9th Malaysia Plan: Interesting Facts and Figures (Part 1)
It's one of those gatherings that should happen more often.
About less than a month ago, I attended the National Convention on the 9th Malaysia Plan, organized by the Asian Strategy and Leadership Institute (ASLI).
It was pretty interesting mix of people - there were Ministers (at least 4 of them, made the attempt to turn up), current and former senior civil servants and policymakers, academicians, think-tanks, NGOs/activists, regulators, industry chambers and companies from the private sector.
Potentially, it's one of those gatherings where the sum of knowledge in the room, if extracted, would give you a 360 degrees bird's eye view of what has been going on in the Malaysian economy and the viability of its plans going forward - like the 9th Malaysia Plan.
I gathered some interesting facts and figures, from the presentations given by the expert panelists of the conference.
Even if you are disinterested in local (or international) economic issues, I feel that it would be useful for every Malaysian, to understand the relevance (or irrelevance) of some of these facts and figures and how it would impact Malaysia's development and survival (both economic and political) in the future.
******************************************
1) The national incidence of hardcore poverty rate in Malaysia is about 3.9%, with Bumiputras making up the highest portion at 8.3%. The highest incidences of hardcore poverty (by state) are in Sabah (6.5%), Terengganu (4.4%) and Perlis (1.7%), followed by Kedah and Kelantan (1.3%).
(Given the above statistics - it's not surprising that the Abdullah administration has decided on agriculture to be the 3rd engine of growth and to lift the income levels of those in the rural areas, particularly in the states mentioned above.)
The lowest incidences of hardcore poverty are in Penang and Selangor, where it is less than 0.05%.
The target under the 9MP is to eradicate hardcore poverty and to reduce overall poverty incidence to 2.8% by 2010.
The Government has also agreed on the setting up of a National Poverty Database and National Poverty Mapping to ensure that specific redress measures are correct and more accurate.
2) Kelantan had the largest reduction of poverty incidence from 25.2% to 10.6% between 1999 and 2004 (even under the PAS Government). And Sabah had the lowest reduction from 23.4% to 23%, over the same period.
3) Looking at the mean monthly household income in 2002, Malaysia's top 20% had a mean income of RM7745, the middle 40% had a mean income of RM2660 and the bottom 40% had an income of RM1019. The numbers in 2005 should be higher.
One part of the 9MP had a table which showed a comparison of average monthly household incomes amongst the races - where the Chinese household earns RM4,127 per month, the Indian household earns RM3,215 per month and the Bumiputra household income is at RM2,522.
(This particular table was severely criticized as being misleading - as it does not exclude the large impact of the top 5% of households, in every ethnic race. This has a high skewing effect on the results, especially on the Chinese and Indian community. The average household income of most wage earners, may be closer than we think)
4) The urban/rural income disparity in 2004 is almost back where it was in 1970, at a ratio of 2.11 (it was 2.14 in 1970). The income disparity ratio dropped from the inception of the New Economic Policy (NEP) up until 1995 and then rose again, up till now, with the impact now worse, than it was during the economic crisis.
The urban population in Malaysia makes up about 63% of the population in 2005.
5) The highest intra-ethnic income disparity (as measured by the Gini ceofficient) is the highest amongst the Bumiputras - which shows a poor distribution of wealth, within the race. Although it must be noted that the increase in Gini coefficient is consistent, within all 3 major races.
Admittedly, the economic region inequality is a far more serious issue than ethnic inequality, as fast-paced development has been focused on few states in Malaysia (like Penang, Johor, Selangor) leaving the East Coast and some of Northern States, under-developed.
6) Paid employment constituted 68% of all household incomes - 74.3% of Indian households, 71.% of Bumiputra households and 62.1% of Chinese households. Of the self employed - the Chinese make up 23%, Bumiputras make up 14% and the Indians 11%.
The central focus on the Government in overcoming ethnic income disparities under the 9MP, is on improving the earnings in paid employment. Malaysia also has an unemployment rate of 3.5% currently.
7) In the World Competitiveness Yearbook 2005, (in a comparison list between 60 countries) Malaysia was ranked 8th on economic performance - despite being ranked 26th on Government efficiency, 25th on Business Efficiency and 34th on Infrastructure.
Overall, Malaysia is ranked 28th amongst 60 countries, in 2005. (We were 16th in 2004 - that's a big slide downwards).
