PM: No salary for me at all, Cabinet ministers to take 20% pay cut

– BernamaAll eyes and ears: Anwar chairing the first special Cabinet meeting of the Unity Government at Perdana Putra.

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PUTRAJAYA: Datuk Seri Anwar Ibrahim will not receive any salary, both as Prime Minister and as Finance Minister, he has clarified.

Cabinet ministers have also agreed to a 20% pay cut until Malaysia reaches economic recovery, he said.

ALSO READ: Zahid and Fadillah have role in bridging economic gap

Rubbishing talk that he would be paid as Finance Minister although he had declined the salary for the top job, Anwar announced he would not be taking any form of government salary.

This was in line with his promise made during the election campaign, he said.

During the campaign, Anwar had said he would not take a salary if he was appointed as prime minister because the people themselves were struggling to cope with rising costs.

“Some people say I’m not taking the Prime Minister’s salary because I am the Finance Minister. That’s not true. There is only one salary,” he said, laughing off such claims during a press conference here yesterday.

ALSO READ:Budget to be enhanced with MOF, Cabinet views

The Members of Parliament Act (Act 347) only allows one salary for ministers, deputy ministers or political secretaries.

On the Cabinet ministers’ pay cut, he said this was their way of acknowledging the tough times faced by the people.

“The pay cut will be implemented as long as Malaysia continues to recover economically.

“It shows the ministers are also concerned about the livelihood of the public,” he said.

Asked if the pay cut would be carried out throughout the government’s five-year tenure, he simply said that it could range from three to five years, depending on the situation. 

Cabinet to take 20% pay cut

Prime Minister Anwar Ibrahim thanks his ministers “for their willingness to make some sacrifices” and said this was to show the government’s concern for Malaysians.

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Our cars are costing us our homes!

WHEN I first started my job as an architect in the 1960s, I was on a three-year contract with a monthly salary of RM628. I bought my first car, a Peugeot which cost RM7,724, equivalent to approximately one year of my salary. The car became my reliable companion for 14 years. Those were the good old days, when a car could be bought with just one year of a fresh graduate's salary.

Circumstances have since changed. Today, for a fresh graduate to own a car in Malaysia, it will easily cost him four years of his salary to purchase a foreign car, and even a local car costs around two years of his salary. If we take into consideration his living expenses and other commitments, it may take him even longer to settle his car loan. Hence, it has left him with very little option but to take the maximum car loan financing tenure of nine years.

In the table illustration below, a fresh graduate in the Washington D.C. earning about RM11,000 (about US$3,500) per month can easily buy a Japanese Honda Civic or Toyota Corolla worth RM50,000 as it is only 0.4 times of his yearly salary.

On the other hand, a fresh graduate in Malaysia earning about RM2,500 per month needs to pay RM120,000 if he would like to buy the same type of car. It costs him four times his gross yearly salary. This ratio is 10 times higher than his US counterpart.

For youths in Malaysia, buying a car is more expensive both in real terms, and in terms of debt-to-income ratio. In reality, it means they have to either purchase a car with lower price tag or commit to a longer term loan to own a car, which cost them the opportunity of owning a home.

This situation requires our youth to choose between buying a car or a house first, and many have committed to own a car first, considering our public transportation system is still in the process of being improved.

Many fresh graduates in Malaysia who start to serve their car loan tend to delay their plan of purchasing a home.

Unfortunately by the time they can afford to purchase a home, be it three, five or nine years later, the price of a property would have escalated due to among other things, inflation, higher construction cost and higher land prices.

While it may be safe to say that their salary would also increase, generally speaking the increment may not aligned to the rate of inflation. In most cases, owning a home will be a huge debt lasting 30 to 40 years of housing loan repayment.

What can be done differently to change the circumstances? Is there a better way for them to financially plan their future? These are questions that Malaysian youths ought to consider before purchasing any big-ticket items.

Let's look at the table again. It also lists the median price for three-bedroom apartments in the suburbs of these cities. The median price of an apartment in the Klang Valley is around RM300,000, equivalent to 10-year gross income of our fresh graduates. The affordability level is more favourable compared to other Asian countries, such as Indonesia and Thailand. The prices of same size apartments in Jakarta and Bangkok range from RM350,000 to RM400,000, and costing their fresh graduates 13 to 18 years of gross yearly income to purchase a house.

Therefore, when it comes to the question of home affordability in Malaysia, we are blessed compared to our regional peers.

However, there are many factors that contribute to the challenge for our youths to own a house. Two primary factors are the additional financial commitment of purchasing a car, and the relatively lower income level in our country compared to our Western counterparts.

When fresh graduates spend a substantial amount of their salary paying for a car, they are left with little savings to own a house, and their house affordability level decreases over the years as prices rise due to inflation.

Clearly the income level of our graduates has to rise, to enable better quality of living and higher affordability level, which is the current government's focus to make Malaysia a high income nation by 2020.

Perhaps it is also time to re-look at our national car policy and how it has affected the house affordability level in Malaysia. From the numbers above, it is clear that our cars are costing us our homes.

Food for thought  By DATUK ALAN TONG

> FIABCI Asia Pacific chairman Datuk Alan Tong has over 50 years of experience in property development. He was FIABCI World president in 2005/06 and was named Property Man of The Year 2010. He is also the group chairman of Bukit Kiara Properties. (email at feedback@bukitkiara.com) 

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