1974 Budget – a disappointment and shame it is not an anti-inflation budget

Twice in his budget speech last Wednesday for 1974, the Finance Minister Tun Tan Siew Sin, described inflation as “our No. 1 economic problem.”

This was in stark contrast to the Tun Tan Siew Sin of June 1971, who gave an assurance that there was no danger of inflation in the country in a big way, when inflation was already in full gallop.

He said, (Straits Times, 14 June 1971): “In fact, I have every confidence that we can maintain price stability as easily in the future as we have done in the past.” Now, he has every confidence to tell of the country that what he has promised to do ‘easily’ has become the No. 1 economic problem!

The Finance Minister had ever been slow to pride himself, whether inside this Chamber or outside, about his foresight in economic and financial matters. But the “No. 1 economic problem” must have been so big that he did not see it until everyone else in Malaysia had seen and suffered for it. The Finance Minister must have the honour of being the last person in Malaysia to see the inflation problem.

In fact, as late as May 15 last year, Tun Tan Siew Sin was denying in this Chamber that there was any general price increases. He dismissed them as rumours.

This failure of sight, however, is no peculiar to Tun Tan Siew Sin, but seems to afflict all his other colleagues in the Government as well.

Thus, in January this year, the Prime Minister, after visiting the National Institute of Technology, told newsmen that increase in prices was “only a temporary phase.”

Last week, in his 1974 budget speech, Tun Tan Siew Sin informed the people of Malaysia that “price inflation is a new phenomenon that is here to stay for some time more.”! The people of Malaysia will be wiser in future to read the opposite meaning into Ministerial pronouncements.

This ambivalence, inconsistency, irresolution and lack of political will, also marks the government’s handling of the inflation problem up to date.

Early this year, the Alliance leaders launched a campaign against shopkeepers blaming them for being the villains of inflation by hiking up prices and hoarding. Senior Ministers even went to the extent of calling on housewives to boycott shops and to get ‘rough and tough’!

Later, when it was found that the shopkeepers were themselves at the tender mercies of importers, wholesalers, manufacturers, the Alliance leaders shifted the blame to ‘imported inflation’ – an intangible enemy whom the people cannot see and against whom the government need take no action.

This trick was picked up by the LPN when the second rice shortage and high prices crisis broke out in September. Led by its chairman, Tan Sri Syed Nasir, the LPN first blamed the retailers as the culprits for causing rice shortage and high prices crisis. When investigations showed the innocence of the overwhelming majority of retailers, the LPN next blamed the wholesalers. The wholesalers were influential enough to have a meeting with LPN officials and called a press conference to clear themselves. Finally, the LPN put the blame on smugglers, the easiest scapegoat for smugglers cannot conceivably call a press conference to say that they did not smuggle as much as the LPN is attributing to them.

1971-1973: Three Wasted Years

The years 1971-1973 were three wasted years in checking inflation, for if anti-inflationary measures had been taken right from the onset of inflation, it would not have become today’s No. 1 economic problem.

Instead, the government wasted the three years in complacency and self-boasts about their ability to keep inflation in check in the sixties to 1% per annum.

It has always been open to question whether this rate of increase of cost of living in the sixties is accurate as the retail price index, on which the rate was computed, had considerable statistical weaknesses. In fact, the retail price index, which has now being replaced by the consumer price index, was condemned as ‘an open fraud’ by a national newspaper not known for its outspokenness against anything government.

Be that as it may, according to the new consumer price index, which is not without its statistical weaknesses in underestimating price increases, the cost of living went up by 1.8% in 1971, 3.2% in 1972 and 10% in 1973.

All that the Finance Minister had to say about the cost of living in his previous budget speech on 6.12.1972 was to give a pat on his own back on Malaysia’s “still remarkable” performance.

While I was in this Chamber last Wednesday listening to the Finance Minister’s Budget presentation, and heard his somber repetition of inflation having becoming the No. 1 economic problem, and his pledge that the government would “leave no stone unturned to combat it”, I told myself it is better late than never.

As inflation has become No. 1 economic problem, the entire theme and whole thrust of the 1974 budget should be to combat inflation, in other words, an anti-inflationary budget.

But as I studied the 1974 Budget, it became clear that Tun Tan’s somber note is as hollow as his 1971 confidence about easily maintaining price stability.

For the 1974 Budget is not an anti-inflationary budget, designed to wage an all out war against inflation and its adverse effects, which is a disappointment and a shame. It is a no-inflation budget, as if inflation is a minor irritant attracting the abolition of the import duties of 33 items and the reduction of nine others.

