Good Governance for Poverty Alleviation: the Case of Malaysia Chamhuri Siwar, Universiti Kebangsaan, Malaysia Abstract: This paper addresses the issue of good governance for poverty alleviation, citing Malaysia as a case study. Malaysia has experienced sustainable growth along with impressive record of poverty reduction. This has been made possible through good governance and pragmatic pro-growth and distribution policies, strategies and programs for poverty alleviation which was implemented since the era of the New Economic Policy (NEP, 1971-1990), National Development Plan (1991-2000) and will be carried over to National Vision Plan (NVP, 2001-2010). The good governance incorporates an enabling policy framework for poverty alleviation which includes the supportive role of the state, effective delivery system embodying an efficient planning and implementation machinery, incorporating top-down and bottom-up processes of strategic planning, targeting and participation, effective implementation coordination, monitoring and evaluation. The public sector has to shoulder good governance by efforts to improve the public service delivery system to make it more efficient, transparent and accountable. Direct targeting of beneficiaries results from identification of the poor and hardcore poor by rural and urban strata and states, supported by a specialized delivery system of a microcredit program, minimizes leakages of poverty alleviation program’s allocations and benefits. Pragmatic pro-growth and distribution policies and strategies in 5-year development plans ensures effective poverty alleviation. overty is still a serious issue facing the marked intensification of the process of globalization. developing economies. The World Bank World Globalization ha led to the convergence and P Development Report (1990): Poverty stated coordination of national and international policies. The that “the most pressing issue facing the development impact of globalization has generally poor marginalized community: how to reduce poverty”. The World Bank the poor, and also increases poverty and income World Development Report (2000/2001): Attacking inequality. For example, the 1997-1998 financial crisis Poverty stated that “Poverty amidst plenty is the world’s has devastated and impoverished millions of poor and greatest challenge. vulnerable men, children, women and families. The global picture of poverty is not encouraging. In 1998, out of 6 billion people, 1.23 Status of Poverty in Malaysia billion (21%) live under US$1 per day, 2.8 billion Generally, poverty is defined as the inability to meet (47%) live under US$2 per day. Between 1965 and basic needs as measured by income or consumption. 1998, average income has doubled in developing Poverty and standard of living are closely linked. countries, but widening global disparities has also Poverty may be visible as shown by several indicators, increased the sense of deprivation and injustice for the such as lack of control over resources, lack of education poor. Globalization expects to burden the poor more and skills, lack of shelter, lack of access to water and than the non-poor. sanitation, poor health, malnutrition, vulnerability to The development paradigm has seen growth as shocks, violence and crime. the primary means of reducing poverty and improving In Malaysia, poverty is measured by the quality of life. Reliance has been placed on market poverty line income (PLI), which states the minimum forces and the ‘trickle down’ process to achieve this level of income or consumption expenditure on based aim. However, the phenomenon of “market failure” has human basic needs, such as food, clothing, shelter, basic placed emphasis on the role of government as the key services such as education, health, transportation, determinant in poverty alleviation. But government, too, recreation and culture. A household is considered poor is burdened by expenditure deficits and inefficiency. if its income or consumption falls below the officially Hence, some countries have relied on mixed-economy determined PLI (Table 1). approach, emphasizing partnership between role of Table 2 shows the level of PLI in years 1990 to market and the government intervention in poverty 2002. The PLI is revised regularly to reflect change in alleviation. The debate has since moved to the cost of living and also difference in regions. In 2002, importance of good governance and good coordination the PLI was set at RM529 for a household size of 4.6. between government and the market. Hardcore poor (very poor) is defined as households with Since the 1990s, the poverty alleviation and incomes under ½ PLI (eg. RM264.5 in 2002). Beginning equitable income distribution form a one of the major the Outline Perspective Plan 3 (OPP3) the measure of aims of most government. The 1990s has also seen low income households of RM1200 per month was Siwar / Good Governance for Poverty Alleviation: the Case of Malaysia 