Upload
others
View
4
Download
0
Embed Size (px)
Citation preview
CHAPTER 1
NATURE, EXTENT AND CAUSES OF RURAL POVERTY
IN MALAYSIA : THE HISTORICAL PERSPECTIVE
The eradication of poverty and the ending of hunger have long been
considered the most important challenges before development planners
and practitioners alike. Today, there are more people suffering from
chronic deprivation than ever before in the history. During the twentieth
century, the focus of world poverty eradication efforts were concentrated
in the developing countries, mainly in their rural areas. It was natural
therefore that, after these countries got independence in the decades
following World War II, interests sharpened regarding ways to tackle the
problem of poverty. One strand of thinking goes that rural poor are in
actuality an untapped potential and not an obstacle in development
process and their talents could further add to all round prosperity 1• The
eradication of poverty should be seen as a new opportunity· for the
development of social capital.
Developing countries followed various rural development models
after their independence such as community development, Gandhian
model of decentralised villages, Integrated Rural Development (IRD),
1 Idriss Jazairy, Mohiuddin Alamgir and Theresa Panuccio, The State of World Rural Poverty: An Inquiry into its Causes and Consequences, (New York, 1992), International Fund for Agricultural Development (IFAD}, p.xx.
1
economic growth model and micro-finance model but all these belied
their expectations as poverty levels continued to rise. Nevertheless,
among all these models, economic growth continued to generate intense
debate and discussion as the trickle-down process did not help to
percolate down-to-bottom to lessen poverty. Interestingly, economic
growth model has been touted as a significant factor in reducing poverty
in some of the Asian countries. Notable examples of success in this respect
have been Republic of Korea and Taiwan and more recently Malaysia and
Thailand. Between 1975 and 1995, the incidence of poverty fell by 95 per
cent in Malaysia, by 90 per cent in Thailand and by 82 per cent in Indonesia.
But elsewhere in Asia, as also in other parts of the developing world, the
record has not been very encouraging. The incidence of poverty, for instance,
in Laos PDR and Vietnam in 1995 was around 41 and 42 per cent ·
respectively and Vietnam had the largest number (31.3 million) of poor
people of any ASEAN (Association of South-East Asian Nations) country2 .
This is partly because in many countries the pace of growth, especially in
per capita income terms, has been very modest. It is also partly because·
the nature of growth in many countries has been such as to limit the
percolation of benefits to the poor. And yet, expectations and political
consciousness with regard to poverty alleviation have been consistently
increasing in all developing countries requiring immediate and visible
remedial measures.
In fact, poverty alleviation is no longer regarded as something that
should be safely left to the process of growth and the operation of automatic
2 The World Bank, World Development Report 1997, (NewYork, 1997), p.23.
2
"trickle down" processes alone. It is now widely accepted that poverty
alleviation must be treated as an explicit objective and development
strategies consciously structured to achieve this objective. Many national
plans have explicit quantitative targets for reduction in poverty level and
related issues such as creation of employment and provision of basic needs.
There is also much greater interest in establishing an explicit linkage
between policy formulation and the achievement of poverty-related objectives.
It is against this broader perspective of poverty profile that the Malaysia's
policies and programmes to tackle this menace should be understood.
This chapter will make a modest attempt to describe the definition,
causes, geographic location and occupational structure of rural poor in
Malaysia. Reasons for focussing on "rural" aspect of poverty will be explained
in the chapter. Besides, ethnic dimension of poverty and impact of Asian
Financial Crisis on poverty alleviation programmes would be explained in
the chapter as these two issues have deeply influenced policies and
programmes of Malaysia.
Post-Independence Malaysia : Early Years
Malaysia, like any other developing country, was surfeited with poverty
after it got independence with overall incidence of poverty being 51.2 per
cent during 1957-58 in Peninsular Malaysia3• Socio-economic conditions
3 Ragayah Haji Mat Zin, "Policies and Strategies of Poverty Alleviation in Malaysia'', in V S Vyas and Pradeep Bhargava, eds., Poverty Reduction in Developing Countries (Jaipur, 1999), p.195.
3
at that time were quite dismal. In 1960, life expectancy at birth was 54
years and infant mortality 72 per 1000. Similarly, public expenditure on
health as per cent of GNP was merely 1.1 per cent4• In fact, around two-
thirds of the Malaysian population was living in rural areas mainly
consisting of peasant farmers who were poor and underemployed.
Rural poverty scenario was further compounded with the flaring up
of ethnic clashes in May 19695 when Chinese dominated-opposition parties
secured a larger number of the parliamentary seats vis-a-vis the Malays
dominated ruling coalition. Malays, majority of whom were poor, reacted
violently, with fear of losing political influence. Thus, ethnic clashes
influenced the economic and social development of the country in terms
of resource allocation and utilisation, sectoral balances and consistency,
pattern of income distribution and social upliftment of the majority of
Malaysians. A real test for the government after the ethnic clashes was to
take various ethnic groups into confidence and to make them understand
and realise the importance of nation-building at such a crucial time. In
this respect, of much significance was the issue of removal of abysmal
poverty particularly from rural areas. It was thought that the removal of
poverty would be possible through two ways : i) to accelerate economic
growth; and ii) government's commitment to adopt and implement a pattern
of income distribution to minimise income disparities and uplift the poor
4 Rajeshwar Dyal, "Poverty Alleviation in a Multi-Ethnic Society : Experiences of Malaysia and its Lessons for India", India Quarterly (New Delhi), vol. LIX, nos. 3&4, JulyDecember 2003, p.98.
5 For details on violent ethnic clashes, see chapter 3, Goh Cheng Teik, The May Thirteen Incident and Democracy in Malaysia (Kuala Lumpur, 1971).
4
strata of society in various regions of the country6• The poverty situation in
Malaysia should, thus, be understood and analysed in the context of weak
social fabric. Before any rural poverty scenario is discussed, it would be
appropriate first of all to understand why this study has focussed specifically
on "rural" aspect of poverty?
Why Rural Poverty?
