As wage earners brace for higher spending under the goods and services tax (GST) that takes effect on Wednesday, they will feel the brunt of decades of Malaysia's economic policies which have kept wages low and local industries uncompetitive.
Low wages have not helped the government improve its revenue, as only 1.7 million Malaysians pay income tax out of a workforce of 12 million, and Putrajaya is seeking to increase earnings with the broad-based consumption tax.
But low wages are the legacy of Malaysia's industrialisation policy, which has long focused on making the country a low-cost, low value manufacturing hub.
Although this helped transform the economy in the early 1990s, experts are now warning that a new industrialisation policy is needed, as there are worrying signs that the government’s push for developed status in five years is not raising the incomes of the majority of people.
