THE POVERTY TREND AND GOVERMENT INTERVENTION

A211 BEEB2023 MACROECONOMICS

GROUP C

GROUP iASSIGNMENT i1

TITLE :

THE POVERTY TREND AND GOVERMENT INTERVENTION (2010-2021)

LECTURER i: I

DR. ANIZAH BT. MD. ALI

DISEDIAKAN OLEH :

KUMPULAN 9

NO. i NAME MATRIC iNO.

1. BASYIRAH JAAFAR 271451

2. THARSANA A/P PAVI 277723

3. NG POH TZO 278496

4. YUSLIZA BINTI MOHD YASIN 279250

5. MUHAMMAD IZZAT BIN AHMAD @ BUKHARI 281376

THE POVERTY TREND AND GOVERMENT INTERVENTION

CONTENT

1.0 INTRODUCTION................................................................................................................1

2.0 FACTOR OF POVERTY IN MALAYSIA.........................................................................4

3.0 EFFECT OF POVERTY IN MALAYSIA.........................................................................12

4.0 GOVERMENT INTERVENTION IN ERADICATING POVERTY...............................23

5.0 CONCLUSION..................................................................................................................28

REFERENCE...........................................................................................................................29

APPENDIX..............................................................................................................................32

i
THE POVERTY TREND AND GOVERMENT INTERVENTION

1.0 INTRODUCTION

1.1 Research background

Poverty in Malaysia is explained from a financial or income viewpoint. Poverty is

separated into two types using this concept: absolute and relative poverty. Absolute poverty is

defined as the inability of an individual or family to meet their basic needs to maintain a

minimum level of dignity.

Food, clothes, shelter, education, and medical are the five fundamental requirements.

Absolute poverty is determined by comparing a set of households' income to a standard

known as the Poverty Line Income (PGK). This PGK is determined by the inhabitants of this

country's living conditions.

While the degree of poverty is defined by the amount of money received from PGK,

whether it is poor or not. Income distribution can be linked to the concept of relative poverty.

By comparing an individual's degree of welfare to the level of welfare of others, income

distribution might reveal an individual's level of well-being. Relative poverty has always

existed and will continue to exist as long as there is an income distribution mismatch. Even if

absolute poverty has been addressed, the problem of relative poverty becomes increasingly

acute as income inequality rises..

According to the theory of poverty, the most common form of poverty in Malaysia is

absolute poverty, which is defined as household income less the Poverty Line Income (PGK).

If a household's monthly income is less than the PGK, the household is termed poor. The

incidence of poverty in Malaysia is defined as the proportion of impoverished households

among the total number of households.

In short, these two ideas have different political and social ramifications due to

different measuring focus and purposes, i.e., absolute poverty is linked to fundamental

1
THE POVERTY TREND AND GOVERMENT INTERVENTION

requirements, whereas relative poverty refers to income distribution. In comparison to the

concept of absolute poverty, the concept of relative poverty can better explain the socio-

economic situation of a society, notably economic and social disparity.

Next, Malaysia has made numerous declarations about its plans to develop the

country, and while this has garnered widespread support, there are some issues that must be

addressed, and one of the country's economic challenges is its inability to grow. Absolute

poverty in Malaysia, according to ethnic groups, socioeconomic levels, and states, is one of

the issues that must be addressed.

Absolute poverty is defined as poverty based on income, whereas monetary poverty

is defined as poverty based on income below the poverty line (PLI). It covers both food and

non-food goods. Food, clothing, and footwear are all included in PLI Food. Shelter rental,

transportation, communication, recreation, schooling, and cultural services are all included in

the non-food PLI. The PLI has been tweaked to account for household size, demographic

factors, and geographic location.

According to the data from Malaysia Department of Statistic, the poverty line

income has been increased from RM980 to RM2208 with more than 400,000 household in

the country receiving montly wages below this level classified poor in 2019, (DOSM).

According to the current poverty line income, Malaysia's poverty rate dropped in 2019

compared to 2016.

According to the data gathered, there are various elements that contribute to the

increase or decrease of absolute poverty in Malaysia in a given year, including ethnic groups,

strata, and states, as well as certain repercussions that can be produced if not addressed. As a

result, numerous options must be presented in order to solve this problem.

2
THE POVERTY TREND AND GOVERMENT INTERVENTION

1.2 Reseach questions

i. Is there any direction and government intervention in Malaysia to combat poverty?

ii. What does it mean to be poverty in Malaysia?

iii. Are there any factors that contribute to poverty in Malaysia?

iv. Is Malaysian poverty having an effect on the strata, society, and state?

v. Is the government involved in the fight against poverty in Malaysia?

1.3 Reseach objective

i. To study direction and government intervention in Malaysia to combat poverty.

ii. To study absolute poverty in Malaysia.

iii. To determine factors that contribute to poverty in Malaysia.

iv. To determine if Malaysian poverty having an effect on the strata, society, and state.

v. To determine how government involved in fight against poverty in Malaysia.

vi. To develope goverment strategy in fight against poverty in Malaysia.