• A closer examination of poverty scenario in Malaysia indicates that
majority of the poor has been living in rural areas (58.7 per cent in
1970) {Table 1) and their conditions have been far from satisfactory
vis-a-vis the urban poor. In other words, magnitude and severity of
poverty have been deeply rooted in rural Malaysia and spread across
the vast hinterland of Sabah and Sarawak states, which at times,
maldng it difficult for the government officials to locate the poor,
specifically the aborigin poor.
• It is true that rural population has been consistently declining in
Malaysia since independence. Despite this, rural poverty could not
be eradicated. For example, during 1975-2000, rural population
decreased from 57 per cent to 37 per cent; still nearly 72 per cent of
the total poor households remained in rural areas in 1999 (Table 1).
• Another important reason for addressing rural poverty has been that
it helps in raising food production. As is known, Malaysia is not self-
6 A.kira Ishida and Azizan Asmuni, "Poverty Eradication and Income Distribution in Malaysia'', Journal of Contemporary Asia (Manila), vol.28, no.3, 1998, p.341.
5
Table 1
'Incidence of Poverty and Number of Poor Households, 1970-2002
Year 1970 1976 1980 1984 1987 1990 1993 1995 1997 1999 2000 2002
----------------------------------------------------------------------------
Incidence of Poverty (Per cent)
Overall 52.4 42.4 29.0 20.7 17.3 16.5 1 3.5 8.7 6.8 8.1 5.5 5.1 (791.8) (764.5) (649.4) (619.4) (517.2) (418.3) (332.4) (360.1) (276.0) (269.7)
Rural 58.7 50.9 37.4 27.3 22.4 21.8 18.6 15.3 11.8 12.4 10.0 11.4 (705.9) (669.6) (556.4) (530.3) (319.0) (267.5) (257.4) (198.3)
Urban 21.3 18.7 12.6 8.5 8.1 7.5 5.3 3.7 2.4 3.4 1.9 2.0 (85.9) (94.9) (93.0) (89.1)
Malays 65.9 56.4 NA 25.8 23.8 20.8 NA NA NA 10.2 NA 7.3 Chinese 27.5 19.2 NA 7.8 7.1 5.7 NA NA NA 2.6 NA 1.5 Indians 40.2 28.5 NA 10.1 9.7 8.0 NA NA NA 1.9 NA 1.9
Incidence of Hard Core Poverty (Per cent)
Overall NA NA NA NA NA 4.0 NA 2.1 1.4 1.4 0.5 1.0 (143.1) (88.8) (67.5) (66.0) (52.9)
Rural NA NA NA NA NA 5.2 NA 3.6 2.5 2.4 1.0 2.3 (126.8) (76.5) (55.3) (52.1) (40.3)
Urban NA NA NA NA NA 1.4 NA 0.9 0.4 0.5 0.1 0.4 (16.3) (12.3) ( 12.2) ( 13.9) (12.6)
Notes : Number of poor households ('000) is given in parenthesis. NA = Not Available.
Source: Household Income Surveys, Malaysia Plans, Economic Reports, Ministry of Finance, various issues as quoted in, Anoma Abhayaratne, "Econhmic Growth and Poverty Reduction: Lessons from the Malaysian Experience" (Department of Economics and Statistics, University of Peradeniya), Sri Lanka, p.11.
sufficient in rice production7; by helping rural poor- most of those are
engaged in paddy cultivation- the country can strive to attain higher
level of self-sufficiency in food production.
• Many studies have revealed that rural poor migrate to urban areas
in search of gainful employment which they are unable to find in
their villages8 . By effectively tackling rural poverty, the Malaysian
government can control migration to urban areas, thereby lessening
burden on civic infrastructure like drinking water supply, electricity,
housing, health and sanitation and educational facilities.
o With regard to sectoral distribution of poverty, the agriculture sector
recorded the highest incidence with 32.5 per cent whereas in the
manufacturing sector it was at 10.6 per cent in 1990 (Table 2).
Subsequently in 1997, although the sectoral data showed decelerating
trend, agriculture sector still suffered from the high incidence of
poverty. Various studies that have been carried out indicated that
the higher incidence of poverty in the agriculture sector has been
mainly due to low value added activities and highly exploitative·
environment. This sector thus needed more serious efforts on the
part of development planners.
7 World Trade Organization, Malaysia Trade Policy Review 1997, Geneva, March 1998, p.98.
8 International Fund for Agricultural Development (!FAD), The Challenge of Ending Rural Poverty: Rural Poverty Report 2001, (New York, 2001), p.l6.
7
Table 2
Incidence of Poverty by Sector, 1990 and 1997 .
(Per cent)
No. Sector 1990 1997
1 Agriculture 32.5 16.4 2 Mining 4.5 2.9 3 Manufacturing 10.6 3.3 4 Utilities 0.2 0.8 5 Construction 8.9 2.2 6 Commerce, Restaurant and Hotels 7.7 2.4 7 Transport and Communication 5.2 1.0 8 Financial Services and Insurance 2.3 0.4 9 Community Services 3.3 1.8 10 Miscellaneous 29.1 15.4
Source: Economic Planning Unit, Prime Minister's Department, Government of Malaysia, KualaLumpur, 1998.
• The gap between rural and urban areas in terms of income, nutrition, .
health and education has not decreased as was originally envisaged
by the policy makers. By addressing rural poverty on a priority basis,
this gap can be abridged.
Rationale for Poverty Alleviation
Although alleviation of poverty has been part of the Malaysian
government's agenda ever since the country became independent in 1957,
the rationale for poverty alleviation was further justified after violent ethnic
clashes of May 1969. One of the main reasons for violent clashes was the
relatively weak economic position of the Malays and rampant poverty in
rural areas of the country.
What followed, therefore, after the violent ethnic clashes was the
8
enunciation of New Economic Policy (NEP) in 1971 to create conducive socio-
economic environment as was envisaged by the Rukunegara (national
ideology) 9 • The NEP was based on the fundamental premise that
(i) unemployment and poverty, especially in a relatively affluent society like
that of Malaysia, are affront to human dignity, and (ii) that ethnic imbalance
in the opportunities to participate in the economic life of the country has
seeds for social and political tension. These two factors are inimical to the
development of an integrative value system and socio-economic environment
so vital for nation building and solidarity. The NEP was, thus, designed to:
i) eradicate poverty among all Malaysians, irrespective of race; and
ii) restructure Malaysian society so that the present identification of
race with economic function and geographic location is reduced and
eventually eliminated 10.
