The problem with a comparative advantage is that it is comparative. You have the advantage only as long as someone else doesn’t. Our advantage in Malaysia was for a very long time the ability to keep production costs low through the voodoo of interventionist policy and wage repression.
This particular edge involved mass-producing industrial stuff for export at relatively lower prices than anywhere else; but we were supplanted in the wake of the ’97-’98 crisis with the rise of other low-cost manufacturing exporters like Vietnam and now (increasingly) Indonesia. Economists consequently talk about the middle-income trap from which we can emerge only by way of evolution into a high-income economy.
The Government thinks that it can pull this magical rabbit out of its own arse by fiat, but apparently it can’t agree with itself on whether we are on the threshold of greatness or verging on bankruptcy. It wishes to increase its income through subsidy reduction as well as a new tax, the GST; but at the same time it cannot account adequately for its expenditure or the administration of public funds. Idris Jala would pauperise half the country to what end? To pay Idris Jala’s salary?
We have no business formulating policies for a fictitious high-income economy if we cannot even agree on Syed Shahrir’s request for a minimum wage (pdf). And all he’s asking for is RM900 plus RM300 COLA . Does the Government mean to tell me that it intends to keep wages ruinously low while taxing those same workers and removing whatever relief they have through subsidised goods and services (such as healthcare and education)?
Does it therefore intend to achieve its high income rubbish for only some Malaysians via the enslavement of others?
And on what does the Government propose to spend our money? I’m not merely talking about aeroplanes without engines, unsinkable submarines, or double-page-spread full colour advertisements in the New York Times. I am talking about the Government’s own abject administrative foolishness on a daily basis.
For example, the Health Ministry would like you to believe that it is serving the public good through its 1Malaysia clinics that effectively deprive low-wage earners of adequate primary healthcare. It prefers to justify its budget through the deeply questionable practice of having medical assistants do the work of GPs while the Ministry’s primary responsibility for district and general hospitals remains unattended. Is this what Malaysians pay taxes for?
High income economies have high per capita incomes because public services like healthcare, education, transport, and social security remain the chief responsibilities of government. People pay higher taxes because they don’t have to pay additional fees for some or all of these services.
On the other hand the Malaysian Government and Idris Jala’s band of clever people seem not to have spent a minute of their precious time studying the social impact of their policies. If they believe the mass of Malaysians earn, as they do, RM20,000+ monthly salaries and live in the wealthy suburbs of Kuala Lumpur then I suggest that they should spend less time in their plush air-conditioned publicly funded offices and more on the street where people are dying because no one gives a shit.