3
THE POVERTY TREND AND GOVERMENT INTERVENTION

2.0 FACTOR OF POVERTY IN MALAYSIA

2.1 Low level of income

Low income plays a big significance to the poverty rate in Malaysia. Low income

makes it difficult for the household to live their daily life in peace as they could not afford

even the basic necessities like food and shelter. Those who are affected by this form of

poverty are from the category of B40. Category of B40 represents the bottom 40% of the low

income group among Malaysian households (Romeli, 2021). The wage during 2010 – 2012

was low which effected the income of the people negatively.

Chart 1

Chart 1 shows the mean and median monthly wage in Malaysia from 2010 to 2012.

We can see that the mean wage in 2010 was RM 1936 which increased slightly to RM 1,959

in 2011. There was a RM 93 increase in 2012 compared to 2011 at RM 2,052. As for the

4
THE POVERTY TREND AND GOVERMENT INTERVENTION

median wage, the chart shows that the median wage stayed constant from 2010 to 2011 at

RM 1,500. This value then increased to RM 1,566 in 2012.

We can see from the chart provided that the wage at the time was not sufficient

enough for the people to live a comfortable life. This caused them to have low incomes. The

low income level caused many people to be dragged into poverty.

Therefore, Malaysian government has taken a measure to reduce poverty caused by

low income by introducing the concept of minimum wage that had to be accepted by all

employers. This measure has been amended a few times to cater to the current economic

situation. The living cost has been increasing over the years, the increase in minimum wage

would be able to help those with low income to fulfill their basic needs. The lowest monthly

gross wage is referred to as the "minimum wage".Apprentices and domestic servants are not

included.. As part of the New Economic Model, which aspires to transform our country's

economy into a high-income economy, the minimum wage was announced in October 2010

and entered into effect in January 2013. (Malaysia Minimum Monthly Wages, 2021).

5
THE POVERTY TREND AND GOVERMENT INTERVENTION

Minimum Wage in Malaysia from 2013 - 2021

1400

1200

1000

800

600

400

200

0
2013 - 2015 2016 - 2018 2019 2020 - 2021

Minimum Wage

(Malaysia Minimum Monthly Wages, 2021)

From the chart above, we can see that there has been an increase in the minimum wage in

Malaysia from 2013 to 2021. The minimum wage from 2013 to 2015 was RM 900. This

amount was increased to RM 1000 from 2016 to 2018. This value was increased to RM 1100

in 2019. The increasing cost of living required the government to increase the minimum wage

by RM 100 to RM 1200 in 2020 and our country has been using the same minimum wage

value throughout 2021. The implementation of minimum wage has increased the income of

the people which reduces poverty.

6
THE POVERTY TREND AND GOVERMENT INTERVENTION

2.2 Geographical disparities

Geographical disparities also affects the poverty rate in Malaysia severely. Despite

the fact that poverty exists in cities, the poverty rate in rural areas is nearly double that of

metropolitan areas.

Incidence of Poverty in Malaysia from 2012 - 2016

3.4

1.6

1 1

0.3
0.2
2012 2014 2016

Urban Area Rural Area

Chart 3

Indicators of poverty in Malaysia in 2012, 2014, and 2016 are shown in Chart 3. The

graph illustrates that poverty rates in rural areas are higher than in urban areas in all three

years. In 2012, 1% of people lived in poverty in cities, while 3.4% lived in poverty in rural

areas. Poverty rates in urban areas were 0.3% in 2014, while they were 1.6% in rural areas.

Poverty rates in rural areas remained 0.8% higher in 2016 than in urban areas.

As a result, the Malaysian government has taken proactive initiatives to eliminate

poverty in rural areas. The government diversified the economy in rural areas by developing

7
THE POVERTY TREND AND GOVERMENT INTERVENTION

industries based on natural resources. The examples of these industries are agro-business,

timber, petrochemical, non-metal mining and travel industry (Cooperation, 2001). The

government also came up with “Pelan Induk Pembangunan Luan Bandar” and “Model Baru

Ekonomi Luar Bandar” as well as the Rural Transformation Programme. The government

provided rural basic infrastructure to the people in rural areas.

Rural Roads coverage (km) in 2014

Sabah

Sarawak

Peninsular
Malaysia

Chart 4

The rural road coverage done in Sabah was 7,246 km whereas in Sarawak it was

5.885 km. The road coverage in Peninsular Malaysia was 38,131 km.

8
THE POVERTY TREND AND GOVERMENT INTERVENTION

Electricity and Water supply coverage in 2014

(%)
Sabah Sarawak Peninsular Malaysia

99.8

98.8
94.1

91

81.7
80.6
El ec t r i c i t y C o v er ag e W at er S u p p l y C o v er age

Chart 5

The electricity coverage was 94.1% in Sabah and 91% in Sarawak. Meanwhile in

Peninsular Malaysia, it was 99.8%. The water supply coverage was 80.6% in Sabah, 81.7% in

Sarawak and 98.8% in Peninsular Malaysia.