In addition, there is a human consideration to eliminate poverty arising
from the recognition that human beings are the most important economic
resource; therefore the social returns to poverty reduction are high. Relative
deprivation in the face of growing affluence and the unfulfilled desire to
attain good life with all its material inputs can act as destabilising forces to
further weaken the moral and ethical fabric of the Malaysian society. There
9 Fadil Azim Abbas, "Rural Development and Poverty Eradication in Malaysia, 1970-1995", Paper presented at the First ASEAN Senior Officials' Meeting on Rural Development andPovertyEradication, heldatKualaLumpur, Malaysiaon20-21 October 1997, p.2.
10 Ibid.
9
are indications that already the moral and ethical fabric of the Malaysian
society is gradually getting eroded11•
Causes of Rural Poverty
In Malaysia, major causes of poverty differ from state to state; and
within the state, from district to district, depending upon the nature of
poverty and types of poor. In fact, there is a wide variety of causes afflicting
rural poor. However, certain characteristics of economic and social nature
which are prevalent throughout the country bind the rural poor to make
them look homogeneous mass. At macro level, these, inter alia, include
uneconomic size of land holdings, use of traditional technologies, lack of
credit and marketing facilities, inefficient transport system, low productivity,
middlemen exploitation, lack of access to schooling and lack of
opportunities for work in the informal sector that can supplement the
family income12 .
While tracing genesis of rural poverty in Malaysia, it can be argued
that as in many other developing countries, rural poverty in Malaysia too
has its seeds in the ruthless exploitation of its natural resources by the
British colonial administration. Rural poverty under British rule was
stratified along ethnic lines. Malays, who were dependent upon agriculture
for their livelihood, were the worst sufferers as size of their holdings were
11 See, http:/ jwww.devnet.org.nz/conf/Papers/nair.pdf.
12 Zin, n.3, p.206.
10
very small; consequently productivity of Malay peasants on the average
was lower as compared with Chinese who were engaged in mix farming
(farming of vegetables and livestock production) 13 • In addition, Malay
peasants were considered 'lazy' and this was also attributed as reason for
their poor conditions.
The conservative economic policies followed by the government of
Malaysia before enunciation of the NEP abetted rural poverty. For example,
due to the government policy of maintaining fixed price for paddy, the
prices remain unchanged in spite of moderate increases in the prices of
purchased inputs and consumption goods. The net effect of this disparate
development was a serious deterioration in the economic position of rural
poor and this resulted into increased underemployment and
unemployment in rural areas. For instance, among paddy farmers in some
areas, there was over 50 per cent underemployment for four months of
the year when there was little off-farm work available14 • It may be mentioned
here that paddy farmers are one of the worst affected rural poverty groups
in Malaysia.
Prior to independence and the years preceding thereafter, the
Malaysian economy, by and large, followed laissez-faire system of
development. This system had caused the poor, especially the peasants in
13 J T Purcal, "Rural Economic Development and its Impact on Economic and Social Integration in West Malaysia", in Judith A. Nagata, ed., Pluralism in Malaysia: Myth and Reality- A Symposium on Singapore and Malaysia (Toronto, 1975), p.66.
14 Ibid., p.70.
1 1
the rural areas, to fall victim to various types of exploiters at three levels :
namely, the landlords, middlemen and money-lenders at the village level;
the big capitalists and feudal groups at the state level; and the foreign
monopoly at the international level. Under such type of multi-level
exploitation, rural poor were the worst sufferers.
In the rural peasant economy consisting of paddy farmers, fishermen,
rubber plantation smallholders 15 and mixed farming of various agricultural
crops, linkages of individual farmer vis-a-vis the modern sector were
historically established through middlemen and traders who were mostly
Chinese. And as is common in most peasant economies, the middlemen
provided various types of important economic services to farmers such as
complementary factor inputs, credit, transportation and processing
facilities. In lieu of these facilities, they manipulated the system in their
favour and perpetually exploited the peasants and hence, poverty
continued.
To protect Malays from the economic encroachment of other ethnic
groups, the Malay Reservation Act was promulgated in 1913. According to
this Act, lands designated for Malays can neither be sold nor leased or
mortgaged to a person of another ethnic group under any circumstances16 .
While the Act ensured land rights reserved for Malays in certain areas of
West Malaysia, it also, in a sense, confined Malays into their villages and,
15 The term 'smallholder' is commonly linked to th size of a landhlding a person possesses. A smallholder normally derives his/her livelihood from a holding ranging between 1.5 to 2.5 hectares.
16 Purcal, n.l3, p.71.
12
thus, isolating them from availing of the nev.r economic opportunities
becoming available in other parts of the country. In other words, the Malays
did not utilise new opportunities to come out of the poverty trap.
In the international perspective, however, external factors have been
as much responsible for poverty as internal ones. Tracing the genesis of
underdevelopment and poverty in Malaysia, some analysts have argued
and blamed ruthless colonial exploitation of the country's economy. As
exporter of commodities based on its natural resource endowments such
as rubber, palm oil and cocoa, terms of trade showed secular deterioration
in the second half of the 19th century and early part of the 20th century.
Even in the post-independence period, lack of diversification of the
economic activities and heavy dependence on primary commodities for
survival and strong linkages with the erstwhile colonial rulers led to the
divergence of Malaysia's development levels and perpetuated poverty,
unemployment and backwardness, especially in the rural areas.
However, agriculture sector, in which majority of rural population of
Malaysia has been engaged for a long period, is subject to law of diminishing
return. It suffers from technological backwardness and is vulnerable to
the vagaries of nature. The domestic terms of trade turned favourable to
manufacturing and services sectors with the process of accelerated
development, thus leaving the agriculture sector to a low level of
development.
Further, many of the writings on 'internal colonialism' explain vividly
poverty divergence levels within the state and its various sub-state strata,
13
thanks to socio-political structure and production relations. Malaysia has
been no exception in this context.
