Rich Malaysian, poor Malaysian

Abdul Taib Mahmud, the former Chief Minister of Sarawak from 1981-2014 and the current Head of State has never appeared on any international wealth ranking list. Yet according to the Bloomberg Billionaires Index, he presides over a family fortune exceeding US$1 billion. Sarawak is the third poorest state in Malaysia with an average household income that is about half that of Kuala Lumpur and with some of the poorest and most marginalized communities in Malaysia (see previous blog). So when the current Head of State of the third poorest state has amassed a huge fortune, this reads like a clichéd story of a feudal Rajah.

However he is in good company. The total wealth of the richest 40 Malaysians (you don’t need me to list them, just Google) is equivalent to 22% of Malaysia’s total GDP and their share has been increasing continuously. In relative terms, these fine gentlemen (unfortunately there are no women yet amongst their ranks) are in fact much wealthier than the top 40 richest individuals from the US.

The richest 10% of Malaysians take home 32% of the total income of the country while the poorest 10% have to manage with a measly 2%. In terms of wealth ownership (assets, savings, investments), the disparity is even more striking. The top 10% own 40% of the total wealth of Malaysia while the top 20% own 60%. The bottom half of Malaysians own only 14% of the nation’s wealth. The top 1% of Malaysians (our top 40 friends) earn 8% of the total income which is almost equal to what the bottom 25% earn. They also control more than 10% of the nation’s wealth. That has not changed much in the past 25 years.

I can rattle off more boring statistics that pretty much all tell the same story. Malaysia has a problem of persistent income and wealth inequality that will affect its long term growth prospects unless specific measures are taken. Despite overall household incomes increasing on average, the relative income gap between the top 20% (rich) and the bottom 40% (poor) has remain stuck at 7.0 since 1990. The relative income gap between rural and urban households in 2012 is the same as at independence in 1957! The richest state in Malaysia has about 3 times more income than the poorest state. This is of course not to say that there has been no progress. Incomes have increased overall but the rich are getting richer faster than the poor are getting less poor, irrespective of ethnicity. Some states have progressed while others are languishing. Rural households are at risk of being left behind.

We need new policies in place to address the growing gap between rich and poor as we are fast heading towards a divided Malaysia. Not so much by religion or ethnicity as we are being constantly reminded. But by income and wealth distribution and the accompanying access to power and opportunities. Unless the Government gives everyone a hand up without pushing others down or out and making sure no one gets left behind.