Poverty Reduction Policies in Malaysia: Trends, Strategies and Challenges

Article excerpt

Abstract

Malaysia is a multi-ethnic religious country with a population of 28.5 million, it is characterised by mainly three ethnic groups-Malay and indigenous people, Chinese, and Indians. Ever since independence in 1957, Malaysia has successfully transformed itself from a poor country into a middle-income nation. The Malaysian economy has seen a periodic growth despite challenging external factors. It can also definitely claim its success of combat against poverty. Despite its poverty reduction success, there still remains a vulnerable group of people in the country experiencing poverty for some geographical and societal reasons. This concept paper has several objectives: A brief description of the country's nature of poverty, poverty reduction policies and programs, and an analysis facing the challenges and recommendations for a sustainable poverty reduction in Malaysia.

Keywords: Malaysia, poverty, policy, challenges

1. Introduction

Defining poverty conceptually is easier as opposed to operational definition. Poverty is perceived as an amalgamation of various aspects which exceeds the argument on lack of income and not confined to a single-faceted phenomenon. The term poverty refers to different adverse social and psychological repercussions namely domestic violence, crime, perceived inadequacy of social investments and problems in expansion of human capital, unfair service delivery and feeble political participation. Hence, the definition of poverty is ultimately country specific.

Universally, poverty is normally referred to failed income "dollar-a-day" by World Bank. However, for country specific purposes it is standard recommended practice to use national poverty lines where there exist. Most countries adopted this practice in the 2005 Millennium Development Goal report (United Nations, 2011). Malaysia developed its own poverty line in the 1970s when the government's national policy gave a high priority for poverty eradication. The government utilized this poverty line on assessments of the minimum consumption requirements of an average sized household for food, shelter, clothing and other non-food needs.

The Gross Domestic Product (GDP) in Malaysia contracted to US$156.53 billion in 2007 and US$278.7 billion in 201, and the GDP growth was 5.7% and 4.7% respectively. The GDP per capita in Malaysia was last reported at US$7.760 in 2007 and US$5,364.5 in 2011. The Gross Domestic Product (PPP) in Malaysia was reported at US$13,740.93 in 2007 and US$14,730.93 in 2011.The unemployment rate in Malaysia was 3.2% in 2007 and 3% in 2011 (Department of Statistics in Malaysia, 2011).

2. Definition of Poverty in Malaysia

Adjustments were made to the poverty line in its earliest form, for differences in mean household size and cost of living among the three main regions of Malaysia-Peninsular Malaysia, Sabah and Sarawak. No adjustments were made for rural or urban location. This resulted in three regional poverty lines (besides the national one). These poverty lines, with adjustments for inflation and changing mean household sizes, were in use from their adoption in 1976 to 2004.

Although the poverty line was defined by consumption, poverty status was determined with reference to gross household income rather than expenditure. Thus, households with income below the poverty line were defined as living in poverty, and those with incomes below half the poverty line as living in "hard-core" or extreme poverty. In 2004, a revision was done to the poverty line. The revised poverty line now defined for each household and averaged to each state and rural or urban location, taking into account relative costs of living, household composition and size. This new poverty line also defines extreme deprivation or hard-core poverty as household with incomes below their food poverty line or households unable to meet their minimum food needs. In 2009, the mean national poverty line translated to an unadjusted RM6. …