Is the poverty rate in Sarawak only 5.3 per cent? The real poverty rate may be much higher than the official figure suggests, writes Philip Khoo.
For some time, Rocky’s Bru has been trying to run with the hares and hunt with the hounds, especially since a change in professional status.
The latter website is a deliberate attempt to confuse by using the same name except for the ‘s’. Its main purpose: to rubbish the former. sarawakreport.org seeks to document all its allegations, using official documents as far as possible. sarawakreports.org indulges in undocumented allegations and name-calling.
But Rocky’s Bru extols the latter as balanced over the former — but without providing any evidence as to how and in what way sarawakreport.org is unbalanced. Are Suruhanjaya Syarikat Malaysia documents not valid proof? Are Sarawak Land and Survey documents not reliable? So much for professional journalism!
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And sarawakreports.org? Let’s look at a recent item in it, an item which tries to rubbish both sarawakreport.org and RPK, and extol the development that Taib Mahmud has brought to Sarawak.
In the course of that item, sarawakreports.org engages in chest-thumping, boasting that Sarawak’s poverty rate of 5.3 per cent in 2009 was less than half the poverty rate in the United States. Actually, sarawakreports.org might as well have boasted that Sarawak’s poverty rate of 5.3 per cent is lower than what’s reported for much of the EU and the OECD countries! Imagine, there’s less poverty in Sarawak — and in Malaysia — than in the EU, the United States and in the OECD generally. And this despite the fact that there’s greater inequality in Malaysia and Sarawak than in the EU or the United States.
As they say, a little knowledge can be a dangerous thing — and can make one look very foolish and unbalanced.
The rub is in how poverty rates in Malaysia (including Sarawak) and in the United States are determined.
In both cases, they use a poverty line income. Any family falling below that poverty line income is deemed poor. So far so good.
In both cases, the poverty line is based on a minimum food basket and a provision for non-food — housing, clothing, services — needs. We can assume that the minimum food basket is sufficient to keep people alive, i.e., we can assume that governments are not looking to fix the minimum food basket at starvation rations, but enough to provide the required calories with the cheapest available foods.
The joker is in how the income for basic non-food needs is set.
In the United States, the income for basic non-food needs is set at twice the income needed for the minimum food basket. So, the poverty line income in the USA is the amount needed to meet basic food needs multiplied by three. Another way to look at it is that basic food needs amount to one-third of the poverty line income.
In Malaysia, the basic non-food needs is based on what the poorest 20 per cent of families actually spend. So, instead of assessing what is needed by way of housing, clothing and services, we look at what the poor spend and set that as the need. If that seems a little circular, it is.
The result is that in Malaysia, basic food needs amount to almost two-thirds of the poverty line income. In other words, if you have enough to eat, you have little left over for anything else; and if you try to meet those non-food needs, you will have to give up on food. Not pretty.
If we look at the Ninth Malaysia Plan, we find that for Sarawak, basic non-food needs were costed at roughly RM300 a month in 2004 for a family of five persons. Taking inflation between 2004 and 2009 to be around 15 per cent, this translates into a basic non-food allowance of RM350 a month for a family of five in 2009 as the poverty cut-off.
That’s RM350 a month to pay for rent to house five persons, to pay for clothing, shoes, transport, schooling, telephone, etc. It is doubtful anyone would be able to meet the non-food needs of a family of five on RM350 a month. The bulk of the RM350 a month allowed for basic non-food needs would be swallowed up by rent. In 2008, the Valuation and Property Services Department of the Ministry of Finance estimated a low-cost single-story terrace house rental in Sarawak at between RM200-500 a month, depending on location.
Putting all this together, we have:
* in the United States, the poverty line income for a family of five persons amounted to US$2,166 a month (from the US Census Bureau)
* in Sarawak, the poverty line income for a family of five persons amounted to RM1,040 a month (from the 10th Malaysia Plan)
80% or 30%, it’s still high
Obviously, comparing poverty rates using these different measures is foolish. This is one reason for using PPP, or purchasing power parity, i.e., what would be the equivalent of US$1 in ringgit in terms of actual purchasing power, or the actual amount of goods and services that can be purchased.
So, let’s translate the poverty line income for a family of five persons in the United States to the equivalent purchasing power amount in ringgit. According to the World Bank, the PPP equivalent of USD1 is about RM2.10.
Thus, US$2,166, the poverty line in the United States for a family of five, translates to RM4,549.
What percentage of Sarawak families make less than RM4,549 a month?
In 2009, the Tenth Malaysia Plan reported the average family income in Sarawak to be RM3,581. In other words, the average family income in Sarawak is less than the poverty line income of the United States converted at purchasing power parity.
Since the average family income is the cut-off for about 60 per cent of Sarawak families, this would mean that around 80 per cent of Sarawak families would be considered poor if we were to use the US poverty line, at purchasing power parity, as the cut-off!
Let’s be kind and accept that the basic food allowance in the Malaysian poverty line is adequate, and let’s apply a similar method of calculating the poverty line income as the United States, i.e., take the amount required for basic food needs and multiply by three.
Doing this would give a poverty line income in Sarawak of RM1,660 a month in 2009. Estimating from the average family income in 2009 suggests that over 30 per cent of Sarawak families would be below this poverty line income. Quite a far cry from the official 5.3 per cent, and more than double the poverty rate in the United States.
Philip Khoo is a keen observer of Malaysian politics