Impact of the Neoliberal Agenda

5 %

57 %

28 % Salaries & Wages

Profits of Companies(EBITDA)

GDP by income approach, 2005 Malaysia -DOSM

10 %Profits of Unincorporated Enterprises(Mixed Incomes)

Tax less Subsidies

297.8 b

26.1b

52.2b

146.3 b

Total GDP(2005) 522.4 bil

CE/GDP – Wage Share of the Economy

5 %

57 %

28 %

The Gross Domestic ProductGDP by income approach, 2005 Malaysia -DOSM

10 %

297.8 b

26.1b

52.2b

146.3 b

Total GDP(2005) 522.4 bil

Household Income

Household Income

CE/GDP – Wage Share of the Economy

MALAYSIA IS A SWEATSHOP

Malaysia’s

Wages/GDP only

28% in 2005

• Income disparity widening• GINI coefficient worsening

The Trends

Top 20% households earn 7 times more

than the Bottom 40%7%

34%

53%

66%

76%

87%94%

1%

11%

23%

34%

45%

61%

76%

1,000 2,000 3,000 4,000 5,000 7,000 10,000

Income Bracket Share of Income

Household Income Inequality

Average income is RM4,000 but top 20% households earn nearly 7 times more than the bottom 40%

Top 20% H/holdsRM10,200

Middle 40% H/holdsRM 3,800

Bottom 40% H/holdsRM1,500Source: EPU/HIS

46.2

42.5

40.0

34.0

43.0

35.6

37.9

36.7

50.9

Malaysia

Singapore

Thailand

Indonesia

Philippines

Vietnam

Cambodia

Laos

Papua

Gini Index

Source: World Bank data and indexmundi.com

13 14 17 20 15 19 18 19 12

35 37 36 37 35 38 36 3632

52 49 47 43 50 43 46 45 56

Bottom 40% Middle 40% Top 20%

Income Inequality among the worst in Asia

1. Fiscal policy discipline, avoid large fiscal deficits relative to GDP2. Redirection of public spending from subsidies toward broad-based provision of

key pro-growth3. Tax reform, broadening the tax base and adopting moderate marginal tax rates;4. Financial Liberalization -Interest rates that are market determined and positive

(but moderate) in real terms;5. Competitive exchange rates;should be managed to induce rapid growth in non-

traditional exports6. Trade liberalization: liberalization of imports, elimination of quantitative

restrictions (licensing, etc.); liberalization of the service industry7. Liberalization of inward foreign direct investment; Increasing foreign direct

investment (FDI) - by reducing barriers8. Privatization of state enterprises;9. Deregulation: abolition of regulations that impede market entry, regulatory

coherence 10.Legal security for property rights.11.Secure intellectual property rights (IPR) - without excessive costs and available

to the informal sector12.Small Government - Reduced role for the state.

The Washington Consensus

654

1,681

0

200

400

600

800

1,000

1,200

1,400

1,600

1,800

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

ETP GNI or GDP target by 2020

@ 9% growth

Malaysia GNI/cap = RM53,000

Core features of NEM, RMK-10 and ETP

• Achieve High Income Goal of USD15,000 GNI/cap by 2020

• Achieve GNI of RM1,700 bil by 2020

• Attract more private investments – FDI or DDI

• Incentivize investments

• Liberalize, deregulate, dismantle distributive policies

• Indifferent towards inequality and marginalized groups

Strategy is :-GET INVESTMENTS

Idris Jala’s Main Strategy

smallnet export

gain

New Economic Model (NEM)

Does not address

• Household income• Wages & salaries• Inequalities inter-ethnic, intra-ethnic• Assume “trickle-down” effect, once

RM 1.7 trillion GNI achieved, “everybody will be rich”

• Regards welfare policy as adequate• Does not address high “cost of living”

ETP Wage target by 2020

Creating 3.3 mil medium to high income jobs

GNI created by NKEAs is RM800 bil

So

urc

e: E

TP

E

xh

ibit 2

-5 P

ag

e 8

1S

ou

rce

: E

TP

E

xh

ibit 2

-11

P

ag

e 8

7

ETP’s wages/GNI regressing

Projected

Wages/GNI for

ETP’s NKEA is

only 21% in 2020

So

urc

e: E

TP

A R

oa

dm

ap fo

r M

ala

ysia

, E

xh

ibit 2

-12

Pa

ge

88

Analysis of PEMANDU’s GNI & Wages Projection

15

ETP use 2020 nominal RM against 2009 current prices

ETP use nominal prices for 2020

2020 Projected Salary Distribution using 2.8% p.a. inflation

No. of Jobs, millions

2009

2020 (Projected)