Definitions of Poverty
Available literature on definition of poverty has remained inconclusive
so far. There has been various methods in vogue to define poverty. In fact,
the way poverty is conceptualised, defined and measured has a significant
bearing upon the impact of poverty eradication efforts. Defining poverty is,
therefore, very important. Generally, poverty is described as a condition of·
insufficiency to acquire basic needs. It is well known that the basic needs
are food, shelter and clothing. Are these the only ones? or a person is said
to be not suffering from poverty if he I she acquires these basic needs. Two
things arise from this question. First, what about the existence of such
utilities and social infrastructure like supply of electricity and potable
water, availability of doctors and hospitals and opportunities for continuing
education. In developed countries, these are considered as part of basic
needs. Secondly, even if basic needs are met, what quar1tity of them constitute
the level of sufficiency? So, by defining poverty as the insufficiency of basic
needs, we still do not have clear picture of its meaning. What is regarded as
'basic needs' or 'insufficiency' vary according to the level of development
achieved by a particular country. In fact, insufficiency of basic needs arises
because people are unable or cannot aiiord to get them. Whether an individual
can afford to have the basic needs and social facilities sufficient for himself
and his family depends on his income. In other words, poverty can be
measured according to income earned by an individual or his family. When
14
an individual does not have enough money to enable him to acquire the
basic needs and social facilities, at the very minimum, then he is in a state
of poverty.
According to the commonly perceived definition of the World Bank,
an individual's expenditure falling below one ( 1) US Dollar a day is
categorised as poor17 • However, given GDP calculation in purchasing power,
the criteria of defining poor may be quite different. Further, different
organisations, notably NGOs, have used different criteria to define poverty
by taking into account the local socio-economic conditions.
In fact, an important component or pre-requisite of the fight against
poverty is an agreement on the definition and measurement of poverty. In
Malaysia, the government has taken the lead in this task, after consultation
with various experts and groups. The government has adopted income
method as the criteria to define and measure poverty. Table 3 provides the
weightage given to different components in poverty line income with food
having the highest weightage (63.3) followed by rent and fuel ( 13) in
Peninsular Malaysia in 1997. The income data used for estimating poverty
incidence have been derived from several official surveys, namely, the Post
Enumeration Survey of the Population Census 1970 (PES 1970),
Agriculture Census 1976 (AgCensus 1976), Household Income Surveys
(HIS) of 1979, 1984, 1987, 1989, 1993 and 1995. These census/surveys
have been conducted by the Department of Statistics, Government of
17 World Bank, World Development Report 2000/2001, on "Attacking Poverty" (Washington, 2001), p.27.
15
Source: Economic Planning Unit, Prime Minister's Department, Government of Malaysia, Kuala Lumpur, 1998.
Malaysia. The detailed reports. of these surveys are not available to the
public except for summary data published in official documents18•
The income method of poverty, however, is subject to certain
limitations. Firstly, it is generally agreed that the census/ surveys have
not employed a consistent and comparable income concept and approach
in conducting various surveys. Secondly, the income concept used in various
estimates is the household income, not an individual income. Anand (1983)
explained that household income dc:)es not provide a good indication of
inequality in the levels of living as it does not take into account of. the
differences in household size and composition, and economies of scale in
consumption 19• Thirdly, a separate PLI (Poverty Line Income) for urban
18 Zin, n.3, p.201.
19 Sudhir Anand, Inequality and Poverty in Malaysia: Measurement and Decomposition (NewYork, 1983) asquotedinibid.,pp.201-2.
16
and rural areas has not been constructed which is required because the
relationship between food intake and consumption expenditure varies by
region, activity levels, relative prices and taste. This would result in an.
underestimate of the incidence of urban poverty since the income level
required to sustain a subsistence level household in the rural areas would
not be adequate for a similar household in the urban areas. Fourthly, the
Malaysian PLI does not take into account the differences in household
size between rural and urban households. And lastly, the PLI also neglects
the differences in consumption pattern between urban and rural households
as well as the changes in consumption patterns as income grows.
Nevertheless, the definition of poverty as adopted by the Malaysian
government is, by and large, accepted as this has become the basis to
plan, implement and evaluate the impact of anti-poverty programmes. This
has been done by adopting three concepts of poverty, viz., absolute poverty,
absolute hardcore poverty and relative poverty.
Absolute poverty has been defined as a condition in which the gross
monthly income of a household is insufficient to purchase certain
minimum necessities of life. These necessities include a minimum food
basket to maintain household members in good nutritional health and
other basic needs viz., clothing and footwear, rent, fuel and power,
transportation and communication, health care, education and recreation20 .
20 For more details on absolute poverty, see Steward mac Pherson and Richard Silbum, "The Meaning and Measurement of Poverty" in John Dixon and David Macarov, eds., Poverty: A Global Reality (London, 1998), pp.1-18.
17
To facilitate the measurement of this condition, a poverty line income
has been constructed and used based on the basic costs of the items namely,
food items, clothing and footwear, rent, fuel and power, transportation and·
communication, health care, education and recreation. Further, since the
PLI is linked to the consumer price index or CPI, it has been periodically
revised in line with movements in the CPl. Since the cost of living and
household size over different parts of Malaysia are not the same and hence,
separate PLis and household sizes have been constructed for Peninsular
Malaysia, Sabah and Sarawak as is evident from Table 4. However, no
differentiation has been done with regard to urban and rural PLI and
household size.
In Malaysia, a poor is one whose income falls below Ringgit Malaysian
(RM) 529 per month in peninsular Malaysia, RM 690 in Sabah and RM 600
in Sarawak region as per 2002 data (Table 4). The corresponding household
size for the said three regions is 4.6, 4.9 and 4.8 respectively. But at the
national level, poverty line income has been adopted as the main criteria
which was developed by the Economic Planning Unit of the Prime Minister's
Department. According to this criteria, a poor is one who does not have ((an
income sufficient to purchase a minimum food basket to maintain a
household in good nutritional health and the conventional needs in respect
of clothing and footwear, rent, fuel and power, transport and
communication, health, education and recreation"21 • The criteria to define
21 Ministry of Rural Development, "Malaysia- Route to Poverty Alleviation- Programmes and Projects", Paper presented at the International Training Course on Localising the Anti-Poverty Agenda : The Malaysian Experience, held at Kuala Lumpur, Malaysia on 22 September- 12 October, 2002, p.l.