However, on the knowledge-based econonomy development index (from a list of 22 countries), Malaysia is ranked 17th - behind Singapore (13th), Korea (14th), New Zealand (15th) and Ireland (16th). But it is ahead of China (18th), Thailand (19th), Philippines (20th), Indonesia (21st) and India (22nd).
8) Kuala Lumpur is one of the least costliest cities to live in the world, according to the Mercer Human Resource Cost of Living Survey 2005 - it's ranked at 117th out of 144 countries and 12th cheapest amongst Asian countries.
In the Economist Intelligence Unit's (EIU) 2005 survey, Malaysia is ranked the 36th best country to live in (out of a total 111 countries) and the 6th best Asian country to live in, coming in behind Singapore (11th), Japan (17th), Hong Kong (18th), Taiwan (21st) and South Korea (30th).
9) Currently, 35% of all school leavers in Malaysia have access to some form of tertiary education. This is pretty good, considering that developed countries like America have over 40% of their school leavers, having access to tertiary education.
10) If we assume a constant and regular GDP growth of 6% per annum up until 2020, it is a certainty that Malaysia will not achieve Vision 2020's GDP size target of RM920 billion (which is the original economic target set for reaching the status of being a developed country). Assuming a constant 6% growth, we would be missing the target by about approximately 38%, in 2020.
But of course, we recognize that being a developed country is a more holistic concept than the size of the economy and measurement of per capita income.
*******************************************************
I shall not comment just yet - I'll leave that for the next part. But these 10 points above, should give you some economic and competitiveness indicator of where Malaysia is, currently.
About less than a month ago, I attended the National Convention on the 9th Malaysia Plan, organized by the Asian Strategy and Leadership Institute (ASLI).
It was pretty interesting mix of people - there were Ministers (at least 4 of them, made the attempt to turn up), current and former senior civil servants and policymakers, academicians, think-tanks, NGOs/activists, regulators, industry chambers and companies from the private sector.
Potentially, it's one of those gatherings where the sum of knowledge in the room, if extracted, would give you a 360 degrees bird's eye view of what has been going on in the Malaysian economy and the viability of its plans going forward - like the 9th Malaysia Plan.
I gathered some interesting facts and figures, from the presentations given by the expert panelists of the conference.
Even if you are disinterested in local (or international) economic issues, I feel that it would be useful for every Malaysian, to understand the relevance (or irrelevance) of some of these facts and figures and how it would impact Malaysia's development and survival (both economic and political) in the future.
******************************************
1) The national incidence of hardcore poverty rate in Malaysia is about 3.9%, with Bumiputras making up the highest portion at 8.3%. The highest incidences of hardcore poverty (by state) are in Sabah (6.5%), Terengganu (4.4%) and Perlis (1.7%), followed by Kedah and Kelantan (1.3%).
(Given the above statistics - it's not surprising that the Abdullah administration has decided on agriculture to be the 3rd engine of growth and to lift the income levels of those in the rural areas, particularly in the states mentioned above.)
The lowest incidences of hardcore poverty are in Penang and Selangor, where it is less than 0.05%.
The target under the 9MP is to eradicate hardcore poverty and to reduce overall poverty incidence to 2.8% by 2010.
The Government has also agreed on the setting up of a National Poverty Database and National Poverty Mapping to ensure that specific redress measures are correct and more accurate.
2) Kelantan had the largest reduction of poverty incidence from 25.2% to 10.6% between 1999 and 2004 (even under the PAS Government). And Sabah had the lowest reduction from 23.4% to 23%, over the same period.
3) Looking at the mean monthly household income in 2002, Malaysia's top 20% had a mean income of RM7745, the middle 40% had a mean income of RM2660 and the bottom 40% had an income of RM1019. The numbers in 2005 should be higher.
One part of the 9MP had a table which showed a comparison of average monthly household incomes amongst the races - where the Chinese household earns RM4,127 per month, the Indian household earns RM3,215 per month and the Bumiputra household income is at RM2,522.
(This particular table was severely criticized as being misleading - as it does not exclude the large impact of the top 5% of households, in every ethnic race. This has a high skewing effect on the results, especially on the Chinese and Indian community. The average household income of most wage earners, may be closer than we think)
4) The urban/rural income disparity in 2004 is almost back where it was in 1970, at a ratio of 2.11 (it was 2.14 in 1970). The income disparity ratio dropped from the inception of the New Economic Policy (NEP) up until 1995 and then rose again, up till now, with the impact now worse, than it was during the economic crisis.
