Income Inequality:Causative
Factors and How to Address It
Lim Teck Ghee
Center for Public Policy Studies
What’s Happening to Income
Inequality
• Historical trends since independence
• Trends since NEP ended
• Recent ethnic and regional patterns
•
•
•
•
•
Decreasing inter-ethnic disparities
Increasing intra-ethnic disparities
Marked regional disparities
Narrowing urban-rural disparities
Growing urban disparities
Gini-Coefficient by Ethnic Groups, 1957-1995
1957/58
1967/68
Overall
0.412
0.444
Malay
0.342
0.400
Chinese
0.374
0.391
Indian
0.347
0.403
1970
1976
1979
1984
0.502
0.526
0.493
0.480
0.466
0.494
0.488
0.469
0.455
0.505
0.470
0.452
0.463
0.458
0.460
0.417
1987
1990
0.458
0.446
0.447
0.428
0.428
0.423
0.402
0.394
1995
1997
0.4560
0.4586
n.a.
0.4495
n.a.
0.4188
n.a.
0.4092
n.a. = not available. Source: AH Roslan
(The Gini Coefficient measured income disparities. The higher the coefficient, the greater the
disparity.)
Caveats to Income Inequality Data
• How reliable?
• Who are data gatekeepers?
• How do these data collectors and
gatekeepers operate?
• The culture of secrecy and lack of
transparency
Other Indicators and Data Sets
•
•
•
•
Consumer Price Index and its weaknesses
Official poverty line data
Poverty estimates
Based on OPLI of $529-$695 per month
per hh, 2002: 200,000 hhs = 1 million
• Estimates based on WB US$2 per day per
capita: possibly 2- 3 million
Conclusions on Income Inequality
Trends
•
•
•
•
Worsening trends
Prevalence of Hard Core Poverty
Growing Relative Poverty
Urban Context of Income Inequality
Illegal Migrants: Trends and
Impact
• Big spurt since 1992
• Annual totals of 500,000 ±
• Largest inflow from Indonesia
• Adverse impact on local labour market and
employment
• Annual remittance outflow in billions
• Major contributor to growing income
inequality
Illegal Immigrants in
Malaysia
• Table 1: Number of immigrants
over the past 15 years
• Table 2: Departures of illegal
immigrants
Country of
Origin
1989
Indonesia
12,000
1998
2000-1
309,905
1 million
2 million
Philippines
411
400,000
Thailand
22,518
33,000
Burma
9,389
South Asia
29,869
Africa +
Middle
East
135
Total
N/A
1992
200,000
1993
372,268
1995
250,000
*a
1996
554,941
**
* Discrepancy in figures:
a
b
500,000 – 700,000; New Straits Times, April 5 1996
1 million; The Star, July 30 2001
** An additional 1 million illegal immigrants refused regularisation
1997
612,000
N/A
2003
2004 –
2005
1.2
million
200,000
300,000
*b
560,000
400,000
Bail Outs: Trends and Impact
•
•
•
•
Steady stream of bailouts since 1970’s
Estimated value of bailouts:
Who gains, who pays and who loses
Impact on poverty alleviation and income
inequality
Malaysian Bail Outs?
A Chronological List of
Malaysian Corporations in
Debt
No.
