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Is Malaysia Poor?

Is Malaysia PoorMalaysia is a country located on the Malay Peninsula in southeast Asia. In 2016, it had a population of 31,187,265. In the same year, its GDP was $296.359 billion. Life expectancy went up by almost two years from 2002 to 2015, and it has a reputation for the massive strides it has made in poverty reduction due to its economic growth. The Commission on Growth and Development identified it as one of a few countries to experience more than 7 percent growth every year for more than 25 years. Its exports are varied, including electric parts, components and appliances, and palm oil and natural gas. By all accounts, Malaysia is prospering. So is Malaysia poor?

Is Malaysia Poor?

The national poverty headcount (which is the percentage of the population living below the poverty line) was 0.6 percent in 2014, down from 6 percent in 2002. However, migration from rural areas to urban areas has increased urban poverty, which has been exacerbated by crony capitalism and a rising cost of living.

Factors Causing Malaysia Poverty

Rural to Urban Migration
In recent decades, poverty was much higher in rural areas than in urban areas in Malaysia. As a result, the government’s poverty-reduction programs and policies were focused on rural poverty, neglecting urban poverty. During that same period, many people moved to cities from rural areas, including many foreign workers.

This rural to urban migration put pressure on urban infrastructure and essential services. Currently, 70 percent of Malaysians live in urban areas. Unemployment rose, and large families earning low wages now suffer from a lack of basic resources.

Profiteering, rent-seeking and crony capitalism have all widened the income gap between the rich and poor in Malaysia’s cities. Big companies hold on to more of their profits, allocating less toward wages. In more “developed” countries, 50-60 percent of GDP typically goes toward employee wages. In Malaysia, only 33 percent of GDP goes toward wages. Low wages prevent families from saving for emergencies or healthcare costs.

In May 2016, the Crony Capitalism Index, which compares the billionaires’ wealth percentages against GDP, ranked Malaysia as number two, second only to Russia.

High Cost of Living
The cost of living in urban areas is significantly higher than in rural areas. On average, as of 2015 60 percent of Malaysians lived on approximately $1,600 a month. Looking solely at rural areas, the proportion rises to 85 percent who live on less than $1,600 a month. This skews the perception of poverty in rural areas relative to urban areas. But according to one Malaysian man, “In rural areas, the cost of living is cheaper and there is no shortage of housing. Food supplies can be supplemented by farming, growing your own vegetables and rearing chickens. But you can’t do that in flats in urban areas.”

Food prices have skyrocketed in Malaysia, and 94.6 percent of Malaysian households say that they spend more on food than anything else. Despite many years of economic growth, the per capita gross national income dropped from $10,440 in 2015 to $9,850 in 2016. As a result, Malaysians can experience poverty in urban areas even if they are technically earning an income above the poverty line.

Ethnic Disparities
Malaysia defines ethnic minorities broadly as “Other Bumiputera“, which encompasses communities such as the Orang Asli and all of the indigenous peoples living in the Sabah and Sarawak states. Poverty rates among “Other Bumiputera” are consistently much higher than ethnic-majority groups. For example, the poverty headcount in the Sabah state is 4 percent, more than 6 times higher than the national poverty headcount.

The Good News
So, is Malaysia poor? Like any country, a portion of its citizens are experiencing poverty, and that must be addressed. But it has made major strides in reducing poverty since the 1980s. Today, the government provides free primary and secondary education for all Malaysians, and healthcare is free in rural areas and very low cost in urban areas. In short, there is always room for improvement, but Malaysia is on the path to eliminating poverty.

Olivia Bradley

Photo: Flickr