Malaysia’s economy is projected to expand by only 3.9% in 2023 amid subdued external demand but may edge up to 4.3% in 2024, as an anticipated global recovery offset a slowdown in China, according to the World Bank Malaysia Economic Monitor: Raising the Tide, Lifting All Boats.
Malaysia’s GDP growth slowed to 2.9% in Q2 2023. Although domestic demand continued to grow, its pace has moderated, and revenue collection is expected to remain relatively low. Therefore, efficiency improvements in expenditure are crucial, especially to refine the efficacy of subsidy measures for those who need it the most. Though the report recommends a combination of stronger tax collection, reduced blanket subsidies, and more adequate targeted support for those who need it, maybe time to ask whether the structuring institutional reforms for economic development (SIRED) is still sustainable.
The report examines gaps between the rich and poor in Malaysia, where, despite dramatic declines in poverty over the last 50 years and a narrowing of income gaps among ethnic groups, regional disparities in income and human capital outcomes remain significant. Malaysia’s low tax revenues of 12% of GDP, well below the upper-middle-income country (UMIC) average of 18%, leaves less fiscal space for pro-poor and growth-enhancing investments.To increase fiscal space to meet growing spending and investment needs, Malaysia can strengthen its revenue capacity by enhancing general consumption taxes, personal income tax, and health taxes, streamlining corporate tax incentives, expanding capital gains taxes, and exploring other progressive taxes.
Labour is still underpaid; and labour employment has only slightly improved post-Covid pandemic period, with underemployed with unskilled labour still being persistent.
To compound these economic situations, both urban and rural poverty has risen, too; indeed, half a million households still live below the average national poverty line of a monthly income of RM$2589 with the urban poverty rate rising to 4.5% in 2022.
Further, growth of wage in labour is comparatively lower than competitive counties in Southeast Asia, with many workers earning below the “living wage”.
Then, the rate of unemployment among youths has been raising during the last 6 years, too, especially among those without skill-element endowments.
Even with foreign direct investments, the upskilling of labour is not properly mobilised because of the mismatch deficiencies in the public education provision and an inadequate commercial training ecosystem to support, say, the semiconductor industry.
As an instance, despite holding an impressive 8% share of semiconductors in the global market, Malaysia still lags in advanced pattern development as its integrated circuit (IC) design is only 0.07% within the semiconductor industry. The country is still stuck in assembly and testing and has not been able to do the design and development which are long-term structural issues that need to be addressed if the semiconductor industry wants to keep prospering, and benefiting.
World Bank Malaysia lead economist Dr Apurva Sanghi has cautioned that Malaysia’s semiconductor sector, which contributes nearly 25% of the country’s gross domestic product (GDP), continues to thrive and play a crucial role in the nation’s economic stability but warned it needs to move up the value chain if it is to continue to benefit in the longer run.
Then, there are 2.2 million workers having less than RM$2,000 in monthly salary despite the implementation of the fully voluntary productivity-linked wage system (PLWS) — introduced in 2007 — and the minimum wage policy. The consequence is that, with consistent inflation and a low take-home wage, Malaysian has a relatively high household debt to GDP in the ASEAN countries.
II] BIG CAPITAL
The country has maintained a high level of operating expenditure (seeMadani Malaysia Budget 2024; other aspects on Madani: The Script; the Narrative; TAPAO; the Conversation) where in 2022 almost 60% of the government’s operating expenditure has been related to supporting an inefficient civil service sector in the provision of salaries, pensions and debt service payments which are also on a rising trend.
While Malaysia’s public expenditure is comparable to OECD, there are tremendous challenges because of the high levels of public debts so much so an additional RM$15 billion was allocated to the development expenditure in the last 12th. Malaysia’s Plan, thus constituting 4.0 percent of GDP. Even these development programs have remained fragmented because of the institutional arrangements Federal government made with various stakeholding entities at the State governance level and related government-linked companies (GLCs). Coupled with these ensuing issues are that the already high national debt level limits the government to increase borrowings to fund other developmental projects.
Secondly, with government revenue projected to remain low, but operational expenditure to remain high, this has eventually to further narrowing of Malaysia’s fiscal space which is gradually narrowing since 2012. The current fiscal consolidation would need to blanket a higher revenue collection regime. As often expressed by World Bank through the decades, it is pertinent to address the persistent decline in revenue collection and explore new revenue sources.
Thirdly, with global growth expected to slow over the near term – projected 2.1% in 2023 – what the Madani Malaysia economy needs to be careful about is to focus domestic spending to counterbalance the prevailing world depression.
However, the key downside risks rest with the uncertainty around domestic inflation and the strength of household consumption. Unfortunately, the low-income households have been impacted disproportionately by frequent price increases. Indeed, any further inflation upside may only prompt further monetary tightening that is not conducive to domestic enterprises, and downstream affecting labour and its already declining take-home pays.
III] CONSOLIDATINGLABOUR AND CAPITAL
The Marxism view of surplus value presents that only labour creates value, but capitalism by having a monopoly on the means of production, is able to appropriate the value created by labour. Capital regards, and turns, labour as a commodity. As such, a labour effort, and the labour loss, is capital surplus through the sale of the commodity for more value than the labour’s wages.
There are basically three ways that capital can increase the rate of surplus value and thereby the potential volume of profit:
• Increase the absolute surplus value by an extension of working time and/or the intensification of work, in relation to the required working hours to reproduce the “basket of goods” that forms the value of labour power.
• Increase the relative surplus value by an increase in productivity, as a result of new technology or more effective management form, (like kanban just-in-time) which reduces the “necessary working hours” share of total working hours.
• Extract super surplus value by lowering the actual level of reproductive costs (through commodity supply chains) and thus, the “necessary working time” share of total working hours.