The government’s initiative to intensify economic activities in rural areas as took

place to reduce the poverty in rural areas. The 21st Century Village Programme was

introduced in 2013 with three sub programmes under it which were “Program Desa Lestari”,

Large Scale Fruit and Vegetable Farming and Rural Business Challenge (RBC). “Program

Desa Lestari” was created to help intensify the economic activities operated by village

cooperatives by taking their strengths into consideration. The large Scale Fruit and Vegetable

Farming focused on producing six high value non-seasonal tropical fruits and three high

value highland vegetables. The Rural Business Challenge was a competition targeted for

youths ages 18 to 40 to propose viable business plans for new or existing businesses in the

field of agriculture, manufacturing and service in rural areas.

9
THE POVERTY TREND AND GOVERMENT INTERVENTION

2.3 Low Employment Rate.

The employment problem has been an issue for a long time in Malaysia. The

workforce for Malaysia are 68.3% in accordance with Department of Statistics Malaysia.

Even the workforce of Malaysia is high, the unemployment rate of Malaysia are still 4.7% in

the third quarter of 2021. Even the employed are having a problem of being underpaid. This

also happen because the small to medium sized firm are not given budget to grow in order to

create more job opportunity for the society.

The low rate of loan allowed to this type of businesses have cost many of this size of

firm to stagnant even more so during this pandemic. The government economic policy is

encouraging people to have personal loan which usually lead to a financial problem due to

underpaid job. The government should try to create more job opportunity to the society so

that a lot more people would have income which would help in flow of state economy. This is

also true of teaching man how to fish and not giving man fish.

The number of employees in the third quarter of 2021 was 15.27 million (Q2 2021:

15.21 million), an increase of 0.4% (+67.5 million) from the quarter. Meanwhile, compared

to the third quarter of 2020, the number of employees increased by 1.2% to 179.2 million (Q3

2020: 15.1 million). In the case of education, more than half (55.1%) of the employed are

8.41 million people with secondary education. It was followed by high-educated workers

(32.5%) with 4.97 million.

The unemployment rate fell to 4.7% in the third quarter of 2021 4,444 people. In the

third quarter of 2021, the unemployment rate was 4.7 %, down 0.1 percentage points from the

previous quarter (Q2 2021: 4.8%). 2nd quarter: 764.9 million). Compared to last year, the

unemployment rate remained unchanged, while the number of unemployed increased slightly

10
THE POVERTY TREND AND GOVERMENT INTERVENTION

by 1.2 million. The number of unemployed 4,444 was 658.1 thousand, or 88.2%, an increase

of 1.5 percentage points from the previous quarter (663.4 thousand persons, 86.7% in the

second quarter of 2021). Accordingly, the inactive unemployment rate decreased by 1.5 %

points to 11.8%, equivalent to 88.11 million people (2Q21: 13.3%, 101.6 million).

11
THE POVERTY TREND AND GOVERMENT INTERVENTION

3.0 EFFECT OF POVERTY IN MALAYSIA

3.1 Effect of Poverty on Strata

The absolute poverty has effected the strata in which policy are made to handle the

problem. Poverty is a multidimensional social problem that drives away all the

disadvantaged, haywire. This goes beyond the condition of not having enough income. The

other means of meeting deeper material, cultural and basic needs cause location (such as

location and space), climate and natural resources. For example, groups of people are isolated

from each other. Conditions such as agricultural or rural, inland or inland areas locations far

from mainstream markets can be vulnerable to generation-to-generation poverty. Dimensions

related to poverty therefore include:

i. Income and employment, productive assets (i.e. land and housing),

ii. Access to social safety net services such as education, health care, information, credit,

water, and sanitation is limited.

iii. Power, involvement, decency, and respect are all political terms.

12
THE POVERTY TREND AND GOVERMENT INTERVENTION

Mean Monthly Household Income By Strata

of Malaysia From 2009 and 2012

5742
5000
4705
4025

3080
2545

Malaysia Urban Rural

2009 2012

Chart 6

The differences between the east Malaysia and west Malaysia (Sabah and Sarawak)

are too much. Among the provinces, Sabah has the highest poverty rate. Kedah and Sarawak.

Malaysia's poverty rate has risen over time. With the spread of urban poverty, new forms of

poverty have emerged, as well as rising interracial and intersectoral income disparities.

The poverty line in Malaysia is defined by absolute and relative numbers. Absolute

poverty is income poverty or Financial poverty is measured using income below the poverty

line (PLI). Includes PLI for food and non-food items. Food PLI includes food and clothing

and footwear, non-food PLI consists of rental housing, transportation. And

telecommunications services, recreation, education and culture. PLI adapted to household

size and demographic characteristics as well as location. Different PLI sets are used in urban

and rural areas.

