Home 2010: 2 Who are the poor in Malaysia?

Who are the poor in Malaysia?

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The poor often get a raw deal. Francis Loh observes they can be found within every ethnic group. Thus, he says, efforts to eradicate poverty should cater for all. 


A major assumption for the adoption of the affirmative-action New Economic Polciy (NEP, 1971-90) was that a majority of bumiputera families were still living below the poverty line in 1970. Thus one of the two prongs of the NEP was ‘to eradicate poverty regardless of race’. (The other was to restructure economic occupations so that occupations would not be associated with ethnic groups.) Hence in the Five-Year Plans, Malay padi farmers, rubber smallholders, fishermen, the indigenous peoples of Sabah and Sarawak living in the interiors, but also the predominantly Indian estate labourers, Chinese New Villagers, and urban squatters of all races, were perennially identified as the poor in need of government aid and attention.

Providing such aid is related to the question of economic development. In this regard, the BN government has managed our economy relatively well by successfully adapting it to the global market economy. Through a series of Five-Year Plans, economic development and the NEP goals were vigorously pursued. This growth was facilitated by the fortuitous discovery of oil (including liquefied natural gas) and high rates of foreign direct investment (FDI), especially in the export-oriented electronics and electrical industries and in the services sector.

Overall, employment expanded steadily, rising from 3.3 million in 1970 to 4.8 million in 1980 to 6.7 million in 1990, to 10.9 million in 2005. Accordingly, the unemployment rate declined from 7.4 per cent in 1970, to 5.7 per cent in 1980, rose to 8.6 per cent in 1987 during a period of recession, dropped to 5.1 per cent in 1990, but rose again when the regional financial crisis occurred in 1997-98.  As the economy improved during the 2000s, the unemployment rate dropped to 3.5 per cent in 2005.

Not surprisingly, the poverty situation in Malaysia has also improved. In the Ninth Malaysia Plan (2005-2009), it is reported that only 3.6 per cent of all households in the peninsula, 4.4 per cent in Malaysia as a whole (using the traditional system of measurement), lived below the poverty line; whereas the rate of poverty was 49.3 per cent in the peninsula in 1970.

Even if one quibbles with how the poverty line is determined (and this varies from country-to-country), or doubts the accuracy of government data, the trend is towards fewer families living below the poverty line. If one uses the UNDP’s more comprehensive Human Development Index (HDI) to measure development in Malaysia, the achievements are still impressive. In 2004, Malaysia was ranked 59 in terms of its HDI, among the top medium-ranking countries in the world. Only Singapore performed better among Asean countries.

Using a variety of measurements, we can also determine that the number of poor bumiputera families has dropped. Increasing numbers of Malays have moved out of lower-paying into higher-paying occupations due to:

  • greater access to higher education,
  • the provision of government scholarships and a system of quotas for entrance into tertiary-level institutions;
  • higher rates of Malays living in urban areas; and
  • expansion of the public sector especially during the first 15 years of the NEP.
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Globalisation and neo-liberal policies

The National Development Policy (NDP, 1990-2000), which replaced the NEP, continued with the twin objectives of poverty eradication and restructuring. But it was the latter goal of creating a BCIC (Bumiputera Commercial and Industrial Community) and achieving at least 30 per cent bumiputera ownership of corporate equity that were emphasised. Continuing the strategy adopted for economic recovery and growth since the mid-1980s recession, the private sector was identified as the engine of economic growth for the duration of the NDP. Put another way, Malaysia began to roll back the intervention of the state in the economy and adopted neo-liberal policies of privatisation, deregulation and liberalisation in line with the demands of the new globalisation.

Major infrastructural projects like the construction of KLIA, the KLIA Express, the Second Link with Singapore and the administrative centre in Putrajaya were awarded to the private sector. Many statutory bodies providing services were also privatised: Telecoms Malaysia, the National Electricity Board, Malayan Railways, and other bodies supplying water, treating sewerage, and garbage collection. Higher education and some health services were corporatised, a version of privatisation.

Liberalisation of the financial sector also led to the inflow of portfolio capital into the money market and the KL Stock Exchange, while deregulation led to the gradual removal of restrictions on foreign involvement in the banking industry. Although foreign and Chinese business people benefited from neo-liberal policies, the bulk of the benefits were enjoyed by bumiputera businesspeople, particularly those with the best political connections, otherwise known as ‘cronies’. In the event, there occurred an increase in the bumiputera share of corporate equity: according to official estimates, rising from 1.5 per cent in 1969 to 20.6 per cent in 2004, and according to unofficial estimates, exceeding 30 per cent in several important sectors like banking and transportation.

New inequalities, new poor

The adoption of neo-liberal economic policies in order to make Malaysia attractive in the era of a globalised market economy has resulted in several contradictions.

