KUALA LUMPUR – Every household in Malaysia is classified into one of three income groups. The T20 are those in the top 20% of household incomes. The M40 represents the middle 40% and the B40 are 40% of households with the lowest income.
Due to the Covid-19 pandemic, hundreds of thousands of Malaysians have become poorer and been pushed into poverty. More than 200,000 households have moved from M40 to B40. The number of people now below the poverty line has increased from 0.4% of the population to 1%.
By comparison, the number of households in the T20 group has decreased, but their overall worth has increased.
This is demonstrable evidence that the rich are getting richer and the poor are getting poorer. In fact, this is not just a Malaysian problem. Credit Suisse’s Global Wealth Report has also shown this, which we reported on earlier this year.
Malaysia, though, cannot just accept that the poverty gap is a global problem. The fact that it is widening in Malaysia needs to be addressed.
There are three areas that we should focus on:
i) generating employment,
ii) increasing employability, and
iii) making the labour market more efficient.
In the long term, this is preferable to helping people through social care programmes (although these are still important) as helping others rise from the poverty trap is more sustainable than using our taxes to support those in need.
There have been previous examples of this in Malaysia, with the Felda programme, dating back to 1957, being a good case study. Felda aimed to develop land and eradicate poverty. The initiative was praised in 1988 by the World Bank as being one of the most successful land development agencies in the world.
The programme lost its way in 2011, when it became a listed company and raised RM10.4 billion. However, these funds no longer supported those in need but were used in investments that were not profitable and did not support their core business. This has led to Felda being about RM8 billion in debt in 2018.
Other examples of programmes designed to support the poorest Malaysians, but led to them becoming even poorer, are given in the video.
The video also draws out some of the programmes and initiatives that Malaysia has implemented to address the poverty that many in the country face. Indeed, the level of poverty has dropped from about 50% in 1970 to 3.8% in 2015, for which the country should be proud.
Yet, there are still seven million people receiving social welfare, and the World Bank recommends that Malaysia invest in human capital, not just in the job market, but also in areas such as education and healthcare.
Due to the pandemic, the poverty rate in Malaysia has increased for the first time in years and unemployment is the highest it has been in the past 20 years.
Despite any advances we have made since independence, poverty in Malaysia is still a serious issue and the global pandemic has not only made this worse but should force us to focus our attention on helping those who are less fortunate than ourselves. – The Vibes, September 19, 2021