PETALING JAYA: The widening income gap in the country is evident when one looks at the distribution of funds in the Employee’s Provident Fund (EPF).
According to data from EPF, more than half of the savings belongs to just 0.4% of the members.
In real numbers, this translates to about RM47.2 billion in the accounts of just 28,727 EPF members, The Edge reported, with reference to the information contained in EPF’s Annual Report 2016.
This compares with 3.6 million people, which makes up 51.9% of EPF contributors, collectively having RM43.9 billion in the fund.
The same report showed close to 70% of members aged 54, just one year short of the age when they can withdraw their full EPF contribution, have less than RM50,000 in their EPF account while about 20% have less than RM8,000.
An economist who co-authored a 2014 World Bank report, spoke on how the nation’s economy should never be taken to mean that the income levels will be distributed evenly.
“Malaysia’s GDP growth does not necessarily translate into a corresponding rise in the standard of living of a major segment of the population.
“What matters are not headline GDP figures, but the consequences and effects of economic growth on the rakyat’s well-being,” DM Analytics Malaysia managing director and chief economist Muhammed Abdul Khalid told the business publication.
He was referring to the 5.8% growth recorded by the Malaysian economy in the second quarter of 2017.
Highlighting the potential pitfalls of growing income inequality, Muhammed cited the Asian Development Bank’s 2012 report which had stated: “High and rising inequality can curb medium-term growth by reducing social cohesion, undermining the quality of governance and increasing pressure for inefficient populist policies.”
He said another 2014 World Bank report warned: “Inequality, especially deprivation, may intensify the grievances felt by certain groups or can reduce the opportunity costs of initiating and joining a violent conflict.”
The Edge reported that the EPF data and the comments from the economist contradicted data released by the government stating that income inequality among Malaysians has been trending downwards over the past four decades, from 0.513 in 1970, when the New Economic Policy was introduced, to 0.401 in 2014.
Muhammad also had some advice for those responsible for the nation’s economy, including the government of the day, stating that more focus must be placed on inclusive growth instead of merely aiming to become a high-income nation.
He alluded to this in his book The Colour of Inequality, where he wrote about the future not looking too bright for Malaysia.
“The current policies are encouraging wealth disparity between rich and poor, and between ethnicities.
“Unless bold and drastic actions are taken urgently, a harmonious future for Malaysia is uncertain.
“There must be an urgency to give every Malaysian economic security, a better and sustainable future that is essential for a stable, harmonious and prosperous society,” Muhammad had written in his book, published in 2013.