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What car sales tell us about the economy

 | May 13, 2017

An economist says the gap between the rich and poor is widening.

Barjoyai-Bardai_kereta_new_600

PETALING JAYA: The variation in the recent sales of entry and mid-level cars and luxury cars is indicative of a widening wealth disparity, according to an economist.

“The gap between the haves and have-nots is widening,” said Universiti Tun Abdul Razak lecturer Barjoyai Bardai in a comment on a recent FMT report on the car market.

Last year, despite the economic downturn and some of the worst layoffs the Malaysian job sector had seen in years, Mercedes-Benz and BMW reported record sales while the automotive market as a whole experienced a drop in sales of about 13%.

The good times for Mercedes-Benz and BMW have continued into the first quarter of 2017, with increased sales compared to the same period last year.

“With the cost of living going up and people bracing for a recession expected next year, many are putting off their decision to buy cars,” said Barjoyai. “But this doesn’t apply to the rich. That’s why you can see a discrepancy between the demand for lower and mid-level cars and luxury cars.”

Barjoyai said the rising cost of living had pushed up the threshold of what he called “relative poverty” – the inability to reach a minimum standard of living. He said the threshold, in terms of monthly income per household, would currently be about RM2,350.

He noted a recent statement by the Bumiputra Agenda Steering Unit (Teraju) that the 2016 average monthly income of Bumiputeras in the private sector was RM2,213.

Teraju also said that only 75,000 Bumiputeras in the private sector earned RM10,000 or more a month.

According to the Department of Statistics, 21.7 million of Malaysia’s 31.7 million people are Bumiputeras.

“It is important for the government to take measures to address this wealth disparity because, as it widens, it can lead to anxiety and tensions between the rich and poor, and this in turn can lead to social unrest,” Barjoyai said.

He also said extreme income disparities could have a negative impact on health issues.

Referring to the 40% of Malaysian households with a monthly income of RM3,900 or below, which the government refers to as the B40 group, he said it was likely that a large number earned less than RM3,900.

He said the incomes of those in this group would have to be raised to narrow the rich-poor gap, not by asking them to take up second jobs such as driving for ride-sharing services, but by equipping them with “knowledge and tools to increase their capabilities and to enable them to participate in e-commerce, because e-commerce is the future.”

At the same time, he said, efforts must be made to reduce the cost of living, especially in terms of food, clothing and accommodation.

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