Company Involved
Year Recorded
Losses/Debts
Incurred (RM)
1
Bank Bumiputra
1970
3.51 billion
2
Kojadi
1985
N/A
3
Kosatu
1986
1 billion
4
Komuda
1987
3.3 million
5
Koteksi
1987
3.1 million
6
Sepadu
1987
10.6 million
7
Indah Water Consortium
Late 1990s
1 billion
8
Renong Group
1998
28 billion
9
Konsortium Perkapalan Berhad
(KPB)
1998
1.7 billion
10
United Engineers Malaysia Berhad
(UEM)
1998
12 billion
11
Ekran Berhad
1998
950 million
12
Park May Berhad (Renong Group)
1999
146 million
13
Setegap Berhad
2000
95.5 million
14
Affin Holdings Berhad
2000
101 million
15
Chongai Corporation Berhad and
Pembangunan Bandar Mutiara
Sdn Bhd
2000
115 million
16
Trans Capital Holding Berhad
2000
185.6 million
17
Nam Fatt Corporation Berhad
2000
312.3 million
18
Gadek Berhad (DRB-Hicom)
2000
750 million
19
Idris Hydraulic (Malaysia)
Berhad
2000
782 million
20
Naluri Berhad
2000
950.1 million
21
Tongkah Holdings Berhad
2000
1.189 billion
22
Metroplex Berhad
2000
1.2 billion
23
Mycom Group
2000
1.8 billion
24
Lion Group
2000
10 billion
25
Malaysia Building Society
Berhad
1998-2001
950 million
26
TA Enterprise Berhad
2001
1.77 million
27
New Straits Times Press
(Malaysia) Berhad (NSTP)
2001
2.97 million
28
National Steel Company
2001
3 million
29
K&N Kenanga Holdings Berhad
2001
16.76 million
30
Country Heights Holdings Berhad
(CHHB)
2001
74.51 million
31
Malayawata Steel Berhad
2001
20.17 million
32
Dewina Berhad
2001
25 million
33
Rashid Hussain Berhad (RHB)
2001
198.08 million
34
Berjaya Sports Toto
2001
1.01 billion
35
DRB-Hicom
2001
5.06 billion
36
Sistem Transit Aliran Ringan Sdn
Bhd (Star) and Project Usahasama
Transit Ringan Automatik Sdn
Bhd (Putra)
2001
5.5 billion
37
38
39
40
41
42
43
44
45
Intrakota Komposit Berhad
Cygal Berhad
Actacorp Holding Berhad
Johor Corporation
Land & General Berhad
HVD Entertainment Berhad
NCK Corporation Berhad
Abrar Corporation Berhad
Abrar Corporation International Sdn Bhd
2001
2001
2001
2001
2001
2001
2001
2001
2001
46
Timbermaster Industries Berhad
2001
47
48
49
50
51
52
Cableview Services Sdn Bhd
Magnitude Network Sdn Bhd
Bridgecon Holding Berhad
Jupiter Securities Sdn Bhd
Suasa Unik (M) Sdn Bhd
Perusahaan Sadur Timah Malaysia Berhad
2001
2001
2001
2001
2001
2001
53
54
55
56
57
Red Box (M) Berhad
ELITE
Business Focus Sdn Bhd
Tanco Holdings Berhad
Hai Ming Holdings Berhad
2001
2001
2001
2001
2001
Companies
contributing to
Corporate Debt
Restructuring
Committee’s
(CDRC)
management
of a total of
RM29 billion
of corporate
debts as of
year 2001.