As at August 2023, there are 97,799 employers undertaking the productivity-linked wage system (PLWS) involving 5.96 million employees, but wages have still not been able to be increased. On a main point, there is this wage compression phenomenon where salaries for non-skilled employees may see increases to meet the minimum wage requirement, but at the expense of semi-skilled and skilled employees, especially younger employees, and those in the executive levels who saw no significant increases in wages during the period.
According to the 1Q2023 formal sector wages report issued by the Department of Statistics Malaysia (DoSM), median monthly wages in March 2023 for citizen with formal employees is RM$2,600, with the number of citizen formal employees amounting to 6.45 million persons. The highest median monthly wages in March 2023 was recorded at only RM$3,500 for formal employees aged 45 to 49 and aged 40 to 44, accounting for nearly 20% of total formal employees. Meanwhile, the age group below 20 years received the lowest median monthly wages amounting to a mere RM$1,500 monthly salary.
Though the White Paper on Progressive Wage Policy was tabled on Nov 30 2023, however, the progressive wage policy to be implemented to complement the existing minimum wage policy would possibly see first light only by first half of 2024.
The cacophony on orchestrating the Madani Economic Narrative ( MEN) is overwhelming loud, with the Malaysia Institute of Economic Research (MIER) not likely to hold the baton too soon.
Whether the Madani precepts alone can serve as the pillars of a grand nation-building project when a rumah in a kampung built on a capital-muddied stilted foundation likely to collapse at any time under a neoliberalism policy regime, is due for a conversation.
This is appropriate time because even an neoliberal institution – which was in the country prior to her independence as the International Bank for Reconstruction and Development (IBRD precursor to the World Bank) – has once again expressed the multifaceted problems facing the economic state of a nation:
These uncomfortable situational conditions are further decimated by the MIDF Research data which maintained its forecast that Malaysia’s GDP growth will moderate at 4.2% in 2023 (2022: 8.7%), weighed down by uninspiring external trade performance as real export of goods is predicted to contract by 2.8% (2022: +11.1), reflecting weakness in regional and global demand.
The 2nd August 2023 economic brief indicated that Malaysia’s S&P Global Manufacturing PMI recorded at 47.8 in July 2023 (June 2023: 47.7), marking 11 straight months of contraction which was mainly attributable to a significant dip in new orders, as demand has consecutively paced down for the last 11 months, (theedgemalaysia 2/8/23
The Madani Challenges facing this state of nation were familiar issues covering +65 years in the development of underdevelopment of a nation where poverty, inequality, and marginalisation are predominant. As late as 2015, the Malaysia poverty rate was 4.80% which is the percentage of the population living on less than US$5.50 a day, (World Bank).
This is ardently expressed by Khalid research paper at the London School of Economics and Political Science, where presented, the disparity among the Malay community – the top 1% – is very much acute then as it is likely to be accentuated:
The most important implication is that although the middle 40 per cent and the bottom 50 per cent benefited significantly from economic growth, the Bumiputera in the top income groups (the top 1 per cent and the 10 per cent) benefited the most from economic growth. In sharp contrast, the income of the Chinese in the top income groups deteriorated. In a way, the strong growth in high-income Bumiputera occurred at the cost of a decrease in Chinese and the slow growth of Indians in the top income groups; Khalid, Income Inequality and Ethnic Cleavages in Malaysia: Evidence from Distributional National Accounts (1984-2014), World Inequality Database, working paper No. 2019/09.
The World Bank Report has this to say:
“The bulk of inequality today can be explained by differences in socio-economic factors within ethnic groups rather than differences across groups. It is time to bring all Malaysians within the ambit of greater economic opportunity.”
The need to update Malaysia’s inclusiveness strategies reflects both new realities and new challenges. The new reality is that poverty is no longer the key issue when thinking about inclusive growth. Poverty still exists—and pockets of poverty remain deep and concentrated—but inequality is now in the spotlight and is presenting a tremendous challenge. The other new reality is that inequality is no longer what it was four decades ago. Nowadays over 90 percent of the level of inequality is explained by differences within ethnic groups rather than differences between these groups. Individual socio-economic characteristics, such as activity status, sector of employment, urban versus rural stratum, and educational levels in different geographical locations are despairingly displayed.
To undertake this task, according to Philip Schellekens, lead author of the Malaysia Economic Monitor, (World Bank, 2010).
“The dual approach in the Economic Transformation Program of combining cross-cutting policies with private sector-led projects provides an excellent platform. The proof of the pudding, however, will be in the consistent execution of policy reforms,” he said. “Also, until solid implementation of policy reforms is seen there is unlikely to be a groundswell of positive sentiment of foreign investors towards Malaysia.” (World Bank 2010, ibid).
The November 2010 issue of the Malaysia Economic Monitor offered another analysis of where Malaysia is today and where it could go tomorrow by updating its inclusiveness strategies. “Our recommendations on this highly charged topic do not come out of the blue — they are based on a detailed analytical study of the latest household income, labour force, and enterprise surveys, which the authorities have made available to our team. We are also leveraging on the experiences of other countries around the world, who have addressed or are coping with similar challenges.”
The implementation of an economic development plan requires the proficiency and professionalism of the public sector. This is where the effectiveness from the public service is under constant, and continuous, doubts.
At a time when the emoluments and the retirement charges of the public sector constitute 31.2% of the RM$372.340 million Budget 2023 announced on 7th. October, 2022 (which excludes contingency reserves yet-to-be disclosed) in the operating expenditure which are equivalent to the 32.8% of development expenditure for socio-economic programs and projects, including subsidies and social assistance – there is more than much concern on the performance and productivity of our civil servants whom,some alluded, to performing money-laundering.
