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‘Sabah for Sabahans’ and living costs
Published on: Sunday, July 01, 2018

By Datuk John Lo
Definition from Investopedia:- “Cost of living is the amount of money needed to sustain a certain level of living, including basic expenses such as housing, food, taxes and health care.”

There are many definitions on cost of living. I like this one best.

For years, Sabahans have suffered from increasing cost of living. Sabah’s is one of the highest in Malaysia.

It is probably the highest after KL. Why is Sabah’s cost of living so high? And why Sabahans’ income has not matched the national average? The answers and some solutions can be found in some the following factors.

Income not keeping up with inflation. Over the last 30 years, income in Sabah has failed to match with inflation.

Prices of many items like housing, fuel, essential food items like meat and fish and clothing have increased by several fold. Income has lagged behind by miles. The direct resultant increase in cost of living means lower standard of living for many Sabahans. Housing in particular has skyrocketed so much that for many Y generation, house ownership has remained a distant dream. Many, even after marriage, are forced to stay with their parents.

Inflation. Sabah’s major economic weakness in the fight against inflation is that we are unable to increase income at a faster rate than inflation. In fact, Sabahan income has lagged behind inflation seriously.

Broadly speaking, we should be able to contain local inflation better than imported inflation.

However, it would appear that both have overwhelmed us. The reason for this is that: -[a] Sabah has not managed to increase productivity to match inflation. [b] The authorities have failed to focus on management of supply and demand [c] Sabahans have lost control and/or ownership of all the major factors of production.

Most large, medium and even small businesses are in the hands of non-Sabahans. Income thus generated do not stay in Sabah. It is repatriated to W Malaysia.

Productivity. With stagnant or snail pace improvements in productivity, increase in income has been left far behind inflation. The nett effect is that the value of Ringgit in our pocket has shrunk.

It now can buy much less than before.

Examples of stagnant productivities are plentiful.

[a]The cost of fuel, even with subsidy, has more than doubled in the last 10 years.

The transport industry, especially public transport has not been transformed. We still use “mini buses” to commute.

[b] Increase of food prices has hurt the less fortunate Sabahans the most. But the Ministry of Agriculture in Sabah has failed to look into enhancing food production, in quantity and quality. There is little mechanisation to improve farmers’ productivity. Most farmers are still using “cangkul”. Even wheelbarrows are a rarity.

Fishermen are using sampans and small outboard engines.

[c] The most glaring example is the construction industry which has failed to adopt to changes in more efficient/cheaper construction methods and technologies. Building a house in Sabah can take 2 to 3 years, a high rise even longer. A house in Australia takes only months and a medium high rise in China can take not more than 1 year.

This list can go on ad nauseum, suffice to say that Sabahans need to drag ourselves into the modern age by paying serious attention to increase productivity to match with inflation so as to avoid a continuous slide in standard of living.

Economies of scale in food production. Food prices are the most important component in the cost of living as any increases can have adverse effects on the poor and lower income Sabahans. Sabah is proud to be the leading oil palm state and land size same as whole of W Malaysia. The issue is why Sabah cannot become self-sufficient in rice, having to import from Vietnam and Thailand, beef and lamb from India, Australia and NZ, chicken parts from USA and Denmark, fruits and vegetables from over the world. Why the hotels are serving orange juice squeezed from imported USA oranges when Thailand can serve juice from locally grown oranges? Why? Why? Why?

Why nothing has been done even though Ringgit has devalued 30pc over the last so many years?

Sabah should be exporting and not importing all these items.

There has never been a comprehensive policy that can encourage economy of scale in food production.

Such a policy must take into account of the huge potentials in the export market like China because our domestic market is small.

Supply and Demand. Sabah is oblivious and insensitive to the inter-play of the forces of supply and demand.

There is no mechanism to absorb over supply when there is an abundant harvest – no storage, no efforts to divert over supply to another market. On the reverse, when there are excessive demands, little or no effort to meet these demands except to impose price control which is a very poor economic instrument.

Over time, such price mechanism can deter increase in production. Farmers get punished when there is a bumper harvest [prices slumped]. They also get punished also when harvest is poor.

Housing and property development. I am happy to see that Datuk Seri Shafie has announced that development plans and approvals will be handed over to a committee. The high property prices can be kept to a more reasonable level if the government can sort out: -[a] Inordinate delays in processing and giving approvals.

In business, time is money because interest charges run 24 hours a day, 7 days a week, 365 days a year, on public holidays and weekends. Delays impose heavy interest costs which are always passed on to buyers.

To ensure speed, I hope this committee can look into the whole system within the government to minimise red tapes. All ministers, senior government officials should know the concept of huge cost of time delays.

They should not use delays to squeeze for under counter money.

Corruption in the property development industry, from A to Z, is so well known. No elaboration required except that some developers have estimated as much as 20pc of the sales price goes to feeding corruption!

This percentage may not be dead correct. The message is clear. Corruption in this industry is huge.

A strong political will be needed to eradicate corruption. Sort corruption out and the price of housing will come down.

Property developers are to be blamed for being slow or reluctant to adopt cost-effective building technologies and building materials, many of which have been available for years.

Sorting out these problems in property development industry is not rocket science. Learn from Singapore which has the most efficient system in the world – from planning, zoning, approvals to high rise management condos.

The most outstanding Singaporean features are: - [a] Certainty and prompt time frame by the government in granting approvals if pre-set government conditions have been met by the proposed development. [b] The government keeps a close monitoring and uses transparent mechanisms to regulate supply and demand. [c] All property transactions and their details are available on the web so that the public can make informed decisions.

[d] Last and most importantly, there is only 1 charge called “Development Charge” with a transparent formula for property developers to pay to government. Sabah is exactly the opposite. There are many charges from various departments in Sabah resulting in delays and uncertainties – hotbeds for festering corruptions.

In line with current PH federal government policy to end monopoly and sweet heart deals, the state government can put a stop to the monopoly in cement for Sabah Cement Industry Sdn Bhd. Let private sector buy cement from other sources.

Sabahans will be grateful to the government if it can put right to all the above as house prices will drop and many more Sabahans and their families can own a roof over their heads.

Sabahan political leaders have alienated and sold the best and choicest lands to non-Sabahans since 1985!

Oil palm plantations? Sabahan private ownership cannot be more than 5pc. CPO mills? Oil palm refineries?

Oil and gas? Hotels? Motor workshops? Coffee shops? May be Sabahans own more hawker stalls only.

Can someone tell me which part of the economy that Sabahans really own/control? The picture can be very depressing if we conduct a business ownership census. Sadly, generations of Sabahan political leaders have no ‘ECONOMIC SABAHANISM” [meaning Sabahan economic nationalism] and have succumbed themselves to greed and corruption.

I pray that the new political leaders will continue to act on [a] their pledge to implement their GE14 election promise of “Sabah for Sabahans” by restructuring Sabah’s economy to revert economic ownership to Sabahans.

[b] reducing cost of living. [c] follow example of the PH federal government in eradicating corruption.

These 3-prong actions will transform Sabah and give real meaning to “Sabah for Sabahans”.

To do that, Sabah will need innovative economic leadership, a new “out of the box” economic model and appropriate policies.

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