58
I-Berhad
2002
10.66 million
59
Telekom Malaysia
2002
29 million
60
George Kent (Malaysia) Berhad
2002
173 million
61
Johan Holdings Berhad
2002
318 million
62
Chase Perdana Berhad
2002
570 million
63
Sriwani Holdings Berhad
2002
609 million
64
Sistem Televisyen Malaysia Berhad
(TV3)
2002
645 million
65
Expressway Lingkaran Tengah
Berhad
2002
1.05 billion
66
Malaysian Resources Corporation
Berhad (MRBC)
2002
1.8 billion
67
Employment Provision Fund (EPF)
2002
10 billion
68
Malaysia Airlines System (MAS)
2002
9 billion
2005
Half year net
loss
684.4 million
69
EPE Power Corporation Berhad
2003
2.38 million
70
Lien Hoe Corporation
2003
240 million
71
Perwaja Steel
2003
10 billion
72
Amtel Holdings Berhad
2004
783,000
73
Astro All Asia Networks
2004
2.4 billion
74
Pantai Holdings Berhad
2004
112.7 million
75
Time dotCom
2004
833.24 million
76
Tenaga Nasional Berhad (TNB)
2004
30 billion
77
Perusahaan Otomobil Nasional
Berhad (Proton)
1999
19 million
2005
154.3 million
2nd
78
79
BIMB Holdings
KUB Malaysia Berhad
Quarter ended
September
2006
315 million
2005
456.44 million
2005
9.02 million
2nd Quarter ended
June
80
PSC Industries Berhad (PSCI)
2005
789 million
CDRC: Company Debt Restructuring Cases
(RM Mil)
Subject
1998
1999
2000
Application
received
(accumulative)
Total Debts
(36)
(66)
(75)
11,028.15
24,624.62
11,556.98
Withdrawn/
Rejected Cases
-
3,504.35
(15)
4,855.28
(6)
Transferred to
Danaharta
-
2,764.70
(8)
1,813.54
(1)
Completed Cases
344.50
(2)
11,089.28
(11)
13,698.63
(20)
Cases
Outstanding
10,683.65
(34)
16,651.13
(28)
12,093.40
(12)
Note: figure in parenthesis is the number of applications/cases
Source: CDRC Website
• The Malaysian private (corporate) sector is struggling to settle its debt. The debt
has been estimated at more than RM60 billion since the Asian financial crisis
struck in 1997.
• Loans to the private sector in 1997 which was RM406.9 billion declined to
RM397.2 billion in 1998 and increased marginally in 2000 to RM398.3 billion.
However, loans in the form of debt papers (securities) accelerated from RM40.7
billion in 1997 to RM54.5 billion in 1998 to RM72.2 billion in 2000.
• Since the formation of the Corporate Debt Restructuring Committee (CDRC) in
July 1998, 84 debt restructuring cases amounting to RM65.9 billion were referred
to it.
• According to AmResearch, within Khazanah’s stable of companies, only six out
of 24 companies yielded positive total shareholder returns in 2005, and of these,
only five saw year-on-year (yoy) gains in their share prices.
Sources:
•Asian Free Trade Act (AFTA) Online
•Aslam, M. (2001), ‘Heterodux Economic Policies in Malaysia. Economic
Rational, Stock Market and a Corporate Mess’, Applied Economics
Department, Faculty of Economics and Administration, University of Malaya,
Malaysia.
•Corporate Debt Restructuring Committee (CDRC) Press Release, Newspapers
•Daily Express
•Asian Financial Network (AFN)
•New Guiding Principles of Corporate Debt Restructuring Committee (CDRC),
September 2001
•The Edge Daily
•The Star
•Yeoh, K.K. (2005), ‘Diasporic Dilemma and Economic Exigencies:
Communal Corporatization or Corporate Communalism?’, Department of
Analytical Economics, Faculty of Economics and Administration, University of
Malaya, Malaysia.
Size of Federal Government’s
Development Budget
Development Allocation for Education and Training, 1996-2005
(RM million)
Programme
Education
• Pre-school
• Primary Education
• Secondary Education
Government & Government-aided Schools
MARA Junior Science Colleges
Technical & Vocational Schools
• Tertiary Education
• Teacher Education
• Other Educational Support Programmes
Training
• Industrial Training
• Commercial Training
• Management Training
Total
7MP
8MP
Allocation
Expenditure
Allocation
17,948.5
123.6
2,632.0
5,330.1
3,860.0
710.0
760.1
5,362.8
350.0
4,150.0
17,542.2
107.5
2,631.8
5,317.5
3,853.7
707.2
756.6
5,005.1
332.5
4,147.8
18,660.0
147.4
2,750.0
4,862.6
3,262.6
700.0
900.0
8,900.0
300.0
1,700.0
2,237.3
1,876.0
71.3
290.0
2,181.9
1,827.0
71.2
283.7
4,000.0
3,760.0
100.0
140.0
20,185.8
19,724.1
22,660.0
Source: Malaysia, (2001). Eighth Malaysia Plan 2001-2005, Kuala Lumpur. Percetakan Nasional Malaysia Berhad.