Kuala Lumpur– Though only less than 30% of families in Malaysia can be regarded as the upper middle class, a recent survey shows that nearly 80% of Malaysian families think that they live as upper middle class group.
Their lifestyles and expenditures are like the upper middle class that earn over RM8, 000 a month.
All families in Malaysia, especially the salaried groups, must have additional source of income. Every family must have a family business operating from home. Internet system is the best and most convenient way of creating this opportunity. Every family would create a web page and find a product or service that they would try to market worldwide. The product can be anything, from home cooked foods and recipes, to information such life methods and tips, special services, or some living and communities’ skills.
The whole family members work together and strive to sell their goods and services. This way of life requires a new culture, habit and attitude towards business and entrepreneurship among all families in Malaysia.
This programme may need a generation to see the fruit of success, but it must be launched soon to solve the structural problem in the Malaysian economy.
What we need to do then, is to help the B40 group to lift their position so they could earn more income and really become upper middle class citizen.
The B40, the lowest 40% of the population have an income below RM3, 900 per month. The average incomes were actually below RM5, 000 a month – RM3, 080 in the rural and RM5, 742 in the urban. However there are over 40% of them that actually earn below RM2, 000 per month, especially over the one million (1,000,000) government servants.
The average expenditure of a Malaysian household is RM3, 578 a month – RM2, 431 in the rural area and RM3, 921 in the urban area. The minimum required cost of living in Malaysia is about RM2, 350 per month.
Based on the above comparison, there is about 20% of Malaysian household who are at the relative poverty position. Real poverty has dropped from 1.7% to 0.6% for the whole nation but, in the rural area there are still 1.6% poverty compared to the urban at 0.3%.
The 2017 budget have focused on raising the take home income of the B40 groups by giving subsidies and special goodies. The BRIM at between 1,000 to RM1, 200 per annum is the special highlight.
There are also special relief for paddy planters, fishermen, rubber tappers, students and the jazz. Over RM11 billion have been allocated to these B40 groups.
First of all the amount is actually not much. There are over 12 million citizens in the B40 group. So if we divide RM11, 000,000,000 with 12,000,000 peoples, the average giveaway is less than RM1, 000 per person. That is assuming, there is no leakages and no transaction costs involve in the distribution.
Giving away direct subsidy is not going to help much because we need huge resources to relief these groups out of their “miseries” in life. Just to relief the relative poor, so to keep up with the cost of living, we need about RM1,000 per family per month X 5,000,000 families X 12 months – over RM60 billion per annum.
Affordable housing issue
Housing facilities and house ownership is a critical issue for the B40 group. Affordable houses become the central point. Various efforts have been initiated, but the total supply is still far from what is required. The main issue is in pricing. Based on their take home pay, the B40 really cannot afford any houses beyond RM100, 000, though financial analysts think that RM178, 000 is the maximum affordability for these groups. Unfortunately the numbers of units offered are just not enough and this has subsequently pushed the price up.
An alternative scheme should be thought just like the ‘my beautiful home scheme’ that helps the land owner to build their homes with the government assistance. One scheme that has been proven successful in the socialist based system is the ‘Cooperative Development Society’ model.
Under this model, the government will find a suitable large area say 2,000 hectares and earmarked it to be a satellite town. The government then selects say 100,000 low income families and forms a cooperative development society where all the 100,000 families become members. The cooperative development will be managed by a team of professionals in developing the houses. The government also provides soft loans to develop the satellite town. All the properties will be earmarked to each of the cooperative members as the potential tenant and owners.
The satellite town will be built without profit as a motive but using high technology like the IBS and robotic to produce quality houses suitable for the upper middle income families. The construction cost will be relatively cheaper than the normal development properties because of the societal motive placed upfront. With the soft financing, the cost can be further squeezed down.
As soon as the houses are completed, all the earmarked owners will be invited to occupy the houses and properties and pay rental that is calculated based on the installment repayment of financing cost for each house. They will be renting for say 20 years until all the financing liabilities and the costs are recovered by the cooperative.
After that, the houses and properties will be transferred into individual title of the occupants and the cooperative development society will reduce its role to the ‘Management Corporation’ role in management of the town.
Dr. Barjoyai Bardai
Emeritus Professor and Coordinator of PhD in Management Program
Malaysia University of Science and Technology