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Economics Politics & government Society

[2872] Lasting change needs more work, more time and wider support

We have the right to celebrate May 9. It is after all the first time in Malaysian history change at the very top happened. For years we were only chipping at the edge. Progress felt irrelevant. But now, here it is. Change.

Yet, not all or even most of the changes Malaysia needs will be instituted quickly. It will take time and work for these changes to happen. There will be residual resistance to change and perhaps using the adjective residual understates the problem at hand. After more than six decades of Perikatan/Barisan Nasional in power – seven decades if you go all the way to the first Malayan general election in 1955 – there is a kind of deep state the new Pakatan Harapan government will need to win over and even fight.

There will be disappointments, and Pakatan supporters and sympathizers will accuse the new government of betrayal and hypocrisy.

But before any of us levels those accusations, we must understand that the government will have to pick their battles. Some will be won. Some will be lost. Pakatan and their supporters will need to be smart in which battles they want to win.

More importantly, before throwing those accusations in the future, we need to understand the long arc of history all of us have to deal with. Malaysia’s deep multifaceted history – with dimensions of race, religion, Peninsula-Borneo, federal-states, urban-rural, national origins, class, gender, etc – is the proper context to judge the new government in the next few years. No action could be judged in isolation.

And the future is just as important as the past in understanding this new Malaysia and the new government.

Our demography and culture are changing at glacial pace. It is slow but the inertia is massive: our society is set to become less diverse in a meaningful way. By 2050 the Bumiputras will form 70% of total population from about 60% in 2014. So would be the Muslims. The Malay population share will rise to 60% from 50% in the same period.

At the same time, we will be an aged society by 2050, from our low median age of 28-29 years old and low dependency ratio.

I fear the two demographic shifts could make our society less open and less progressive in our values. It is not the Malays and the Muslims per se that I fear. It is the increasingly monolithic nature of our society, and hence, the possible intolerance of differences. I fear that future where the Malaysian mind would narrow to a point that leaving is the only reasonable option for too many people.

This is the reason why the 2018 election was the last chance to change in time. The trends are pushing against us, especially against the liberals. It is not simply an election rhetoric. It is a real long-term concern about the fate of Malaysia. This is why I feel spoiling your votes or not voting is unwise: the advocates of the tactics (who wanted some kind of change) are ignorant of history and blind to demographic changes.

It was also the last chance to change because substantive changes that Malaysia needs could not be made by the same side that benefited from the closing of the Malaysian mind. Najib Razak tried it in 2009-2013 and he failed. All his attempts were in the end reduced to mere silo economic targets that stood alone outside of multifaceted Malaysian contexts, making them utterly dissatisfying as a vision. So dissatisfying that we had to go back to the 1990s to move forward.

And substantive change will need more support from Malaysians. While the Pakatan victory is the first step, we have to remember Pakatan won only plurality in popular votes, not majority. Lasting change would require Pakatan to get more Malaysians on board.

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Politics & government

[2691] Soon, Reformasi will fade

The wisdom of our age has it that young adults are more likely than not to vote against Barisan Nasional. A survey carried out by the Merdeka Center for Opinion Research backs this up. In a report it published on May 3, the poll agency found out that Malaysians in their twenties and thirties preferred Pakatan Rakyat to BN by a significant margin. In contrast, support for BN was the strongest among those aged 50 or older. In a country where the median age is younger than 30 years old, that offers some hints about the political future of the country.

While that is so, nothing guarantees that wisdom will last for too long.

The generational divergence Malaysia is witnessing now has a lot to do with the political turmoil of the late 1990s. The sacking of Anwar Ibrahim as the deputy prime minister and the subsequent events that followed made a lasting impression on the minds of these young Malaysians who then were still in school, in university or new to the labor market. Whether it was about Anwar or about a larger sense of justice — that something was extremely wrong — they were moved by the event.

These Malaysians are also the largest age cohorts that Malaysia has ever seen yet. It is not merely a coincident that BN comes under intense political pressure exactly when these generations are maturing and exercising their political muscles.

Each generation has an episode which defines their political belief and partly, their worldview. Those above 50 years old now remember the old Umno and hold dearly onto those nostalgias. Future young Malaysians, those in their teenage years and even younger, will no doubt have their very own episode.

Unlike the others however, these new young Malaysians have their book wide opened and its pages unwritten yet. There has not been any big wake-me-up moment for them so far.

One thing is certain though. Time has the power to make society forget the past. The old old generation will disappear into the background, hopefully bringing with them the ghost of May 13, among others. The old new generation — the young adults of today — will have their political views at the new bedrock of Malaysian society. The new new generations will challenge the prevailing views, as youth always do all around the world.

These new young Malaysians will not remember the events of 1998 because they will never experience it. It is much like how young adults today do not remember the events of 1988 when the old Umno was disbanded and the judiciary came under assault by the Mahathir administration. It is the exact reason why many young Malaysians today are not swayed by May 13 and scaremongering opportunists who fuel their sad career on racist politics.