This is heading a grueling question on total government debt and liabilitiesas of June 2022 which is estimated to be at RM$1.42 trillion and will rise further; indeed, it was announced on 17th. January 2023 that the national debt including liabilities has reached RM$1.5 trillion. Total debt and liabilities are already 82 per cent of GDP, (read STORM October 2022, Underdevelopment of Development – consolidation of financial monopoly-capitalism).
As a share of revenue, a review done by the World Bank as far back as in 2011 has had found that Malaysia was spending about 27 percent of its revenues on salaries and wages/personal emoluments in 2009, significantly more than in some of the higher-income countries it aspires to emulate such as Canada (13.7 percent); Norway (12.5 percent); Australia (10.6 percent); and South Korea (9.6 percent).
In fact, by 2018, this percentage has increased to 34.3 percent for Malaysia, (seeWorldBank (2019). Malaysia Economic Monitor: Re-energizing the Public Service).
This is an extract from the World Bank 2019 Report on the challenges Malaysia has to confront to fulfill rakyat2 expections:
Can productivity performance objectives be executable or even achievable?
The second major restructuring requisite is the generation of government revenue to implement economic development programmes whilst supporting a top heavy, and inefficient, public sector – at a time when national fiscal revenue space is narrowing:
III] FINANCING ECONOMIC DEVELOPMENT
With those underlying facts, the key task is to source funds for economic development. This is well explored in (STORM 2023, Debt financing towards progressive economic path) where the nuances of the conversation are that since expenditures are already at high levels; and secondly, other operating expenditures components such as supplies and services, and grants and transfers have been on a declining trend or are already at low levels, therefore, the government’s current fiscal consolidation plan would have to include – besides restructuring Petronas, Khazanah and the GLCs -a higher revenue collection target that should coverage of a windfall tax on industries , according to Khazanah Research Institute senior advisor Professor Dr Jomo Kwame Sundaram.
“This is precisely the time when you must reform taxes as you have it (windfall tax) all the time amid extraordinarily high petroleum prices or palm oil prices.”
This is concurred by Institute of Malaysian and International Studies research fellow Dr Muhammed Abdul Khalid who pointed out that policy-makers tend to ignore the imposition of capital gains tax when it comes to the issue of tax reform.
Even Bank Negara Malaysia (BNM) assistant governor Dr Norhana Endut noted that the government’s tax collection capacity had not kept pace with the economic growth, at a time when the manufacturing sector is moderating on its p erformance:
IV] PRAXIS IN ECONOMIC REJUVENATION
The economic development of a nation demands that its goal to attain high-income and developed nation status while ensuring that shared prosperity is also sustainable.
As one of the many Global South countries, Malaysia is one of the most open economies in the world with a trade to GDP ratio averaging over 130% since 2010. Openness to trade and investment has been instrumental in employment creation and income growth, with about 40% of jobs in Malaysia linked to export activities.
A government is always confronted with difficult decisions about appropriate measures under unforeseenable situations or in a crisis: what restrictions to impose and when to loosen them, where money will be spent and how it will be raised, and how to coordinate tasks between states and enable community cooperation.
These decisions have to take into account public health recommendations, economic considerations, and political constraints. Just as the policy responses varied – from the 2007–08 Global Financial Crisis, the dotcom 2002 burst and the Asian Financial Crisis in 1997 – so do national policy responses to the COVID-19 pandemic should differ for health, economic, and political reasons.
Play Politics
Why does the advice of independent consultants, analysts, and the academic go so often unheeded?
Political economy is about how politics affects the economy and the economy affects politics that Governments try to prime the economy before elections. However, business cycles are also creating ebbs and flows of economic activity and the circuitry of capital distribution around elections whence economic conditions have a powerful impact on elections. Politicians would manipulate these economic parameters to woo voters to gain political advantages, and contesting capital tries to support politicians.
Where are we now?
There is a cohort of powerful interests in favour of international trade and foreign investment. The world’s transnational corporations and international banks depend on an open flow of goods and capital. These are the monopoly-capitalists and the financial capitalists. This is especially the case today, when the world’s largest companies depend on complex global supply chains. A typical transnational corporation produces parts and components in dozens of countries, assembles them in dozens more, and sells the final products everywhere. Trade tariffs create barriers with these supply chains, thus the world’s largest companies are biggest supporters of freer trade.
That is why there is a need for perpetuating the mass of special and general interests in society so that these social institutions play a major role in national policymaking. The ways in which societies organize themselves – through and by economic sector, ethnicity, and importantly at this juncture of our political awareness, the class factor, shall affect how we would like to restructure our politics.
Definitely, political institutions have to mediate the pressures constituents bring to bear on them; even oligarch rulers have to pay attention to at least some part of public opinion. Political economists call this the “selectorate,” that portion of the population that matters to policymakers. In an authoritarian regime, this could be an economic elites or the ruling class or the armed forces. In an electoral democracy it would be voters and interest groups. No matter who matters, policymakers need rakyat2 support to stay in office.
In building an equity society with socialism as the dominant foundation, we must do all we can to develop the productive forces and gradually eliminate poverty, constantly raising the people’s living standards. Only when this outcome is achieved and there is significant prosperity for all will it become possible to begin the shift to advanced stage of an economy that is highly developed and where there is overwhelming material abundance. Only by this process that we shall be able to apply the principle of from each according to his ability, to each according to his needs.
To achieve this process, there is a need on genuine planning and genuine democracy where these are through the constitution of power from the bottom of society. It is only in this way that a progressive socioeconomic society, and its healthy and well-being domain, becomes irreversible.
