Office of YB Wong Chen
Preparing for Parliament
1st March 2016
My office has been tracking economic indicators and issues for almost 3 years now. I warned about the 2015 slow down in a January 2015 speech in an economic forum. Unfortunately, my negative projections for 2015 came true.
About a month ago, my office completed initial projections for fiscal 2016 and fiscal 2017. We are awaiting Q1 results to verify our numbers. So it will be late June before we publish anything, if any. I don’t particularly want to be charged as an “economic saboteur”. With the current state of Malaysian politics, no one is safe. All I can say about our initial numbers is things are looking more grim than 2015.
I make it a habit to talk to people on their feel for the economy, wherever I go. My many, many conversations with noodle hawkers, blue collar workers, professionals, bankers and businessmen all suggest that 2016 will be extremely tough economic year.
Distributors and wholesalers are talking about a big shrink in their margins from 5% to 3%. Retailers are reporting 40% drop in sales. Restaurants are also doing badly (except CNY) at 30%. Law firms are struggling with limited to non-existing conveyancing work. Some people are complaining that GST rebates have not been paid since September 2015.
We also know that the oil and gas sector and banking sector have shed thousands of jobs late last year. This shedding will likely continue this year. The next vulnerable sector is predicted to be construction. When 2016 projects are completed and delivered, 2017 is currently looking decisively quiet.
Today, Petronas announced that they are cutting another 1,000 jobs. This is dreadful news. Malaysians as a whole are heavily in debt. Household debt is 89% of GDP at the end of 2015. As a proportion of our salary, house and car prices are ridiculously expensive. As a result, the vast majority are in debt and those who are not, don’t have savings of more than 3 months salary.
So when people lose jobs, their severance pay will allow them to survive for only 6 to 9 months. Therefore those who recently lost their jobs will face severe hardship closer to 2017. When they can no longer service their home or car loans, they will lose these assets. Some will be declared bankrupt. Corporate and income taxes will drop, presenting bigger fiscal challenges to the government already on the ropes with the fall in oil prices.
So what can be done? The most important thing is to maintain employment. Corporations need to consider a new approach instead of choosing to cut jobs. Workers need to be allowed to collectively bargain and unions must be empowered. Workers should consider a collective pay cut rather than sacrifice some colleagues to the chopping block. Foremost, top management must lead by taking bigger salary cuts.
Example, workers should strive to collectively accept a 15% to 20% pay cut, in return, nobody is made unemployed. Correspondingly, senior management must lead with a bigger pay cut of 30% to 40%.
Another solution is to bargain for shorter work hours for lesser pay. Because of the high level of household debts most Malaysians are trapped in, no one can afford to lose a job. We can survive a pay cut but we cannot survive a total lose of income.
The social economic implications of losing a job is an evil that must be avoided. If a parent lose a job, the children will suffer and the family may break. Therefore corporations must do their bit and MPs must be vigilant and ensure correct policies are encouraged.