Malaysia has raised its poverty line by more than 100%. Where do things go from here?

Malaysia has raised its poverty line by more than 100%. Where do things go from here?

Kuala Lumpur
This general view shows the Kuala Lumpur city skyline as seen from the Kuala Lumpur Tower on February 24, 2020. (Photo: AFP/Mohd Rasfan)

KUALA LUMPUR: Working as a building manager for the block of low-cost flats he lives in, Lazim Sakel, 50, earns around RM1,800 (US$429) a month. 

Living in urban Klang Valley with his wife and five kids, Mr Lazim tries all means to control costs to make it through the month. In addition, he also seeks out odd jobs to supplement his income. 

"You have to tighten your belt. Every time you feel like taking the family out, you have to think twice or more, and that happens only once in a while," he said. 

Back in 1988, Mr Lazim's salary was RM300 plus and he could rent a room with a kitchen. "Of course it was a squatter area, but I could still save," he reminisced.

Malaysia PLI 01
Lazim Sakel, a building manager for the block of low-cost flats he resides in, notes many residents struggle to survive with salaries below RM2,000 and also face difficulties in paying the monthly building maintenance fees. (Photo: Vincent Tan)

These days, room rental costs at least four times more, while salary has not moved much once inflation is factored in. "I'm lucky because the most expensive part is over. Three of my kids are working now and I only have two more children in school," he said. 

Stories like Mr Lazim's are not uncommon. 

Many of his neighbours work odd jobs or as general labourers, drivers or store assistants, with average wages hovering below RM2,000. Quite a number of them cannot afford to pay the monthly RM49.50 management fee and sinking fund for their units, he said. 

Malaysia PLI 04
Desa Mentari, a low-cost housing development in central Klang Valley. (Photo: Vincent Tan)

Thus, when Malaysia's Department of Statistics announced on Jul 10 it had revised the country’s Poverty Line Income (PLI) from RM980 to RM2,280, people like Mr Lazim said the news was welcome. The new amount better reflects survival in urban Klang Valley, they said.

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The previous methodology had stood for 15 years since its formulation in 2005. It was based on the minimum food requirements for each household member and 106 non-food items, according to the B20's (the bottom 20 per cent of households) spending patterns. 

Chief statistician Mohd Uzir Mahidin explained in a press conference that the new figure was reached based on a new methodology that emphasised healthy eating and quality basic needs.

It calculated an individual's expenditure on food based on servings according to food categories, converted to price. Previously, this was based on individual caloric requirements. In addition, non-food components covered in the PLI include clothing and shoes, housing, fuel, utilities, furniture, transport, communications, education and health.

In a 2018 study by Bank Negara, the country's central bank, estimated living wages in Kuala Lumpur for singles, childless couples and couples with two children at RM2,700, RM4,500 and RM6,500 respectively. 

With the revised PLI, Malaysia's poverty rate was 5.6 per cent (405,441 households) for 2019. If the 2005 methodology had been used, the poverty rate would have been 0.2 per cent, involving only 16,653 households for the same year, according to Malay Mail  

This essentially means that the number of households categorised as poor has increased, and this revision is not without policy, financial and political implications, experts said. ​​​​​​​

POLICY IMPLICATIONS FROM THE NEW PLI

Sharpening the focus on poverty eradication would require both federal and state governments to increase their budget allocation for the enlarged eligible households, said Professor Yeah Kim Leng, an economics professor at Sunway University. 

“Besides extending income support for the B40 group (bottom 40 per cent of households), the federal government will likely raise the cash handouts for those living below the newly-defined poverty line,” he said.  

Yeah Kim Leng
Sunway University Business School's economics professor Yeah Kim Leng. (File photo: Bernama) 

Over a longer term, he added, other policy implications from this upward revision would include a refocus on growth with more effective distributive and pro-poor policies. And such policy shifts would necessitate higher development spending directed at reducing poverty levels and incidence between Malaysia’s ethnic groups, states and also the rural-urban divide. 

At the micro-level, Prof Yeah said the minimum wage (currently at RM1,200) would have to be revised upwards to reflect the new poverty line. But this would have to be tuned to the country’s economic health and employers’ ability to absorb higher wage costs without aggravating the situation. 