13
THE POVERTY TREND AND GOVERMENT INTERVENTION

Mean Monthly Household Income by Ethnic in Malaysia For

2009 and 2012
6366

5233 5233

4457
3999
3624

Bumiputera Chinese Indians

2012 2009

Chart 7

14
THE POVERTY TREND AND GOVERMENT INTERVENTION

3.2 Effect of Poverty on Social

Every society has a poverty household, but when the percentage of absolute poverty

household over the maximum of the normal poverty line, that will bring many negative

effects for the society. For example, Malaysia's absolute poverty rate fluctuated a lot from

2015 to 2020, especially in 2020, when it jumped from 5.6% in 2019 to 8.4%. That is the

highest percentage in those 5 years (2015-2020). The higher absolute poverty already

exacerbates and leads to many society problems in Malaysia.

The first society problem that affects the higher absolute poverty is the competition to

find jobs has become more intense. Normally, the unemployment rate will influence absolute

poverty such as the absolute poverty of 2020 will increase, and the main resource was many

people lose their work after pandemic COVID-19 break out. In the report of the Department

of Statistics Malaysia (DOSM), the pandemic COVID-19 cause the unemployment rate to

increase 1.19% from 3.31% in 2019 to 4.5% in 2020.

In higher poverty countries, many people want to find a job to solve their household

economic problems. However, the work unit is limited so the absolute poverty people need to

face more intense competition in finding a job. Despite this, not every poverty household is

all in unemployed person. They also have a job, but their wage is not enough to cover their

living wage. That is because when the demand for labour is higher, the wage of labour in the

market will be less than before.

At that time, many unkind businesses ignore the law. They exploit the wage and

another benefit of labour. As an example, the Voanews already expose the forced labour

rising in Malaysia Rubber Glove factories. They give a little money and order the labour

work in overtime or overwork. That is why even the poor people work in the endeavor but

15
THE POVERTY TREND AND GOVERMENT INTERVENTION

they also cannot break away the absolute poverty. The higher competition for jobs and the

difficult work environment will be forming an unhealthy and adversity society.

After that, following the absolute poverty increase also will appear a new group of

poverty people. Especially is after Movement Control Order (MCO), many people are

compelled to stop their work in the tourist industry, entertainment industry, beauty industry,

and other industries that are not allowed to open. The policy of MCO causes the people to

lose their income, but the living wage still needs to pay. The average Poverty Line Income

(PLI) for an average family size of 3.9% people is RM2,208 per month, in accordance with

the Department of Statistics Malaysia (DOSM).

However, the breakout of the pandemic COVID-19 already disruptions to people’s

income, they have some lost wages even have people lost work. As a result, many

households, particularly those in the B40 categories, have become impoverished.. At the

same time, the new group of poverty people also will appear in the citizen because the

spending of the city is very high. That situation will cause many people to choose to load

with the bank or another illegal lending company.

The base for the Families Edge report of United Nations Children’s Fund (UNICEF),

the urban low-income household has more probability to unemployed because the MCO cut

their work time and wage. When the people have low-income only, they will choose the

cheaper and insecure food. That will cause the health of people to decrease and the problem

of malnutrition crisis.

Suddenly, the increase of absolute poverty also will influence child development.

When absolute poverty rises, we can discover the poverty children will more tend to drop out

of school especially in the higher absolute poverty area. As everybody knows, the highest

16
THE POVERTY TREND AND GOVERMENT INTERVENTION

poverty rate in our country is the state of Sabah. In 2020, the absolute poverty rate in Sabah

increased from 19.5% (2019) to 25.3%, which increase by 5.8%. That means in Sabah about

have 989 thousand people are living in absolute poverty households.

The poverty lives to force the poor student to always be truant or immediate drop out

of school because they need to work and get money for the family. The higher absolute

poverty will cause the child labour to increase and the education of the child decrease. On

other hand, the increasing in absolute poverty rate will escalate the situation of child

marriage. In our country, child marriage still has many cases occur in urban and rural area

and it is throughout all ethnic and religious communities.

The basis for the report of the United Nations Children’s Fund (UNICEF), the factor

that causes child marriage include low household income and poverty. When the poverty

parent is not able to bring up the children, they will choose to child marriage because that can

reduce their living spending and the child can be weal.

However, the report also shows us, many children after married lose the chance to

remain in school, and that will be leading to a higher risk of sustained poverty. The absolute

poverty in higher will cause the children lost their opportunities to school indeed will be

forced to marriage with an adult, that is an unhealthy society and the absolute poverty will

carry on to the next generation.

In conclusion, the higher absolute poverty will impact the competition of finding the

job and bring out the forced labour problem. At the same time, the society will formation a

new group of poverty people and they must face higher economic pressure and loans. Then,

the education of children also will influence by the absolute poverty rate. When the absolute

poverty rate increase, the poverty children will be forced to work or marriage. These are all

17
THE POVERTY TREND AND GOVERMENT INTERVENTION

bad society phenomena affected by higher absolute poverty. The government must execute

the policy to reduce the absolute poverty rate still can give Malaysia’s citizens a healthy and

safe society.