Abolish Sales Tax

The Finance Minister blames imported inflation as the cause of our inflation, blissfully ignoring the fact that his Sales Tax and Surtax on imports had significantly contributed to price increases. In 1973, Sales Tax, which was intended to not only $84 million on its introduction in 1972, added $106 million on the cost of imports, $104 million on the costs of domestically manufactured goods, while import surtax added $151 million on imports.

How can Tun Tan Siew Sin be so naïve as to believe that these regressive taxes have had no effect on fanning the flames of inflation?
I invite the Finance Minister to commission international taxation and economic experts to make a study as to what extent both these measures had spurred on inflation.

If Tun Tan Siew Sin believes that inflation is the No.1 economic problem, then among the first measures his 1974 Budget should contain is the abolition of these inflationary taxes, and to raise government revenue by other non-inflationary and anti-inflationary measures.

In Para 34 of his budget speech, Tun Tan said that “inflation is the result of too much money chasing too few goods and hence the obvious remedy for this disease is less spending, not more.” He went on: “In this connection, I would like to disabuse the public of the view that one of the remedies for inflation is to decrease taxation. This will only make matters worse, not better, because reduction of taxation will place more funds in circulation and will therefore only add to the problem.”

The abolition of sales tax and surtax is not a question of reducing taxation, but of removing the main causes of inflation.

If we take Tun Tan’s argument to its logical conclusion, then the answer to inflation would appear to be double or treble Sales Tax and slap on a series of new taxes to mop up the “too much money” so that they could not chase the few goods available.

The Hon’ble the Minister of Finance fails to make a distinction between anti-inflationary, non-inflationary and inflationary taxation.

Call for Anti-Trust Laws

‘Imported inflation’ is being used as a convenient scapegoat by the Government.

Inflation cannot be blamed solely on external factors, for we know that many local products have shot up in prices. A good instance is oils and fats, which have shot up some 25% between September, 1972 and September, 1973 although Malaysia dominates two-thirds of the world’s exports of palm oil. Local rice is another example. Despite government assurances that there is no shortage of rice, many areas in the country cannot get rice at LPN rates. The latest area affected is Taiping, where prices are far exceeding the government prices.

The government takes the attitude that there is little that it could do to fight inflation because of the imported nature. The 1973/74 Economic Report states that as a result of the 1971 and 1973 currency realignments and the float of the Malaysia ringgit on June 21, as at the end of November, 1973, the Malaysian ringgit appreciated by about 21% against the US dollar and 29% against the pound sterling.

The Finance Minister said he found it difficult to understand why goods from countries whose currencies have depreciated substantially against the Malaysian ringgit have only been obtainable at prices which do not reflect these substantial parity changes.
What is difficult for me to understand is why the Government find it so beyond their ability to check profiteering even to the extent of exceeding 100% profits by importers, which the Finance Minister has blamed as one of the major causes of inflation in a speech in Seremban in August this year.

As the Minister of Finance himself admitted that Malaysia is probably one of the most cartel-ridden countries in the world, I want to know from him why his government has allowed such a regrettable state of affairs to last so long? The government should without any more delay introduce anti-trust laws to bust monopolies and price-fixing cartels and provide protection to weak and defenceless consumers.

Import more from China to reduce imported inflation

In combating imported inflation, the government must shift sources of supply from higher priced exporters to cheaper suppliers in East Asia, like the People’s Republic of China. In this connection, it is a matter for concern that the imports from the People’s Republic of China from 1970-1972 has been in the continued decline, from $243.4 million in 1969, falling to $228.4 million in 1970, $202.4 million in 1971 and $194.6 million in 1972. For the first two quarters of 1973, imports from the People’s Republic of China have picked up, but at a very much slower rate than other countries, like Japan, Germany, whose goods have become more expensive with revaluations of the Yen and Mark.

China’s products are cheaper than the other countries, and Malaysia should import more of her requirements from China to reduce imported inflation in Malaysia.

The establishment of diplomatic relations between Peking and Kuala Lumpur would further mutual trade and benefit, and it is the DAP’s hope that this normalization of relations between Malaysia and China would not be delayed any longer.

Cutback in expenditure

The government should take more effective steps to reduce the supply of money by increasing the interest rates of borrowing to make money dearer and to encourage more savings.

We note that for the 1974 Budget, the total expenditure of $5,424 million is 17% above the 1973 Budget. The government itself should set the example in reducing non-essential expenditure in the public sector and increase productivity.

I call on the Finance Minister to launch economy and productivity drives and make regular reports to the nation on their progress.

The disadvantaged groups in inflation

One of the gravest omissions in the 1974 Budget is what the government proposes to do to help the low and fixed-income groups who are the worst hit by inflation, and whose real income has fallen with the reduction in their purchasing power.

