Malaysia Introduces Minimum Wage as Najib Eyes Election

Malaysia will introduce its first minimum wage to benefit an estimated 3.2 million workers, joining neighbors Thailand and Vietnam in strengthening support for low-income households as elections approach in Southeast Asia’s third-largest economy.

“The lowest-paid will now be guaranteed an income than lifts them out of poverty and helps ensure that they can meet the rising cost of living,” Prime Minister Najib Razak said, announcing the plan in a speech in Putrajaya, near Kuala Lumpur, ahead of tomorrow’s Labor Day holiday. “The proposed rates take into account the needs of business, while ensuring that no Malaysian is left behind.”

The government has been preparing for a possible early election in May or June, before the due date in early 2013, according to four officials who spoke in March on condition of anonymity because the talks are private. Najib, 58, has raised civil servant salaries and pensions, waived school fees and boosted handouts for the poor in a bid to extend the ruling party’s 55-year lock on power.

The pay plan comes two days after police arrested 512 people who took part in a street protest in Kuala Lumpur to demand cleaner and fairer elections. Najib’s government enacted legislation in April banning such protests after police detained more than 1,600 people during a similar rally in July.

Workers on Peninsular Malaysia will get a minimum 900 ringgit ($297) per month starting in October, said Najib, who is also finance minister. The rate will be 800 ringgit in some more rural areas, including the eastern Sabah and Sarawak states, he said. The government has already begun distributing one-time 500-ringgit ($165) cash payments to the poor after announcing a record 232.8 billion-ringgit spending plan for 2012 in his October budget.

Wealth Gaps

Asian nations from Thailand to Taiwan are introducing or raising minimum pay to address wealth gaps in a region that is leading global growth.

Thailand increased its minimum wage to 300 baht ($9.75) a day in Bangkok and six provinces in April, and by an average of 40 percent in the rest of the country. The move partly fulfilled a campaign pledge that helped propel Prime Minister Yingluck Shinawatra’s party to a majority win in July elections.

Vietnam in May will raise the minimum wage for state employees by about 27 percent to 1.05 million dong ($50) per month, according to a National Assembly decision last year. The government enacted a minimum wage increase of as much as 69 percent in October that applied to workers employed by private and state-owned enterprises.

Taiwan’s move last year to increase minimum pay by 5 percent to NT$18,780 ($644) per month helped President Ma Ying- jeou win a second term in January.

Labor Day

Hong Kong introduced its first statutory minimum wage of HK$28 ($3.61) an hour last year. Thousands of workers are expected to take to Hong Kong’s streets on the Labor Day holiday tomorrow, demanding Chief Executive-elect Leung Chun-ying address a widening wealth gap when he takes office in July.

Najib, who took over as prime minister mid-term in 2009, sparked speculation of an early vote when he said in December that preparations had begun for the contest. His National Front coalition, which has governed Malaysia since independence, had its narrowest election victory in half a century in 2008.

Malaysia’s minimum wage policy is part of the government’s long-term economic plan to move the country up the value-added chain into higher-yielding industries from its agricultural base.

The country’s per capita income has risen to $9,700 from $6,700 when the government’s economic transformation program was started two years ago, Najib said on April 3. This means Malaysia is on track to achieve its target of per capita income $15,000 by 2020 when the Southeast Asian nation wants to achieve developed-nation status, he said.

To contact the reporter on this story: Barry Porter in Kuala Lumpur at bporter10@bloomberg.net

To contact the editor responsible for this story: Stephanie Phang in Singapore at sphang@bloomberg.net

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