IT’S like being in a crosswind when you look at Malaysia’s prosperity dipstick. Latest reports say Kuala Lumpur is the city with the most number of millionaires in the world, with more on the way. Billionaires are also said to be increasing fast. But what do we make of it when there are also more bankrupts around in the country? A greater number of young executives also can’t afford to own houses. And what about the current oil price plunge and ringgit depreciation?
According to WealthInsight, a London-based intelligence network on the global super rich, Kuala Lumpur recorded 13,800 millionaires, also referred to in the finance sector as high net worth individuals (HNWIs) last year, even more than oil-rich Abu Dhabi (12,500) or diamond studded Cape Town (8,753). For Malaysia as a whole, there were 26,000 HNWIs as of last year with a net worth of RM527 billion (US$151 billion). This is expected to increase further to 30,054 in three years by which time there will be more billionaires here than the entire United Arab Emirates.
Millionaires in this instance are those with net assets measured not in ringgit — which has lost a lot of its value anyway — but in US dollars. They are classified as those holding more than US$1 million each (RM3.4 million) excluding their primary residences.
This all sounds well and good even if I feel the figure is very conservative. Malaysia is flourishing. May everyone prosper.
But while we do not begrudge the rezeki or fortunes earned, I hate to say it that it may not be as rosy if we consider things in perspective.
For instance, just a few months ago Deputy Finance Minister Datuk Ahmad Maslan told the Dewan Rakyat that 19,575 persons were declared bankrupt last year, 1,284 of whom were due to credit card debts. He also said Malaysia’s household debt had gone up to 83 per cent against gross domestic product, with credit card debt accounting for 4.5 per cent. Home loans account for the highest with 47 per cent followed by car loans at 20 per cent, non-residential loans at 9.3 per cent and personal loans at 8.7 per cent.
Even if home loans make up a lot of the debts recorded, owning a house is still a dream for many young executives as the prices and terms make it impossible for them to buy. A person earning RM5,000 per month, it is said, must be ready to be stuck in deficit if he buys a modest “mid-range” property. Something is therefore very wrong with the system.
A Khazanah Research Institute report on “The State of Households” released recently also gave a rather glum picture about household debts saying that while the not-so-rich may have televisions, refrigerators and cars, such ownership does not indicate prosperity but debt, as families pay more than the value of these goods through hire purchase plans with high interest rates.
Several news reports quoting the institute on this said poorer Malaysians who rely on instalment plans to purchase goods are paying more than their wealthier counterparts for the same items, due to the high interest rates. This ansuran mudah scourge has caused Malaysians to spend most of their income, have little savings, and become more susceptible to price increases.
It was also revealed that a RM24,936 Perodua Viva at an interest rate of 3.38 per cent for nine years may cost only RM271 a month. However, consumers would in the end be paying RM6,827 in interest at an annual percentage rate of 6.14 per cent.
The report said that households earning less than RM3,000 have a relatively low share of total household debt but their borrowings are proportionately higher than the rest, at seven times their annual income.
The crosswind feeling is intensified when at the same time it was noted in the Khazanah report that Malaysians were the fourth largest buyers of newly-built London property in 2012 and that around 7,000 houses costing more than RM1 million are sold in Malaysia each year. Malaysians also purchase many luxury cars. Last year, 28,298 luxury cars were sold to Malaysians, including brands such as Volkswagen, BMW, Mercedes Benz, Audi, Lexus, Land Rover, Mini Cooper and Porsche.
But let’s be real and ponder over this question: much as Malaysia could brag about its super rich, the middle class continues to be caught in a rut and are clamouring for higher wages and big bonuses with the year coming to an end. So, are the income and wealth gaps actually widening?