1. Pensioners: At the end of September, the government announced additional allowance to more than 25,000 pensioners who retired before the implementation of the Suffian Report and the restoration of full pension to those who have completed 12 ½ years of retirement.

This was the first pension revision since 1956. The additional allowance, going some way to meet the rising cost of living from 1965 to 1972 is not enough to help the pensioners cope with the galloping inflation that is expected to register 10% this year.

I therefore call on the government to award an additional COLA to pensioners to enable them to live in dignity and decency.

2. Special Allowance for Public Employees:

The recent government award of special allowance to government employees is grossly inadequate to help the lower brackets cope with the galloping inflation, and I call on the government to increase the special allowance to government employees.

3. COLA for private sector employees:

The large majority of private sector employees are without the benefit of cost-of-living allowance to face the inflationary situation.
For instance, the 200,000 estate workers throughout the country have their claims for COLA rejected by the Malayan Agricultural Producers’ Association on the most flimsy ground. Thus MAPA claimed that the tapper is already getting more pay because of high prices of rubber. It is unjust to tie the increasing cost of living with higher rubber prices, although the wages are at present tied to the level of rubber price.

In the commercial and industrial sector, too, many employers, have either refused to pay, COLA or COLA rates exceeding government rates though within means to pay. An instance of the latter is the bank employers with regard to the cost of living allowance claims of bank employees.

I therefore call on the Minister of Labour to make two clear announcements:

i. That employers may exceed government special allowance rates, as COLA payments, as the Government’s rates are not to be regarded as a maxima for COLA in private sector.

ii. Require all employers in the private sector to pay their employees COLA along the Government special allowance rates, with exemptions for managements which demonstrate their inability to pay.

4. 20% upward revision of wages council rates

Some 180,000 unorganised workers like shop-assistants, catering and hotel workers, cinema workers, Penang’s stevedoring and cargo handling workers are governed by wage regulation orders fixing their minimum rates of pay. In view of the greatly increased cost of living, the minimum wage regulation orders should be revised upwards by at least 20%.

5. Minimum wage for workers

The Prime Minister, in his weekend visit to Johor Bahru, expressed his surprise that workers were being paid at less than $2/- a day in factories, and called for a report on it.

This is not an untypical factory wage for Malaysia labour on which workers can hardly keep their body and soul together after having to meet food, transportation and housing expenses.

Two months ago, there was talk of labour shortage hitting various states. What Malaysia had was not labour shortage, with our 8% unemployment rate, but cheap labour shortage.

In his foreword to the Mid-Term Review of the Second Malaysia Plan, the Prime Minister called on the private sector and workers to respond to the challenges as “partners in development”. Workers cannot be partners, but only slaves, of development, at the ridiculously low wage of $1.50 or $2.50 a day.

The DAP calls on the Government to take immediate action to protect the workers from exploitation by both pioneer and non-pioneer industries. If the Government is not prepared to promulgate a universal minimum wage, then it should set up wages councils for the workers of the various categories of industrial workers to lay down separate minimum wage rates and working conditions.

The Government, both at Federal and State levels, must set a good example to the private sector as a good employer, by paying decent wages to workers in industrial projects in which it has shares. I had the occasion to take up the matter of the exploitation of workers by the Mercury Textile Berhad in Malacca, which is joint venture between Germans and the Malacca State Development Corporation. I am glad that the Labour Minister has responded to my complaint and written to me sating his Ministry’s agreement that workers in Mercury Textile Berhad are being paid extremely low wages –some not even exceeding $30/- a month.

I would like to know what action the Ministry of Labour has taken to remedy the matter.

I also call on the Prime Minister to issue a directive to all Federal and State agencies to ensure that in all industrial projects which they have participation, workers must be paid decent wages, which should under no circumstances fall below $120/- a month.

In this connection, I would like to ask the Minister of Labour, in his reply, to furnish this House with a full list of industrial projects with Federal or State participation, together with information on the wage rates prevailing in each project.

6. EPF contributions and insurance

The long-term effect of inflation and the relentless fall in the purchasing power of the Malaysian dollar, must be a source of concern to all workers with regard to their E.P.F. contributions.

Let us say a worker, at the end of his working life, is entitled to $15,000 of E.P.F. contributions. If prices doubled during this period, although the worker gets his nominal or face-value sum of $15,000, he would have lost one-half of the real value, i. e. one half of its original purchasing power over real goods. If prices should more than double during his working life, or the purchasing power fall by more than 50%, his real capital would be less, and what a retired worker gets will not be able to serve the purpose for which it was originally meant for.

This danger applies to all claimants of fixed incomes in future, like beneficiaries of insurance policies.