< RM 750 RM750-1,500 > RM7,500RM1,500-3,000 RM3,000-5,000 RM5,000-7,500

2.9

3.7

4.4

4.7

3.3

4.0

1.3

2.0

0.31.0

0.10.2

+1.3 +1.0 +0.7 +0.7 +0.7 -0.1

2020 Salary Bracket1

Change in # of workers, millions

1 Salary brackets reflects 2020 @ 2.8% p.a inflation

new 1.5m joins the the poorest <RM750 bracket

Analysis of PEMANDU’s GNI & Wages Projection

Only 3mil gets >RM3k, not 4mil as ETP claims

8.7mil earns <RM3k (1.7m

more), the urban poor class

Less employees with >RM7k

2020 Projected Salary Distribution using 6% p.a. inflation

No. of Jobs, millions

2009

2020 (Projected)

< RM 750 RM750-1,500 > RM7,500RM1,500-3,000 RM3,000-5,000 RM5,000-7,500

2.9

3.7

6.6

4.7

3.3 3.1

1.3 1.3

0.3 0.3 0.160.2

+3.7 +1.0 -0.2 +0.0 +0.0 -0.1

2020 Salary Bracket1

Change in # of workers, millions

1 Salary brackets reflects 2020 @ 6% p.a inflation

Analysis of PEMANDU’s GNI & Wages Projection

Workers earning below RM750 INCREASEDfrom 2.9 mil to 6.6 mil

Not much change in these brackets

new 3.7m joins the the poorest <RM750 bracket

4.7mil earns <RM3k (1.0m

more), the urban poor class

2020 Projected Salary Distribution using 2.8% p.a. inflation

No. of Jobs, millions

< RM 750 RM750-1,500 > RM7,500RM1,500-3,000 RM3,000-5,000 RM5,000-7,500

2.9

3.7

4.4

4.7

3.3

4.0

1.3

0.31.0

0.10.2

2020 Salary Bracket1

Analysis of PEMANDU’s GNI & Wages Projection

2009

2020 nominal

Low Income Medium & High Income

< RM750 RM750-1,500 RM1,500-3,000 RM3,000-5,000 RM5,000-7,500 > RM7,500

This was

ETP’s

gameplan

Bottom 40%

Trends in Workers’ Salaries under ETP

2009

2020 nominal

2020 @6%

Low Income Medium & High Income

< RM750 RM750-1,500 RM1,500-3,000 RM3,000-5,000 RM5,000-7,500 > RM7,500

Bottom 40%

Trends in Workers’ Salaries under ETP

Population (29.3 mil)

Young (0-14)7.8 mil (26%)

Old (>64)1.5 mil (5%)

Wage Recipient9.088 mil

Employment12.7 mil (97%)

Outside LF6.9 mil (34%)

Labour Force (LF)13.1 mil (66%)

Working age (15-64)20.0 mil (68%)

Foreign workers 2.8 mil

Local workers 6.3 mil

The Labour Market (2012)

Self-Employed/ Family

3.134 milSource: EPU, DOSM Informal Sector 2012, MTUC Press

Explaining the classifications of the the 12.7 mil jobs, only 9.1 mil jobs are formal jobs

Is job creations lower than forecasted?

The Labour Market (2012)

12.7 mil employed but only 6.4 mil registered with EPF

(6.4 mil workers)

Age Groups

Civil Servants about 1.4 mil

About 4 mil workers registered with EPF earn below RM2,000

About 6 mil workers are not registered with EPF

Formal Jobs Created in 2012 only 150,800

Empires &

Colonies

Nationalism,

Capitalism &

Welfare State

Socialism

World Bank, IMF Debt-Slavery

WTO, FTAs, BITs Trade & Investment

Military Power

1800s to 1950s 1938 to 1945 1945 to 1980s 1980s to present

World War II&

Independence

Yalta ConferenceDividing the world

NeoliberalismDemocracy

NeocolonialismWealth controlled by few economic elites

through

MNCs

Military DebtTrade & Services

InvestmentGovt Proc &Deregulation

“New Age” FTAs

US-Peru FTAUS-Chile FTAUS-Singapore FTA

TPPA

Colonial EraNewly

GATT,GATS,WTOReg & Bilateral PTAs

Washington Consensus

World Bank, IMF Loans,

SAP on Defaulters

Independent The GATT years

0.40

0.45

0.50

0.55

0.60

0.65

0.70

0.75

1820 1850 1870 1890 1913 1929 1950 1960 1980 2000 2020

World GINI IndexIncome Disparity

Source: "Global Inequality: Beyond the Bottom Billion“ - UNICEF

Disparity between therich and the poor growingG

INI I

nd

ex

Rationalisation of subsidies to rakyat but not to industries

Malaysia free-market doctrine is veeringmore and more towards neoliberalism

FDI Obsession

liberalized, deregulated and privatized social services that had previously remained under state control – power generation, telecommunications, waste disposal, water supply, healthcare services, and tertiary education

