On behalf of the consumers in Malaysia, especially the vulnerable consumers, FOMCA would like to express our deepest gratitude to the Prime Minister of Malaysia, for ensuring no increase in electricity tariffs and efforts being made to address the chicken and egg shortages. More important still, the Prime Minister has declared that the Cost of Living agenda is of critical importance to the new government, and is personally chairing the National Action Council on the Cost of Living (NACCOL), thus making it clear to all sectors that the new government gives great priority to consumer welfare and consumer well-being.
Beyond electricity, eggs and chicken what is needed is a holistic approach to the Cost of Living Agenda. Cost of living encompasses the issues of income and social protection, food availability and affordability, affordable housing, reliable public transport, accessible healthcare, affordable childcare services, and affordable internet services. Not less important, the Cost of Living agenda must include the empowerment of consumers. Next, to ensure that the efforts and actions taken are actually having a positive impact on the rakyat, we need to monitor their perceptions and their subjective well-being. Finally, we need to find a new way to move forward to ensure effective implementation and monitoring to ensure that the policies and programmes really make a positive impact on the rakyat.
Income and social protection
Cost of Living issue must begin with income. Incomes in Malaysia are low. The living wage as proposed by Bank Negara Malaysia is RM 2,600 for a single adult,, Yet, according to the World bank Report in 2018, 6 million workers or 50% of workers in Malaysia earned less than RM 2,160. That was before the pandemic. Currently it has been reported that due to job loss and fall in income levels coupled with the significant increasing in cost of living, 20% of M40 have fallen into the B40 group.
Many Malaysians, especially in urban areas, feel that their income is insufficient to raise their living standards. As at 2018, nearly 30% of Malaysians felt that they did not have enough money for food and 23% reported they did not have adequate money for shelter. According to Bank Negara Malaysia, 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 the workers in the informal sector, micro business such as hawkers and small businesses as well as workers in the gig economy.
Safety nets are crucial to ensure that vulnerable families achieve some level of support to ensure 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 due to it being managed by multiple agencies at both Federal and States levels. It states for example that despite the sizeable expenditure of RM 17.1 billion (1.1% of GDP), the pay-out 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.
It is time indeed that the government seriously considers the need to implement some form of basic universal income to ensure that Malaysian citizens are able to enjoy at least a minimum standard of living.
Food availability and food affordability
The price of food items in the market place is exorbitant. Food is certainly the most important expenditure of households. Malaysians in the Bottom 40 group spent a total of 48% of household expenditure on food. Certainly the poor will be more effected on high food prices as a greater percentage of their income is spent on basic food items.
Why is food so expensive in Malaysia? 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. This has resulted in Malaysian consumers depending on imported food. Malaysia imported RM 51.3 billion in 2017 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 practises as well climate change effects in food producing countries. This could easily affect the price of food in Malaysia. Food production thus has to be increased and importantly financially sustainable to attract young talent.
The second reason for high food prices in Malaysia is price manipulation and monopolistic practices along the food supply chain.
The recent report on the market review of key food items by the Malaysia Competition Commission confirms that one of the key reasons for high food prices is distortions and manipulations in the food supply chain. Malaysia Competition Commission (MyCC) in their report on the food supply chain have identified multiple causes of the exorbitant food price in the market. The reasons include market manipulation by middlemen, multiple intermediaries and manipulation of Approved Permits causing unreasonable increase in food prices. Thus action needs to be taken to ensure open competition in the entire food supply chain and the removal of any price manipulation, I strongly believe that prices of food will reduce substantially.
It is time to ensure that the MyCC plays a more advocacy role rather than a mere passive and quiet role. MyCC’s silence in the increasing price of food is deafening. FOMCA hopes that the Government relooks at the agency to inject some urgency and vibrancy in its role so that the agency functions effectively to enhance consumer well-being.
Affordable Housing
Next, houses in Malaysia are simply unaffordable. According to Khazanah Research Institute and Bank Negara Malaysia, 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, houses prices are 4.4 times the median income. Further while according to Bank Negara the affordable home is at RM 242,000, in actual fact the average price of houses in Kuala Lumpur is RM 490,000, and in Selangor it is RM 300,000. To put it simply, houses in Malaysia are simply not affordable to consumers. The efforts, through policy and programs then, should be to reduce the price of houses to the affordable range.
Thus, the first priority in assisting home ownership should be to build affordable homes as well as regulate the private sector to build affordable homes. Further, the rental market also needed to be expanded and promoted; so that consumers who are unable to afford homes, can rent their homes until they have the financial capacity to purchase their ow homes.
Reliable Public transport
In relation to cost of living, after food and housing expenses, transport makes up the third highest expenditure. Due to the inefficient and unreliable public transport currently, consumers are often forced to use their cars. It is estimated that households spend about 20 to 30% of their disposal income on private transport. An efficient public transport would contribute substantial savings to the households.
The core of the public transport system is the bus system. It is the “last mile” of the system. Too often the last mile is unreliable. It has been reported that in Kuala Lumpur, only 17% of consumers use the public transport compared to 62% in Singapore.
For a public transport system to be popular, obviously it must be available. FOMCA urges the Ministry of Transport 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.