The Government is duty bound to see to it that workers’ contributions are not eaten away by inflation, with the Government as the sole beneficiary, for it is making full use of the EPF funds to finance Government projects.

To provide a hedge against the devaluation of the workers’ future savings, the Government should increase the interest rate of EPF contributions, and work out built-in system whereby the workers’ contributions would not depreciate because of galloping inflation, so that workers can get the whole worth of their savings at the end of their retirement.

Similarly, the Government must consider legislation to require insurance companies to provide for built-in adjustments to insurance holders and beneficiaries so that they can get the full real value for real life and endowment policies, and not half or even less of the real values because of the effects of uncontrolled inflation.

Both these measures are urgently needed to ensure that the savings of Malaysian workers are no wiped out be continuous inflation.

Tax incentives for increased productivity

As increased productivity should be one of the weapons in the anti-inflation battle, the government can profitably consider tax innovations to provide tax incentives for increased productivity in industry.

Land Speculation Tax

It is unlikely that the land speculation tax presently proposed by the Finance Minister would make any dent on land prices or speculation. There are many loopholes for evasion, as by subdivision of land to below the $200,000 figure attracting the operation of the tax.

The figure of $200,000 should be brought down, and the two-year period extended to five. Furthermore, to ensure that Malaysians can own their own land and homes, the government should introduce legislation to forbid foreigners from buying land, except for specified purposes as industrial development.

Overhaul of the Income Tax Laws

The income tax laws were first introduced by the British colonial government in 1947, and has not been reviewed or revised.
I am surprised that the launching of the New Economic Policy, signally, according to the government a re-ordering of the priorities of the nation, has not been accompanied by any restructuring of taxation laws.

A comparative study of the income structures of Malaysia with other countries, like India and Pakistan, show that the average tax rates applicable to a single person at low levels of income, say below $10,000 per annum, are higher in Malaysia. However, beyond a level of income equal to $15,000 a year, average tax rates in Malaysia are lower than other countries.

The Government must place greater reliance on direct taxation, on the basis of ability to pay, instead of the indiscriminate and inequitable resort to regressive indirect taxation, like Sales Tax and import surtax, which taxes the poor more than the rich.
At present, direct taxes constituted about 31% of total tax revenue. This is insufficient.

The DAP calls on the Finance Minister to restructure the income tax to ensure that the higher income brackets at $20,000 and above should pay enhanced rates, while those below $15,000 should have their income tax burden reduced.

This is all the more necessary as all available evidence point to a growing disparity in the distribution of incomes 16 years after Merdeka.

Quality of Life in Malaysia

I wish to commend the Treasury for making a preliminary start in measuring the quality of life, for economic terms like per capita income or per capita consumption have no real meaning to the people, as they ignore the question of distribution which is fundamental to the concept of level of living of the population as a whole.

Page 63 of the Report on Income Distribution makes very interesting reading.

It has been the DAP’s contention that despite Malaysia’s economic growth, all indication point to the widening gap between the rich and the poor, and the goal of the eradication of poverty, regardless of race, is as remote as before Merdeka.

Thus, as given in Page 63 of the Treasury Report, the 1970 Census of Population Post-Enumeration Survey shows that 27% of households in Peninsular Malaysia had incomes below $100 per month, while a further 31% had incomes between $100 and $200. This means that 58.5% of West Malaysian families had incomes below $200 a month.

If we take an average of six persons per household, this means that 27% of Malaysians subsist on a per capita income of below $200 a year, while 58.5% of Malaysians subsist on a per capita income of below $400 per year – a far cry from the magic figure of $1,166 per capita income for Malaysia.

The Survey shows that the top one-tenth of all households accounted for nearly 40% of the total income earned in the economy, while the share of the poorest 40 percent of the households amounted to only about 12% of the total income.

Table V of the Report shows that since Independence, there has been greater concentration of income in the hands of a few. Thus, in 1957/58, the top one-tenth of the households accounted for 34% of the total income, increasing progressively to 40% in 1970. In 1957/58, the lowest 40% of the households accounted for a meager 16% of the incomes, but this has shrunk to 12% in 1970.

Malaysian leaders are very proud that among the developing countries, Malaysia is in the top league as far as per capita income is concerned.

I submit that Malaysia should be thoroughly ashamed of herself, because as far as the distribution of income is concerned, despite Malaysia’s GNP and high per capita income, we are no better than the poorest developing nations.

Thus, surveys showed that for the three largest countries, in Latin America, Mexico, Brazil and Argentina, 40 per cent of the total income accrues to the richest 10 per cent and not much more than 10 per cent of the income accrued to the poorest 40 per cent of the population.

