Growth, Income Distribution and Poverty in Malaysia (UNDP-MHDR 2013)

By admin-s Last updated Nov 26, 2014

Who should offer insights into how Malaysia has developed and how Malaysia should develop?

Rama Ramanathan

What if I told you an activity to collect those insights and use them to develop national policy recommendations has already been completed?

What if I told you the three principal authors are two of Malaysia’s most humble and competent economists, Dr Muhammad Abdul Khalid, Director of Research at Khazanah; Dr Lee Hwok-Aun, a Professor of Economics at University Malaya; and one of Malaysia’s most distinguished economists, Tan Sri Prof Dr Kamal Salih, now of University Malaya?

What if I told you that contributors include Azmi Sharom, the University Malaya Law Professor who is now charged for Sedition and Dr Denison Jayasooria, Secretary General of Proham (and a Principal Research Fellow at the Institute of Ethnic Studies, UKM)?

What if I told you that the bulk of the hard numbers in the report were provided by the Economic Planning Unit and the Statistics Department?

What if I told you that the work was commissioned and funded by the United Nations?

Suspend your disbelief. All of the above are true. Today the UNDP released the Malaysia Human Development Report 2013: Redesigning an inclusive Future (MHDR2013). There are many striking things about the report. I compliment the Umno-BN government for having the courage to release data to people whose conclusions they could not dictate.

The report, launched in Kuala Lumpur today, covers about 350 pages. It is a vast compendium of data which is not available elsewhere. It will be a much quoted document in the days and years to come. I’ll just highlight ten of their findings:

Middle class. Only 20% of Malaysian households may be classified as middle-class (households whose income lies between 80% – 120% of the median household income).
Income disparity. Non-Malay Bumiputra in Sabah and Sarawak have fared very poorly; also, the average income of those who dwell in rural areas is about a third the income of urban-dwellers.
Income inequality in Malaysia is amongst the worst in the region, and has remained at the same level since 1990. The disposable income of the top 1% is 22 times the disposable income of the bottom 40%.
Low wages. Wages have not kept up with the productivity of labour; the situation has worsened since 1996. Wages make up only 28% of national income. The corresponding figure for the Philippines is 29%; for India, 30%; for Singapore, 42%; and for China, 48%. The lower share of Malaysia’s workers is attributed to declining bargaining power: it is our national policy to discourage the formation of workers unions. [I have not read the report closely enough to say if it touches on our bloated civil service.]
Low savings. 53% of Malaysian households have no financial assets (rural: 63%; urban: 45%). This means the social effects of any economic downturn and corresponding loss of income will be severe.
Wealth distribution. 11% of the population own 50% of the wealth. The wealth of the richest 40% of the population amounts to about 22% of the Gross Domestic Product.
Inequality within the Malay community. 3% of Amanah Saham Bumiputra (ASB) is owned by 74% of unit-holders, while 8% is owned by 0.2% of unit-holders.
Impact of ethnicity on hiring. The private sector is pro-Chinese in hiring whereas 90% of civil servants are Bumiputra.
Gender inequality. Women have lost out on growth as they are “disproportionately low in the occupational hierarchy,” are paid less than males for similar work and have difficulty re-entering the workforce.
The NEP was successful in the first two decades (1970-1990), but was much less successful in the next two decades (1991-present), when assessed using the measures of real growth, inequality and number of middle class households.

As is to be expected at this stage of the report, the policy recommendations are tentative.