The urban population in Malaysia makes up about 63% of the population in 2005.
5) The highest intra-ethnic income disparity (as measured by the Gini ceofficient) is the highest amongst the Bumiputras - which shows a poor distribution of wealth, within the race. Although it must be noted that the increase in Gini coefficient is consistent, within all 3 major races.
Admittedly, the economic region inequality is a far more serious issue than ethnic inequality, as fast-paced development has been focused on few states in Malaysia (like Penang, Johor, Selangor) leaving the East Coast and some of Northern States, under-developed.
6) Paid employment constituted 68% of all household incomes - 74.3% of Indian households, 71.% of Bumiputra households and 62.1% of Chinese households. Of the self employed - the Chinese make up 23%, Bumiputras make up 14% and the Indians 11%.
The central focus on the Government in overcoming ethnic income disparities under the 9MP, is on improving the earnings in paid employment. Malaysia also has an unemployment rate of 3.5% currently.
7) In the World Competitiveness Yearbook 2005, (in a comparison list between 60 countries) Malaysia was ranked 8th on economic performance - despite being ranked 26th on Government efficiency, 25th on Business Efficiency and 34th on Infrastructure.
Overall, Malaysia is ranked 28th amongst 60 countries, in 2005. (We were 16th in 2004 - that's a big slide downwards).
However, on the knowledge-based econonomy development index (from a list of 22 countries), Malaysia is ranked 17th - behind Singapore (13th), Korea (14th), New Zealand (15th) and Ireland (16th). But it is ahead of China (18th), Thailand (19th), Philippines (20th), Indonesia (21st) and India (22nd).
8) Kuala Lumpur is one of the least costliest cities to live in the world, according to the Mercer Human Resource Cost of Living Survey 2005 - it's ranked at 117th out of 144 countries and 12th cheapest amongst Asian countries.
In the Economist Intelligence Unit's (EIU) 2005 survey, Malaysia is ranked the 36th best country to live in (out of a total 111 countries) and the 6th best Asian country to live in, coming in behind Singapore (11th), Japan (17th), Hong Kong (18th), Taiwan (21st) and South Korea (30th).
9) Currently, 35% of all school leavers in Malaysia have access to some form of tertiary education. This is pretty good, considering that developed countries like America have over 40% of their school leavers, having access to tertiary education.
10) If we assume a constant and regular GDP growth of 6% per annum up until 2020, it is a certainty that Malaysia will not achieve Vision 2020's GDP size target of RM920 billion (which is the original economic target set for reaching the status of being a developed country). Assuming a constant 6% growth, we would be missing the target by about approximately 38%, in 2020.
But of course, we recognize that being a developed country is a more holistic concept than the size of the economy and measurement of per capita income.
*******************************************************
I shall not comment just yet - I'll leave that for the next part. But these 10 points above, should give you some economic and competitiveness indicator of where Malaysia is, currently.
posted by Stingrayz | 10:31 AM
9 Comments:
I must thank you for this very informative summary of the socio-economic statistics of the m'sian economy at both the domestic level n internationally. Its good to know where you stand economicaly in a diversivied ethinicly segregated economy. Room for improvements? hell yeah.
So 20% is earning > rm7k ay? Did they also mention that bumiputra stake in the economy was at best only %18.x? I heard this from somewhere. And yes, there is a definate n growing monetery gap between the top 2 income brackets. Did the conference conclude with viable implementable resolutions and recomendations to legitimize? Do keep me informed.
i think the govt should use a more realistic figure for the baseline for poverty level. the current figure is a few hundred (can't remember exactly) which is way outdated.
the fact that the income disparity within the malays is the highest simply proves the failure of the NEP. i guess this is what happens when wealth is 'distributed' amongst a select few.
on the bumi stake as mentioned by fade, i think if we add the wealth held by GLCs that are exclusively bumiputera in nature (e.g. Petronas) the figure should be way higher than 18%.
i'm looking forward to reading your comments.
p/s- i echo your sentiments on AI. the best performer has left the building.
Tis an valid sugguestion for govt to redefine the poverty level, now with the increasing price of fuel and other crucial commodities that are more suppressive in nature, for the lower income. Ethnicity difference that influences basic economic oppertunties must also be factored in, to formulate a suitable poverty level that is usefull to measure and to eradicate.