18
THE POVERTY TREND AND GOVERMENT INTERVENTION

3.3 Effect of Poverty on State

Global poverty is a serious issue that the world faces today, every country’s

government is active in progress against the poverty problem. Malaysia’s government also

needs to the problem of absolute poverty in our country. According to a report by the

Department of Statistics Malaysia (DOSM), our country's absolute poverty rate has reduced

from 7.6% in 2016 to 5.6 % in 2019. That proves our government has executed a good policy

to reduce the issue of absolute poverty. That is because when the absolute poverty rate is too

higher will be serious to influence the nation's economic growth full.

When a country has a higher absolute poverty rate, the national development of that

country will be slow. That is because the poverty households many times is low-income or

unemployed families. Then, the people are unable to pay the income taxes and that will cause

the income of the government to decrease. We can see the data of the Inland Revenue Board

of Malaysia (LHDH) show the government already collect the total taxes direct is RM145.11

billion in 2019.

However, following the absolute poverty increased in 2020, the total taxes direct

collected by the government decreased RM123.093 billion only, that total decreased the

22.017 billion or 15.17% from 2019 to 2020. The decline that happen in government income

also will cause the budget of development expenditure to decrease. After that situation will

lead the many projects in development will be forced to delay or stop because the

government needs to spend more money on non-developmental Expenditure to solve the

problem of poverty. As an example, Malaysia’s absolute poverty rate in 2016 was higher by

7.6%. In the next year, the government total spends RM 1,287 million on the recurring

expenditure.

19
THE POVERTY TREND AND GOVERMENT INTERVENTION

The budget of recurring expenditure in 2017 years was more than RM 40 million

compared with development expenditure in the report of National Bank Malaysia. The

expenditure on subsidies and good policy can ease the economic problem of poverty people

but wanting the poverty people to break away from absolute poverty still need a long-time. In

that time the national development process of building the new facilities, development

environment, expenditure incurred on education with another be slow and less attention of the

government. So, the increase of poverty really will slow down the development speed of our

country.

At the same time, a larger absolute poverty rate will have an impact on the Gross

Domestic Product (GDP). We can see the absolute poverty rate in 2016 was increased to

7.6% meanwhile the GDP growth rate of Malaysia in 2016 only have 4.4% compared with

2015 already fall the 0.7%. When the absolute poverty rate increase and the unemployment

rate also increase (from 3.10% increase to 3.44% in 2016 years). That means the demand for

labour market in Malaysia decreased.

When the firm decreased labour, their quantity of products also will decrease. From

the standpoint of macroeconomics, we can see that the situation will have a direct impact on

the country's GDP because the product has been greatly reduced by the rate of poverty. This

situation changes even more dramatically in 2020.

Malaysia's absolute poverty rate increased from 5.6 % to 8.4% in 2020, totaling 2.8

%. It is not only unemployment that causes poverty, the policy of MCO also comes out new

group poverty. They are forced to stop the business and firm in MCO time. So, the

production of people was greatly reduced because the poverty and policy. In the same year,

our country's GDP growth rate was full to -5.6%. Although the appeal of pandemic COVID-

19 is a big setback to our country, the problem of absolute poverty also needs to pay attention

20
THE POVERTY TREND AND GOVERMENT INTERVENTION

to and endeavor to reduce. Therefore, the higher absolute poverty will cause the GDP growth

to be lower.

Next, the higher absolute poverty rate occur will cause the nation’s monetary for

foreign exchange value to become devaluated. When the majority of the households in a

country are low-income or unemployed, the country's absolute poverty rate is usually greater.

Then, the monetary value of those countries will not be higher like Afghanistan, Yemen,

Nepal, and other poorest countries. That is because the value of money on the international is

dependent on the size of the money supply and the productive capacity of an economy.

When the productive capacity growth is slower than the money supply in the

economics, then that will cause the monetary value to become devaluated. This is due to the

lower productive capacity will using more monetary to appeal productivity, so the exchange

value for each one in the market will become less.

However, Malaysia also experienced a higher absolute poverty rate in the 2016 and

2020. First, when the absolute poverty rate rose to 7.6% in 2016. Based on the Exchange

Rates UK records the average exchange rate from $1 (USD) change RM3.90 in 2015 full to

$1 change RM4.14 in 2016. That is because the higher absolute poverty caused the

productive capacity to become lower, so the value of Ringgit Malaysia in international also

decreased. Under the influence of the pandemic COVID-19, the absolute poverty rate of

Malaysia rose again to 8.4% and that is a new higher rate in nearly 5 years.

Then the pandemic and high absolute poverty rates took a toll on the productive

capacity. So, our average exchange rate devalued again from $1 (USD) change RM4.14 in

2019 to $1 change RM4.20 in 2020. This shows that an increase in the absolute poverty rate

reduces the foreign exchange value of the Ringgit Malaysia.