A similar pattern is reported elsewhere in Latin America: Thus in Chile, Colombia, Costa Rica, El Salvador, Panama, Peru and Venezuela, the poorest half of the population received less than one-sixth of the total income.

A survey in India, where per capita income is far below ours, show that the richest 10 per cent among tax-paying households received about 40 per cent of all income while at the other end of the scale, half of the households accounted for about a fifth of the income.

In the Philippines, a survey early in the 1960s indicated that, as in India, the richest 10 per cent of the population received about 40 per cent of all income and that only a fifth of the total income accrued to the poorest half of the population.

The DAP calls on the Government to work out a strategy to reduce the concentration of wealth and income in the hands of the top ten per cent Malaysians, and increase the stake of the poorest 40 per cent Malaysians in the national cake.

We should work on a ten-year plan to distribute in a more just fashion the fruits of our society, so that the top one-tenth do not account for more than 20 per cent of the national income, while the lowest 40 per cent of Malaysians account for at least 30 per cent of the income.

This plan would end the ostentatious consumption we see around us in Kuala Lumpur in the midst of poverty and squalor, which testifies to the growing extremes of poverty and affluence in Malaysia – the antithesis of a ‘Masyarakat Adil’ which the Government claims it is building.

I hope the Minister of Finance would have the courage to deal with this grave problem in his reply, and let the country know what plans the Government has to stop making a small class of new rich at the expense of creating more poor Malaysians.

In this connection, the Government’s New Economic Policy objective to ensure that within 20 years the Malays and other indigenous people will manage and own at least 30 per cent of the total commercial and industrial activities in all categories and scales of operation is no recipe for a more equitable distribution of income.

Assuming that this target is achieved in 1990, it would seem most likely from present trends that this 30 per cent of total commercial and industrial Malay participation would be owned by two or three per cent of the Malays – while the overwhelming majority of the Malays remain poor and dispossessed.

I do not think that the ordinary Malays are going to take pride in the fact that one of their numbers is rich, even though they themselves remain poor.

The Second Malaysia Plan will fail so long as its basic philosophy is to restructure the capitalist class, leaving the poor in greater poverty.

The DAP insists that the poorest 40 per cent of Malaysians, of all races, should command Government priority and enjoy the fruits of economic growth through more equitable redistribution of incomes and wealth.

Politics which serve to distribute income more equitably must be as important as those designed to accelerate growth.

Here, it would be pertinent to observe that the present inflation crisis in the country, caused by rampant profiteering, price-fixing and monopolistic practices, actually leads to a redistribution of income from the workers to the capitalists.

This probably explains the inertia of the Finance Minister, for though the masses suffer, the MCA and UMNO capitalists make windfall profits at the expense of the poor.

Before I leave this subject, I hope that next year, the Treasury Report would carry more complete and comprehensive figures and information about income distribution in Malaysia.

Thus the real per capita income grew by 2.8% this year, but how many Malaysians had registered real income growths to 2.8%? How many had incomes which registered no real growth? In fact, the majority of Malaysians must have found that their real incomes have fallen, wiped out by inflation, while to a tiny minority, their real income growth must have exceeded the national average by 10,000 or even more times.

These would be useful figures, for they would show the extent of continued maldistribution of income in the country.

We also need data to show the form in which the national income is distributed, what percentage of it comes from salaries and wages, from earnings from self-employment and incomes from property.

Employment, Wages and Unemployment

One of the socio-indicators used by the Treasury in assessing the quality of life, in Chapter V, is the quality of working life.

I hope that in figure, the Treasury would give us real wage earnings in each sector of employment to show whether there is any real increase, or whether it had remained more or less static or even a reduction in real terms – reflecting that nominal wages did not rise fast enough to offset the effects of rising consumer prices as is prevalent today.

I must here confess some bewilderment at the attitude adopted by the Government with regard to the problem of unemployment.
For the past few years, the government had expressed concern about the high unemployment rate in the country. The 1972/73 Economic Report of the Treasury in page 2 said that unemployment remained one of the most serious long-run economic problems of the country.

The Finance Minister seemed to have now taken a more fatalistic attitude and put the blame on unemployment on the lazy Malaysians.

Thus, in para 49 of his speech, the Finance Minister said:

“If I may say so, life in this country is too easy as one does not have to strive too much to keep body and soul together, provided one does not ask too much. While this may be alright for a climate such as ours, it does make it more difficult for the Government to reduce unemployment substantially even with the best will in the world, if the people concerned are not prepared to make the extra effort to help themselves.”

The Finance Minister forgets that under his stewardship, unemployment in Malaysia has kept rising. Thus in 1957, unemployment was 2%, in 1965 it went up to 6.1% and in 1973 it is 7.3%.

