Why is it so hard for a larger majority of Young Malaysians - Indians in particular to obtain wealth?
By: Gunabalan VGBS
Without going into fine details my personal observation leads me to believe there is a strong correlation between the race of the folks running the country and how wealthy people of that race get. Over a few decades, this results in most of the country’s 'wealth' and access to future wealth sitting in the hands of a few favoured families and individuals but most TAXES paid by the middle income and poor classes!
Even though the political landscape today has changed over the years, the cause-and-effect relationship of How to Attain and Maintain Wealth is still there in this country.
Allow me to explain.
For many young Malaysians today, they are in a struggle to win in the rat race with the hope that wealth can be found at the end of the track. Only, many are still at a disadvantage as they are still under educated –Financially, under paid due to the country’s legacy of labour cost mismanagement, given easy access to predatory loans, high small business entrance costs, and for especially for the lower income , low educated, single parent Indian working youngsters- the Last to be hired / first fired.
I have not taken into account high cost of private Medical and Transport in this country.
This alone would make it hard for people of middle income to obtain wealth, not to mention the poor and urban poor. If fact, if you look at the overall poor communities of all races here in Malaysia, you'll often find similar issues.
Zooming in specifically on the Indian Diaspora within peninsular Malaysia and in particular to those in the central and southern zones of Malaysia,(that which I am familiar with) it wasn't that long ago that many Indian Families were deprived of their ‘living’ security by being forcibly moved out of the Estates while discriminated and deprived of their rights to a secure comfort zone from where their children could concentrate on educating themselves to the requirement of city life or more accurately put- of ‘OUT OF ESTATE’ life i.e. the need to own property, run businesses, access resources, and how important it was to transfer their wealth to their kith and kin. (Financial Education)
And this important lesson unlearned caused inequality within the Indian sub races (caste) which trickles down through the generations. Along with less access to education & freedom to plan for a future due to constant worries of monthly debts and bills, these groups were also exposed to fewer opportunities for career building or jobs and positions of power, which is the next stage in the journey to acquiring higher wealth.
Or as some under - graduates are taught: ‘Maslow’s Theory of Hierarchy”
With less opportunity there is less wealth. With less wealth, there is a lower chance of you changing your fortunes or your children’s and the cycle continues….
Statistics of Malaysians by wealth and Earnings by Race shows us that economic gap, though has improved in last 50 years, produces very small incremental increase when compared to birth rate statistics & notes that in the last 50 years there has been almost no change in the wealth inequality in real terms for the larger Malaysian Indian community. ( i.e same small increase amongst people with accumulated wealth but birth rate and community increasing therefore further reducing the stats).
This unfortunately is not limited to only Malaysian Indians but is also today, affecting the Bumiputera community with statistics showing twice as high unemployment in the last 12 months due to the economic realities of today. Believe me when I say the true impact of the current economic malaise will only be seen 20 years down the road amongst the young adults of these Bumiputera.
For the sake of clarity in this article, let’s also forward other disparities. (Indian)Urban poor children are increasingly growing up in concentrated, low income neighbourhoods and attending increasingly segregated schools, racially and politically.
They are also growing up in single-parent households much more frequently than other race children. This means that lower income Malaysian Indian children not only are more likely to be born into poverty than other races of children; but they are also less likely to escape it .
Living paycheck-to-paycheck means that these Indian families are less likely to save money, own homes, and invest in retirement plans, common avenues to wealth later in life. Even when these children manage to study well and go to college, they accumulate more personal debt than students from other families.
Social studies in the west have investigated measures of success amongst challenged communities at differing checkpoints at various stages of their life:
That research concluded that the opportunity gap widened between races at every stage of development and adulthood. (The Other American Dream: Social Mobility, Race and Opportunity) This point to the fact that at every level of achievement in today's society, lower income classes and minority races still face unique disadvantages.
But, amongst those who succeed to break the wealth and class barriers, their children and families do accumulate higher wealth, (it was discovered that they have accumulated knowledge on how to use that wealth differently than their same race middle income counterparts).
The top 15% of wealthy Malaysian Indian individuals here have a median income of $500,000/year. Similarly to other classes of rich Families elsewhere, they are likely to be older, financially educated, married into money, and either retired and/or still running their own business.
However, compared to Malaysian Chinese households in the same income group, wealthy Malaysian Indians are less likely to hold liquid financial assets, but when they do; they are more likely to invest in safer assets, preferring fixed deposits, savings bonds, and life insurance to higher risk (and higher reward) assets. They are also more likely to have more money in real estate holdings (a lower-risk investment), and less likely to hold equity in business assets.
In my observation, when comparing amongst the Malay, Chinese and Indian race (amongst groups of same income level & likely to run their own companies), Chinese and Malay professional business owners (GLC Directors and Shareholders) are investing in their businesses at a rate 7 times higher than rich Indian business owners who put more investments overseas as a precaution to local race politics. This trend seem to have started in response to local racial politics beginning the early 1980’s and though was seen to be reducing in the 2000’s have been resurgent since 2013.
This means that when Malaysian Indians obtain wealth, they are more cautious and conservative when it comes to using that wealth to expand locally. One reason for this maybe Fear of political upheavals, as they believe they have less financial support from the previous generation or community to rely on.
A crucial fact many probably do not realise is that the wealthiest 1% of High Income Families / Individuals’ primary source of income is from their Inheritance, which is on average 60 times greater than the amounts that middle income households pass down to their families.
As I mentioned before, the inheritance in many Malaysian Indian families is limited by the course of Malaysian Politics & History, as it takes many decades for money to be passed on to future generations.
But because of this, Chinese & Malay and other race children’s of the rich also have more access to start-up capital when they found their businesses, which translate into greater business success down the line. (Or the ability to have /endure more failures).
The reason this was written down is my believe that part of the process of eradicating a problem is to understand its origin and current situations.
So, having said that I welcome any responses to what I've written.