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Cost Of Living Survey 2007

Excerpt: ECA’s Cost of Living Survey is carried out twice a year comparing a basket of 128 consumer goods and services commonly purchased by expatriates in over 300 locations worldwide. Multinational companies use the results to help compensate their internationally mobile staff. Living costs for expatriates are affected by inflation, availability of goods and exchange rates, all of which can have a significant impact on expatriate remuneration packages. Some people may be surprised to see African locations in the top ten. However, ECA’s cost of living survey compares like-for-like goods and services, certain items and brands typically purchased by expatriates, which are not readily available locally, can be very expensive. In addition, the commodity boom in recent years has led to considerable currency appreciations in commodity-exporting markets, such as Angola, making it an increasingly expensive location for expatriates.
Seoul maintains its position as the most expensive city in Asia for expatriates, moving from 8th to 7th in the global ranking over the past twelve months. During the same period, Tokyo, Asia’s second most costly city, dropped out of the top ten for the first time moving from 10th to 13th. Depreciation of the yen against most other currencies, coupled with low inflation, has significantly reduced living costs for foreigners in Tokyo, Yokohama and Kobe in recent years. Several other Asian cities have fallen in the ranking, including Taipei which has fallen six places. This is largely explained by the weakness of the US dollar to which their currencies are linked. The region’s biggest fall was in Indonesia with Jakarta dropping 11 places to 153rd position. However, with a large number of Asian cities experiencing higher rates of prices increases than elsewhere in the world, locations in the region have, in general, moved up the rankings.

A 6% overall rise in the cost of goods and services typically purchased by expatriates has meant that despite the weakening Hong Kong dollar Hong Kong’s position in the ranking has remained steady and is still the fifth most expensive location in the region and ranked 79th worldwide. The recent rise in GST in Singapore from 5% to 7% has contributed to pushing up living costs in Singapore, which has risen 10 places in the ranking since 2006. This, together with no change in Hong Kong’s position, means that the gap is closing between the two locations. As living costs in other locations in the region catch up, the need for companies to provide higher cost of living allowances when moving people to Hong Kong rather than elsewhere in Asia, has been eroded over the past 12 months.

Most Expensive Cities Globally (Last Year's Position)
1 (2) Luanda, Angola

2 (3) Oslo, Norway
3 (4) Moscow, Russia

6 (5) Kinshasa, Congo

7 (8) Seoul, Korea

9 (11) Geneva, Switzerland

10 (17) London, UK

13 (10) Tokyo, Japan

23 (54) Istanbul, Turkey

48 (28) Manhattan New York, USA

Asia's Most Expensive Cities (Global Ranking)

1 (7) Seoul

2 (13) Tokyo

5 (79) HK

6 (94) Taipei

7 (95) Beijing

8 (100) Shanghai

9 (122) Singapore

11 (153) Jakarta

18 (168) Bangkok

24 (177) Mumbai

25 (178) New Delhi

29 (191) Manila

32 (195) Hanoi

33 (197) Kuala Lumpur

35 (203) Karachi

36 (204) Ho Chi Minh City

My Comments: Should we be happy or sad that Malaysia is so "cheap"? I see three main reasons why Malaysia is cheap:

a) Subsidised products - The country puts in a lot of subsidy in many essential necessities, but more importantly the government subsidises a lot in oil & gas products as well. This helps to translate into a lower COL for all, albeit unecessarily subsidising the profits of many manufacturers and MNCs. Naturally, when these products' prices surge (like they have been doing for the past 2 years), the subsidy budget will become unmanageable. The government has to look deeper into the opportunity cost of such deep subsidy plans. We also need to put in place a timeline to trim the subsidy for all companies operating in Malaysia - they must be forced to compete with fuel and electricity at normalised prices.

b) Foreign Workforce - Malaysia enjoys near full employment, however the country has some 2 million official foreign workers and probably another 2 million in the country working illegally. The foreign work force is a significant factor in depressing wages and keeping prices in check. They also free up a sizable percentage of the local workforce to other areas of employment.

c) Its In The Real Estate (the biggest reason for low COL figure) - Malaysia has one of the cheapest real estate market in Asia, and real estate is a huge component of overall cost structure for any businesses. Translate that down the line for all products and services, you get an effectively lower COL for Malaysia.


Comments

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Adrian said…
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