It would appear that the Finance Minister is now looking for an excuse for his failure in job-creation policies, and who better to blame, then the people.

But the fact that tens of thousands of Malaysians are prepared to slog in factories at the sweated wage of below $2/- is proof that Malaysians “are prepared to make the extra effort to help themselves.”

The 1973/74 Economic Report, Page 49, tries to play down the figure of unemployment, when in fact, it should be some 10 per cent, if we include a group of what the Government regards as ‘passive unemployed’ and does not include them in the unemployment figures. This of course, does not take into consideration the underemployed, which may represent 25 per cent of the total agricultural labour force.

The Report said:

“What makes unemployment a problem in Malaysia, however, is not so much its aggregate level but its distribution according to race, region and age group”.

During the debate on the Mid-Term Review, we were told that the Indians led in unemployment with 11% the Malays at 8% and the Chinese at 7.4%.

A number of MPs, including myself, raised our voice of concern at the consistently high rate of unemployment among Malaysian Indians for the last decade.

The Minister of Labour and Manpower, Tan Sri Manickavasagam, said in his reply to the Mid-Term Review Debate on 3rd of this month, that the Government took note of the high rate of unemployment amongst Indians as revealed in the Review and that it would take all appropriate measures to deal with this problem.

The Economic Report 1973/74, however has shown an aggravation of the situation for the Malaysian Indians, with the following unemployment rates: Indians 12.3% (as compared to 11% in 1970), Chinese 7% (as compared to 7.4% in 1970) and Malays 6% (as compared to 8% in 1970).

What I want to know is why the Minister of Labour and Manpower on December 3rd withheld from this House information of the further aggravation of the unemployment position among Malaysian Indians.

The Second Malaysia Plan Mid-Term Review was signed by the Prime Minister only on 20th November, the Minister of Labour and Manpower spoke on December 3rd, and the Treasury Economic Report tabled on December 5th, though it must have been completed earlier.

I would like to know whether the Minister of Labour and Manpower was aware that in 1971, 1972 and 1973 the unemployment rate had been worsening, and his lack of candour in dealing with this problem in depth and breadth.

My only conclusion is that the Government has no plans whatsoever to alleviate the economically and educationally backward status of the Malaysian Indians, particularly the estate workers. The urgency of the problem requires the establishment of a special Ministry for estates, to be responsible for spearheading the economic, educational, social and cultural upliftment of estate workers generally, and Malaysian Indians in particular.

Urban Poverty

Unemployment continues to be higher in the urban than in the rural areas, aggravated by a higher rate of growth in the urban population than the rural population. Thus in the intercensal years between 1957 and 1970, the urban population has grown annually by 3.3% and the rural population by 2.4%. My guess is that in the last five years, the urban population has grown twice as fast as the rural areas. A good part of this increase is caused by the world-wide phenomenon of migration from rural to urban areas.

Economists and sociologists are of the view that urban unemployment is more onerous than rural unemployment. The social tensions and unrest associated with unemployment will generally be higher in the case of the urban unemployed partly because of the weaker links of the extended family system, partly because of a higher money income is required to maintain the same level of wellbeing, and partly because the level of aspiration – what has been called “demonstration effect” – will usually be more marked. This is admitted by the Second Malaysia Plan which states that the social and physical hardships of urban poverty are more severe than those of rural poverty.

Consequently, while the transfer of the rural unemployed into the urban areas will not of itself increase the size of the labour force, it may be regarded as a qualitative worsening of the overall unemployment problem.

Therefore be a matter of paramount concern that the Government’s policy appear to encourage unchecked migration of the rural people into the urban areas, when there is no job-creation plan which can mop up the already very high rate of unemployed in the urban areas.

I call on the government to give serious consideration to the acute problem of urban poverty, which is aggravated by the high proportion of jobless youths, and curb the rural-urban migration drift until the problem of urban poverty is brought into check. Meanwhile, the government must step up job-creation opportunities in the agricultural sector by opening up more land than it is doing at present, and the dispersal of industries to rural areas.

Finally, continued high rate of unemployment at 10% is indefensible from the point of view of income distribution. For this would mean that this 10% of the labour force have a zero share in the national income.

As the government planners themselves are incapable of creating full employment and give jobs to every Malaysian then the Malaysian Government must take responsibility to assist and subsidise their livelihood from an unemployment fund.

In a modern society, every man and woman must have a constitutional right to work. If he is denied this right to work through no fault of his own but because of the inadequacies of the national economic planners, then every such person must have one constitutional right to be looked after by the State.

This is why an adequate rate of job creation must be one of the main objectives of our economic policy as unemployment is not only the principal immediate cause of poverty but also of social alienation.