“A quicker rise in the minimum wage is a necessary short- to medium-term pain that businesses have to endure while stepping up productivity, upgrading technology and labour-saving processes and moving up the value chain,” Prof Yeah pointed out. 

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Those living below the PLI, he added, would see more education, training and employment opportunities being made available by the government. These could be widened through private sector collaboration.

However, the pandemic-induced economic downturn is expected to lead to an increase in poverty rates, Prof Yeah noted. Besides an anticipated rise in unemployment, the self-employed, small- and medium-size enterprises and lower-wage employees were expected to suffer greater negative impact too, he said.

“A prolonged pandemic beyond the six to 12 months fiscal relief and financial assistance provided by the government will likely result in a worsening of the poverty rate and income disparities,” he said. 

STATE AND FEDERAL AGENCIES TO REVIEW POVERTY ERADICATION POLICIES

At the moment, state and federal governments have different poverty eradication policies, Wan Ya Shin, a research manager in the social policy division for the Institute for Democracy and Economic Affairs (IDEAS) think-tank, pointed out. 

Therefore, better coordination between states and federal is needed to reduce redundancy and ensure effective targeting.  

"However, this did not mean centralising all poverty-reduction policies or programmes. Rather, there should be a comprehensive, coordinated overview," she said. 

This can be achieved via better access to data and transparency, she explained. 

READ: 'We have to ration our meals' - Malaysians share their struggles after COVID-19 left them jobless

On Aug 10, Minister in the Prime Minister's Department (Economy) Mustapa Mohamed informed the parliament that federal agencies and state governments have five months to review their poverty eradication policies with the revised PLI.

He said the different government bodies have to assess the financial implications of the new poverty level and identify target groups for poverty eradication programmes. 

In urban areas, the poverty incidence was 3.8 per cent, compared with rural areas at 12.4 per cent, Mr Mustapa said. 

Mustapa Mohamed
Minister in the Prime Minister's Department (Economy) Mustapa Mohamed. (File photo: Bernama)

POTENTIAL POLITICAL BENEFITS

While the PLI’s upward revision should not be ascribed to political motives - as the old methodology had become increasingly untenable - there are undeniable political benefits to gain from the revision, according to a political analyst.  

Professor Ahmad Fauzi Abdul Hamid from Universiti Sains Malaysia said the new PLI was a good way to differentiate Perikatan Nasional (PN) from Pakatan Harapan (PH), even though the latter might have revised the PLI had it continued its stint in government. 

“If the PN government, which is always wrestling with legitimacy issues, sticks to the 2005 methodology which its predecessor didn’t change last year and then-minister for economic affairs Azmin Ali even defended in the face of criticism, PN could easily be accused of being unduly apologetic over past government incompetence,” the political science professor said. 

Dr Ahmad Fauzi pointed out that with the PLI’s revision and the logical expansion of households categorised as “poor”, this would enable the PN government to embark on more poverty alleviation measures than before. 

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“Backed by its seemingly ethno-nationalist leanings, PN's grip on rural and semi-urban Malay constituencies will be more or less secure. It was the PH government's subsidy cuts which adversely affected rural incomes, that drove Malays who had backed PH in 2018 away from it,” the political analyst noted.

Malaysia PLI 05
In this public housing block for the hardcore poor, children play handphones and soccer at the void deck. (Photo: Vincent Tan)

While the B40 communities are pleased that the PLI has risen significantly to reflect reality, some have expressed concerns about the actual implementation of the government aid programmes. 

For housewife Janaki Krishnakumar, 34, applying for welfare is a path she finds fraught with uncertainty.

Speaking to CNA at a public housing apartment designated for the hardcore poor, she said that her household income is only RM1,300 a month from her husband’s job as a school bus driver.

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Janaki Krishnakumar and her daughter Yagzini Vegneswaran in front of their apartment in Petaling Jaya. (Photo: Vincent Tan)

“It’s a struggle every month, and I’ve tried applying for eKasih, the federal government’s welfare programme, but I never heard anything from them until I got frustrated,” Mdm Janaki claimed. 

During Malaysia's movement control order, instituted since mid-March this year to combat COVID-19, her family's income was virtually nil. Luckily, they qualified for a state government aid, which helped the situation.

“The problem is that even after they raise the income level to over RM2,000, I still don’t know if I’ll be able to apply for aid and get it approved or not, “ she said. 

Source: CNA/vt

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