History books alone are insufficient to influence a whole generation so comprehensively. No matter how moving words in the archives can be, reading them in a dark library room up in the stacks or deep in the basement is a passive, cold action. Words of history may work for a minority with true appreciation of history who read heavily but for the majority, they have to be in the dizzying mist of action before the essence of the era seeps into his or her being.

So the new new generation will forget. Society will forget. Slowly but surely, the what-we-call Reformasi era will take a bow, come down off the stage and be relegated to the pages of history.

That may be a comfort to BN. It is a second chance for them in what seems to be a contest between BN the rock and PR the water.

Nevertheless, BN will have to suffer the demographics and the momentum of time for now.

Mohd Hafiz Noor Shams. Some rights reserved Mohd Hafiz Noor Shams. Some rights reserved Mohd Hafiz Noor Shams. Some rights reserved
First published in The Malaysian Insider on May 31 2013.

Categories
Economics Society

[2649] Malaysian demographics in 2040

Last week, the Department of Statistics released its projection of Malaysian population in 2040.[1] The Department projects that there will be 39 million persons living in Malaysia by 2040, of which 93% of them will be Malaysians. In 2010, there were 29 million persons living in the country with 92% of them being Malaysians. The median age is projected to be about 10 years older than what it is right now. In 2010, the median was 26 years old.

The projection has two population booms in it (possibly three; whether the third is part of the second or distinct by itself is up for debate). The first is the current generation either in universities or has just entered the labor market. The next boom is expected to happen between the next five and ten years or so as the earlier boomers start their own families and do what rabbits do (chart from the Department of Statistics):

Some rights reserved. Creative Commons 3.0. Hafiz Noor Shams

If the assumptions of the projection are taken to heart, Malaysia’s economic growth from now till 2040 might set to be strong if nothing disastrous like wars or institutional degradation happens. Growth may begin to slow down 20 years later in 2060 when the first Malaysian baby boomers enter retirement. The real demographic trouble may start in 2080 when the second boomers enter retirement.

The projection states that the Malaysian society will become an aging society by 2021 but this is merely definitional problem as the projected median age in 2021 is around 30 years old. That age is still well inside the productive age, and probably close to the optimal age/experience to productivity, wherever that point is.

It is possible that the second boomers may bring about a third boomers (there is a third local peak for 5-9 cohorts in 2040) but the fertility rate is projected to be pretty low by the time the second boomers reach their 20s, which is expected to happen in 2040s. Fertility rate in 2040 Malaysia is expected to match that of an advanced country.

The Malays and the other Bumiputras are expected to experience an annual population growth rate of less than one. The Chinese and Indians lose interest in making babies and only the mysterious “Others” will have an amazing rabbit-like rate of 2%.

So, it appears, 40 million to 50 million (or 60 million but anything above 60 million sounds like a very unlikely scenario) people may be the maximum number for Malaysia in this century.

The projection however may be conservative. The growth rate of non-citizens is low and given how ASEAN is set to integrate even further and on top of that, more globalization, one would expect more non-citizens.

But anyway, based on the population projection by the Department of Statistics, the population dividend Malaysia is enjoying is set to last for a very long time. It will probably outlast my generation, which is part of the first boom.

Mohd Hafiz Noor Shams. Some rights reserved Mohd Hafiz Noor Shams. Some rights reserved Mohd Hafiz Noor Shams. Some rights reserved
[1] — [Population Projection, Malaysia 2010-2040. Department of Statistics. January 18 2013]

Categories
Economics

[2647] Sometimes, some inequality does not matter much

Wealth inequality does worry a lot of people. Malaysia’s Gini coefficient has been bandied around as a proof that something must be done to address the inequality that we see in the country. ”We are the 99%” is the favorite rhetoric to pound in the message that wealth inequality is a problem.

Yet not all kinds of wealth inequality deserve the indiscriminate worry that it receives. What defines inequality as an issue of importance is its cause and causes of inequality are aplenty and diverse.

Some causes may warrant serious attention and more importantly, action. A particularly worrisome kind of equality is the one caused by monopoly of power. Such power tends to concentrate wealth in the hands of the few at the expense of the rest. The monopolistic few can become so powerful that they begin to amass further wealth through unfair means to create an excessively unequal society not merely in terms of wealth, but also in terms of rights.

But wealth inequality can also be caused by factors that we should inculcate in our society. Those factors are so desirable that we should tolerate inequality caused by them. For instance, some level of inequality is preferable simply because inequality is a symptom of meritocracy. As long as we reward successes, there will be some level of inequality in our society.

In between lies inequality created by benign causes. It is a kind that nobody should go down to the streets shouting their lungs out in protest in the name of the people, whoever the people really are. In fact, so benign is the inequality that it should be discounted from any serious informed discourse on inequality.

One of these kinds of inequality is caused by demographics. Or probably in clearer language, it is inequality caused by age difference.

When the young enters the labor market, it is only expected they will not earn too much. But as they age and gain more experience, their income will grow and so too will their wealth. In the same line of reasoning, the older generations will likely be wealthier than their younger counterparts, controlling for other factors.

So when we place age profile and wealth side by side, it is reasonable to expect the existence of wealth inequality. Wealth will likely concentrate in the hands of the older generations than in the hands of the younger generation. It is an inequality between the young and the old. It does not explain everything about overall wealth inequality but it does contribute to overall wealth inequality.