Towards this process in striving the Socialism with Malaysian characteristics goal, there shall be a combination of planning and markets forming the basic socialist economic system. Second, we need to keep in mind the dialectical relation between ownership and the liberation of the productive forces that shall entail, then
(1) the system contains a multiplicity of components, but public ownership remains the core economic driver, with corporate capitals supplementing capital formation but without undue surplus value extracted from labour;
(2) while both state owned and private enterprises must be viable, their main objective is not profit at all costs, but social benefit that meets ‘people-centred’ needs from appropriate shelter, education equity to community-base healthcare, harnessing modern technologies towards social needs;
(3) it employs the primary socialist principle of from each according to ability and to each according to work, limiting exploitation and wealth polarisation, and ensuring common prosperity and wealth sharing for every rakyat2 wellbeing;
(4) the primary value should always be ‘socialist collectivism’ – gotong royong community-based than bourgeois individualism and inflicted neoliberalism ethos.
Therefore, as applied under a TAPAO approach, it would be sizing and averaging rural per capita income besides focusing on the country’s hinterlands, especially the mountainous interiors of Sarawak and Sabah.
Refining the geographical target of poverty reduction programs is a necessity. The TAPAO needs to shift from daerah² to kampung² including more likely some outside the list of poverty-stricken daerah, too. Collectively, those designated kampung² (villages) may cover a certain high percent of the country’s rural poor. Designated villages could then apply for projects to support local production and infrastructure (including makan-pada-kerja : food-for-work programs, worker training, and agribusiness development comprising technology extension services; not to be neglected, government-linked investments in social infrastructure (schools, clinics, community and recreation centers), with a particular strong participatory community-based self-help gotong-royong approach.
V] MADANI IMPLEMENTATION PRINCIPLES
For the SCRIPT in Madani Malaysia to be successful, in term of implementation and sustainability of a progressive politico-economic developmental praxis, working-class unity has to be consolidated.
It can only be further solidified if the tenet of divisive divisions by capitalism is better understood both in theory and in practice. Hence, we argue for a comprehensive yet bold project that is based on TAPAO that goes beyond its ethos as a renewal of an socialist ideal with Malaysian characteristics in order to take full account of the struggle of the labour movement.
Within the context of Malaysia development of underdevelopment – glaringly as in the cases of northeastern states in semanjung and the Borneo states of Sabah and Sarawak, and the many urban poors in the country as documented by the World Bank and UNICEF, we are witnessing the relational inequality generated. This is further reproduced by labour superexploitation and relational surplus value whence labour superexploitation is the essence of capitalism as neoliberalism is imperialism, too.
For Malaysia politico-economic model to be successful, and sustainable, the core issue of contradiction between capital and labour needs to be resolved with a Madani trustful outreach.
More so, after ethnocapital has owned, controlling and dominated the Malaysia resources, it is appropriate period of a new era under an unity governance to present a new narrative on Malaysian labour working cohesively and collaboratively – at this particular junction of a historical period – with capital to a shared prosperity domain under a common wealth practice for labour, too.
For one main obvious reality of capitalism is that massive poverty across the Global South is not the result of some local insufficiency (resources or skill talent) but rather due to the functioning of neocolonialism perpertuated by liberal economic policies as neoimperialism where the ongoing effects of dependency on financialisation capitalism need to be tamed.
The haemorrhage to present economy is the resulting outcome of those extractive institutional forces since post-independence, accelerated by succeeding regimes in governance with odious practices, and as articulated by Prof Kamal Hassan in Corruption and Hypocrisy in Malay Muslim Politics while Khalid’s London School of Economics and Political Science research has pinpointed the class structure-laden beneficiaries to their enduring enterprises.
The trust between labour and capital has to be firmed up solidly in fulfillment of a Madani Malaysia – more so when 98.5% of businesses are the SMEs contributing 36% of the national GDP where labour is important as capital because it provides employment for 7.3 million people – nearly half of the country’s workforce.
EPILOGUE
In short, we need to modify, adapt, and contextualize a conversation with our preceding political-economic reform agenda, and while trying to calibrate the sequence of, and the dimensions for, economic reforms – we seek to ask the pertinent question: have we really restructured the stagnated, and a doomed, national economy, ever ?
We need to be in the threshold of a new sovereignty re-imaging a New Malaysia positioning an entity adhering a New Narrative to perform New Politics for the generasi muda.
The IMF Report on Malaysia 2023 projects a slower economic growth this year owing to a high global inflation rate and the cross-border conflict between Russia and Ukraine. This institution expects the global economic growth to drop to 2.8 per cent this year, down from its earlier forecast of 2.9 per cent and in comparison to the growth in 2022 of 3.4 per cent. Consequently, a correlated decreasing growth in the country is expected.
2] ECONOMIC GROWTH DIMENSION
The central theme in a capital-driven economy is a system driven by endless economic growth impulse. This mode becomes the root of our multiple, interlinked, and the contributory and accelerating crises become embedded within the socioeconomic system. The consequence of this growth – especially with the Global North excessive material throughput – drives the ceaseless accumulation of capital where it builts upon a constellation of exploitation of labour and extraction of natural resources.
Capitalism – which surges from crisis to crisis – is leading us to ecological collapse, while creating inequality on its capital accumulation process through commodifying essential goods and services. It assumes the replication of neocolonial relations with the Global South, and committed neoimperialism in this endeavour.
One distinguished aspect clearly distinctive is that with globalisation, rentier capitalism compradores begin attaching to neo-imperial monopoly capitalism and their linkages to the global commodity chain dimension because of the multiple roles of rent intermediaries between capital and its accumulation. The consequence is that these capitalists are accentuating wealth disparity with the working class.
The absolute gap across income groups has increased with the top 20% of population – the T20 – possess 46.2% of the national income share, while M40 have 37.4% but the bottom 40% of population – the B40 – only 16% share of national income.
Compounded with
i) Compared to many other countries that have graduated from middle-income status, Malaysia has a lower share of employment at high skill levels and higher levels of inequality.