Land Ownership

Among the aspects of the economy that have most bearing on the wellbeing of the population and the quality of the living is land ownership and rent, which is not included among the socio-economic indicators in the Economic Report 1973-1974.

The ownership of land has a direct and important influence on the distribution of income. In fact, in our society, the distribution of land, of wealth and of current income tend to parallel one another. If we are to better measure the levels of living of Malaysians, then we must have data which can give us information about land ownership, and monitor ownership changes. I hope this omission would be made good in the next Treasury Report.

In this connection, I note that in his reply to my speech during the Mid-Term Review debate, the Minister of Technology Research and Co-ordination, Datuk Lee San Choon, boasted about $10 million set aside for new villages under the Second Malaysia Plan. In the first place, are these $10 million to be used productively for the socio-economic development of new villages, or is it to be used as vote-getting contributions for the MCA as is the wont with the approach of every elections.

The figure of $10 million for five years from 1971-1975 is so pitiable small that it is indeed laughable, for how can $10 million turn 450 new villages into new growth centres with job-creating opportunities for its people.

I note that if we exclude Datuk Lee’s pompous portfolio about technology and research, there is only $3 million for new villages upliftment. His is thus the Ministry with the lowest allocations. He gets even less than the Minister for National Unity who is given $4 million, for doing even less!

In contrast, his equal, Inchik Ghaffar Baba, the Minister for Rural Economy, gets $132 million or 44 times that allocated to Datuk Lee San Choon.

It is noted by all concerned that Lee in his speech made no reference to my call that three basic functions of the government is to provide jobs for the jobless, homes for the homeless and land for the landless.

Let him draw up a masterplan to perform these three basic tasks of government for the 900,000 new villagers during the duration of the Second Malaysia Plan.


Another socio-economic indicator for assessing the quality of life is education.

At present only 1.2% of these in the age group from 19-24 years have the opportunity to go for university education. This is too narrow a percentage and I call on the government to increase its higher education expenditure so that every Malaysian who has the qualifications and ability to pursue higher studies in Malaysia or abroad can be given the opportunity.

In the last few days, there has been a minor controversy in the University of Malaya over the intake of Malaysian students who had graduated from Ngee Ann College and other institutions into diploma of education courses.

I call on the Minister of Education not to succumb to pressures but to take an enlightened approach permitting Malaysians from foreign institutions to be re-absorbed into the mainstream of Malaysian education and national service.

Health: Malacca Hospital deaths

Health is another socio-economic indicator of quality of life. It is essential however that despite the large amounts of money we are spending on health, the people should have confidence in the integrity and quality of the health service if the public outlay are not to go down the drain.

The Minister of Health said last week that a departmental inquiry was investigating into the causes for the unusual number of deaths during July 21 – August 20, when the hospital’s autoclave broke down.

I would like to point out here that the Minister of Health’s statements following my disclosure of the autoclave’s deaths have greatly shaken public confidence in the entire integrity of the Malacca Hospital and Ministry of Health.

The Minister of Health was led by his subordinates to make untrue statements:

1. Thus the Minister said on August 24 that there were 12 deaths during the period in question, which he said was not unusual, when in fact during the period in question, from July 21 to August 20, there were 110 deaths.

The average monthly mortality rate for the Malacca Hospital in the first six months of this year is 70, which means the monthly mortality rate for the month from July 21 to August 20 was 40 more than the average rate.

Why did the Minister of Health said there were 12, and described it as “not unusual”.

2. On August 24, the Minister of Health said that when one autoclave in the Malacca Hospital was condemned on July 21, immediate action was taken by the hospital authorities to use the second autoclave available in the hospital. When the second autoclave started to breakdown on August 13, it was immediately stopped and arrangements were made for sterilised bottles and other medical materials to be supplied by the Seremban General Hospital.

In fact, the so-called ‘first autoclave’ that was condemned on July 21, was to have been condemned in May as instructed by the Inspector of Machinery.

The Malacca Hospital did not have a second autoclave as stated by the Minister of Health, but only a disinfectant until to disinfect mattress and such like materials. Thus, for a month, this disinfectant until meant for disinfecting mattresses and blankets was used to sterilise bottles and medical instruments leading to contamination of bottles, saline and blood and the death of 110 persons during that thirty-day period.

What I wan the Minister of Health to tell this House and country is how, he as Minister of Health, could allow himself to be so misled as to giver a completely false and untrue account to the public. Furthermore, why is the Medical Superintendent Puan Dr. Wong May Yae, not suspended from her post so as not to influence investigations.

Economic Prospects

Malaysia is enjoying a prosperous year as a result of the boom prices for all our exports, which were strongly stimulated by the exceptional growth in the industrialized economies, namely the U.S. , Western Europe and Japan, which were all experiencing boom conditions at the same time.