This phenomenon is particularly important to a youthful society. In a society where the median age is low, wealth concentrates in the hands of the few members of the older generations. That fits the definition of wealth inequality: few rich old men (and women) and lots of not-so-rich young men (and women).

But as that society grows grayer — when there are fewer youth and more ”˜older persons’ around — wealth will be more well-distributed among members of the society: lots of well-off middle-aged or old men (and women) and few not-so-rich young men (and women). To put it more concisely, as the median age grows older, one expects to see a reduction in inequality.

Coincidentally, Malaysia has a young population. Based on the Department of Statistics’ Population and Housing Census published in 2010, the median age is approximately 26 years old. The median Malaysian just entered the labor market and still developing their career, if they have chosen one to start with. A consideration portion of the population is made up of young adults. One can expect to observe wealth inequality just because the demographics evolve just as such.

For Malaysia, that reduction inequality may happen in a decade or two when a significant fraction of the population enters their middle age and experience considerable income growth.

The Gini coefficient however takes everything into account, regardless of the causes of inequality. Demographic-driven inequality will correct itself sooner or later and there is not much we can do to address the root cause without resorting to population control.

These benign types of inequality should be discounted from a discourse of inequality. If somehow we can correct the Gini coefficient to reflect that, then perhaps the hard numbers would show us that the situation is not as bad as some make it out to be, that it is not really a case of the 99% versus the one percent.

Besides, in many case, it is poverty that mostly matters and not so much wealth inequality. Why would inequality matters when everybody is living comfortably and a few persons live rather lavishly but ultimately of no adverse effect on others? Jealousy is not strong enough a reason for us to ”˜correct’ wealth inequality in the society.

Mohd Hafiz Noor Shams. Some rights reserved Mohd Hafiz Noor Shams. Some rights reserved Mohd Hafiz Noor Shams. Some rights reserved
First published in the Selangor Times on December 28 2012.

Categories
Economics Society

[2634] Any Malaysian welfare system may encounter some problems 30 to 50 years from now

An ageing population is a major economic problem to a number of developed countries. It is not ageing itself that is the issue or even slower economic growth. An aged society usually has an advanced and rich economy. Further economic growth does not mean much if the society is already extremely rich. The problem comes when there is a social welfare system that depends on the young to support it. With an aged society, the system would have to distribute its resources to the aged majority with the young minority supporting contributing to the system.

Malaysia does not the demographic problem yet because the country has a very young population. The median age is approximately 26 years old. In fact, Malaysia’s baby boomer generation has just entered or just about to enter the Malaysian labor market. With a high proportion of productive population, Malaysia is set to grow in a meaningful way in the long run.

Population growth, specifically labor force growth, is important to the sustainability of a social welfare system, including the Employees Provident Fund. The EPF is a retirement fund for those working in the private sector in Malaysia. It is not a comprehensive welfare system but it is still susceptible to demographic changes nonetheless.

At the moment, words on the streets have it that the EPF has more money than it can invest in Malaysia: there are not enough Malaysian sovereign bonds for EPF to buy (this probably leads to a conclusion that I dislike: the Malaysian government can comfortably raise more debt, especially in this environment of low yield without much economic repercussion). That is a testament of how favorable Malaysian demographics is at the moment.

This is the latest population profile for Malaysia from the Department of Statistics:[1]

You can see the baby boomer generation in the lower part of the chart.

What may be of concern — some far distant future, probably in 30, 40 or even 50 years — is when the Malaysian baby boomers begin transitioning into their golden years. I give the 30 to 50 years range because the current boomers are below the age of 30; remember the population median is 26. Assuming that they will retire at 60 years, you will get an estimate. My guesstimate is somewhere between 30 and 50.

Already the 0-4 years old, 5-9 years old and 10-14 years old cohorts are individually smaller than the 15-19 year old and 20-24 years old cohorts. The profile of a boom is clearer when one compares the population profile in year 2000 against that in year 2010.

There is still possibility that the baby boomers may have more children to produce yet another population boom sometime in the future. Yet, with rising income which tends to lead to smaller families everywhere in the world, I doubt it. And average Malaysian income is set to rise (at least in the next few decades notwithstanding business cycle) — please, not because of Pemandu — it’s the population boom dividend!

I may be wrong still — we will see that within the next 40 years’ time — but I think we are seeing our only population boom. If I am proven right, then the EPF might have trouble servicing the retirees in 40 or 50 years’ time, unless Malaysia suddenly develops a greater appetite for immigration.

The problem of EPF will be the least of our concern if Malaysia institutes the so-called 1Care scheme which aims at creating a more comprehensive healthcare system, which includes universal insurance coverage.

The problem however is beyond the horizon of the current leadership, in both Barisan Nasional and Pakatan Rakyat, judging by the populism of the day.

Mohd Hafiz Noor Shams. Some rights reserved Mohd Hafiz Noor Shams. Some rights reserved Mohd Hafiz Noor Shams. Some rights reserved
[1]Population and Housing Cencus, Malaysia 2010. Department of Statistics.