After the availability of the bus system, consumers would expect the buses to be reliable, affordable and well-connected. There should also be ease in obtaining information of transportation schedules.
Apart from reducing the financial burden of consumers, a good public transport also plays a significant role in reducing traffic congestion and pollution emissions.
Access to Healthcare
The Malaysian public healthcare system is under severe pressure being overburdened by too many patients while facing 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 Gross Domestic Product, while the World Health Organisation suggests expenditures of up to 5-7.5% of GDP. 65% of the population use the public health sector but is served by only 45% of registered doctors and about 25% of specialists. This under-investment in healthcare has severe consequences to the welfare of the Malaysian consumer.
Private healthcare is exorbitantly expensive. Prices are not regulated, thus consumers end up paying a hefty sum they can ill-afford for treatment. 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. Out of pocket payments have risen from RM 17.4 billion in 2013 to RM 23.1 billion in 2020, a rise of more than 32% in seven years. Further, medical insurance premiums have been skyrocketing, making it unaffordable to low and middle income consumers.
FOMCA hopes that public healthcare is given serious priority by the government and that as stated in the Pakatan Manifesto, healthcare financing will be increased to at least 5% of GDP over the next five years. FOMCA also hopes that more effective regulatory measures are put in place to control prices in private hospitals.
Support for Childcare Services
Bringing up children in today’s environment is challenging. Most families today are nuclear families, without the support of an extended family. Often, both parents are working – just to make ends meet, thus the need for child care services. Additionally, there is the need to educate the child from pre-school until a university education. The Edge in an article on The Cost of Raising a Child Today in 2018 suggested that the cost from birth to a university education is between RM 393,000 to RM 1.368 million. Taking a conservative cost of RM 393,000 for a child until the age of 22 years old that would require an average of RM 1,480 per month for 22 years to raise child from birth to the age of 22 with a full university education. Child care centres have been reported to charge from RM 700 to RM 1,350 per child depending on the breadth of services.
To reduce costs for child care it is common for parents to send their children to unregistered child care services instead of licenced child care centres with all the risks of abuse, lack of competency and skills in taking care of children and this might affect the social, emotional and cognitive skills of children later.
It is proposed that for low-income families, the government provides subsidised child care and child support services, including education. The payment can be made direct to the child care providers. Families can make a co-contribution. FOMCA strongly advocates that quality and affordable child care should be the state’s responsibility.
Reducing Internet Services Prices
Internet services has become critical in modern day living. It is essential for work, education and of course also entertainment. In a study by Kenaga Research, only 35.3% of household in urban areas have access to fixed broadband while only 11.7% of households in rural areas have access to fixed broadband. Malaysia’s fixed broadband penetration is lower than the global penetration average that is Malaysia’s penetration average is 8.6% compared to the global average of 15.5% in across 178 countries.
It is indeed very fortunate that the Minister of Communications and Digital is making serious efforts to reduce the price of the internet and telephone charges. In the current age, internet and telephone can certainly be considered as one of the basic needs of the rakyat.
Financial Literacy
In managing the cost of living, consumers too have a significant role. Especially for young workers, it has become clear that often they lack the right attitude, knowledge and skills to manage their consumption and finances responsibly leading to serious financial problems. For example 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 it was found that 70% were living beyond their means and 47% were facing excessive debt. Many Malaysian consumers, but especially young workers are not managing their finances responsibly. There is thus 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 Well-being Index
Moving forward, much too often there is a wide gap between the statements of policy makers and the lived experiences of a significant number of consumers. This disparity between what is happening on the ground and the announced statements can contribute to distrust in the government, as it might indicate that the policy makers do not have a sense of the sufferings of the rakyat. FOMCA thus proposes that the government develops a Consumer Well Being Index incorporating three components – subjective well-being, sense of economic insecurity of the rakyat and their trust in institutions. This consumer well-being index can be constantly monitored to ascertain the rakyat’s true feeling on the ground. What is the level of satisfaction or dissatisfaction? Do the people feel that policy or programme seriously addresses their issue? Or is there merely a misunderstanding between policy makers and the rakyat that can be corrected through the correct information? Through monitoring of the pulse on the ground, changes can be made at the policy level or more effective communication can be undertaken. The purpose of course is to effectively address the sufferings of the rakyat.
Way Forward
The Prime Minster had mentioned that sometimes you have to do thing differently to get different outcomes. The Prime Minister chairing the NACCOL session is already a new approach. To assure coordinated and integrated implementation, FOMCA wants to suggest a crucial change of strategy in addressing the Cost of Living agenda. . We need a holistic, coordinated and integrated approach. The cost of living agenda thus should be placed under the purview of the Economic Planning Unit. The Unit should play a facilitative role to bring key agencies and stakeholders to identify the problems and seek practical solutions. As often, the issues involve multiple agencies and stakeholders, the central role of the EPU can bring a strong planning and coordinating function to address the issues. A strong and effective central implementation and monitoring agency would ensure a holistic, integrated and coordinated approached to the cost of living agenda. Further EPU, through the Consumer Well-Being Index can monitor how effective the programmes and policies are on the ground as perceived by the rakyat themselves.
