2. 3. Social Economic Issues
3.1 Poverty
3.1.1 Trend Of Poverty Since Independence
3.1.2 Causes And Measures To Solve
3.2 Education And Human Capital
3.2.1 Importance (Local Labour)
3.2.2 Human capital development Policy
3.2.3 Foreign Labour (contribution and Problems)
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3. Introduction
Malaysia face problem of poverty since independence although the percentage is decreasing.
The official poverty line, developed by the Economic Planning Unit (EPU) of the Prime Minister’s
Department, is based on a minimum needs basket required to sustain an average household at a
‘survival’ level.
It includes basic essential food and non-food items suppose necessary to maintain minimal decent
standard of living.
The Malaysian poverty line has three main components:
1. Food Expenditure
2. Clothing and Footwear Expenditure
3. Other Non-Food Expenditure
The poverty line was then derived by adding the monetary costs of the three components.
Malaysia poverty line in 2019 is RM980
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4. 3 types of poverty:
Absolute poverty – below PLI
Hardcore poverty – below half of PLI
Relative poverty – comparison between groups
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6. 6
• At Independence, more than half of the population were categorized as
poor. The government at the time pursued limited intervention as it
adopted laissez-faire system. This exacerbated poverty rate over the
years.
• In 1970, the government shifted its policy towards a more interventionist
one. This is to correct market failures that caused a persistent poverty
rate. NEP stressed on eradicating poverty in general, while NDP
focused on hardcore and relative poverty. Nowadays, the critical issue
in poverty is on the urban poverty.
• Due to the various programs implemented by the government, poverty
rate declined significantly over the years after 1970.
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1. The rapid rate of industrialization in the country.
a) Urbanization attracted people to migrate to urban centers for higher
paying jobs. Subsequently, only the less able bodies are left in rural
areas, compounding poverty in certain areas.
b) Rapid rate of industrialization also pushes prices of essentials up,
causing a decline in purchasing power.
2. Educational standards among children of the poor are low
thus they are unable to get better paid jobs.
3. Lack of job opportunities.
Increase in urban population coupled with limited growth in opportunities in
certain industries rendered people unemployed and poor.
8. 8
4. Depressed labour market.
Industry’s overdependence on foreign labour created a depression on wage
rate in the labour market. This is because foreign labour are willing to accept
lower wage rate.
5. Inflationary pressure.
Increase in general price level due to factors such as urbanization,
increased imported inflation, weak exchange rate, and interest rate increase.
This increase in general price level is particularly damaging for the poor
communities.
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1. Development of hardcore poor programs
Programs specifically for the hardcore poor was first introduced in 1988 known as the
Development Programs for the Hardcore Poor (Program Pembangunan Rakyat
Termiskin-PPRT; RMK7). The programs involved the creation of register and profile of
hardcore poor households and the delivery of appropriate projects to meet their specific
needs such as additional opportunities to increase their employability and income, better
housing, food supplements for children and educational assistance.
2. Provide opportunities to involve in higher paying job
The primary strategies that provide opportunities to the poor to be involved or
gain employment in higher paying jobs or activities so that they could become
self-supporting and increase their income to exceeds the PLI.
Examples of such projects include:
• To modernize their traditional method of production.
• Providing support and opportunities to be involved in modern farming and value added
processing of agricultural products.
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3. Better Town Planning
Plans on public land should ensure that a high proportion of the projects will
directly benefits the poor.
Community facilities such as schools, clinics, libraries, civic centers, markets,
playing fields and low cost housing, low rental trading or light industrial space
should be considered.
4. Provide Loans for Small Business
Credit support will initiate and expand business activity among urban
community.
5. Educational Facilities
Provide educational facilities like primary and secondary schools near their
houses in addition to providing various kind of educational assistance such as
scholarship, textbooks, foods and uniforms.
11. What's the truth about Malaysian Poverty?
https://www.youtube.com/watch?v=uwCE8BLobzQ
https://www.nst.com.my/news/nation/2020/07/607452/malaysias-poverty-line-income-
revised-rm2208-month-nsttv
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12. Introduction
Education is importance to develop human capital thus improving standard
of living.
The level of education among Malaysian increases by reason of expanding
of income, better educational facilities, financial assistance and incentive
provided by the government and private sector.