To me, the no.1 problem of the NEP is the fact that it allows the establishment, legislation and enforcement of an authoritative governance to influence and to dictate the distribution of wealth in an uneven tone, through unfair and monoplolistic business practises. Instead of eradicating poverty at an ethnicity level, NEP creates wealthy selected individuals who do nothing to address the widening economic gap within the ethnic group it was meant to have helped.
I heard that AI is planning to enter the building again?
fade0:
Yes, they did mention about the Bumiputra corporate equity portion of approximately 18%.
And that close to two-thirds of it, are held by institutions/trust bodies, not individuals.
But an economist did point out to me over lunch, that the target of 30% corporate equity should have been exceeded already if Bumiputra individuals, did not sell out their stake, to make easy money.
And he also mentioned that a "transfer of wealth" did happen, even when most Bumiputra individuals sold out their 30% Bumiputra stakes - and that should be accounted for somewhere.
The mean income gap between the top 20% and everyone else probably is mainly correlated to the urban/rural income gap.
Our development has been focused on the urban areas and on a few states - leaving many behind out of uneven development.
The current numbers on poverty (and measurement of Poverty Line Index - both rural and urban) have been updated till 2004 - which is why there is a slight increase in the poverty rate.
But as you pointed out, it has not factored in the recent impact of the fuel increase, on the general prices of goods.
On the NEP:
As a poverty eradication measure, the NEP has succeeded. We're a model for most countries in the world, for poverty eradication.
As an instrument to create a large Malay middle-class, it has also been successful.
Access to tertiary education has been key to creating a Bumiputra professional class - the lynchpin of our stability.
But as a distribution mechanism, the NEP has had a great shortfall.
Corporate equity is still below 30%, because greedy Bumiputras wanted to sell out and become instant millionaires.
As for narrowing inter-ethnic and intra-ethnic income gap (or even asset ownership gap) - it has failed. And this is true of all 3 major races.
Differences of economic culture and pace of economic growth (other than the uneven pattern of development, between the states) between the different races and between the urban and rural community, encourages a widening of the income gap.
It is obvious that the narrowing (for rural/urban income disparity) is only effective when Malaysia is experiencing high growth rates, like it did, up to 1995.
From the crisis years of 1997 till today, the rural income disparity ratio is almost back to where it was in 1970 - in the pre-NEP days.
As for creating a vibrant Bumiputra entrepreneur class, it has failed too.
This I suspect is for 2 reasons - most of them are too entirely reliant on Government projects (which involves a high level of politicking) and secondly, there is no culture of "pooling of business capital" within the community - everyone is entirely too reliant on Government funds, for business.
Desparil:
The Poverty Line Index (PLI) has been updated till 2004.
The fact that wealth distribution has been given to a select few, could partly explain the income gap in between the Bumiputras.
But more than two-thirds of this country are employed. About 71% of Bumiputras are.
Perhaps, a better explanation of the income gap is the relative productivity and business performance of the companies that you work for and related to that, the remuneration awarded.
Other explanations could also be the choice to have a double-career family (instead of a stay at home wife) or having a second part-time income source (like selling insurance or unit trusts part-time or teaching tuition classes or even speculating on the stock market)or pursuing further educational or professional qualifications, to get a promotion/pay raise.
I think the idea of narrowing the income gap without narrowing the environment, effort, education and productivity gap, is absolute nonsense.
It cannot be done.
As for Petronas, oil is a national resource and should not be regarded as Bumiputra-owned (although it is already Bumiputra-run). It belongs to all Malaysians.
Furthermore, including Petronas into the equation, does not redress the problem in at least 10 Malaysian states out there.
There is no point in having rich Bumiputra institutions/corporates and having a very small percentage of Bumiputra individuals that own corporate equity.
Narrowing the gap must be done in substance, not just form.
For different races to equalize, there must be a similar economic culture between them.
No amount of Government assistance will help you, otherwise.
stingray...thanks again for the very conclusive summary of the issues on why bumi ecuity in the economy falls short of the targeted 30% (due to selling short for quick gains), facts about the NEP and how the socio-economic gap we are seeing today is attributed to the disparity of polar development between urban/rural areas where bumi constitutes for the largest population.
Perhaps we should be more cautious and realistic in formulating our policies next time.
fade,
AI = American Idol.
just to avoid any confusions lah.
stingray,
by rights, corporations like petronas belongs to all malaysians. in practice, however, are they?
it's the same as other govt bodies like jpj, customs or even the police & armed forces. they should be malaysian but if somebody were to say they are malay instead of malaysian, we would be hard pressed to say otherwise, no?
and i hear you on the NEP & income disparity. selective distribution only ensures a few people get really, really rich while many others get what's left. but what's worse IMO is the attitude that it inculcates - you don't have to work hard to succeed, just suck up to the right person.
this is what we're seeing today. people just wanting to take shortcuts and get rich quick.
fade0:
I think uneven national development is a natural phenomenon in all countries - despite policy.