The foreign cheap labour is the biggest policy issue in Malaysia because if they are cheap, our young people cannot get their wages up.
ii) There is a growing sense that despite economic growth, the aspirations of Malaysia’s middle-class are not being met and that the economy did not produced enough well-paying and sufficient high-quality jobs. There is a widespread sense that the proceeds of growth have not been equitably shared and that increases in the cost-of-living are outstripping incomes, especially in urban areas, where three-fourths of Malaysians reside. The UNICEF 2020 Report has shown that low income female-headed households are exceptionally vulnerable.
iii) The country shall, increasingly, need to depend upon more knowledge-intensive and productivity-driven growth, closer to the technological frontier and with a greater emphasis on achieving inclusive and sustainable development, yet this generation is not forthcoming.
iv) According to the World Bank’s Human Capital Index, Malaysia ranks 55th out of 157 countries. To fully realize its human potential and fulfil the country’s aspiration of achieving the high-income and developed country status, Malaysia will need to advance further in education, health and nutrition, and social protection outcomes.
v) Key priority areas include enhancing the quality of schooling to improve learning outcomes, rethinking nutritional interventions to reduce childhood stunting, and providing adequate social welfare protection for household investments in human capital formation.
Companies need to organise their training and reskilling programme as part of their business strategy. This is also truism for the civil service, (seeSTORM 2023, Place, Position, Power of Public Sector) because the economic dimensions are changing very rapidly. On one prominent aspect is that lower economic growth translates into lower ROE for FDI which is the Malaysia’s structural weakness of relying on debt-driven domestic consumption to fuel economic growth. Basically, Malaysia’s growth strategy of the last 25 years since the Asian Financial Crisis was a debt-driven domestic consumption story. This is the dominant structural issue that Malaysia now faces conspicuously, and has not only to destruct its legacy and lack lustre entities but to construct a new economic development mode, (seeSTORM April 2023, Structuring lnstitutional Reforms for Economic Development {SIRED}; TAPAO; and Madani Malaysia praxis).
It had once expressed if development in Malaysia is to be self-directed and comprehensively inclusiveness, then traits of such a “developed society should also embrace secularisation, industrialisation, commercialisation, increased social mobility, increased material standard of living and increased education and literacy besides such things as the high consumption of inanimate energy, the smaller agricultural population compared to the industrial, and the widespread social network” (Syed Hussein Alatas, “Erring Modernization: The Dilemma of Developing Societies”, paper presented at the Symposium on the Developmental Aims 1996, pp 70-71).
Therefore, the key challenge for the next two decades, at least, would be to improve the indigenous innovative capacity of domestic firms and to continue to raise the productivity of Malaysian workers and firms whereas succeeding ruling regimes had given preference towards corporate capital than socioeconomic determinants of rakyat2 labour well-being, (seeSTORM, May 2023, MADANI the SCRIPT : labour exploitation and capital accumulation factors).
3] CRITIQUE OF THE IMF REPORT
On the inflation spectre, though it is projected to remain elevated at about 3.25%, there is a likelihood of a persistence in core inflation. Then, there is also an emerging evidence of a build-up of demand-side pressures, adding to higher prices, (see various MIDF Research reports).
Further, with record spending on subsidies, though seen from within the country that the inflation had not surge in tandem with global food and commodity prices, but nevertheless, there was still on the upward trend for most of 2022, reaching 3.3% for the year that may migrate to the later part of year.
Therefore, monetary policy would require further tightening to keep inflation contained and rakyat² expectations well anchored.
Secondly, whether the gradual fiscal consolidation strategy, as set out in the 2023 Budget, can be set to rebuild buffers has yet to he discerned. The national debt is yet to be on a downward path but instead has been tracking upwards. The ability to reduce overall fiscal risks – high budgetary expenditure on top of repayments to 1MDB debt interests, and the efficiency to collect due corporate taxes – is still an unknown uncertainty. Debt repayment is the second highest operational expenditure in the 2023 Budget, where 18.5 percent is designated to repaying public debt.
This owes to the fact the previous governance had not performed due compliance, expecially durable revenue collection measures of high quality and enforced with prudence.
Preceeding regimes had constant, and continuous, budget deficits (meaning it spends more than it brings in through taxes and other revenue), and had inadvertently borrowed huge sums of money to pay its bills.
If these measures are not applied bluntly, then likely there is not much of created space for critical investment needs and, most importantly, for targeted transfers to low-income households. Further, if these revenue-collection tasks are well coordinated, and managed administratively well, this would help market confidence in the country’s strong fundamentals.
Thirdly, the unity government’s commitment to fiscal reforms is highly appreciated by capital and endorsed by labour. As such tabling of the Fiscal Responsibility Act is most welcomed. Further, the planned subsidy reform, and plans to develop a medium-term revenue strategy, would positively tighten the economy, and may bring the currently accommodative stance to neutral. What this means is that the approaches would well be kept inflation contained, and thereby, rakyat² expectations anchored.
MIDF Research has indicated that Malaysia’s growth of gross domestic (GDP) is set to increase 4.5 per cent for this year and 2024. In a sense, the structural reforms initiated by the unity government is on the correct Madani Malaysia pathway to an economic growth, (seeSIRED, 19/04/2023).
However, though the economy is growing but with unbalanced development where geographically some states in semanjung and in the Borneo states of Sabah and Sarawak are still stumped by retarded development.
As an instance, ten years ago, the median household income in Kuala Lumpur was 2.6 times higher than in Kelantan; latest data indicates that this ratio has crept higher to 3 times higher.
In 2016, nearly one in three households living in Kelantan do not have access to piped water in the home, while one in nine households in both Kelantan and Sabah live in houses classified as ‘dilapidated’. In parts of Sabah and Sarawak where connectivity is poor, geographic disparities in access to basic services are more alarming: one in five households in East Malaysia live further than 9-km from the nearest public healthcare facility and secondary school.