21
THE POVERTY TREND AND GOVERMENT INTERVENTION

In summary, the government must reduce the absolute poverty rate in our country

because the impact of higher poverty will seriously affect national economic growth. The

development of national will delay by higher poverty because the government will pay more

attention to solving the poverty problem and spend more budget on recurring expenditures.

Meanwhile, GDP growth will be slower when the country's absolute poverty rate is higher.

Finally, the rate of absolute poverty will have an impact on our monetary value. That all

shows that the problem of absolute poverty is very serious and urgent, and we hope that the

government will pay attention to it so that our country's economic growth can improve.

22
THE POVERTY TREND AND GOVERMENT INTERVENTION

4.0 GOVERMENT INTERVENTION IN ERADICATING POVERTY

If we recall a little of Malaysia's past history, the government had established a strong

policy to manage poverty, known as the New Economic Policy (NEP) which ran from 1971

to 1990. It focuses on eradicating poverty through social restructuring, repairing social and

economic imbalances between races through an approach of expanding work opportunities

for all people, regardless of race. Restructuring of society to diminish and eventually remove

racial identification based on economic roles. The implementation of the NEP for 20 years

has succeeded in significantly reducing the incidence of poverty and at the same time can

strengthening national unity.

The economy of Malaysia has grown rapidly despite various challenges. Following

that, attempts to alleviate poverty were continued through the National Development Policy

(NDP), which replaced the New Economic Policy from 1991 to 2000. Meanwhile, the NDP

focuses more widely, including the urban poor. The role of the private sector is also

encouraged to be involved in the national development process. Education and training are

the main thrust of the implementation of the NDP, especially in the aspect of eradicating

poverty. In this study, we have listed three government interventions to eradicate poverty,

which are implementing an expansionary fiscal policy, implementing the minimum wage

order, and improving skills and education among the Malaysians.

Implementing an expansionary fiscal policy is a major government intervention to

eradicate poverty in Malaysia. Expansionary fiscal policy is the government's action to lower

taxes and increase government spending in an effort to increase the level of aggregate

spending in the economy. Providing income tax relief to the people, specifically lifestyle tax

relief, is one of the government's initiatives through tax reduction strategies. The examples of

23
THE POVERTY TREND AND GOVERMENT INTERVENTION

lifestyle tax relief are the purchase of reading materials, computers, internet subscriptions and

others. As a result, people will have a surplus of money from tax relief and can use it for

savings or buy other necessities. Not only is the personal income tax reduced, but the

government has also given tax rate reduction initiatives to companies and Small and Medium

Enterprises (SME) to boost development programs.

When company and SME taxes are reduced, then the company’s net profit will

increase allowing them to give bonuses or increase the salaries of their employees.

Furthermore, they can expand the business and hire more employees because there is a

surplus of profits. Among the government's expenditures to reduce poverty is by providing

subsidies and incentives that are included in operating expenditure. Subsidies are a small

portion of financial assistance made by the government to a business or economy sector. The

implementation of subsidies makes the price of essential goods cheaper and enjoyed by the

target group, which are low- and middle-income groups. The examples of subsidies provided

by the government are housing subsidies, health subsidies, food subsidies, and so on.

Through the My First Home Scheme (MFHS), MyHome Scheme, and Youth Housing

Scheme, low- and middle-income people can purchase a home (YHS). For health subsidies,

the government bears a high percentage of medical costs in public hospitals and clinics. This

subsidy benefits those who cannot afford medical treatment in private hospitals or clinics. In

addition, many 'Klinik 1Malaysia' clinics have been built across Malaysia to make it easier

for low-income people to seek treatment by charging as little as RM1 each treatment.

As a result, the health status of the people in Malaysia will improve.Subsidies on a

variety of foods, including rice, cooking oil, sugar, and wheat flour, are also in place to help

with living expenses. Aside from subsidies and incentives, the government also provides one-

off aid to eligible citizens, such as “Bantuan Rakyat 1 Malaysia” and “Bantuan Sara Hidup”.

24
THE POVERTY TREND AND GOVERMENT INTERVENTION

Other than that, the government also provides capital funding to intensify programs to

generate income for the people through various programs such as Mobilepreneur Program,

Agropreneur Program, eRezeki Program and so on. Therefore, it is important for the

government to pursue fiscal measures to help those in poverty.

Another government intervention to eradicate poverty is implementing the minimum

wage order. The minimum wage is the lowest wage that an employer can pay to a full-time

employee by law. The minimum wage is set through several acts including the National

Wage Consultative Council Act 2011, the Minimum Wage Order 2012 and the Employment

Act 1955. The minimum wage rate is reviewed and discussed by the National Wage

Consultative Council comprising government representatives, employers, employees and

other members. After consultation between members, the Council recommends a minimum

wage rate to the Ministry of Human Resources. After obtaining approval, the rate is gazetted

for implementation. These salary rates are revised on a regular basis to ensure that they

remain relevant to current economic and social circumstances.

