Significant drop in real wages in Malaysia

PUTRAJAYA: Real wages in Malaysia have dropped dramatically over the last 10 years since the Asian financial crisis.

According to the Reshaping Economic Geography Report in East Asia, an East Asian and Pacific region companion volume to the World Development Report 2009, the growth in real wages, which refers to wages that have been adjusted for inflation, had reduced significantly to 1.9% post-crisis from 5.6% per annum for export-oriented industries.

Meanwhile, for domestic-orientated industries such as food, beverages as well as tobacco, growth in real wages had fallen to 1.4% post-crisis from 6.8% per annum.

According to report author Dr Yukon Huang, the fall in real wages was in tandem with the drop in gross domestic product (GDP) over the last 10 years.

Huang added that in terms of labour migration to Malaysia, although the number of migrant workers had increased over the same period, there was a fall in the number of highly-skilled expatriates.

Incidentally, over the last 20 years, Malaysia’s services sector contribution to the GDP had remained steady at 46.4% in 2007 from 46.2% in 1987.

“These indicators may reveal that Malaysia has not moved up the economic value chain successfully over the last 10 years and steps should be taken to address these issues,” Huang said at the launch of the World Development Report 2009 yesterday.

According to the Economic Planning Unit director general Tan Sri Sulaiman Mahbob, the latest report from the World Bank looks at the global economic development from fresh perspectives.

“Instead of emphasising on the role of government in initiating and dictating the shape and momentum of economic development, the report highlights the critical importance of natural, human and geographical forces at work such as density as well as distance that encourage the emergence of economic growth centres or hubs across the globe.”

He added that governments should not resist the emergence of these economic hubs but instead should encourage their development. “We share the World Bank’s view that we should approach economic development on a holistic level rather than on a central level.

“We believe that policies or approaches that work for one country or even a region, may not work for all regions within a particular country,” he said.

He said the Government had recognised the geographical differences when launching Malaysia’s five economic corridors, namely, Iskandar Malaysia, the Northern Corridor Economic Region, East Coast Economic Region, Sabah Development Corridor and Sarawak Corridor of Renewable Energy.

“The Government also recognise that each region possesses different economic resources and have adopted different sets of economic strategies designed to exploit the resources and maximise on the economic potential of each region,” he said.

For instance, Iskandar Malaysia would focus on the services, property and tourism industries, he pointed out.

He added that to date, Iskandar Malaysia had attracted investments totalling RM40.25bil.

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