by middlemen, multiple intermediaries and manipulation of approved permits, causing unreasonable increase in food prices.
MyCC must play a more advocacy role rather than a mere passive and quiet role. MyCC’s silence in the increasing price of food is deafening. The government needs to relook agency functions so it can effectively enhance consumer wellbeing.
According to Khazanah Research Institute and BNM, the signal of a well-functioning affordable home market is when the median price for the whole housing market is three times the gross annual household income. Overall in Malaysia, house prices are 4.4 times the median income. While BNM said affordable housing is priced at RM242,000, in Kuala Lumpur the price averages RM490,000, and in Selangor it is RM300,000. Putrajaya needs to put in more effort to make prices of houses affordable.
The first priority in assisting home ownership should be to build affordable homes as well as properly regulate the private sector. The rental market also needs to be expanded and promoted, to ensure consumers can rent their homes until they have the financial capacity to purchase their own homes.
Reliable public transport
Transport makes up the third highest expenditure. It is estimated that households spend about 20 to 30% of their disposal income on private transport. An efficient public transport would help households save substantially.
The core of the public transport system is the bus system, which is the “last mile”. Too often the last mile is unreliable. It has been reported that in Kuala Lumpur, only 17% of consumers use the public transport against 62% in Singapore.
For a public transport system to be popular, it must be available. Fomca urges the Transport Ministry to undertake an audit of how extensive the current bus system is in serving the public not only in the capital city but in all cities and towns in Malaysia.
Buses also need to be reliable, affordable and well-connected. Commuters must have ease in getting scheduling information.
Access to healthcare
The public healthcare system is under severe pressure, with too many patients and extremely limited resources. Two of the biggest challenges in the healthcare system are long waits for investigations and tests as well as to meet the specialists and shortage of hospital beds for admission.
There is clearly under-investment in pubic healthcare. Public health expenditure is a mere 2.4% of GDP, while the World Health Organization suggested expenditure of up to 5-7.5% of GDP. Some 65% of the population use the public healthcare but is served by only 45% of registered doctors and about 25% of specialists. Under-investment in healthcare severely impacts consumer welfare.
Private healthcare is expensive. Prices are not regulated, resulting in consumers having to pay more. What is worse, many consumers do not have medical insurance. In fact, about 38% of consumers pay their hospital bills by out-of-pocket expenses, considered the most risky form of payment. These have risen from RM17.4 billion in 2013 to RM 23.1 billion in 2020 – more than 32% – in seven years. Similarly, medical insurance premiums are spiking.
Childcare support services
The Edge, in an article “The Cost of Raising a Child Today in 2018”, suggested that the cost from a child’s birth to a university education is between RM393,000 to RM1.37 million. Taking a conservative cost of RM393,000 for a child until the age of 22, would require an average of RM1,480 per month, with a full university education. Childcare centres have been reported to charge from RM700 to RM1,350 per child depending on the breadth of services. High prices lead to parents sending their children to unregistered support services.
It is proposed that for low-income families, the government provides subsidised childcare and child support services, including education. The payment can be made directly to the childcare providers. Families can make a co-contribution.
Young workers often lack the right attitude, knowledge and skills to manage their consumption and finances responsibly, leading to serious financial problems. In a recent report on bankruptcy among Malaysians, between 2018 and 2022, 42% of those declared bankrupt were below the age of 35. In a study on young workers, 70% were living beyond their means and 47% were facing excessive debt. There is a great need for an extensive national financial literacy programmes to ensure all Malaysians, but especially young workers, acquire the knowledge and skills to manage their finances responsibly.
Consumer Wellbeing Index
There is a wide disparity between the statements of policy makers and the lived experiences of a significant number of consumers – an indication leaders do not grasp the people’s sufferings. The government should develop a Consumer Wellbeing Index, covering subjective wellbeing, sense of economic insecurity of the people and their trust in institutions. This index can be constantly monitored to ascertain the people’s true sentiments. Through monitoring of the pulse on the ground, changes can be made at the policy level or more effective communication can be undertaken. – December 21, 2022.
* Paul Selva Raj is secretary-general of the Federation of Malaysian Consumers Association.
* This is the opinion of the writer or publication and does not necessarily represent the views of The Malaysian Insight. Article may be edited for brevity and clarity.