Poverty, Malaysia’s Hidden Crisis – Analysis

Successive Malaysian administrations have hidden the real incidence of poverty in the country for decades. The government narrative asserts that it has reduced poverty from 50 percent in 1970 to almost eliminating it – to just 0.4 percent in 2016. International organizations including the like the United Nations Development Program and the World Bank, although they don’t say it publicly, suspect the figure is totally inaccurate. 

When the Malaysian Department of Statistics last year revised national Poverty Line Income (PLI) upward from RM980 to RM2,280 (US$242-564), the official poverty rate in Malaysia jumped from 0.4 to 5.6 percent. Based on this official figure, the incidence of poverty affects more than one in 20, or upwards of 1.7 million people and is on the rise due to the long-standing Movement Control Orders (MCO) implemented as a result of the coronavirus crisis and a deteriorating economy. Urban poverty is on the rise and pockets remain almost unchanged after years at barely the subsistence level in many rural areas of Sabah, Sarawak, Kelantan, Terengganu, Kedah, and Perlis. 

It is not a homogenous problem. Poverty exists across multiple demographics and geographical locations. There are various underlying causes and current economic conditions have exacerbated the incidence. Clusters consist of various groupings negatively affected from a variety of causations, making the issue extremely complex in terms of alleviation strategies. Officially, 1.3 million people domiciled in rural areas are considered to be living in poverty. These include the Orang Asli, or indigenous peoples living on the peninsula, and the Orang Asal and other indigenous groups in Sabah and Sarawak, who live traditionally, or semi-traditionally. Many areas where Malaysia’s indigenous peoples reside are still void of basic infrastructure, electricity, water, basic health amenities, sealed roads and telecommunications. Many live an almost subsistence lifestyle, with some supplemental income from children working in the cities. 

Next are smallholders who may farm uneconomic tracts of land, with limited access to markets. There is a large pocket of poverty outside of Federal Land Authority (FELDA) schemes.  They have also suffered from downturns in commodity prices and lack access to capital and technology. In the rural towns and kampongs, many face chronic unemployment, particularly male youth, with drug addiction a major problem. Petty crime has risen dramatically in many rural areas over the past 15 years given chronic lack of access to economic opportunities. 

The Integrated Agriculture Development Projects (IADPs) that assisted communities with infrastructure and crop technologies of the 1970s and 1980s are long gone, with almost zero agricultural extension programs today. Community infrastructure projects over the past few decades have not provided what communities really need, and funds commonly leak from such projects to contractors and associates. Other subgroups within the rural poor include single mothers, unskilled workers, the elderly and infirm and the handicapped/disabled. This is particularly so in the rural states of Perlis, Kelantan, Terengganu, parts of Kedah, and Sabah and Sarawak. 

According to a UNICEF study, 7 percent —  1.72 million people – of those living in urban areas are in poverty and struggling to maintain minimum incomes to sustain a healthy and reasonable life. Moreover, the Movement Control Order 2 (MCO2) has added large numbers to the above figure, where a recent UNICEF report stated that 15 percent of urban dwellers are now unemployed and are very quickly falling into poverty. In addition, foreign and unskilled workers from rural areas are migrating to urban areas looking for work are causing concern for authorities as people are becoming more pessimistic and exacerbating mental health issues. 

Ghettos of ethnic Chinese in poverty have long existed in outlying areas of Kepong, Klang and Cheras, within the Klang Valley and major cities and towns of Ipoh, Penang and Butterworth. Ethnic Indian ghettos exist in former rubber and palm oil estate areas of Klang, Negeri Sembilan, and Johor, and along the railway line linking north with south. These groups do some of the lowest jobs within the community.

Together with single mothers and the handicapped, many slip through the meager safety net eKasih, the National Poverty Data Bank system, which is reported to be totally unresponsive to many peoples’ needs. 

With an estimated 6 million foreign workers flooding the low end of the labor market, there are few opportunities for the above groups to find any kind of work. Local employers prefer foreign workers for their reliability, higher productivity, and lower wage costs. 

The issue has long been off the government’s policy radar. Poverty eradication policy and implementation has been overshadowed by the government’s development narrative, placing ‘big ticket’ policy initiatives like IT, biotechnology, and smart farming above the mission of getting people out of poverty. Many of these initiatives benefit government agencies and government-owned companies (GLCs), rather than filtering down to the village community level where people benefit. Malaysia has a federal and number of state biotechnology corporations, but very few, if any, projects make any difference to marginal communities. New technologies, for example, systems that allow year-round harvesting of mangoes, are so capital intensive that only wealthy corporations can afford them.   

The top-down approach of the Economic Planning Unit (EPU) earmarks projects that bureaucrats, politicians, and GLCs want, not necessarily what small local communities need. Even Village Security and Development Committees, known by their Malay initials JKKK, are stacked with political appointees, rather than true representatives of local communities. Non-affiliated NGOs working with communities are not consulted, and sometimes seen as a threat by bureaucrats. 

Many projects are complete white elephants as the motivation behind them was to reallocate government land to GLCs and other private corporations, and to provide contractors with massive profits. The drive to develop halal and biotechnology industries over the past two decades has resulted in mostly empty, decaying industrial parks that, once built. ‘Consultancies” are formed by those favored by bureaucrats and politicians to undertake projects of little relevance to the really needy. Developing projects are about meeting artificial goals rather than any passion about making a difference for neglected communities. Ministries, state departments, agencies and government corporations’ programs to assist in eradicating poverty exist in their thousands, but primarily waste government funds. 

Past experience indicates that the government has difficulty really understanding the issues. High-rise apartments for the poor remain under-utilized, as kampong people prefer to live in villages to maintain their social environment. Putting villagers in apartments strips them of the value they have from their small plots to become self-sufficient in food. Large paddy estates that rent smallholder land, with the elderly expected to work as laborer, appears as bonded feudalism to villagers. Entrepreneurship programs provided by many agencies are designed around building growth enterprises, rather than sustainable micro-enterprises villagers prefer. 

Education courses provide little in the way of village-suited technologies, micro-finance or marketing channels to sell products. Often purpose-built stalls to sell products are given to the cronies of the governing political party, who re-lease them at excessive rates. 

The fifth Protection Assistance stimulus package developed to assist those in difficulty from the Covid-9 lockdown doesn’t tackle growing urban poverty. Single mothers not only live with economic hardship but cultural stigma which has been allowed to grow and fester. The effects of growing unemployment are filtering back to rural areas, where children can no longer remit funds back to assist their parents.  The education system is lopsided with too many university places available for non-existent jobs, while the vocational educational sector needs much more focus. Scholarships must go to those in most need, rather than the privileged. 

The poor, including the bottom ethnic Malay and Bumiputera classes have no political influence, and have been primarily ignored by the governing elite. However, within Putrajaya, bureaucrats are very quickly becoming aware that poverty is a major problem0. 

We have to wait until the next state general election to see any political effect. This will be the Sarawak state election due before October, where votes coming from longhouse communities may weaken the governing Gabungan Parti Sarawak (GPS) rural stronghold. Federally, malapportionment within urban centers means growing urban poverty will have little electoral effect. However, within the Malay heartlands, poverty may become a much more important political issue as the rural Malay vote has always been about economic wellbeing rather than political issues. 

What is certain is that growing poverty, particularly in the urban areas, is going to retard any economic recovery later in the year. Poverty, policy, and politics is set to be the next major challenge after Covid-19. 

Originally published in Asia Sentinel