Escaping the middle-income trap requires a rise in real wages and high-paying jobs for locals not foreigners.(e/c)

May Day Message by Penang Chief Minister Lim Guan Eng in Komtar, George Town on 1 May 2014.

For decades, Malaysia has been wallowing in an economic dilemma known as the “middle-income trap”. This term denotes a situation where developing economies that have achieved middle-income status (per capita income of USD1,036 – USD12,516) are unable to compete with, on the one hand, low-cost labour in low-income economies, and on the other hand, innovation-driven productivity of advanced economies.

Therefore, it is critical for Malaysia to escape the middle-income trap and transform into a high-income economy. The Penang state government believes that this objective can be achieved by two ways, which are a rise in real wages and the creation of high-paying jobs for locals and not foreigners.

According to claims by labour unions, the last decade saw a 6.7% annual rise in productivity. However, the rise in real wages has not caught up, being a paltry 2.6% every year. The situation in the manufacturing industry is more distressing with real wages of export-oriented industries increasing by 1.9% whilst that of domestic-oriented industries rising by 1.4% after 1997.

Clearly, real wages have stagnated while inflation has set in and will continue to rise following price hikes by the BN Federal government in sugar, petrol, power tariffs and motor insurance premiums.

In order to ensure real wages go up, Pakatan Rakyat has proposed a minimum all-in monthly wage of RM1,100. However, this minimum wage will only be applicable to local workers while Small and Medium Enterprises (SMEs) will be given a grace period of 5 years for foreign workers. This will have the dual effect of increasing income for Malaysians while protecting Malaysian SMEs.

After the 5 years grace period, SMEs will have to pay the minimum monthly wage to all foreign and local workers. After all, Malaysia loses out when foreign workers send most of their money home. Remittances by legal foreign workers doubled from RM10 billion in 2009 to almost RM20 billion last year. This RM20 billion foreign workers’ remittances last year are expected to double when the minimum wage is fully applied to foreign workers.

For this reason, Malaysian employers and employees should be given priority by ensuring that Malaysian workers enjoy a higher minimum monthly wage of RM1,100 and giving SMEs a grace period of at least 5 years for SMEs to adjust before extending this minimum wage to foreign workers.

The second thrust for escaping the middle-income trap is to create knowledge-intensive, high-paying jobs. Penang has now embarked into the shared services sector through a RM3.3 billion BPO-ITO (Business Process Outsourcing and Information Technology) Hub.

This BPO-ITO Hub brings a unique business model to Penang by leveraging on our manufacturing strengths, and is set to become a rich training ground for building new capabilities, skills and careers. This project is expected to be an economic game-changer that can generate up to 30,000 high paying, knowledge-intensive and high-value jobs for Malaysians.

As of now, global financial services giant Citibank has set up their Global Citigroup Transaction Services Centre in Penang, employing more than 1,000 local employees who manage an annual volume of 20 million transactions worth USD5.8 trillion.

Previous growth strategies of spending on public projects are no longer effective. Apart from engendering corruption, wastages and inefficiency this has only led to increased federal government debt to RM541 billion in 2013 and the second highest household debt in Asia of RM 854.3 billion or 86.8% of GDP in 2013.

—–Mandarin Version —






为了确保薪酬增加,民联建议的1100令吉最低薪金制,并给予中小型企业外劳一个5年的宽限期, 将协助人民增加收入,同时保护我国的中小型企业。


因此, 我们必需先照顾马来西亚的雇主及员工,确保本地劳工享有较高,也即是至少1100令吉的最低薪金,并在此措施延伸至外劳身上之前,给予中小企业至少5年宽限期作调整。

第二个能逃离中等收入陷阱的办法是创造知识密集及高薪的工作。槟城如今透过33亿令吉的商业服务外包与资讯工艺中心(BPO-ITO Hub)计划,全力投入资源共享服务领域。