CURRENT ISSUES

MGM4136

COST OF LIVING ISSUES IN MALAYSIA

No Student Name Matrix No

1 Nurul Nadia Binti Kamaruddin EX03460

Lecturer Name:

Dr Mazlan Bin Hassan

 TABLE OF CONTENT

CHAPTER DETAILS PAGE

Acknowledgement ii
1.0 Cost of Living Introduction 1
2.0 Increase of Cost of Living Factors & Impact 4
3.0 Improvement Drive to Control Increase of Cost of Living 6
4.0 Maslow’s Hierarchy Needs 8
5.0 Conclusion 9
References

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Acknowledgment

First of all, we are grateful to God as finally we are able to finish the assignment that

have been given by Current Issues lecturer, Dr Mazlan Hassan. This task has been done with all

afford given even with limitation to divide the time between study and working time. But

because of the great enthusiasm and determination, we had finally managed to finish this

assignment on time.

Besides that, big thank to our lecturer Dr Mazlan Hassan, because without his guide this

assignment cannot be done properly. He had guided us on how to complete this assignment with

full commitment online and offline.

Last but not least, I also want to thanks to my parents and partners who always prayed

well for me, giving support in term of time, money and always be by my side to lend a shoulder

and heard my problems.

Finally, I hope that all my afford that we have put to complete this assignment will give

a lot of benefits to me and also to other management students. Once again thank you to all.

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1.0 Cost of Living Introduction

The cost of living is the amount of money needed to cover basic expenses such

as housing, food, taxes, and healthcare in a certain place and time period. The cost of

living is often used to compare how expensive it is to live in one city versus another.

The cost of living is tied to individual or household wages. If expenses are higher in a

city, such as at western country and UAE, for example, the salary levels must be higher

so that people can afford to live in that big and urban city. The cost of living can be a

significant factor in personal wealth accumulation because a salary can provide a

higher standard of living in a big city like Kuala Lumpur where daily expenses such as

rent, food and entertainment are high compare to the small city like Perlis. In contrast, a

high salary can seem insufficient in an expensive city.

A recent survey by UCSI Poll Research Centre showed that nearly nine in 10

Malaysians are concerned about the cost of living, with over 60% saying the government

has not done enough to address the matter. The survey, conducted among 1,031

respondents which 59% whom were working adults and 23% of whom were students.

The surveys found that 89% were very concerned about the cost of living, in line with the

increase in the inflation rate from 2.5% in 2021 to 3.3% in 2022. The majority of 60%

said that they were concerned most on the daily groceries and food prices. This was

followed by the utilities cost at 45% and fuel cost at 43%. The healthcare costs came

next at 39% and followed by recreation and entertainment costs at 39%, rental at 34%

and public transport costs at 33%. 

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 With this inflationary pressures have pushed the cost of living so much to the

forefront in 2023 that it has become the key issue for most Malaysians and, consequently,

the foremost issue for the new unity government. As Bank Negara pointed out in its

2021 Annual Report, the implication is that when price pressures are driven by food

items, cost of living pressures are disproportionately experienced by lower-income

households. Food items in Malaysia especially, in some cases, have gone up by as much

as 20%. Many even in the M40 spend most of their income on food and transport, which

means purchasing capacity has been severely reduced for Malaysian people based on

Malaysian Institute of Economic Research (MIER) senior fellow Dr Shankaran Nambiar.

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2.0 Increase of Cost of Living Factors & Impact

Category Factors Impact

International / Global Resurgent of US dollar The ringgit’s weakness against the

US dollar has offset the impact of
inflation in Malaysia. It causing it to
drop in the global ranking and
resulted in the ringgit averaging 4.40
to the greenback and touching a new
record low of 4.744.
Escalated of import costs Import costs have escalated, and at a
time when oil prices also rose to
multi-years’ highs. A rising level of
imports and a growing trade deficit
can have a negative effect on a
country’s exchange rate. A weaker
domestic currency stimulates exports
and makes imports more expensive.