18
poverty as described by the government has been more widely accepted in
the country mainly because resources for poverty alleviation are allocated
on the basis of this criteria.
Absolute hardcore poverty has been defined as a condition in which
the gross man thly income of a household is less than half of the PLI. This
definition was introduced in 1988 to enable more accurate targeting of
poverty redressal projects to the hardcore poor. Important among hardcore
poverty sub-groups in Malaysia are widows, old people, handicapped and
Table 4
Poverty Line Income : Regional Estimates
Year
1970
1976
. 1979
1984
1987
1989
1992
1995
1997
1999
2002
Peninsular Malaysia
RM
163
243
274
349
350
370
405
425
460
510
529
Household Size
NA
NA
5.4
5.1
5.1
5.1
4.8
4.6
4.6
4.6
4.6
RM
NA
377
410
540
533
544
582
601
633
685
690
(Ringgit per month per household)
Sa bah
Household Size
NA
NA 5.4
5.4
5.4
5.4
5.1
4.9
4.9
4.9
4.9
RM
NA
307
347
428
429
452
495
516
543
584
600
Sarawak
Household Size
NA
NA 5.6
5.2
5.2
5.2
5.1
4.8
4.8
4.8
4.8
Note : Ringgit is Malaysian currency. i.e., RM. Presently 1 US$= 3. 75 RM Approx.
Source: Ministry of Rural and Regional Development, "Poverty Reduction in Malaysia: Towards Achieving Millennium Goals", Paper presented at the Intemational Training Course on Localising the Anti-Poverty Agenda: The Malaysian Experience, held at Kuala Lumpur, Malaysia on 11-30 September 2005, p.14.
19
indigenous communities. Each of these sub-group typically has
unique problems and, therefore, has to be dealt with differently if the
poverty has to be wiped out from the country. "Hardcore" poor is roughly
equivalent to "extreme" poor and this refers to extent of poverty in the
country. In terms of age group, incidence of poverty as per 1999 data, was
highest (21. 7 per cent) among 65 years and above i.e., old people and lowest
among those in age group of 40-44 years (3.1 per cent) i.e., high productive
age.
Relative poverty : The definition of absolute poverty has become
increasingly unacceptable in those parts of the world where higher general
levels of living have been achieved. In a country like Malaysia which is
experiencing rapid growth and apparent reductions in the incidence of
absolute deprivation, poverty is increasingly defined in relative terms. As
the threat of starvation recedes, questions concerning the appropriate
distribution of income and opportunity assume greater importance. In this
situation, the definition of poverty moves away from minimal, physical
survival notion to the direction of a relative, varying definition which puts
increasing emphasis on social survival and attaches value to "quality of life"
that even the poorest in a community should be able to enjoy. A different
vocabulary is developed to introduce notions of social participation, of social
20
TH 362.509595
098 Ru
lllllllllllllllllllllllllllllil TH13901
inclusion and exclusion, 'of citizenship and of erripowerment22 .
The concept that has been used in Malaysia is linked to the notion of
income disparity between groups. Thus, a group whose mean income is less
than those of another group has been defined as being in relative poverty.
Under this definition, it is possible to define a group, for example, rural
dwellers, as being in relative poverty to another group, namely, urban
dwellers, even though their mean income exceeds the PLI. Relative poverty
is a dynamic concept, meaning that the line "shifts" with changes in the
overall condition of the economy. In fact, measurement of relative poverty is
0 much more complex as it requires data updating from time to time concerning C) ('\) income distribution, norms, values and attitudes of the groups in the society. -I
F In Malaysia, relative poverty has been measured by using income
disparity ratios oftop 20 per cent and bottom 40 per cent income groups. It
has also been used to measure relative income of different ethnic groups. In
fact, Malaysia has had the highest disparity in the Asia-Pacific region with
an income disparity ratio of 11.7 per cent between the richest 20 per cent
and poorest 20 per cent of the population-in 1999. While income distribution
patterns during the period 1970-1990 showed improvements with declining
income inequalities, the period of the 1990s and beyond showed a reversal
22 For more details on relative poverty, see Steward macPherson and Richard Silbum, "The Meaning and Measurement of Poverty" in John ~d David Macarov, eds., Poverty: A GlobalReality(London, 1998), pp.1-18. p~() ..
(i/ ' .. '( \ ~ \
. 21 {·~(library .. ;~\ ~~\ -/0/J ~~~/ .
·· ... :~
of these trends. The Gini coefficient23 decreased to 0.446 in 1990 from 0.513
in 1970 but again increased to 0.459 in 2002 as per data in Table 6. Like
wise income disparity ratio between rural and urban households first
decreased from 1:2. 1 in 1970 to 1: 1. 7 in 1990 but again increased to 1:2.1 in
2002 (Table 6). Income disparities in Malaysia have significant ethnic
overtones and income disparities between Bumiputra and non-Bumiputra
households first showed progressive decline during 1970-1990 but started
widening during 1990s and beyond despite affirmative policy measures to
narrow the gap between these households. For example, the income gap
between Bumiputra and Chinese decreased from 1:2.3 in 1970 to 1:1.7 in
1990 but slightly increased again to 1: 1.8 in 2002 (Table 6). Relative poverty
in the context of growing affluence has the potential to be politically volatile
as some groups or factions within the country are deprived from enjoying
the benefits of development. Such groups, despite an improvement in their
socio-economic status in absolute terms, continue to feel a sense of
Table 6
Malaysian Development Performance and Relative Income Disparity
1970 1990 1999 2002
Bumiputra: Chinese 1:2.3 1: 1.7 1: 1.7 1:1.8 Bumlputra: Indians 1: 1.8 1: 1.3 1: 1.3 1:1.3 Rural : Urban 1: 2.1 1: 1.7 1: 1.8 1:2.1
Gini coefficient 0.513 0.446 0.443 0.459
Source : Ali Hamsa, "Enabling Policy Framework for Poverty Alleviation", Paper presented at the Intemational Training Course on Localising the Anti-Poverty Agenda: The Malays!·an Experience, Kuala Lumpur, 28 September- 17 October, 2003, p.39.