There are just certain "star" states or cities in every country that has the natural advantages (i.e. talent, money, infrastructure, geographical location, climate, costs, etc.) and is in the right place, at the right time.
It acts as a natural magnet for investment and human capital, both foreign and local.
It's like how California is ahead of Alabama. It's how Shanghai is ahead of Xinjiang. Or how London is ahead of Cardiff.
The problem with free-market capitalistic development, is that it tends to follow the areas with the highest potential returns.
There is a natural tendency for economic (and now, even technological) disparities to happen - by some states accelerating far ahead of the others.
And if a country is FDI-driven, like we were, up till 1997 - high growth tended to happen in these "star" states - Selangor, WP, Penang and Johor.
But it's not high growth necessarily that causes the gap to widen (because the taxes from these high-growth states can be used to "spill-over" the wealth to other states).
And that's what we've been doing - funding 14 states on the major growth of 4 states.
And funding the growth of the civil service too (it only slowed its recruitment in 1999, or so - by that time, there were over 1 million people in the civil service)
And for the short term, it worked.
No one really felt the impact of the hollowing out, even as we abandoned agriculture in favour of manufacturing in the 80's.
Everyone assumed that the growth would continue and it would eventually spread to some of the other states, by osmosis.
If we look at the statistics (from 1997 onwards), it's LOW growth combined with the inability to distribute wealth that widens the urban/rural income gap.
(Our GDP average growth during the 8th Malaysia Plan was 4.5% - slightly more than half, of what it was during pre-crisis days)
I think the Abdullah administration is continuing the drive of the Mahathir days - services and manufacturing will still provide more than 90% of our GDP, by 2010.
But agriculture is there to "lift
the floor" - so that the remaining 9-10 states are not left far behind.
There has to be economic activity generated in these states, that suit the skills of their population base and their natural resources and advantages.
Income and wealth disparity is a natural phenomenon in all countries, especially high-growth ones.
But what makes it crucial in Malaysia is that we have a socio-economic redistributive policy (NEP), the objctives of which has to be achieved - because it is the cornerstone, of us becoming a nation.
And not just a country, with 3 major races. Honestly, in the long term, Malaysia cannot survive on this premise.
Desparil:
I think we have to draw the distinction between corporate equity (as measured on Bursa Malaysia) and employment in the civil service.
Yes, recruitment to the civil service is extremely skewed, nowadays. The other races make up a very small minority, in most Ministries.
But I think some of the deterring factors are the pay scale and the work culture. In both areas - non-Bumiputras will not be inclined to join the civil service.
Although, yes, I believe that their numbers could be higher if we tried harder to be fair, in our recruitment process.
As for Bumiputra corporate equity - it is only measured by the things that are on Bursa Malaysia.
(It's not the best of measures - but it's the best that Tun Razak's era could find to benchmark equitability in Bumiputra economic participation)
And the Mahathir administration did much to grow the Bumiputra corporate equity pie, via "privatization" and public listing of such entities.
TM, TNB, PLUS, Malaysia Airlines are all examples of such efforts.
And I think between 1995 - 1997, there was a point when Bumiputra corporate equity grew to 23%, though it's now back to 18-19%.
Yes, listing Petronas would make us exceed the NEP corporate equity targets, by far.
But as I pointed out earlier, having rich corporates and a poor citizenry, does not redress the substantive change, intended by the NEP.
For wealth and income disparities to narrow, all races must have a similar economic culture. And a similar emphasis on education. We have to evolve such a culture.
Can we do that, considering that all races have different emphasis in their lives, culture and perhaps, their effort?
Remains to be seen. Economic equitability between the races, is achieveable. Poverty eradication is likely. We can always lift the floor.
But true substantive economic equality between the races, takes much more effort than that.
And politics is not the answer here. Competitiveness is.
On an entirely bystander and irrelevant Point-Of-View: your comments here should be posted as entries la! Panjangnya nak baca. Heh.
Voice:
If it became entries, it'd be even longer! ;)
Am just replying to Fade0 and Desparil, in specific. Senang like that - specific questions and answers.
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