Has Malaysia Really Eradicated Poverty?

Unrealistically low poverty line results in rosier statistics

In its article titled “The Mahathir Mystique”, Newsweek, (23 November 2003) terms Malaysia as an Asian success story where “the percentage of Malaysian households that fall below the poverty line has plunged from nearly 50 per cent to an estimated 6 per cent in 2000.” The figures quoted by Newsweek are lifted from Mahathir’s 2004 budget speech in Parliament on 12 September 2003. From the horses’ mouth as they say — but unfortunately some horses have learnt to bluff!

The poverty line

Generally speaking, the poverty rate can be lowered by two methods. The first is by raising the income of the poorer families to above the poverty line. The second method, and undoubtedly the easier option, is to lower the poverty line itself!

"Can a family of five survive on an income of RM550 per month, given the cost of living in Malaysia today? Where would they live? And can their children go to school? "

Malaysian household income distribution as quoted in the Eighth Malaysia Plan is pictured in Table 1 — with 75 per cent of Malaysian households earning below RM3,000 per month and 25 per cent of households earning below RM1,000 monthly. The same document (8MP) also specifies the poverty line for Semenanjung Malaysia as RM540 per month for a family of five individuals. Is this a realistic figure?

A living wage?

Table 1 - Household Income (RM/month)
More than RM5,000	9.8%
RM4,001 - RM5,000	5.5%
RM3,001 - RM4,000	9.6%
RM2,001 - RM3,000	17.4%
RM1,001 - RM2,000	32.7%
RM501 - RM1,001	20.0%
Less than RM500	5.0%
Source: Eighth Malaysia Plan.

Can a family of five survive on an income of RM550 per month, given the cost of living in Malaysia today? Where would they live? And can their children go to school? Yet given the government’s definition, they would not be classified as being poor.

At a meeting with 60 factory workers in Sg Siput recently, we asked them to suggest a reasonable household budget, and the outcome of that exercise is summarized in Table 2. The participants felt that the cost of buying a house and a small allocation for savings must be part of a balanced family budget. In their opinion, any family with a household budget of below RM1,750 would be facing economic hardship;

A realistic poverty line

Table 2 - Household Expenditure (per month)
House Loan	400
Marketing	300
Groceries	300
School expenses	200
Motorbike	150
Medical/Clothes	100
Festivals/Trips	100
Light/Water/Phone	100
Insurance/savings	100
Total	RM1,750

In Britain and in several other countries in the European Union, the poverty line is defined as one half the average household income. In Malaysia, the average household income is RM3,200 per month. Half this figure would be RM1,600. In other words if we used the definition used in Britain, households earning less than RM1,600 per month would be considered as poor! If RM1,600 per month is taken as the realistic poverty line, then around 50 per cent of Malaysians are poor — see the Income Pyramid overleaf — and this is the level of poverty as quoted by Mahathir for 1970!

No one is denying that there has been significant growth in the national economy. Per capita income (Per capita income = total income of the nation for that year divided by the population) has soared from RM1,132 in 1970 to RM13,683 presently! (Incidently, this would work out to an average household income of RM5,534 per month.) However as the income distribution pyramid depicts, the distribution of income in Malaysia is skewed towards the rich, and there is still significant poverty in Malaysia.

Perhaps the most incredulous aspect of Malaysia’s poverty statistics is that it hasn’t been challenged by the mainstream media nor by the academicians. Big Brother’s doublespeak (term used by Orwell in his book 1984) apparently rules supreme in Malaysia today!

by Jeyakumar Devaraj
Aliran Monthly 2004:2