Thursday, July 21, 2011

Malaysia: Wider urban-rural income gap

KUALA LUMPUR: The income gap between urban and rural Malaysians is bigger today than before the country gained independence, a trend that could lead to social instability.

Dr Muhammed Abdul Khalid, a Fellow with the Institute of International and Strategic Studies (ISIS), warned that high inequality trends could also affect economic growth.

"Will economic benefits trickle down to all? The income gap has widened further between the top 20 per cent and bottom 40 per cent, jumping from RM659 (1970) to RM8,547 (2009)," he said at a breakfast forum organised by the Malaysian Rating Corp Bhd (MARC) yesterday.

He compared the income trends between 2000 and 2009 which showed that while Malaysia's economy grew at an average 5.3 per cent a year, wages rose 2.6 per cent and inflation averaged 3.2 per cent.

In the workforce, 34 per cent are earning less than RM700 a month, which is a tad below the RM720 poverty line.

Separately, Malaysia Investment Development Authority (Mida) chairman Tan Sri Sulaiman Mahbob said Malaysian companies should invest more in research and development (R&D) to help boost the country's economic growth.

R&D investments could raise the number of Intellectual Property (IP), lending a higher value to gross domestic product.

Domestic investments make up 40.1 per cent of total investments in the manufacturing sector, totalling RM267.2 billion over the past five years.

"In the first five months of 2011, we are already seeing a pick up in domestic direct investments."

Earlier, MARC also launched "Musings of a Financial Economist", a collection of thought-provoking essays on key economic issues by its chief economist Nor Zahidi Alias.

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