Anwar Ibrahim

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More Malaysians to be declared bankrupt, says daily Posted: 08 Jan 2014 06:32 PM PST TMI The number of bankrupts in Malaysia is expected to rise following the recent price hikes in electricity tariffs and other household goods, as well as the removal of sugar and fuel subsidies. Singapore’s Straits Times reported today that last year, more than 60 people were declared bankrupt daily until September, with the figures up from 53 people a day in 2012. RAM Holdings chief economist Dr Yeah Kim Leng told the daily that following the government’s subsidy rationalisation to address the budget deficit, the number of bankrupts would continue to rise.  ”We expect the number of delinquencies to rise, especially among young workers in the private sector who have access to excessive credit via credit cards and personal loans, but may not earn enough that it would be commensurate with their lifestyles. “The question is, by how much, and that is the worrying part,” he was quoted. Economists, however, said unserviced loans were at a "manageable level" for the time being. But there are signs of this worsening. Credit card debt has gone up. The amount owed to banks for longer than six months to November last year stood at RM426.4 million, compared with RM402 million in the same period in 2012, the daily said. Credit Counselling and Debt Management Agency (AKPK) chief executive officer Koid Swee Lian said credit card users also "have themselves to blame". “In Malaysia, only about half of the credit cardholders pay above the minimum required amount of 5% of total owed to banks each month, whereas in Japan and Korea, it is 89% and 87% respectively,” she said. The daily also highlighted that Malaysia’s household debt, which now stands at 83.5% of gross domestic product, is one of the highest in the region as Malaysians "rely heavily on borrowing to purchase homes and cars and for household spending". It quoted a man who wanted to be known only as Malik who had amassed RM100,000 debt from seven unpaid credit cards. The 50-year-old, who earns RM3,000 a month has turned to AKPK for help in managing his finances. “We just buy day-to-day items – groceries, petrol and car repairs, but since I don’t earn enough to pay for the debt; we use one credit card loan to pay for the other,” he said. “Before we knew it, we lost control of spending.” It also highlighted the plight of a 26-year-old salesman who is now struggling to pay off a RM10,000 loan he had taken to foot hospital bills following an accident. He earns RM 2,300 and has no credit cards and he, too, is seeking help from AKPK. “People like us just don’t earn enough,” he said. “Even insurance is a luxury.” Since late last year, Putrajaya has embarked on aggressive cost-cutting measures it to rein in a chronic budget deficit, which has left Malaysia's national debt at just below the critical legal ceiling. Among others, Putrajaya has reduced fuel subsidies, removed price controls for sugar and increased the excise tax for tobacco. Electricity tariffs and the assessment rates for Kuala Lumpur properties have also been increased, and Putrajaya is mulling raising toll rates and public transport fares this year. The goods and services tax, a broad-based consumption tax, was announced during the tabling of Budget 2014 in October and will be implemented in April next year.

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