My opinion: reset the 12 MP approach to poverty

The New Economic Policy (NEP) had two components: eradicating poverty and eliminating the identification of race by economic function. Not only has the former received less attention than the latter, but data on poverty, for many years, has been distorted by definitions and concepts that deviate from international best practice. At the same time, policies, budgets, programs and projects have suffered from bureaucratic and political grip.

Today Malaysia faces its biggest challenge since the NEP. At the macro level, we have a precarious economic recovery that must take into account the aftershocks of the pandemic, higher debt levels and shrinking fiscal space. At the micro level, recent indicators of socio-economic well-being, such as unemployment and underemployment, data on bankruptcies, closures of SMEs (small and medium-sized enterprises), inflation and growth prospects lower, show that the pandemic continues to cause considerable damage to the nation. The hardest hit will be the poor and the B40 group.

It is gratifying that Prime Minister Datuk Seri Ismail Sabri Yaakob, in a recent press interview, noted that due to the pandemic the landscape has changed.

“There are people in the B40 (low income) category who are now hard-core poor. Some previously in the M40 (middle) income bracket are now in the B40 group.

“Under Malaysia’s 12th plan, the goal is to eradicate extreme poverty by the end of 2025. To do this, the mechanisms will be made more effective and several policies, strategies and initiatives from previous Malaysian plans have been improved and included in the 12MP.

So, can the Prime Minister’s political rhetoric be successfully translated into action? Despite the proliferation of projects – a total of 167 programs across all ministries and departments, involving 13.7 million aid recipients worth 28.6 billion ringgit – we find that the 12MP fails to address the real landscape of poverty and is doomed to disappointment if it does not correct the anomalies and gaps identified below.

Challenging the poverty numbers

Malaysia’s five-year plans have always incorporated discussions on poverty. When the concepts and methodology used to derive the various poverty line measures (LIPs) and poverty incidence estimates are flawed, they fundamentally affect the resulting policies.

The 12MP aims to eradicate extreme poverty. This term is not found in international usage. The World Bank and the United Nations Development Program – two global agencies at the forefront of poverty analysis – use the concepts of “absolute” and “relative” poverty. There is no valid reason why Malaysia has deviated from standard international terminology.

The Malaysian LIP’s current approach grossly underestimates the incidence of poverty and continues to be designed to project positive numbers on poverty reduction.

Previous plans had estimated LIPs based on indirect measurements to calculate household consumption. A two-part estimation procedure was used: the assessment of food consumption was carried out on the basis of theoretical caloric values; this was increased by adding an allowance for other necessities. This approach underestimated household consumption and thus set the bar low for the LIP.

The second fundamental flaw concerned the unit of analysis for obtaining the poverty index. The recommended and globally accepted unit used in poverty analysis is the individual. However, past plans have used the household as the unit, thus deviating from internationally accepted standards. It is important to note that the size of the households varies according to the urban-rural and ethnic dimension. Ignoring these differences is not only unprofessional, but also raises serious questions about the objectivity and integrity of the resulting estimates. This absolute poverty remains undercounted and very high indicates political failures, incompetent implementation and the failure of the political will to adapt.

In 2019, United Nations Special Rapporteur Philip Alston reported that Malaysia’s method of measuring poverty produces a national poverty rate of just 0.4%, the lowest in the world, suggesting that less than 25% 000 households live in poverty. He noted that the allegation reflected a statistical sleight of hand that had extremely damaging consequences.

The government initially defended the existing poverty line, but bowed to broad support for the recommendations of the UN report. It led to a revised set of poverty lines based on data from household income / expenditure surveys. The revised poverty lines reflected how the then existing poverty line contributed to the official narrative that poverty was largely a rural phenomenon confined to a few while ignoring poverty in urban areas. For example, the official 2016 poverty rate for Kuala Lumpur was 0%, but 27% of households earned less than Bank Negara’s estimate of the living wage for the city in 2018.