property rights legislation and policies that advanced market-based capitalism

extend private timber-logging concessions or oil palm plantation-based cultivation into Native Customary Land; moves to undercut communitarian rights by re-developing Muslim wakaf land and ‘Malay reserve’ land;

repeal of urban rent control law to benefit a new class of urban property developers

Reducing GovtSpendingsystematic control of labor and wages,

whether by deploying unjust measures, wage suppression

Export-oriented industrialization

EOI with labor-intensiveindustries

liberalization of the financial sectordeeper integration with the global investment market.

Washington Consensus

NEM, ETP

Meritocracy out of contextCompetitiveness out of context

GDP growth obsession

Apa TPPA

Perjanjian antara 12 negara di pesisiran Pasifik:• USA• Kanada• Mexico• Peru• Chile• Malaysia• Singapore• Brunei• Australia• New Zealand• Japan• Vietnam

TransPacific Partnership Agreement

o Malaysia sertai rundingan pada tahun 2010o Jepun pada tahun 2013

Isu-Isu & Kembimbangan –yang berat tapi jarang kita dengar:

Perjanjian TPPA lebih berdaulat dari perlembagaan dan undang –undang

Perjanjian TPPA dikuatkuasakan di tribunal antarabangsa (ISDS) bukanmahkamah tempatan, syarikat pelabur asing boleh heret kerajaan

Menghadkan ruang polisi (policy space) – undang2 baru atau pindaanuntuk mejaga kepentingan masyarakat - sosioekonomi, pekerja danburuh, kesihatan, keselamatan, alam sekitar terbatas

TPPA memerlukan kita pinda perlembagaan, undang2, polisi danperaturan sedia ada - perlu dilakukan serta merta apabila TPPA dimeterai - untuk comply, akur, mematuhi perjanjian TPPA

Peraturan Pelaburan TPPA jadikan kepentingan pelabur asing lebihutama dari kepentingan rakyat atau masyarakat atau peniaga2 tempatan

Failed State. Pembukaan (liberalisasi) sektor sektor ekonomi danperaturan pelaburan (Investment Chapter) akan melemahkan ekonominegara – Malaysia akan menjadi negara “Failed State”

TPPA

Trade Balances of countries who have signed up FTA with USA

NEGARA Tahun

Export to

USA

Import

from USA

Trade

balance

PERU 2008 6.2 5.8 0.4

2012 6.4 9.3 -2.9

CHILE 2003 3.7 2.7 1

2012 9.4 18.8 -9.4

SINGAPORE 2003 15.1 16.6 -1.5

2012 20.2 30.5 -10.3

ARGENTINA 2004 7.5 14 -6.5

2012 9.5 31.2 -21.7

Nilai dalam US$ billion

Chile-US FTA 2003

Tanpa Cukai Export di Chile – Bahan2 mentah (copper) di belasah

Other issues:1. The term Neoliberalism is a misnomer. Nothing to do with human liberty and wellbeing.

Free trade, free market, Carnegie’s endowment for peace, TPPA partnership2. Basic universal principles should be foundation of our political economy - social justice,

equality, welfare of the people, social safety net, protection of the vlnerable, wealth is distributed, sustainability, asset based financial system, prohibition of usury

3. Normative economics vs positive economics4. Labour theory of value and Wage/GDP5. New metrics – dashboard household income, wages, jobs, social mobility, GINI coeff,

NOT JUST GDP6. Trickle-down effect. Even PM Najib believes this does not happens, but its still business

as usual.7. Manufactured consent – the political economy of the mass media (Noam Chomsky) –

economic textbooks, media and academia, nobel prize, neoclassical economist dominates

8. Stiglitz – disagree with GDP growth metric, TPPA9. Piketty proposes wealth tax to address inequality.10. FDI – 30% return minimum11. Wage- led growth strategy, aggregate demand – as opposed to profit-led, export-led,

investment-led12. Laissez faire, unfettered free market capitalism13. Impact: Inequality, depletion of resources

Thank You