Malaysian exports soared by 42% in 1973 over 1972, with rubber providing the lead with the record export performance with a jump of 73% in export earnings over 1972; timber exports were up by no less than 115%; tin prices also soared reaching their highest level ever.

The industrialised countries, however, have reached the crest of the present boom, and world-wide recession is expected to set in. Thus Japan, The fastest growing economy in the past decade and Malaysia’s leading trading partner, may record zero real growth during 1974.

Compounded by the growing energy crisis, production in the industrialised economies would be restrained further.

Malaysia cannot escape from the slower economic growth and continued high rates of inflation in the industrialised countries, as our exports and economy are at present very closely linked with theirs, causing lower prices for our exports, lower incomes, greater unemployment, greater inflation, and a No.1 economic crisis.

In such a situation, the poor would be the worse hit, for they would be ought between the pincers of falling incomes and rising prices.
I suggest that Malaysia should reduce her export dependence on Japan and the West. At present, two thirds of our economy go to the United States, Europe and Japan and only one-third to other destinations like the People’s Republic of China, the USSR and East Europe.

In view of the impending world recession it the United States, Europe and Japan, Malaysia should redouble her efforts to diversify our export markets and reduce our over dependence on the traditional markets, by exporting more to the People’s Republic of China, the USSR and East Europe.

A recent press statement from the Rubber Research Institute of Malaysia showed the possibilities in this field.

The burden of this statement was that the ties between the technologists and scientists of China and the R.R.I. , started in August 1971, were paying off.

China purchased the largest amount of SMR (8,700 tons) for the month of October 1973, pushing the U.S.A., the erstwhile biggest importer of SMR since the inception of the scheme in 1965, to second place.

I suggest that Malaysia should mount a high-powered drive to sell more exports to China as part of our contingency plan to minimize the world impending world recession. Of course, to be fully effective, full diplomatic relations should be established between Malaysia and the People’s Republic of China.

A second proposal I commend to the government is to set up a special task force to make Malaysia the world’s largest producer and exporter of rubber-based products. It is indeed a sad commentary on Malaysia’s economic management that although we are the world’s leading producer in natural rubber, our manufactured rubber products still constitute only 3% of manufactured products.
I do not see why with determination, imagination and foresight, Malaysia cannot produce tyres, not just for out own internal market, but for the whole world.

Thirdly, Malaysia must concentrate, instead of import-substitution, export-substitution. By export-substitution, I mean the substitution of the existing exports of the raw materials by the exports of processed and semi-processed materials. Both in timber and palm oil, there are still great potentialities to be seized.


Malaysia is rightly proud that timber (both saw logs and sawn timber) has overtaken tin as the second largest export earner contributing 22% to merchandise exports, as compared 13% from tin.

In fact, timber is expected to overtake rubber as the main pillar of Malaysian exports.

However, we are paying a very great price for this growth, a price we could have avoided if the government leaders had greater foresight and political will in preventing indiscriminate logging, upsetting the ecology of the country, leading to perpetual great floods in the country.

We are now in the midst of one, the sufferings of the tens of thousands of flood victims must be laid on the conscience of the Alliance Government.

The Finance Minister has expressed concern in his 1974 Budget at the low recovery rate of timber, which is only 55%, as compared with that of Japan’s 100% and Pakistan’s 80%. The Economic Report added; “The low recovery needs further attention in order to strengthen the potential of this industry.” No concern for the need to prevent flooding making tens of thousands homeless from indiscriminate logging.

During the great floods of 1971, the government formed a special committee under the chairmanship of Tan Sri Ghazalie Shafie and the people were told that there was a plan to make Malaysia flood-free. Now, the slightest rain can start a flood, either in the Federal capital or in other parts of the country.

The problem has become even more intractable. I suggest that the Malaysian government send a special team to China to learn from the Chinese government the technique of flood-control.

The present floods are a national disaster. It was said that as far as the Central Government is concerned, there is only national disaster when Kuala Lumpur is flooded.

Let this not be repeated, and let a national emergency be declared so that all manpower and material resources can go to the rescue and help of our flooded and homeless countrymen in Kelantan, Terengganu, Pahang, Perak, Kedah and Perlis.

Let the government spare no money to bring rivers under control and end the age-old plague of floods. The timber industry, which has made such fortunes from our national resources, should be specially levied to meet the costs of flood elimination in the country.

Speech by Ketua Pembangkang, DAP Secretary-General and Member of Parliament for Bandar Melaka, Mr. Lim Kit Siang, in the Dewan Rakyat in the debate on the 1974 Budget on Tuesday, 11th December 1973