Poverty Eradication: Malaysia’s Experience

I. Incidence of Poverty

1.1 Malaysia has subscribed strongly to the belief that economic envelopment
must involve and benefit all citizens. The development thrusts were
centered on the philosophy of ‘growth with equity’. With regards to poverty
eradication, Malaysia has adopted long-term policies since the early 1970’s.
In providing for the vulnerable groups, the thrust of the Government has
always been to enhance income-earning opportunities. Pure transfers to
the needy are limited to a modest scale for a small group of people such as
the elderly and the handicapped. The success of Malaysia’s poverty
eradication programs is evident from the sharp decline in the incidence of
poverty, which decreased from 52.4 per cent in 1970 to 6.1 percent in 1997.
Due to the implementation of the long-term measures, the impact of the
1997 financial crisis was minimal with the incidence of poverty reaching 8.5
per cent in 1998 and decline to 7.5 per cent in 1999. Malaysia constantly
monitors incidence of poverty and state of the vulnerable groups through the
Household Income Survey (HIS).
II. Poverty Line Income

2.1 The incidence of poverty is based on the poverty line income (PLI). The PLI
is defined as an income sufficient to purchase a minimum basket of food to
maintain household members in good nutritional health and other basic needs
such as clothing and footwear, rent, fuel and power, transport and
communications, health care, education and recreation. The PLI is updated
annually on the basis of the Consumer Price Index.
III. Strategy and Programmes

3.1 The main strategy for poverty eradication was providing employment
opportunities in higher-paying jobs, while welfare handouts were reserved
for the aged and disabled who could not find employment. Since the poor
were largely engaged in agriculture, they were encouraged to be involved in
modern farming and non-farm or off-farm activities. The programmes
implemented under the NEP, NDP and NVP1 are as follows:

* Resettling the landless and those with uneconomic holdings in new

land development schemes. The settlers were provided with single
unit houses complete with piped water and electricity;

* Undertaking in-situ development of existing agricultural land through

rehabilitation and consolidation of the land, replanting of old
commercial crops with new higher-yielding clones and better planting
techniques;

1
NEP, New Economic Policy 1971-1990; NDP, National Development Policy 1991-2000; NVP,
National VisionPolicy 2001-2010.
 * Integrating agricultural and rural development with downstream
processing of farm products and encouraging village industries and
rural entrepreneurship to generate additional sources of income;

* Introducing double-cropping or off-season cropping for padi,

inter-cropping and mixed farming on the same plots of land to
supplement the income derived from main crops;

* Establishing farmers’ markets in urban centres so that farm produce

can be sold directly and fetch better prices;

* Providing training and education on topics pertaining to farming as

well as work attitudes and values to motivate participants to become
more productive farmers;

* Providing industrial and vocational training for the rural manpower,

coupled with credit facilities and related support, to enable them to be
employed in non-farm occupations or start their own businesses in
rural areas and urban centres;

* Improving educational access as well as providing text books and

financial assistance to children of poor households; and

* Providing infrastructure and social amenities as part of a broader

programme to improve the quality of life of all Malaysians. For the
rural population, they include the provision of potable and piped water,
electricity, roads, medical and health services and schools, including
rural hostels.

3.2 During the NDP period, the Development Programme for the Hardcore Poor
or Program Pembangunan Rakyat Termiskin (PPRT), was introduced to assist
the hardcore poor. The programme established a register on the profile of
hardcore poor households and contained a package of projects tailored to
meet their specific needs, such as increasing their employability and income,
better housing, food supplements for children and educational assistance.
Direct assistance was given to the hardcore poor who are disabled and aged.
In addition, the hardcore poor were provided with interest-free loans to
purchase shares in a unit trust scheme (ASB-PPRT) so that the dividends
can supplement their income.
3.2 Non-Governmental Organizations (NGOs) and the private sector
complemented government efforts in the poverty alleviation programmes.
Working in close cooperation with one another, they provided small
business loans, industrial training, job opportunities, and educational
support for children as well as better housing. Since 1987, Amanah Ikhtiar
Malaysia (AIM), an NGO, provided micro-credit financing to about 69,000
poor families with interest-free loans of RM300 million provided by the
Government. The private sector and the various state-based poverty
eradication foundations also intensified their efforts in providing skills train-
ing as well as in-kind and financial contributions to the poor.

3.3 During the NVP period, to effectively implement anti-poverty measures, all
the relevant programmes and projects were consolidated under the Skim
Pembangunan Kesejahteraan Rakyat (SPKR). The SPKR included the
Program Pembangunan Rakyat Termiskin (PPRT) and other related
anti-poverty programmes to address issues of general and hardcore
poverty, irrespective of ethnicity in both the rural and urban areas as well as
economic sectors. The Program Sepadu Pembangunan Desa Terpencil was
strengthened under the SPKR to address pockets of poverty, particularly in
remote areas and among the Orang Asli and other Bumiputera minorities in
Sabah and Sarawak. To further improve the well-being and quality of life of
the poor and low-income households, the SPKR, through its Program
Pembangunan Insan, will continue to inculcate the concept of self-esteem
and self-reliance among the households and communities involved.

Distribution Section
Economic Planning Unit

23 April, 2002