The wage rate is determined by the poverty line income, the employer's ability to pay

(median pay), the consumer price index (CPI), the actual unemployment rate, and

productivity growth. During the period of this study which is from 2015 to 2020, there are

three years that the minimum wage order has been enacted. In 2016, the minimum monthly

wage was set at RM1,000 per month for Peninsular Malaysia while Sabah, Sarawak, and

Labuan's were set at RM920 per month. The next Minimum Wage Order is in 2019 where the

order allocates the same minimum wage rate for all workers in the country, including those in

Sabah and Sarawak at RM1,100 per month.

In 2020, In major cities under the jurisdiction of 57 city councils and municipalities,

the new minimum wage regulation was raised to RM1,200 per month, while the minimum

25
THE POVERTY TREND AND GOVERMENT INTERVENTION

wage rate in areas other than major urban regions remained at RM1,100 per month. Due to

the effects of inflation which causes the cost of living to increase every year, so it is

appropriate that income should also be increased. Although the amount of salary increase is

not significant, at least it can help the poor to cover the cost of living. Thus, the minimum

wage order which is revised every two years is very effective in reducing the poverty rate.

The next way to eradicate poverty is by improving skills and education among

Malaysians. Education is very important so that the people acquire knowledge and can bridge

the gap between the rich and the poor. According to UNESCO, if all students have only basic

reading skills, then they can get out of hardcore poverty. This clearly shows that an increase

in the level of education can reduce the poverty rate.

Therefore, the law enacted by the government that requires every parent residing in

Malaysia to send their children to primary school is seen as a very appropriate action so that

no child is left behind in education. In addition, many public universities have been built and

upgraded to raise the standard of education in our country. Education fees in public

institutions in our country are very affordable, enabling the low- and middle-income groups

to improve their level of education and get out of poverty.

Apart from formal education, we also need to have certain skills. Nowadays, many

institutions have been established to train youngsters in various technical fields and talents in

order to qualify them to work in the trade, enterprise, and industrial sectors, as well as to

produce potential entrepreneurs. In keeping with educational trends driven by the growth of a

technology-based economy, our country requires more knowledge workers.

Moreover, technological developments have also caused manufacturing and industrial

firms to need more highly-skilled workers than assembly workers. Accordingly, skills

become an important aspect of human resource development. As a result, the government is

26
THE POVERTY TREND AND GOVERMENT INTERVENTION

bolstering the programme of Technical and Vocational Education and Training (TVET).

TVET is a sort of education and training with a heavy emphasis on industry practises in

certain industries and an occupational orientation.

There are two public TVET institutions that have been established, known as National

Youth Skills Institute (IKBN) and Industrial Training Institute (ITI). TVET graduates are

able to master practical knowledge and skills better than academic graduates. These

advantages have the potential to open up more job opportunities and attract employers to

offer jobs to TVET graduates. Therefore, the impact of improving education and skills among

Malaysians will alleviate poverty.

In comparison to other developing countries, our government has done a lot of

intervention by implementing a variety of initiatives to eradicate poverty in Malaysia. As

Malaysians, we should be grateful for all this assistance and initiatives. We should seize

every opportunity to raise our living standards and lift ourselves out of poverty.

27
THE POVERTY TREND AND GOVERMENT INTERVENTION

5.0 CONCLUSION

According to the information acquired, ethnic groups, social levels, and states all

have an impact on the occurrence of absolute poverty in Malaysia. There have also been

some repercussions as well as solutions that have been implemented.

Several elements of poverty that occur in Malaysia have been discovered to have an

impact on the strata, social features, and the country itself. As a result, a number of initiatives

have been launched to address the country's problem of absolute poverty.

The New Economic Policy (NEP), which ran from 1971 to 1990, was formed with

the goal of eradicating poverty through social reform, social betterment, and reducing

economic disparities between races through providing work possibilities for all people,

regardless of race.

For the past 20 years, the NEP has been successful in eliminating poverty and

fostering national unity. The National Development Policy (DPN), which took the role of the

New Economic Policy from 1991 to 2000, continued efforts to reduce poverty among

Malaysians.

The government's key intervention in reducing poverty in Malaysia is known as the

execution of expansionary fiscal policy. One of the government's goals through tax reduction

measures is to provide citizens with income tax relief, such as lifestyle tax relief.

Subsidies and incentives from the government are also included in operating costs.

Subsidies for health care in public hospitals and clinics, as well as subsidies for various types

of food, are also used to lower people's living costs.

Aside from that, the government enforced the minimum wage law. The National

Wage Consultative Council Act 2011, the Minimum Wage Order 2012, and the Employment

Act 1955 have all been used to set the minimum wage.

28
THE POVERTY TREND AND GOVERMENT INTERVENTION

29
THE POVERTY TREND AND GOVERMENT INTERVENTION

REFERENCE

Cooperation, J. B. (2001). Poverty Profile Executive Summary Malaysia. Tokyo, Japan:

Japan International Cooperation Agency.