Therefore, neoliberalism entity like the IMF’s Executive Board may praise country’s performance to elicit continuing consultation services and financial dispensing from western imperialism .
It is another budge in opening door to Global North domination and exploitation on national economic development – and indebting nations – than an equal exchanges for mutual shared prosperity among common wealth of nations.
This situation is the hallmark of neoliberal economic policies undertaken by country since gaining independence falling into the trap of development of underdevelopment,(read Ruy Mauro Marini, The Dialectics of Dependency).
4] IMF IMPERIAL INITIATIVE
IMF, and its sister entity the World Bank, is well-known for removing foreign exchange restrictions which retard the growth of global trade, with consequential international businesses being adversely affected.
Then, we have IMF’s High interest rates charged on its advances are considered one of the major disadvantages of IMF. So, the debt servicing for the less developed countries is difficult. For example, since 1982 the interest charged for loans out of the ordinary resources of the fund is 6.6 per cent. The interest rates payable on the loans made out of borrowed funds is as high as 14.56 per cent. So, developing countries experience a lot of difficulties in redeeming their loans borrowed from the IMF.
The IMF also often insisted upon that the borrowing countries have to reduce public expenditure in order to tide over their balance-of-payments (BOP) deficits. After 1970, the IMF imposed even stiffer conditional clauses. Among them are periodic assessment of the performance of the borrowing countries with adjustment programmes, increases in productivity, improvement in resource allocation, reduction in trade barrier, strengthening of the collaboration of the borrowing country with the World Bank, etc.
Then, further conditional clauses imposed by the IMF after 1995 are still stiff; just to state a few:
liberalizing trade by removing exchange and import controls;
eliminating all subsidies so that the exporters are not in an advantageous position in relation to other trading countries; and
treating foreign lenders on an equal footing with domestic lenders. The fund maintains a close watch on the activities of the borrowing country related to monetary, fiscal, trade and tariff programmes. IMF’s intervention in the domestic economic matters of the borrowing countries places them in a difficult position.
As an example, of concern is that Malaysia was reported with US$57,566,000,000 of international debts in 2021, according to the World Bank collection of development indicators on International Debt Securities: translated as two hundred fifty-three billion two hundred ninety million four hundred thousand Malaysian Rinngit Debt or RM$7,449 per rakyat owing.
The domination by rich countries is the major weakness of IMF. Though the majority of the members of the IMF are from the less developed countries of Asia, Africa and South Africa, the IMF is dominated by the rich countries like USA and western European nations . It is said that the policies and operations of the IMF are in favour of rich countries so much so that the IMF shall be regarded as “rich countries’ club”. These rich countries are always partial towards the issues faced by poor countries.
As reported in The Hindu (May 2, 2007), Venezuela’s president Hugo Chavez announced his country’s decision to leave IMF and the World Bank. He accused them of exploiting small countries. He branded the IMF and the Wold Bank as “mechanisms of American imperialism“.
Moreover, the OPEC nation’s leader Mr. Chavez said: “we are going to withdraw…. and let them pay back what they took from us”. He then issued an order to his Finance Minister to begin proceedings to withdraw Venezuela from both IMF and World Bank.
5] CONCLUSION
IMF ‘double standard’ displays capitalism’s inherent inhumanity where human lives in the periphery are worth less than human lives in the metropolis.
The IMF’s behavior is thus reflective of the very nature of capitalism, of its essential inhumanity. It does not only mean “inhumanity” merely in the sense that it places profits before people, but also in the sense which follows from it, namely that it does not see all human life as of equal value – that it is surely, and necessarily, applies “double standards” in every sphere of life, (Prabhat Patnaik, 15/05/2023).
Historical politico-economic development of a country comes from social practice, the struggle for production, the class struggle, and scientific work.
With a new perspectives emerging post-1960s, from the Third World revolutionaries like Che Guevara and Fidel Castro in Cuba, Frantz Fanon in Algiers, Ho Chi-Minh and Nguyen Giap in Vietnam, Amílcar Cabral in Guinea-Bissau, and Eduardo Mondlane in Mozambique, and from socialist-progressive academics like Ruy Mauro Marini, Andre Gunder Frank, Samir Amin, Immanuel Wallerstein, Arghiri Emmanuel, István Mészáros, Lebowitz, Magdoff, Baran and Sweezy, Foster, Suwandi, Saito and the Patnaiks’ – who are critical on the dominant capitalist world system and existing socialist frameworks – there were – and still ongoing – various, and varied, enquiries regarding capitalist development and on Third World underdevelopment in development that inevitably open the door to a better understanding of our country place in world history, our present national politico-economic dilemma, and ahead, the future progression.
To understand Malaysia “economic developmemt”, we need to acknowledge the historical perspective when Third World Global South countries had been, and is still are, supplying the Global North metropolis with raw materials and tropical agricultural goods produced with cheap labour, while the metropolis Global North has overwhelming political and economic power and control over our economic destiny. The development of the Global South peripheral countries was, during colonial settlement and postcolonial domination, once deemed impossible within the capitalist system. Development in Third World countries would only become possible if there was a revolution that cut off the supply chains that connected them to the metropolis monopoly-capital ownership and dominating financialisation control. An immediate relevance is the introduction to progressive modern models to be promoted to uplift Global South countries to dynamic development executions more urgent than never before.
The dependency narrative hinges on the principle of unequal exchange as part of an approach of how imperialism transfers value. The idea that unequal exchange was part of imperialism emerged at more or less the same time in different places, affecting various workers, showing how diverse ideas are historically determinate.
All these frameworks point to the central conflict between capital and labour, which is reflected in the global differences in wages and differing degrees of exploitation, (seeTNCs and Labour).
