by Koon Yew Yin
Since my retirement from active business, I have been more and more concerned about our increasing financial profligacy and irresponsibility. Every day new details emerge about how spendthrift we are as individuals, as households and as a nation.
At the national level, the Auditor-General's recent report pointed out that Malaysia's national debt rose 12.3 percent to over RM407 billion in 2010. The amount is equivalent to 53.1 per cent of gross domestic product (GDP) and is the second straight year that the national debt has exceeded 50 percent.
At the micro level, details of how ordinary Malaysians who have accumulated huge debts and are hotly pursued by Ah Long (loan sharks) fill the papers. These stories sit beside constant advertisements urging Malaysians to apply for credit cards with generous spending limits – ads which we have not been able to resist. At last count, there are more than eight million credit card holders, owing over RM30 billion. About one quarter – over two million of card holders – earn less than RM3,000 a month, meaning that many are unlikely to be able to settle their debts.
As for household debt, this has also been rising steadily. According to recent estimates, household debt had reached RM560 billion by the end of August 2010. Household debt-to-GDP ratio had increased sharply from 66.7 percent in 2004 to 76 percent in 2009 making it amongst the highest in Asia. What is especially worrying is that this rate of household debt increase is rising more quickly than the level of increase of household income or wages, meaning that most households are spending more than what they are earning and making up for the difference through borrowing.
Fostering culture of financial insoucianceBesides borrowing from Ah Longs, family members, friends, pawn shops, credit card companies and banks, Malaysians are heavily indebted to the government.
Borrowing from the government for many Malaysians start at an early age and is in the form of loans from the National Higher Education Fund Corporation (PTPTN). Between 2000 and 2009 over 1.3 million young Malaysians in the public and private higher education institutions had received loans ranging from RM8,500 to RM20,000. In all, a total of RM20 billion, RM39 billion and RM71 billion were allocated to the PTPTN for loans to students for the 9th, 10th and 11th Malaysia Plan periods respectively.
Whilst it is encouraging that many young Malaysians are prepared to pursue higher education even though they may not be able to afford it, what is worrisome is the widespread failure to repay the loans taken for the purpose. Authoritative data on loan defaults is not easily available but estimates from a World Bank study in 2007 indicate that the PTPTN management estimates that it recovers only 25 percent of the total amount it should be receiving. As until 2004, the number of graduates making their repayments was only 44 percent of the total number of loan beneficiaries.
In my opinion, some of the blame for the culture of financial profligacy and irresponsibility in our society is traceable to this government policy aimed at providing cheap and easily accessible loans to higher education of our young. Providing low interest loans for educational purposes is in itself an admirable policy. But its noble intentions become subverted when implementation is seriously flawed as students from well-to-do families who can afford the tuition fees are provided access, and there is an inability or unwillingness by the authorities to enforce the repayment of loans.
Once young people learn that they can get away with not paying back their loans or are able to get access to credit despite being ineligible, the bad apples amongst them graduate to scamming the public exchequer and private financial institutions in other ways after they obtain their degrees and diplomas. How else does one explain the massive loans given out to finance businesses in every sector of the economy which have gone sour and have not been repaid?
Readers can identify a sector – whether agricultural or non-agricultural; hi-tech or low-tech; rural or urban – and I am willing to donate a large sum to any charity of their choice if they can show me proof that the repayment of loans provided by the government has been able to exceed more than 70% in that sector.
The bigger the loan that is provided by the Government, the surer it appears to become transformed into a bad debt – this appears to be another financial axiom of life in Malaysia. Recently during the Dr Ling Liong Sik cheating trial, we heard that the Port Klang Authority (PKA) cannot afford to pay back its RM4.6 billion loan for the Port Klang Free Zone (PKFZ) project to the government. This was according to the prosecution’s witness, Adnan Abidin.
Mind you, this was a project in which the development cost ballooned from RM1.088 billion to RM4.6 billion in 2007 and which the cabinet, according to Dr Ling’s lawyers, had given their retrospective approval. It is not surprising therefore that the cabinet is not concerned about the small fry of student loan defaulters when it is blind to other possible financial scandals that involve billions of dollars.
Publish the names of all govt debtors
Clearly too, those who are likely to have access to government loans are those with the most powerful political strings such as happened in the RM250 million cattle-farm scandal linked to Minister Shahrizat Abdul Jalil’s husband and children.
Although I am critical of students who have taken out loans for their education and have refused to repay them, it is unfair for the government to put their names into a blacklist for public consumption as has been done periodically.
However if the government intends to continue carrying out this measure, I would like to propose that it also publishes the names of other Malaysians who have obtained loans for their projects and businesses and failed to repay them, especially those with large multi-million ringgit loans.
Only if this non-discriminatory public disclosure of all Government debtors (and not just of student defaulters) is undertaken can justice be said to be equally meted out. Needless to say, it would be especially revealing to read the names of these large debtors and the amounts that they owe to the government – or actually, to the people of Malaysia.