1 introduced as eligibility government support programs, standard of living based on composite indices of aimed to improve the income and quality of life of the accessibility to amenities and standard of living is used bottom 30%. In addition, the Physical Quality of Life to complement to use of PLI. Index (PQLI) which measures the quality of life or Table 1: Component of PLI (%), 1997-2002 Expenditure Components Peninsular Sabah Sarawak Malaysia 1997 2002 1997 2002 1997 2002 1. Food 62.1 65.5 60.0 53.8 57.8 61.2 2. Clothings and Footware 7.7 5.6 6.0 4.7 6.6 5.1 3. Other expenditures 25.5 24.1 39.2 36.8 30.8 28.9 a. Rents, Fuel & Power 13.2 12.7 23.1 20.7 8.9 7.9 b. Furniture & Household items 2.3 2.0 2.9 2.6 3.1 2.8 c. Health & Medical Treatment d. Transportation & Communications 1.2 1.3 1.1 1.1 6.1 6.0 e. Education, Recreation & culture 4. Safety margin (5%) 6.8 6.3 9.0 9.2 8.9 8.7 2.1 1.9 3.2 3.1 3.9 3.6 4.8 4.8 4.8 4.8 4.8 4.8 Total 100.0 100.0 100.0 Source: Malaysia Plan (various Years) Table 2: Poverty Line Income, 1990-2002, (RM/month) Region 1990 1995 1999 2002 Peninsular 370 425 510 529 Malaysia (185) (212.5) (255) (264.5) Sabah 544 601 685 690 (272) (300.5) (342.5) (345) Sarawak 452 516 584 600 (226) (258) (292) (292) Source: Malaysia Plan (Various years) Note: Figures in brackets are PLI for Hardcore poor. Household sizes have decreased from 5.1 to 4.6 for Peninsular Malaysia, 5.4 to 4.9 for Sabah and 5.2 to 4.8 for Sarawak. Enabling Policy Framework for Poverty Alleviation 1. The role of the state. The state has a major role to In the case of Malaysia, the enablers for effective play in poverty alleviation. In the case of Malaysia, poverty alleviation may include: the role of state in poverty alleviation has been a major policy thrust in it poverty alleviation, good governance, effective delivery development plans, as evident in the New Economic system and direct targeting and participation. Policy (NEP, 1970-1990), National Development Policy (NDP, 1991-2000) and National Vision Policy (NVP, 2001-2010) . Poverty alleviation has been a major thrust 2 Chinese Public Administration Review · Volume 3 · Numbers 3/4 · September/December 2006 in these policies, receiving strong policy, institutional economic imbalances as the root cause of the and budgetary support at the federal, state and local racial conflict. level. Implementation of these policies is detailed in the five year development plans, covering First Malaysia (b) Balancing market driven and interventionist Plan (MP1, 1965-70) to Eight Malaysia Plan (MP8, policies and strategies. In addition to the role 2001-2005). of government as facilitator, this policy Strong policy support is embedded in includes giving emphasis to the role of the pragmatic policies the state has to make to include: private sector as partners in the development process and also to meet the redistributive (a) Interventionists, affirmative action and objective of government policies. In this way, positive discrimination policies and strategies the government has to balance growth and to assist the indigenous population, to correct redistribution policies and strategies, so as to the economic imbalances between the ethnic attain growth and poverty alleviation, which compositions of the population. This has been Malaysia has achieved a reasonable degree of entrenched since the NEP, in the aftermath of a success (see Table 3). bloody racial riot which identifies poverty amongst the indigenous population and Table 3: Relations between Growth and Poverty Alleviation, 1970-2002 Year GNP Growth (%) Poverty Comments Incidence (%) 1970 5.0 49.3 Beginning of NEP era, low growth and high poverty incidence 1980 7.4 37.4 Mid NEP era, export-led industrialization, changing economic structure, propelled economic growth, followed by significant poverty reduction 1985 -0.1 20.7 World recession, negative growth, damper on poverty alleviation 1990-1997 9.1 (average) 16.5 (1990) Era of robust economy growth followed by significant poverty reduction. Focus on eradication of hardcore poor 1997 6.8 Financial crisis, damper on poverty alleviation 1998 -7.4 8.0 Negative growth. Poverty incidence increased due to financial crisis of 1997-1998 1999 6.1 7.5 Economy rebounded after financial crisis, slower impact on poverty alleviation 2002 4.1 5.1 Low growth, slower impact on poverty reduction. Focus on addressing pockets of poverty and reducing relative poverty. Another feature of the role of the state may be which marks the end of the NEP era saw the largest viewed from the budgetary support for poverty percentage of expenditure for poverty alleviation. alleviation. In Malaysia, government expenditure for The Sixth, Seventh and Eight Malaysia Plan periods poverty alleviation has been high throughout its five saw a reduction in the percentage of expenditure for year development plans, averaging between 24-37% poverty alleviation; nevertheless it still forms a (see Table 4).