23 Gini Coefficient is half the expected absolute difference in the incomes of any two individuals, chosen at random, as a proportion of the mean income.
22
deprivation and frustration. Most of them belong to poorest groups in villages,
settlement plantations and in the urban shanty towns/ slums.
Category and Occupational Structure of Rural Poor
Before devising any strategy to alleviate poverty from rural Malaysia,
it will be more appropriate to find out as to who rural poor are and what are
their occupations. Rural poor are heterogeneous mass. They comprise mainly
rubber smallholders, coconut smallholders, paddy farmers, estate workers
and fishermen. Among these groups, jncidence of poverty has been highest
among paddy farmers (58 per cent) followed by fishermen (43 per cent),
estate workers (39 per cent), rubber smallholders (39 per cent) and coconut
smallholders (31 per cent) in agriculture sector in West Malaysia in 199524•
A closer examination of occupational structure of poor has revealed
that majority of paddy farmers and fishermen are Malays. Removal of poverty
of the Malays was one of the major objectives of the New Economic Policy
(NEP) when it was introduced in 1971. Thus, while it was felt that the poverty
alleviation target of the NEP has been, by and large, achieved, yet there
remains pockets of poverty especially in areas which were by-passed by the
development process and where the benefits of development have not 'tricked
24 Abdul Aziz Abdal Rahman and Chamhuri Siwar, "Poverty Alleviation through Microfinance : Potentials and Constraints", Paper presented at the AARDO-CIRDAP International Seminar on Poverty Alleviation through Micro-finance : Potentials and Constraints, held at Kuala Lumpur, Malaysia on 30 October- 2 November 2002, p.3.
23
down' to reach all sectors and regions of the country25• In addition, there
were considerable number of Chinese and Indians who were below poverty
line income.
Geographic Distribution of Poor
Colonial exploitation of resources has had a detrimental impact on
the process of economic development of Malaysia. Ever since the country
attained independence from the British rule, poverty has had been rampant
both in Western as well as Eastern Malaysia. Thanks to developmental
efforts over a period of time, Western (or Peninsular) Malaysia progressed
faster vis-a-vis Eastern Malaysia and poverty fell more rapidly in that part
of the country. For example, incidence of poverty fell to 6. 7 per cent in
1997 from 15.7 per cent in 1990 in Peninsular Malaysia while in Sabah
region of Eastern Malaysia it fell to 16.5 per cent from 29.7 per cent during
the sar.ne period (Table 7). Factors responsible for this included population
concentration in Peninsular Malaysia (around four-fifth of total Malaysian
population), and therefore launching most of the development projects in
that region. In addition, seat of Federal Government is in Peninsular
Malaysia and this might have had persuasive appeal to policy-makers to
alleviate their poverty since they were more directly visible to them. A further
examination of incidence of poverty of different states of Peninsular Malaysia
suggests that the less industrialised states such as Kelantan, Trengganu
and Perlis have a higher incidence of poverty as compared to the more
25 Zin, n.3, p.206.
24
Table 7
State-wise Incidence of Poverty, 1990 and 1997 (Per cent of Household)
S. No. State 1990 1997
1 Johor 9.8 1.6 2 Kedah 29.9 ll.5 3 Kelantan 29.6 19.2 4 Melaka 12.4 3.5 5 Negeri Sembilan 9.1 4.7 6 Pahang 10.0 4.4 7 Pulau Pinang 8.7 1.7 8 Perak 19.2 4.5 9 Perlis 17.4 10.7 10 Selangor 7.6 1.3 11 Trengganu 31.3 17.3 12 Wilayah Persekutuan 3.7 0.1 13 Sabah 29.7 16.5 14 Sarawak 21.0 7.3
Source: Economic Planning Unit, Prime Minister's Department, Government of Malaysia, KualaLumpur, 1998.
industrialised states such as Selangor, Pulau Pinang and Negeri Sembilan.
Again, the more industrialised states are in the more advanced stage of
transformation and therefore command higher returns and income.
Nevertheless, there has been significant reduction in the incidence of poverty
in all states (Table 7) .
. While delving deeper into the causes of poverty of Kelantan and
Trengganu, one finds that these states are located on the East Coast and
therefore, were less affected by the colonial experience. The heaviest
concentration of European economic activities was on the West Coast,
especially in tin mining and rubber estates. The East Coast, isolated by a
spine of mountains running down the middle of the peninsular and by a
lack of adequate port facilities compounded by high seasonal seas did not
receive due attention of the colonial regime. Roads, railways and other
25
infrastructure facilities were concentrated on the West Coast and were
designed to facilitate the exploitation of extractive economy of the colonial
regime. Non-Malay migrants, primarily Chinese who worked in the tin mines
and developed a dominant position in the wholesale and retail trade, and
Indians who worked on British plantations and for the British administl~ation,
were also concentrated on the West Coast. Consequently, the East Coast
states remained more prone to poverty due to lack of 'developmentalist'
efforts. This historic legacy continued ever after independence as is evident
from the highest concentration of poverty incidence in the states ofKelantan
(19.2 per cent) and Trengganu (17.3 per cent) as per 1997 data in spite of the
fact that poverty from Peninsular Malaysia has been considerably removed.
In Eastern Malaysia, rural poverty has remained dominant in both·
the states viz., Sabah and Sarawalc These two states are suffering more
from poverty conditions compared with the Peninsular Malaysia despite
the fact that a variety of natural resources are found in this part of the
country. Rural poverty alleviation efforts received serious attention after
the living conditions improved in Peninsular Malaysia. In addition, most of
the hardcore poor are found in this part of the country. That is why,
poverty line income is higher in Sa bah (RM690), followed by Sarawak
(RM600) and Peninsular Malaysia (RM529).