First, regional inequalities have widened.  The Klang Valley, southern Johore and the state of Penang have grown rapidly while the states of Kelantan, Terengganu, Sarawak and especially Sabah have lagged behind.  According to the Ninth Malaysia Plan, whereas the overall rate of poverty in peninsular Malaysia was 3.6 per cent in 2004, it was 23 per cent in Sabah, 15.4 per cent in Terengganu, 10.6 per cent in Kelantan and 7.5 per cent in Sarawak. Poverty is most acute in the inner reaches of these states.

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Second, the rural areas were neglected in the new economy resulting in a steady migration of young Malays, Dayaks and Kadazan-dusuns, including from the Felda schemes, from rural hinterlands to the urban industrial areas. Whereas in the past the Klang Valley, Penang and Johore Bahru  were overwhelmingly populated by non-Malays, nowadays Malays predominate. Indeed, large numbers of Sabahans, too, can be found in the Klang-Pandamaran areas. Without the necessary skills, many of the youths cannot get absorbed into the new IT and K-based globalised economies. The young men in particular end up in construction and other informal services. Most are underemployed, and some fall into ‘social ills’ – motorcycle racing, dadah addiction, and sometimes the problem of HIV-Aids too, some of these perhaps as forms of escapism from the harsh realities of their everyday lives.

Similarly, little attention was devoted to the estate agricultural sector. Wages in the rubber and oil palm estates have lagged behind those who get employed in the new economy. Until very recently, these workers, mostly Indians, were daily-rated. Under the new so-called monthly-wage system, many still find it hard to make ends meet. Hence many youths from the estates have also migrated to the urban industrial areas in search of better paying jobs. However, since they do not possess the necessary skills required for the new IT, and K-economies, they, too end up with low-paying unskilled jobs. Housing, health, proper nutrition, and even education for their young children pose serious problems. Hence, the well-known plight of poor Indian communities in the estates has been transferred to the urban squatter areas.. Not surprisingly, gangsterism is rife among young Indian men today. Such social conditions have facilitated the rise of Makkal Sakhti and the Hindraf movement generally.

The Chinese youths have fared better generally. Perhaps this is due to the traditional emphasis by parents on education which facilitated these youths acquiring skills that resulted in their absorption into the new economy. The fact that there exists a large SME (small- and medium-scale enterprises) sector, dominated by the Chinese, eased their entry into the old economy too. For instance, the booming construction industry absorbed many of these semi-skilled workers. Many have also started small businesses including food catering and hawking. However, New Village young men also moved to the urban areas, to Singapore, and sometimes to Taiwan and Japan to be labourers, often illegally.

Third, much foreign labour migration into Malaysia has also occurred during this era of globalisation. Official estimates suggest that there might be as many as 1.2 million forced migrants in the country, about half, about 600,000 in Sabah alone. These estimates include both documented as well as undocumented migrants, especially from Indonesia and Philippines, but also from Thailand, Myanmar, Vietnam, Nepal, Lanka, India and China. Many have fled to Malaysia due to poverty and in some cases conflict situations at home. The plight of these migrants is well documented and the local church has attempted to address some of their needs by establishing the migrant workers ministry. Although they are not involved in the new IT and K-economies, they have helped to build much of the Malaysia’s new infrastructure, high-risers and housing; provided hard labour to run the estate sector; besides taking care of our children and cooking our meals in our homes. Yet as foreign labourers they are not entitled to the usual benefits that accrue to workers under the various laws such as days off, health benefits and workmen’s compensation- not to mention educational opportunities or even time for their own children.

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The Malaysian economy has grown rapidly these past decades. This growth has spurred on restructuring the economy and the inter-ethnic inequalities inherited from colonial times, no doubt facilitated by 40 years of the NEP. The numbers of families living below the poverty line has also dropped drastically.

However, the rolling back of the state’s involvement in the economy and the adoption of neo-liberal economic policies has also led to new contradictions. Regional inequalities have arisen among the states. Due to uneven access to opportunities between the rich and middle-class on the one hand, and the lower classes on the other, Malaysian society has been increasingly stratified,  resulting in widening income levels between the rich and the poor, or what we term relative poverty. The poor can be found within every ethnic group. More than that, a large group of migrant workers has emerged in our midst. Put another way, the poor are from all ethnic groups and states, as well as people who originated from other countries. Our efforts to eradicate poverty should cater for all – bumiputera or non-bumiputera, local or foreign and also all regions of the country.

Dr Francis Loh is Secretary of Aliran. An earlier version of this article was published in Catholic Asian News, March 2010

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The views expressed in Aliran's media statements and the NGO statements we have endorsed reflect Aliran's official stand. Views and opinions expressed in other pieces published here do not necessarily reflect Aliran's official position.

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