Middle income country, the age of AirAsia and the emergence of the new cost of living

Recently, certain quarters said that while many lamented on the bad economy, shortage of cash, and rising of goods prices, yet they could still afford to travel abroad. The quality of life for many has improved where they choose to drink expensive coffee, eat in luxurious restaurants, travel overseas and buy foreign brands of cars.

On 5 February 2018, Prime Minister Datuk Seri Najib Razak stressed that there were many Malaysians travelling overseas, in order to deny that this country is a bankrupt or failed state. [1]

He said that he would surely meet many Malaysians whenever he goes to any of the two Holy Mosques, whether it is the Masjid Nabawi or the Grand Mosque of Mecca (Masjidil Haram) and was told by friends who holidayed in London that they would surely encounter Malaysians in Oxford Street. [2]

Besides that, on 6 February 2018, Director of Strategic Communications Division of the Department of Special Affairs (JASA), Tun Faisal Ismail Aziz said that many Malaysians were still spending on car purchase and travelling overseas, in order to reject claims by Managing Director of the hypermarket chain Mydin, Datuk Wira Ameer Ali Mydin that while the country was having positive economic growth, the Malaysian people were lacking of purchasing power at the moment. [3]

First of all, the issue raised is not supported by facts but more on limited personal experience. Furthermore, the statement that the national economy is improving for there are many who travel abroad, is a past logic, not a present logic.

As mentioned above, the present is not the same as the past. It is now easier for people to travel abroad, as compared with the past when there was no cheap air ticket and the use of aeroplanes was not widespread. Therefore, travelling became something which was not easy to be achieved.

However, comparing with the present, we have an advanced technology, perfect aviation facilities, and most importantly a much more affordable air ticket such as AirAsia with the slogan “Now Everyone Can Fly”. The travelling time is also shortened where we only need around two hours to reach nearby countries such as Thailand, Singapore, Indonesia, Cambodia and Vietnam.

Furthermore, good prices and accommodations abroad which are either cheaper or more or less the same as here, especially in the ASEAN countries, is a factor that attracts Malaysian to go shopping abroad. In addition to that, travel agencies often offer attractive and affordable travel package promotions. This would indirectly encourage more Malaysians to travel abroad.

Nevertheless, this is insufficient to prove that the national economy is good. We may be surprised that why Malaysians are still able to travel abroad despite the poor economy and weak Malaysian ringgit.

According to Chairman of The Malaysian Association of Tour and Travel Agents (MATTA) Datuk Tan Kok Liang, the weak ringgit does not hinder Malaysians from travelling abroad, but makes them change their pattern of travelling, and they would be more cautious in spending. [4]

According to reports by The Edge Markets on 28 December 2016, a survey by United Overseas Bank (M) Bhd (UOB Malaysia) showed that more than 7 in 10 respondents choose Asia as their travel destination, where Singapore (46%) and Thailand (42%) were the major choices. [5]

Economist from UOB Malaysia, Julia Goh said that Malaysians stressed more on travelling costs especially due to the weak ringgit. Therefore, they would choose Asia as their destination, in order to maximise their purchasing power.

Their inclination of travelling to Asia is also due to the increase of total flights in this region and a more competitive flight ticket price to the countries in question.

Therefore, the cost of travelling abroad may not be as high as being thought, but lower or more or less the same as travelling locally. Imagine if the cost is more or less the same to travel locally and abroad, which one would you choose?

Cost burden or high expenses are no longer the question for Malaysians to travel abroad. The criteria today provide more opportunities for people to travel abroad. That is why it is not surprising that there are more people travelling, and it is not that the national economy is good.

According to the Mastercard Future of Outbound Travel in Asia Pacific (2016 to 2021) Report, Malaysians recorded international outbound travel trips of 11.9 million in 2016, and forecasted to grow by an average of 3.5 percent per year to reach 14.2 million trips in 2021. [6]

This Report revealed that there were about 46.1 percent of the outbound trips were done by Malaysian households earning above US$30,000 per year. At the same time, households earning between US$10,000 to US$30,000 per year recorded 37.7 percent of the trips and 16.2 percent were done by households earning below US$10,000 per year.

This shows that there were less than half of the international outbound trips being done by high income households which were those earning more than US$30,000 per year. There were only less than 20 percent being done by the low income earners. Therefore, most of the international outbound trips were done by the rich and upper middle class ones. In the context where a middle income nation is attempting to develop towards a high income nation, can this be assumed that the national economy is good?

Therefore, an increase of number of travellers is not an accurate and sufficient measure to prove that the economy of a middle income nation is good in today’s age.