Ethnic Dimension of Rural Poverty
'Ethnic' identification of rural poverty and its alleviation has been the
core issue in the overall poverty alleviation programmes of Malaysia
particularly after the violent ethnic clashes of May 1969. Available literature
26
on rural poverty in Malaysia is replete with ethnic dimension of poverty. Of
the three main rural ethnic groups, namely, Malays, Chinese and Indians,
Malays are poorer vis-a-vis Chinese and Indians despite being numerically
higher26 •
Since ethnic identity has had a consideration in the allocation of
resources for poverty alleviation programmes particularly after 1971, it
would be appropriate to understand first of all the poorest ethnic group
namely, the Malays as to who they are and what is their constituent of the
total rural poverty. The Malay community comprises a mixture of indigenous
Malays and various migrant groups from Indonesia, including Minangkabau,
Javanese, Acehnese and Bugis, as well as migrants from Pattani on
southern Thailand's East Coast. The Mal~ys as defined in Article 160 (2) of
the Malaysian Constitution are persons who profess the Muslim religion,
habitually speal{ Malay language and conform to Malay customs. The term
'Bumiputra' which translates literally 'Sons of the Soil', has assumed a
special legal meaning after the formation of Malaysia and
currently includes the Malay as defined by the Constitution, and the
indigenous peoples of Sabah and Sarawa}{ as well as the aboriginal groups
or Orang Asli27• The inclusion of aboriginal people as part and parcel of the
Malay community further strengthen their position both in terms of resource
26 Bumiputras accounts for 61 per cent ofthe population, the Chinese 30 per cent, the Indians 8 per cent and other minority groups made up the remaining 1 per cent.
27 Orang Asli (a Malay term which means 'original people') is the official and more acceptable term to describe the 'Aboriginal People' of Peninsular Malaysia. The Orang Asli are by no means a homogeneous ethnic entity. They are divided into three different ethnic groups- the Negritos, the Senoi and the Proto-Malays. These in tum can be subdivided into different 'tribal' groups of which the major ones are the Senoi, Temiar, Jakun, Semelai and Negritos.
27
allocation for poverty alleviation projects and socio-political development.
In fact, aboriginal people are one of the poverty target groups and their
inclusion as part of the Malay community entitles them with special privileges
and concessions in order to bring them above poverty line.
The ethnic dimension to rural poverty should also be understood in
the context of political and economic friction between Malays and non-
Malays. While non-Malays namely, Chinese, Indians and Europeans have
considerable control over the country's economy and dominate urban life,
the Malays are predominantly rural producers of primary products, the
marketing of which essentially is not totally under their control. The major
towns of Malaysia are foreign ground to most rural Malays, and conversely
rural Malay villages are foreign to most urban Malaysians28• Interaction
between urban and rural Malaysians essentially is lill!ited to marketing
and other economic relationships which are fraught with tension since rural
Malays feel indignant over unequal distribution of resources and blame
urban dwellers for their poverty conditions. In fact, in electoral politics,
ethnic economic inequality has been a major campaign point of both the
political parties viz., UMNO (United Malays National Organisation) and PAS
(Partai Islam Sa-Malaysia). This is also reflected in the government's policies
to restructure economy by uplifting Malay community including removal of
their poverty.
To further reinforce the arguments that the conditions of Malays are
28 Conner Bailey, The Sociology of Production in Rural Malay Society (Kuala Lumpur, · 1983), p.ll.
28
definitely not better than those of non-Malays, a number of studies have
been carried out mainly by the Malay scholars, NGOs activists and academic
institutions. A study on income distribution confirmed that the economic
position of Malays at the end of the 1960s was significantly inferior to that
of non-Malays29 . In Peninsular Malaysia, the average per capita income of
Malays was half that of the Chinese. Although Malays accounted for more
than half of the total peninsular population, almost 80 per cent of them
worked in rural areas in traditional agriculture - the breeding ground of
poverty. As against this, only half of the non-Malays worked in rural areas.
Malay agriculturalists typically owned small plots of land and the vast
majority earned incomes which kept them at or near subsistence levels.
Malay fishermen also are typically poor, and their small boats and simple
equipment have increasingly been competing disadvantageously with larger
and more efficient boats controlled by urban, usually non-Malay,
merchants.
No doubt, there is little hunger and probably no starvation among
rural Malays, but their relative poverty in comparison to urban non-Malays
points to considerable inequality in income distribution. Income disparities
between Malays and non-Malays households, despite having declined during
197( -1990 started widening during 1990s despite affirmative policy measure
to narrow the gap between these households as explained earlier (Table 6).
Thus, relative poverty has the potential to threaten national unity as deprived
29 During 1957-1970, the average income ofthe bottom 10 per cent of all households (majority of them were Malays) decreased by 31 per cent, from $49 to $33 per month.
29
groups may harbour hatred or ill-will particularly towards affluent urban
class.
Despite efforts by the government, the majority of rural dwellers will
continue to be Malays in the foreseeable future. As agriculturalists and
fishermen, their primary day-to-day concern has been earning a living for
themselves and attempting to ensure a decent standard of living for their
children. Such concerns are perhaps much more immediate than questions
of ethnic solidarity, which typically arises to the forefront of consciousness
only during political campaigns. Daily life at the village level revolves around
production processes and the social relationships which are directly
influenced by these processes.
One of the objectives of NEP namely, restructuring ethnic share of
incomes and employment, has been fundamentally tied to rural poverty.
Because a large portion of rural, low-income households are Malays, a
reduction in rural poverty would evidently narrow ethnic income imbalances.
The government's spending on Malays is particularly evident in rice farming
and land development programmes. For example, the 4.4 per cent average
annual rate of real growth of agriculture, forestry and fishing in Peninsular
Malaysia between 1970 and 1975 was accompanied by significant gains in
the eradication of rural poverty. This strong performance ofthe agricultural
sect~r during the Second Malaysia Plan (1971-75) generally led to higher
incomes, moving a large number of Malay households, as well as non-Malay
30
households, above the poverty line30• Poverty among agricultural households
fell from 68 per cent to 63 percent during the period. More details about the
link between rural poverty and agricultural development are given in
chapter 4.
Trends in Poverty Alleviation during 1990s
The 1990s was a turning point in the rural poverty alleviation
programmes of Malaysia as, it was presumed by development planners,
this ·is the last decade before poverty is completely wiped out from the
country. This decade had posed a challenge before the government as it
witnessed fall, rise and again fall of rural poverty in Malaysia during the
Asian Financial Crisis of 1997-98.