Increase of oil price Oil is the crown jewel of

commodities. It is used in many
ways, from plastics to asphalt to fuel.
As a result, the oil industry is an
economic powerhouse and changes
in oil price are closely watched by
governments, corporations, investors
and traders. Volatile oil prices can
send shockwaves throughout the
global economy. Due to Oil prices
rose to multi-year highs, it leads to
the prices of other key commodities
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 have risen in tandem concurrently.
Local Enforcement Weakness In Malaysia weak of law
enforcement can causes irresponsible
traders to raise goods at their will. In
addition, there are also a few traders
who deliberately commit fraudulent
acts by hiding goods with the aim of
increasing the price of goods.
Subsidy Reduction Subsidies are a way for the
government to intervene in the
market and restore efficiency.
Subsidies are benefits provided by
the government to producers. They
are usually financial and come in
form of tax pardons or cash
payments. The reduction of
subsidies will lead to the increase in
the price of goods due to no financial
support on the cost of production
from the government to producers.

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3.0 Improvement Drive to Control Increase of Cost of Living

Category Factors Impact

International / Global To Increase Investment Foreign capital tends to flow into

Opportunities
countries that have strong
governments, dynamic economies,
and stable currencies. A nation needs
a relatively stable currency to attract
capital from foreign investors.
Otherwise, the prospect of exchange-
rate losses inflicted by currency
depreciation may deter overseas
investors.
Increase the Supply of Food Each country especially with the
agriculture advances should increase
the supply of food to ensure demand
and supply is balanced worldwide.
By increase the supply of food it
make the cost competitive in the
market and able to be controlled.
Implement the International The market competition must be
anti-competitive regulations encouraged to curb anti-competitive
regulations and policies that harm low-
income consumers, and curtail the
cartels’ behavior at various levels of the
values chain, causing harm to both
intermediary customers and the end-
consumer.
Local Improvement on Local The improvement of Malaysian
Enforcement
enforcement may lead to price

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 control, anti-profiteering, trade and
consumer protection to Malaysian
people. This is to ensure their
regular inspections and audits to
comply with the laws and it has the
power to take legal action against
business that violate the rule and
regulation and to take protect the
consumers. In addition, the
improvement on local enforcement
can help to combat illegal trade
activities such as smuggling,
counterfeit goods, and other forms of
illicit trade.
Subsidy Improvement The subsidies improvement may lead
to reduction in both production costs
and the price of the commodity,
making consumers to buy more or
the product. On the other hand the
subsidies make more firms to enter
the market for subsidized products
since it is affordable for producer to
produce the products.
Reduce Dependency on The medium and long-term solutions
Imported Food
are to increase the supply of food
locally and reduce dependency on
imported food and lower down the
cost of food production.

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 4.0 Maslow’s Hierarchy Needs

• Align all the subsidize on the main needs for • Healthcare coverage for Insurance special
human; for B40
• Electricity • Increase of employment opportunities
• Water • Business grant for hawker shop
• Fuel
• First House Purchase
• Hospital
• Control the ceiling market price for products
and services falls under physiological needs

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5.0 Conclusion

The cost of living can be improved by merely increase the minimum wage

without a matching rise in productivity growth or higher productivity will increase the

unit cost of production, and hence, cost-pass through onto consumers. All parties have to

work on improving household incomes through income security programmes for the

targeted vulnerable households; enhancing their employability and earning power through

upskilling and reskilling programmes; creating better-paying employment opportunities;

implementing a productivity-linked and performance-driven wage system; and

encouraging employers to increase the compensation of employees (CE) based on

productivity and performance.

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References

Online Source

 No quick fix to cost of living crisis, The Star Newspaper, Published on 12 Jan 2023,

https://www.thestar.com.my/business/business-news/2023/01/12/no-quick-fix-tocost-of-

living-crisis

 Kuala Lumpur comes in at 32nd most expensive location for expatriates in Asia, Ecca

International, Published on 7 December 2022,

https://www.eca-international.com/news/december-2022/kuala-lumpur-comes-in-at-

32nd-most-expensive-locat

 Cost of living issues to persist even as growth moderates, The Edge Markets, Published

on 9 January 2023, https://www.theedgemarkets.com/node/649873

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