Human Capital:
Is defined as the stock of knowledge, skills, and abilities that determine the
labour productivity of an individual. (Oxford Dictionary of Economy)
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13. Generate Value Added Activities:
skilled and knowledgeable workforce generate higher value added activities.
Research & Design (R&D): Innovations in technological applications, medical
equipment, etc.
Service industries which require specialized skills: Financial services, creative
industries, etc.
Employment Multiplier:
knowledgeable and skilled workforce coupled with conducive business environment
creates opportunities for others.
E.g. individuals with technical skills in software development may establish new
companies that in turn employs more people.
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14. Increase Economic Growth:
knowledgeable workforce is innovative and capable of generating higher value added activities.
These activities are accounted for in GDP, thereby enhancing growth. e.g. in automotive industries,
R&D activities generate greater value and hence output growth compared to production activities
alone.
Supply Of Skiiled Workforce:
Education and other up-skilling programs are essential to prepare Malaysian workforce. Basic skills
include ICT skills, vocational skills, managerial skills and other technical skills that are in demand
by employers and industries. In addition, the World Economic Forum proposes the following skills
for the future workforce:
Attract Investments:
highly skilled workforce reflects a potential for output and productivity growth. This will stimulate
domestic and foreign investments.
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15. 15
Malaysia introduced Malaysia Education Blueprint 2013-2025 in the context of rising
international education standards through preparing Malaysia’s children for the needs of
the 21st century.
Students Aspirations:
1. Knowledge: at the most basic level, every child will be fully literate and numerate. Students must
master core subjects such as Mathematics and Science and acquire a rounded general
knowledge of Malaysia, Asia and the world. Students will also be encourage to develop their
knowledge and skills in other areas such as music, art and sports.
2. Bilingual proficiency: every child will be at minimum, operationally proficient in the national
language, Bahasa Malaysia, and the international language of communication, English.
3. Thinking skill: every child will learn how to continue acquiring knowledge throughout their lives,
to be able to connect different pieces of knowledge, and to create a new knowledge. Every child
will master a range of important cognitive skills including critical thinking, reasoning, creative
thinking, and innovation.
16. 4. Ethics and spirituality: the education system aims to instil strong ethics and spirituality within
every child to prepare them for challenges that they will face as an adult. This includes
strategies to resolve conflicts peacefully, to employ sound judgement and principles during
critical moments, to have courage to do what is right and nurture caring individuals who
contribute to the betterment of the community.
5. Leadership skill: the education system will help each student reach their full potential by
creating formal/informal opportunities for students to work in teams and take up leadership
roles. In education system, leadership encompasses 4 dimensions: entrepreneurship,
resilience, emotional intelligence, and strong communication skill.
6. National identity: unshakable sense of national identity, tied to the principle of Rukun Negara,
is necessary for Malaysia’s success and future. Every child will proudly identify as Malaysian,
irrespective of ethnicity, religion or socioeconomic status.
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17. 17
• To overcome the problem of labor shortages
e.g. in manufacturing, construction and low-skilled services.
• To lower the cost of production
foreigners are willing to accept lower wage compared to local workers.
• To get skilled workers
foreign engineers, medical expert, academics.
• To help in the transfer of technology
e.g. foreign engineers along with foreign capital were actively involved in
KLCC construction: Hazama Corp. (Japan) and J.A. Jones Construction
(USA) for Tower 1.
• Enhances economic growth.
foreign workers enabled rapid infrastructure development and thus
stimulated economic growth.
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• Inferior quality of goods and services produced by foreign workers
e.g. poor communication skills among service sector employees.
• It will create competition against local workers
Since foreigners are willing to accept lower wages, employers naturally prefer
foreign workers. Domestic workers are forced to accept lower wage for any chance of
employment.
• It will create social problems
e.g. four Burmese workers were killed in Malaysia in July 2014. Result of
Scuffle between Buddhist Myanmar's and Rohingya’s.
• Repatriation of wages to their country (outflow of money)
Excessive outflow will lead to decline in value of the ringgit.
• It will increase the government expenditure
Social services like healthcare, management and repatriation of workers
especially illegal immigrants. Cost of detaining and deporting them to their
country.