Higher Household Income, Lower Poverty Rates. (n.d.). Retrieved from Department of

Statistic Malaysia:

https://www.dosm.gov.my/v1/index.php?r=column/cone&menu_id=UlVlbUxzUWo0

L3FEaWZmUVg4ZFQzZz09

Jung, Y. P. (n.d.). Poverty in Malaysia. Penang: Penang Institute.

Lim, I. (2021, July 14). Malaysians’ average, median salaries in 2020 fall for first time since

2010 to RM2,933, RM2,062. Retrieved from Malay Mail:

https://www.malaymail.com/news/malaysia/2021/07/14/malaysians-average-median-

salaries-in-2020-fall-for-first-time-since-2010-t/1989755

Malaysia Minimum Monthly Wages. (2021). Retrieved from Trading Economics:

https://tradingeconomics.com/malaysia/minimum-wages

Romeli, R. H. (2021, July 6). Income Classification in Malaysia: What is B40, M40 and T20.

Retrieved from iProperty.com.my: https://www.iproperty.com.my/guides/what-is-

b40-m40-t20-in-malaysia/

Unit, E. P. (n.d.). Transforming Rural Areas to Uplift Wellbeing of Rural Communities.

Putrajaya: Prime Minister’s Department.

30
THE POVERTY TREND AND GOVERMENT INTERVENTION

Department of Statistics Malaysia Official Portal. (2021, August 06). Household Income

Estimates Incidence of Poverty Report, Malaysia, 2020. Retrieved from

https://www.dosm.gov.my/v1/index.php?r=column/cthemeByCat&cat=493&bul_id=VT

NHRkdiZkFzenBNd1Y1dmg2UUlrZz09&menu_id=amVoWU54UTl0a21NWmdhMjFM

MWcyZz09

FMT Reporters. (2021, June 17). Poverty rate shoots up to 8.4% in 2020. Free Malaysia

Today. Retrieved from

https://www.freemalaysiatoday.com/category/nation/2021/06/17/poverty-rate-shoots-up-

to-8-4-in-2020/

Syahirah Syed Jaafar. (2020, July 10). Malaysia’s absolute poverty rate at 5.6% — chief

statistician. The Edge Market. Retrieved from

https://www.theedgemarkets.com/article/malaysias-poverty-rate-rises-56-%E2%80%94-

chief-statistician

Department of Statistics Malaysia Official Portal. (2021, July 27,). Gross Domestic Product

Income Approach 2020. Retrieved from https://www.dosm.gov.my/v1/index.php?

r=column/cthemeByCat&cat=266&bul_id=elo2M3NQQ2Zzb1oyRk42a1FTdkc5QT09&

menu_id=TE5CRUZCblh4ZTZMODZIbmk2aWRRQT09

Tarrence Tan. (2020, November 1). The poor in Malaysian cities are getting poorer. TheStar.

Retrieved from https://www.thestar.com.my/news/focus/2020/11/01/the-poor-in-

malaysian-cities-are-getting-poorer

Ministry of Housing and Local Government. (2021). Program Pembasmian Kemiskinan

Bandar (PPKB). Retrieved from https://www.kpkt.gov.my/index.php/pages/view/285

31
THE POVERTY TREND AND GOVERMENT INTERVENTION

Department of Statistics Malaysia Official Portal. (2020, December 10). Sustainable

Development Goals (SDG) Indicators, Malaysia, 2019. Retrieved from

https://www.dosm.gov.my/v1/index.php?r=column/cthemeByCat&cat=474&bul_id=OVp

QNVJXMkxMbldxbTdLQXJKbXV5dz09&menu_id=WjJGK0Z5bTk1ZElVT09yUW1tR

G41Zz09

United Nations International Children's Emergency Fund (UNICEF). (2020, August 24).

Families on the Edge: Low-income families need continued support to recover from the

effects of COVID-19. Retrieved from

https://www.unicef.org/malaysia/press-releases/families-edge-low-income-families-need-

continued-support-recover-effects-covid-19

Zsombor Peter. (2021, July 07). Forced Labor Rising in Malaysia's Rubber Glove Factories,

Study Shows. Voa News. Retrieved from https://www.voanews.com/a/east-asia-

pacific_forced-labor-rising-malaysias-rubber-glove-factories-study-shows/6207942.html

United Nations International Children's Emergency Fund (UNICEF). (2019, October). Out of

School Children. Retrieved from https://www.unicef.org/malaysia/reports/out-school-

children

United Nations International Children's Emergency Fund (UNICEF). (2019). Child Marriage

in Malaysia. Retrieved from

https://www.unicef.org/malaysia/media/1801/file/Child_marriage_brief_factsheet_

%28ENG%29.pdf

Hafizi Rosli. (2021, March 1). LHDN kutip RM123.093 bilion cukai langsung tahun 2020.

Astro Awani. Retrieved from https://www.astroawani.com/berita-malaysia/lhdn-kutip-

rm123093-bilion-cukai-langsung-tahun-2020-285342

32
THE POVERTY TREND AND GOVERMENT INTERVENTION

APPENDIX

https://youtu.be/cwTG7YlX5GU

33