One needs to know that it is not just value that was created during production, but it is in the exchange of products or services when value is finally realised. Resultant outcome is due expropriation, and the exploitation thereon that create the full circle of capital accumulation encompassing both production and its circulation.
Emmanuel’s theory of unequal exchange is hence as inseparably linked to the original theory of Prebish, Singer, Lewis and Baron on trade and development. Emmanuel’s argument that “by transferring through non-equivalent exchange, a large part of its surplus to the rich countries, the periphery deprives itself of the means of accumulation and growth.” Therefore, an important implication of Emmanuel’s theory is that a widening wage gap leads to a deterioration of the periphery’s (emerging economies, low-income countries, developing countries) terms of trade, and a subsequent reduction in its rate of economic growth.
2] LABOUR SUPEREXPLOITATION
Labour superexploitation conceptually captures the real condition of the working class in Africa, Asia and south America. It involves three elements: low wages, long hours, and intense work leading to due strenuous exhaustion. Above all, it is characterised by “the greater exploitation of the worker’s physical strength, as opposed to the exploitation resulting from increasing his productivity, and tends normally to be expressed in the fact that labor power is remunerated below its real value.” Ruy Mauro Marini.
For the SCRIPT in Madani Malaysia to be successful, in term of implementation and sustainability of a progressive politico-economic developmental praxis, working-class unity has to be consolidated.
It can only be further solidified if the tenet of divisive divisions by capitalism is better understood both in theory and in practice. Hence, we argue for a comprehensive yet bold project that is based on TAPAO that goes beyond its ethos as a renewal of an socialist ideal with Malaysian characteristics in order to take full account of the struggle of the labour movement.
Within the context of Malaysia development of underdevelopment – glaringly as in the cases of northeastern states in semanjung and the Borneo state of Sabah, and the many urban poors in the country as documented by the World Bank and UNICEF, we are witnessing the relational inequality generated. This is further reproduced by labour superexploitation and relational surplus value whence labour superexploitation is the essence of capitalism as neoliberalism is imperialism, too.
It is an undeniable fact that the capitalist needs to keep wages as low as possible to make the biggest profits possible. However, it has to be emphasised, too, that wages make up a significant part of the purchasing power that is required to sell the products and thereby realize the profit. In a simplistic explanation, the capitalist form of accumulation has a tendency to destroy its own market. If capitalists increase wages, their profits decrease; if they decrease wages, their markets decrease. In both cases, capital has become hesitant to invest, not because they cannot produce, but because they do not know if what they produce can be sold, and acquire the profits thereupon.
Marini put it this way: “The individual consumption of the workers thus represents a decisive element in the creation of demand for the commodities produced, being one of the conditions for the flow of production to be adequately resolved in the flow of circulation.”
As applied to the Malaysian economy which is +40% dependent on foreign trade, a positive trade balance is crucial for its healthy national economy because the export surplus provides the purchasing power needed to keep domestic supply and demand in balance.
However, if the national economy where economic growth is more dependent on private consumption, especially when preceding governaning administrations were being encouraged for fiscal support, namely in the substantial withdrawals from retirement funds (the Employees Provident Fund) and allocated budgetary expenditures for large-scale indirect fiscal support to businesses, then the increase in private consumption came at a cost because such huge withdrawals from the Employees Provident Fund inevitably affected the people’s financial security in the long term, and the depletion of national coffer benefitted again the capital cronies.
To make matter worse, economic growth has been, through succeeding regimes, promoted through misguided consumption patterns rather than return on investments in the past two decades. It used to be about 40 per cent to gross domestic product (GDP) in the late-nineties but presently, consumption stands at almost a high 60 per cent.
Of course, this over-reliance on domestic consumption is not good to the metropolis monopoly-capital because the country has become a consumption-driven economy neglecting an investment growth path that has decreased the capital inflow and the subsequent accumulation process by such respective Global North financialised capital investments.
Even with the reality in a global environment where the division of of the world is rich and poor countries, into center and periphery, it threatens the basis for capitalism’s growth and only prolongs its longevity.
If, on one hand, the sacrifice of our workers’ individual consumption for the sake of exporting to the world market would be depressing the levels of domestic demand and making the world market the only outlet for production – the resulting increase in profits puts the capitalist in a position to develop consumption expectations without a counterpart in domestic production (especially when the national economy is so pivoted to the global market) – then the spectre in expectations have to be satisfied through imports, thus unbalancing national terms of trade patterns accordingly.
On another hand, the relationship between production and consumption develops differently from the Global North imperialist core, where there is a correspondence between the growth of production and the expansion of the home market. The possibility for the industrial capitalist to obtain abroad the food necessary for the worker at a low price did not entail a fall in wage level but made space for the consumption of other manufactured goods by the working class. In the imperialist core countries, the industrial production sector therefore became centered on goods for popular consumption. As the wage level increased, capital will be oriented toward increasing the productivity of labour by introducing new technology like mechanical automation or even computerisation-in-manufacturing, and effective organization of the labour process like just-in-time kanban work procedures. The way to increase profit for capital then is still to produce more goods with less labour.
3] CIRCULATION AND PRODUCTION PROCESS
This Circulation and Production process is, considered one of the critical points against the theory of unequal exchange. However, looking at a broader perspective, this approach actually corresponds to Marx’s presentation in Capital where “The Process of Production of Capital” includes both the production of the goods and the sale. The first two sections of Capital are devoted to explaining the characteristics of commodities by analyzing problems in the sphere of circulation. It is only after more than a hundred pages, in the third section, that the study of the production of goods begins. This makes the theoretical examination of a problem coincide with its historical development, as it accounts for the transformation of simple mercantile production into capitalist mercantile production, (see Marx, Capital, vol. 1, 61–71, 303, 305, 470, 503, 545, 558–60, 590–91).