During the 1990s, the focus of rural poverty alleviation programmes
was shifted to hardcore poor as incidence of absolute poverty has been
consistently declining since mid-1970s. For the first time, the Malaysian
government distinguished between hardcore poor and absolute poor in
1988; hence launched a number of programmes to alleviate poverty of the
hardcore poor during 1990s. For example, a novel scheme for hardcore poor,
namely, Bumiputra Unit Trust- Development Programme for Hardcore Poor
(BUT-DPHP) was introduced in 1992. The scheme provided each hardcore
poor household a one-time interest-free loan up to a maximum of RMS,OOO
to purchase shares in the BUT31 . Repayment amount of the loan was
30 Kevin Young, Willem C.F. Bussink and Parvez Hasan, Malaysia: Growth and Equity in a Multiracial Society (Baltimore, 1980), A World Bank Country Economic Report, p.224.
31 Abbas, n.9, pp.ll-12.
31
deducted from the annual dividends and bonuses. The remaining amount
became an additional source of income for the unit holders and went in
some way towards alleviating their poverty. More importantly, participat'ion
in the scheme gave hardcore poor a sense of being a partner in the growth
of the corporate sector in Malaysia. Thus, in its own small way, the scheme
helped to prevent the hardcore poor from feeling marginalised or neglected
from their more fortunate fellows.
Social sector, a basic parameter to judge poverty, received priority in
the development expenditure of federal government during 1990s. The
share of social expenditure (education, health and housing) increased
from 24.8 per cent during Sixth Malaysia Plan (1991-1995) to 31.6 per
cent during Seventh plan ( 1996-2000) and yet further went up to 41.4 per
cent during the Eighth Malaysia Plan (200 1-05) (Table 8). The increase in
social expenditure reconfirmed government's commitment to wipe out
poverty from the country.
In 1991, phase II of the Operation Perspective Plan (OPP2) was launched
with focus on 'balanced development' in terms of growth and equity,
balanced development of major sectors, namely, agriculture, manufacturing
and services. This strategy has had a bearing on the rural poverty alleviation
programmes too as new initiatives were tal{en to boost agriculture growth
which was otherwise weak compared to manufacturing and services sectors.
Under OPP2, poverty eradication strategies, among others, included
concerted efforts by the government and plantation sector to improve
standard of living of poor estate workers.
32
Table 8
Development Expenditure under various Malaysia Plans
(Per cent of Total)
Sector 4MP SMP 6MP 7MP 8MP
1 Economic Sector 60.5 64.8 50.6 47.6 41.7 ofwhich: Agriculture 16.3 20.8 11.6 8.2 4.8 Industry 13.6 11.3 7.4 11.4 7.1 Infrastructure 20.2 21.5 22.5 21.0 22.2
Utilities 9.9 10.2 T8 5.5 6.1 2 Social Sector 21.5 24.8 24.8 31.6 41.4
ofwhich:
Education 10.1 16.1 13.4 19.9 25.0
Health 1.6 2.6 4.4 3.8 5.9 Housing 8.5 4.1 3.3 3.4 3.9
3 Security 16.2 7.2 20.1 11.8 10.1 4 Administration 1.8 3.2 4.5 9.0 6.8
Total 100.0 100.0 100.0 100.0 100.0 (RM billion) 46.3 35.3 54.7 99.0 170.0
Note: 4 MP =Fourth Malaysia Plan (1981-1985); 5 MP =Fifth Malaysia Plan (1986-1990); 6 MP = Sixth Malaysia Plan (1991-1995); 7 MP = Seventh Malaysia Plan (1996-2000); 8 MP = Eighth Malaysia Plan (200 1-2005).
Source : Allauddin bin Anuar, "Making Sense of History and Its Implication on Public Policy Formulations in Malaysia", Paper presented at the Intemational Training Course on Localising the Anti-Poverty Agenda: The Malaysian Experience, Kuala Lumpur, 11-30 September, 2005, p.75.
·Another important factor during the 1990s was Malaysia's joining of
World Trade Organisation (WTO) in January 1995. Under the WTO
agreement, the country has to phase out the subsidies in a given time frame
as the subsidies will not remain perpetually available to implementing
poverty alleviation projects, and hence the country requires a foolproof
strategy to wipe out poverty from the country. In addition, the forces of
privatisation, liberalisation and globalisation were unleased during the
1990s which made many developing countries including Malaysia to be
33
more vigilant as far as their poverty alleviation programmes were concerned.
To insulate the country from the adverse effects ofprivatisation, liberalisation
and globalisation on poverty, Malaysia· allocated special funds for social
development progrmnmes.
The 1990s also witnessed one of the worst crises in the economic history
of South-east and East Asian countries as social development programmes
including poverty alleviation were adversely affected due to negative growth
experienced by Malaysia and other Asian countries during 1997-98. During
the crisis period, the incidence of overall poverty increased to 8.5 per cent in
1998 from 6.8 per cent in 1997 mainly due to meagre growth rate.
Fortunately, with the economic recovery in 1999, the incidence of poverty
again declined to 8.1 per cent (Table 1). It is, thus, important to learn how
. Malaysia tackled its crisis without much of the social upheaval. The economic
crisis also questioned the conventional wisdom of relying upon economic
growth as a sole factor for alleviation of rural poverty.
In 1998, Malaysia took major initiative to change the criteria of living
standard from poverty line income to quality life index as the latter is more
comprehensive and surpasses from the basic needs of individuals and their·
psychological needs to achieve a level of social well-being compatible with
the nation's aspirations. The Malaysian Quality of Life Index (QLI) is computed
by using 38 indicators derived from ten key areas which are income and
distribution, working life, transport and communication, health, education,
housing, environment, family life, social participation, public safety and
34
culture and leisure32 • QLI has been designed to tackle relative poverty as
Malaysia has achieved advancement in the standard of living over a period
of time.
This chapter has attempted to evaluate basic poverty issues such as
definition, causes, geographic location and occupational structure of rural
poor. By doing so, it has attempted to help in understanding the ensuing
chapters in their proper perspective.
32 For more details on quality of life index, see Economic Planning Unit, Malaysian Quality of Life 2004, Prime Minister's Department, 2005.
35