The Alston report called for reforms to the welfare system to improve the well-being of less well-off members of all racial and ethnic groups. Document 12MP offers no indication that such reforms will be introduced. It makes no reference to how the government intends to include citizens of all ethnicities who are currently systematically excluded from official poverty figures, overlooked by policy makers, and often effectively excluded from access to services. basic services. It is important to point out that the relative income inequality between ethnic groups has reduced since the adoption of the NEP in 1970, although the bumiputeras still have a higher poverty rate than the Chinese or Indian populations.

The latest data from the 2019 Household Income and Basic Amenities report conclusively shows how poverty affects all communities and underscores the importance of racial, fair and equitable poverty reduction policies.

The fact that the vast majority of non-Malaysian households are located in urban areas also indicates a possible underestimation of the true severity of the incidence of poverty among non-Malaysian communities.

Lessons from the past

Poverty eradication programs in Malaysia have always been designed from the top down, imposing Putrajaya’s perspective on what is best on the ground. These projects are plagued by mismanagement, waste, abuse of power and leakage of funds. The emphasis has been on creating bureaucratic agencies and infrastructure rather than investing in community development projects at village and community levels. Much of the poverty eradication spending is therefore inefficient, with evidence of poorly spent funds clearly visible across the country.

There is a lot of inter-agency duplication and lack of coordination, with different government organizations trying to meet designated KPIs (key performance indicators) rather than solving problems. Very few projects have started with formal audits of the situation of community needs, with strategies formulated to emancipate the poor from their current situation of poverty.

To improve the effectiveness of poverty reduction in its various forms and manifestations across the country, agencies must devote time to empowering respective communities to communicate their needs, wants and aspirations. Programs should emerge from grassroots communities according to specific local and situational requirements, and espoused needs and aspirations.

Until the bureaucratic top-down approach of previous Malaysian plans is rejected, there will still be countless examples of failed poverty reduction projects and hundreds of billions of ringgits wasted.

Our proposed bottom-up approach, which provides a material and financial foundation for development-oriented poverty reduction, particularly focusing on the eco-economy of poor areas, can be a game-changer by ensuring real progress in the national program for development. poverty reduction.

It will also serve as a catalyst to change mindsets and liberate productive forces that have been marginalized or co-opted by political proxies and other intermediaries who have the most to gain from the latest round of 12MP projects and programs using conventional strategies.

We reiterate: Continue with the same approach and there will always be a waste of funds, leaks and communities that remain in poverty.

Given the devastation to the economy from 18 months of restrictions and the reduced tax scale for poverty budgets, this should be the main political and programmatic focus of the 12MP.

Recommendations for resetting and programming the 12MP policy

• Consolidation of poverty reduction programs. This would lead to strengthening the safety net to protect the poor, reduce costly overhead costs and generally improve service delivery. Leakage reduction would also result;

• Strengthening of the governance component relating to projects. Projects should be awarded following competitive tendering rather than on a negotiated basis. This would reduce the opportunities for corruption;

• Open availability of data to allow independent assessments of poverty and income distribution;

• Establishment of a special parliamentary committee on rural and urban poverty to examine the true extent of poverty, its various causes and recommend changes to the 12MP poverty reduction program with goals, targets, measures and measures. precise deadlines; and

• Establishment of a Poverty Reduction Oversight Board comprised of unofficial NGO representatives and respected experts to work with the parliamentary select committee and poverty reduction agencies to ensure that the goals and targets are met.

Appeal to our legislators

The Prime Minister and other legislators from poor and disadvantaged backgrounds should be aware of the difficulties and challenges facing the poor. They should also be aware of how and why the huge sums allocated to the country’s anti-poverty programs since independence have failed to deliver the positive results and success promised by previous governments. The 12MP offers the opportunity to break the vicious cycle of poverty in the nation, but only if there is the accompanying political will and determination and the continuation of the new policy and programming described here.

Lim Teck Ghee is a former senior official of the United Nations and the World Bank. Ramesh Chander is a former Chief Statistician of Malaysia and Senior Statistical Advisor at the World Bank in Washington, DC. Murray Hunter is an independent researcher and former professor at Prince of Songkla University and Universiti Malaysia Perlis.

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