Under similar Malaysian environment, to undertake the circulation sphere as a starting point makes all the more sense when in study of the imperialism of unequal exchange, it has everything to do with the exchange on the world market, between the dynamic accumulation circle in the core and the dysfunctional national accumulation circle in the periphery like our country. The dependent economy is subordinated to the accumulation in the industrial countries where its primary function is to secure the profit rate and the overall accumulation of for global capitalism.
Indeed, our argument lies not only on consumption power as the driver of development, but to focus on the problems of the realization of production, too. Since the geographical separation that exists between the location of production and the location of consumption in the dependent economy tend to generate peculiar conditions for the exploitation of labour in the production sector, which Marini had appropriately termed as “super-exploitation.” This super-exploitation aggravates the split between national production and domestic consumption, from the heart of the production sphere,(Marx, ibid, p. 648).
The Marxism view of surplus value presents that only labour creates value, but capitalism by having a monopoly on the means of production, is able to appropriate the value created by labour. Capital regards, and turns, labour as a commodity. As such, a labour effort, and the labour loss, is capital surplus through the sale of the commodity for more value than the labour’s wages.
4] SURPLUS VALUE AND UNDERDEVELOPMENT
There are basically three ways that capital can increase the rate of surplus value and thereby the potential volume of profit:
• Increase the absolute surplus value by an extension of working time and/or the intensification of work, in relation to the required working hours to reproduce the “basket of goods” that forms the value of laboir power.
• Increase the relative surplus value by an increase in productivity, as a result of new technology or more effective management form, which reduces the “necessary working hours” share of total working hours.
• Extract super surplus value by lowering the actual level of reproductive costs and thus the “necessary working time” share of total working hours.
Marini defines super-exploitation as “the intensification of work, the extension of the working day and the expropriation of part of the necessary labour for the labourer to replace his labour power.”
The “intensification and extension of the working day” equals Marx’s absolute surplus value. However, it is the last-mentioned form that is of special interest to our present discourse. By the “expropriation of part of the necessary labour for the labourer to replace his labour power”, Marini is referring to a wage depression in the colonial arrears under the value of labour power. As he concludes, “In capitalist terms, these mechanisms…signify that the labour (power) is paid under its value, and they correspond, therefore, to a super-exploitation of labour.”
Marini draws the conclusion that the super-exploitation of labour power in the periphery has an impact on the pattern of extraction of surplus value in the core of the imperialist system, from being dependent on absolute surplus value (longer and more intensified labour) to relative surplus value (greater productivity) due to the dynamic development of industrial capitalism in the second half of nineteenth century.
Under such conditions, and the situational envornment, it is not surprising that the working class in the center managed to get its share of gains from the increased productivity through the trade union struggle for a higher wage, whereas the southeast Asian experience is one of decimation of trade unionism whenever disputes on working conditions or impairment of workers rights arose; and Malaysia is no exception.
As another instant, the supply of cheap agricultural products from Asia, Africa and south America in the second half of the nineteenth century made it possible for say English capitalism to reduce the value of labour power (reduce the cost of reproduction of labour power) and thus increase surplus value (profit) and, at the same time, increase wages (the price of labour power). In turn, this favoured a mode of capital reproduction in the imperialist center, which then was depending on the consumption power of the working class.
By contrast, super-exploitation — the remuneration of labour below its value (reproduction cost) — became the model used by capital in colonial countries in Asia, Africa and south America in the export sector supplying raw materials and food for the imperialist center. For example, Global South capitalism was not so much dependent on the consumption of a domestic market as long as Europe and the United States demanded their production. Super-exploitation, thus became the most prominent way of increasing profits in the reproduction of capitalism in respective Third World countries.
Marini’s concept of super-exploitation in the colonies and Emmanuel’s explanation of the wage rise in the imperialist center as the driver of unequal exchange between center and periphery supplement each other nicely. Both Marini and Emmanuel argue that the deviation of the wage from the value of labour power has become the generator of an unequal exchange.
After the financial crisis of 2007, however, China was able to shift the cycle of capital accumulation from being focused on the world market to being dependent on domestic circulation – the dual chinese economy. By tripling the wage level and massive state programs for internal investment that would eventually alleviate 800 millions out of poverty, China has reduced unequal exchange and broken the polarising tendency that has ruled capitalism for more than 150 years.
5] TRUST IN MADANI
For Malaysia politico-economic model to be successful, and sustainable, the core issue of contradiction between capital and labour needs to be resolved with the Madani trust.
More so, after ethnocapital has owned, controlling and dominated the Malaysia resources, it is appropriate period of a new era under an unity governance to present a new narrative on Malaysian labour working cohesively and collaboratively – at this particular junction of a historical period – with capital to a shared prosperity domain under a common wealth practice for labour, too.
For one main obvious reality of capitalism is that massive poverty across the Global South is not the result of some local insufficiency (resources or skill talent) but rather due to the functioning of neocolonialism perpertuated by liberal economic policies as neoimperialism where the ongoing effects of dependency on financialisation capitalism need to be tamed.
The haemorrhage to present economy is the resulting outcome of those extractive institutional forces since post-independence, accelerated by succeeding regimes in governance with odious practices, and as articulated by Prof Kamal Hassan in Corruption and Hypocrisy in Malay Muslim Politics while Khalid’s London School of Economics and Political Science research has pinpointed the class structure-laden beneficiaries to their enduring enterprises.
The trust between labour and capital has to be firmed up solidly in fulfillment of a Madani Malaysia – more so when 98.5% of businesses are the SMEs contributing 36% of the national GDP where labour is important as capital because it provides employment for 7.3 million people – nearly half of the country’s workforce.
Towards The Malaysia Narrative 