LETTER | New approach needed to address rising cost of living

LETTER | On behalf of the consumers in Malaysia, especially the vulnerable ones, the Federation of Consumers’ Associations of Malaysia (Fomca) would like to express our deepest gratitude to Prime Minister Anwar Ibrahim for ensuring there is no increase in electricity tariffs and the efforts being made to address the chicken and egg shortages.

More important still, the prime minister has declared that addressing the cost of living is of critical importance to the new government and is personally chairing the National Action Council on the Cost of Living, thus making it clear to all sectors that the new government gives great priority to consumer welfare and wellbeing.

Beyond electricity, eggs, and chicken what is needed is a holistic approach to address rising cost of living. 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. It must also include the empowerment of consumers.

Next, to ensure that the actions taken are actually having a positive impact on the rakyat, we need to monitor their perception and their subjective wellbeing.

Finally, we need to find a new way to move forward in implementation and monitoring to ensure that the policies and programmes really do make a positive impact on the rakyat.

Income and social protection

Addressing the cost of living issue must begin with income. Incomes in Malaysia are low. The living wage as proposed by Bank Negara Malaysia (BNM) is RM 2,600 for a single adult.

Yet, according to the World bank Report in 2018, 6 million workers or 50 percent of workers in Malaysia earned less than RM 2,160. That was before the pandemic.

Currently, 20 percent of the M40 group has reportedly fallen into the B40 group due to job loss, reduced income, and increased cost of living.

Many Malaysians, especially in urban areas, feel that their income is insufficient to raise their living standards. As of 2018, nearly 30 percent of Malaysians felt that they did not have enough money for food and 23 percent 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 the 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 the federal and state levels.

It states, for example, that despite the sizeable expenditure of RM17.1 billion (1.1 percent of GDP), the pay-out 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 affordability

The price of food items in the marketplace is exorbitant. Food is certainly the most important expenditure of households.

Malaysians in the B40 group spent a total of 48 percent of household expenditure on food. Certainly the poor will be more affected by 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 percent is for food production.

This has resulted in Malaysian consumers depending on imported food. 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.

These 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 supply chain.

In a recent market review of key food items, the Malaysian Competition Commission (MyCC) confirms that one of the key reasons for high food prices is distortions and manipulations in the food supply chain.

MyCC in its report on the food supply chain identified multiple causes of exorbitant food prices in the market.

The reasons include market manipulation by middlepersons, multiple intermediaries, and manipulation of approved permits causing unreasonable increases 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 if this was done.

MyCC should also advocate these issues more rather than being passive and quiet. The commission’s silence on the increasing price of food is deafening.

Fomca hopes that the government will revamp the agency to inject some urgency and vibrancy into its role so that it functions effectively to enhance consumer wellbeing.

Affordable housing

Houses in Malaysia are simply unaffordable. 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. Further, while BNM defined affordable homes as priced around RM242,000, the average price of houses in Kuala Lumpur is around RM490,000, while in Selangor it is RM300,000.

To put it simply, houses in Malaysia are simply not affordable to consumers. The government must embark on efforts through policies and programmes to reduce the price of houses to the range of affordability.

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 needs to be expanded and promoted so that consumers who are unable to afford homes can rent until they have the financial capacity to purchase their own homes.

Reliable public transport

In relation to the cost of living, after food and housing expenses, transport makes up the third-highest expenditure.

Due to the currently inefficient and unreliable public transport, consumers are often forced to use their cars. It is estimated that households spend about 20 to 30 percent of their disposable income on private transport. An efficient public transport would contribute substantial savings to households.

The core of the public transport system is the buses, which form the “last mile”. Too often, the last mile is unreliable. It has been reported that in Kuala Lumpur, only 17 percent of consumers use public transport compared to 62 percent in Singapore.

For a public transport system to be popular, obviously 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.

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 on transportation schedules.

Apart from reducing the financial burden of consumers, 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 diagnosis and tests, as well as to meet specialists, and the shortage of hospital beds for admission.

There is clearly under-investment in public healthcare. Public health expenditure is a mere 2.4 percent of gross domestic product, while the World Health Organization recommends expenditures of up to 5-7.5 percent of GDP.

Also, about 65 percent of the population uses the public health sector but is served by only 45 percent of registered doctors and about 25 percent of specialists.

This under-investment in healthcare has severe consequences to the welfare of Malaysian consumers.

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 percent of consumers pay their hospital bills by out-of-pocket expenses, considered the riskiest form of payment.

Out-of-pocket payments have risen from RM17.4 billion in 2013 to RM23.1 billion in 2020, a rise of more than 32 percent 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, as stated in the Pakatan Harapan manifesto, healthcare financing will be increased to at least 5 percent 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 childcare services.

Additionally, there is the need to educate the child from pre-school until a university education.

The Edge in an article, ‘The Cost of Raising a Child Today’, in 2018 suggested that the cost from birth to university education is between RM393,000 to RM1.368 million.

Taking a conservative cost of RM393,000 for a child until the age of 22 years old, that would require an average of RM1,480 per month for 22 years to raise a child from birth to the age of 22 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.

To reduce costs for childcare, it is common for parents to send their children to unregistered childcare services instead of licensed childcare centres, adding risks of abuse, lack of competency and skills in taking care of children, and this may affect the social, emotional, and cognitive skills of these children later.

It is proposed that for low-income families, the government provides subsidised childcare and child support services, including education. The payment can be made direct to the childcare providers. Families can make a co-contribution.

Fomca strongly advocates that quality and affordable childcare should be the state’s responsibility.

Reducing internet service prices

Internet services have become critical in modern-day living. It is essential for work, education and of course also entertainment.

In a study by Kenanga Research, only 35.3 percent of households in urban areas have access to fixed broadband, while only 11.7 percent of households in rural areas have access.

Malaysia’s fixed broadband penetration is lower than the global penetration average, at 8.6 percent compared to 15.5 percent across 178 countries.

It is indeed very fortunate that Communications and Digital Minister Fahmi Fadzil is making serious efforts to reduce the prices of internet and telephone services. In the current age, internet and mobile phones 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 percent of those declared bankrupt were below the age of 35.

In a study on young workers, it was found that 70 percent were living beyond their means and 47 percent were facing excessive debt.

Many Malaysian consumers, especially young workers are not managing their finances responsibly. There is thus a great need for extensive national financial literacy programmes to ensure all Malaysians, especially young workers, acquire the knowledge and skills to manage their finances responsibly.

Consumer wellbeing index

Moving forward, much too often there is a wide gap between the statements of policymakers 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 policymakers do not have a sense of the sufferings of the rakyat.

Fomca thus proposes that the government develops a Consumer Wellbeing Index, incorporating three components – subjective wellbeing, sense of economic insecurity of the rakyat, and

their trust in institutions.

This 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 policies or programmes seriously address their issues? Or is there merely a misunderstanding between policymakers 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 mentioned that sometimes you have to do things differently to get different outcomes. Anwar chairing the NACCOL session is already a new approach.

To ensure coordinated and integrated implementation, Fomca suggests a crucial change of strategy in addressing the rising cost of living. We need a holistic, coordinated, and integrated approach. The agenda therefore 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 approache to the cost of living agenda.

Further the EPU, through the Consumer Wellbeing Index can monitor how effective the programmes and policies are on the ground as perceived by the rakyat themselves.

The views expressed here are those of the author/contributor and do not necessarily represent the views of Malaysiakini.