Sunday, August 12, 2007

Debating an equitable Malaysia (ALIRAN)


Debating an equitable Malaysia

Towards an alternative New National Agenda

by G Lim
Aliran Monthly Vol 25 (2005): Issue 8

indigenoussarawak (13K)
start_quote (1K)... a development strategy that focused on eradicating regional disparities would automatically also alleviate ethnic disparities.
end_quote (1K)
G Lim

At the recent UMNO general assembly, a kris-wielding Hishamuddin Hussein called for a renewal of NEP-style redistribution as part of a New National Agenda. One last push is required, we are told, for ethnic disparities to be a thing of the past. As Philip Khoo has pointed out in another Aliran article, this ‘one last push’ seems likely to benefit only those doing the ‘pushing’ – that small section of UMNO-linked politicians and businessmen who, although already rich, are not quite as rich as they’d like to be.

The truth is that the ‘New National Agenda’ is really just the ‘Old Ethnic Agenda’, dressed up and with shiny shoes. In this article, I want to think about what an alternative New National Agenda might look like, one that truly sought to create a just and equitable Malaysia.

Towards an equitable Malaysia

In the Mid-Term Review of the Eighth Malaysia Plan, the government boldly announced that Malaysia had made “further progress towards creating a more equitable society”. But quite what type of equality are we making progress towards? In Malaysia, we are used to talk of ethnic inequality – bumiputera-Chinese income disparities, distribution of corporate equity and so forth – but this is only one form of inequality. What about inequality between individuals regardless or ethnicity, or regional inequality between states, or gender inequality between men and women?

“Growth with equity” is one of the tenets of development agencies around the world. Certainly, Malaysia has achieved remarkable economic growth over the past decades, surpassed in the region only by Singapore. But has this growth been ‘with equity’?

Table 1: Human Development and Inequality in ASEAN Countries



















Viet Nam









Source: UNDP Human Development report
Let us look at Malaysia’s position internationally. A commonly-used measure of development is the Human Development Index (HDI), devised and calculated annually by the United Nations Development Programme (UNDP). The HDI is preferable to a simple measure of per capita income because it takes into account other factors as well, including life expectancy and other measures of general ‘well-being’. In the UNDP’s 2004 Human Development Report, Malaysia ranked 59 out of 177 countries for which the UNDP was able to calculate an HDI score. Within Asia, only Japan, South Korea and Singapore ranked better. Indeed, with an HDI score of 0.793, Malaysia is just on the threshold of the UNDP’s own definition of a ‘Highly Developed Country’, which is a score of 0.800 or above. From this perspective, it seems that Malaysia is indeed well on track for achieving Vision 2020.

But when we look at Malaysia’s international position in terms of individual inequality, the position is quite different. According to the latest internationally comparable data from the World Bank, individual inequality in Malaysia (as measured by the common Gini coefficient) is the second worst in all of the Asian countries for which data is available. Only Papua New Guinea ranks worse. In fact, out of 127 countries for the World Bank provides data, Malaysia ranks 101 in terms of the Gini coefficient – the commonest measure of inequality. Aside from Papua New Guinea, the only countries in the world with worse individual inequality than Malaysia are in Central and South America – a region of notoriously high inequality – and some areas of sub-Saharan Africa such as South Africa and Zimbabwe.

Generally speaking, countries with higher levels of human development have lower levels of inequality; Malaysia thus stands out as an exception as a country with relatively high human development but also with relatively high inequality. As Table 1 shows, Malaysia’s Gini coefficient is the highest in all of ASEAN (no data were available for Myanmar). While the government’s official data shows that inequality had reduced slightly since these measures were taken to around 46.1 in 2002, this would still place Malaysia alongside the Philippines as joint worst in ASEAN, assuming that the Philippines itself hadn’t improved its position over the same period.

Individual inequality in Malaysia, then, is a serious problem. Yet the government appears to pay little or no attention to it at all. The Mid-Term Review of the Eighth Malaysia Plan, for instance, makes no mention of individual inequality, except for reporting the Gini indices. No programmes or policies have been developed or implemented to reduce overall inequality. Instead, the focus of discussion for income distribution is almost entirely in terms of ethnic inequalities, with passing reference to regional inequalities between states. Have we let our obsession with our relatively successful experience in ethnic restructuring cloud the fact that Malaysia remains a deeply inequitable society?

Ethnic inequality: averages aren't the whole story

It is true that the average Chinese household income remains significantly higher than the equivalent figure for all other ethnic groups, including the bumiputera. In 2003, figures released in the Mid-Term Review of the Eighth Malaysia Plan showed that Chinese households earned on average 1.8 times what bumiputera households earned. But, as with all averages, these figures can be highly misleading. They do not tell us, for instance, how income is distributed within each group. They also do not tell us about the number of wage earners in each family. This is crucial, because the figures released by the government are household averages.

We would thus be wrong to assume that the ‘average’ Chinese earns 1.8 times the ‘average’ bumiputera. These household figures would be affected by, among other things, differing female participation rates in employment and differing practices in ‘leaving home’ among grown-up children. If more Chinese women tend to work than their bumiputera counterparts, and if the children of Chinese families tend to stay in the parental home longer, even after finding employment of their own, then the average income disparity between individual Chinese and bumiputera is likely to be much lower than suggested by these summary figures, which would then be more reflective of differing cultural practices. Conversely, if bumiputera wives work more than Chinese wives and bumiputera children stay longer in the familial home, the inter-ethnic disparity is likely to be worse than suggested here. Unfortunately, the government does not release these data, so we have no way of being sure.

Regional inequality

But taking these figures at face value for the moment, a number of points are worth making. Firstly, while the disparity between average household incomes based on ethnicity remain high, they are nowhere near as high as the disparity between average household incomes based on different places of residence. The average household income in Kuala Lumpur is more than three times the average household income in Kelantan, almost double the equivalent Chinese-bumiputera disparity. The poverty rate among the bumiputera may be around three times the poverty rate among the Chinese, but the poverty rate in Sabah is more than 30 times the poverty rate in Kuala Lumpur. Moreover, the disparity between states has been more-or-less consistently growing since 1970, while ethnic disparities have been significantly reduced.

The government, of course, talks the talk of ‘balanced’ regional development, but its action on this front has been far removed. Consider, for instance, the issue of the petroleum royalty. Most of the country’s oil revenue comes from the poorer states such as Terengganu and Sabah. A strong case could thus be made for increasing the royalty paid to the state governments where the oil is extracted – currently a paltry 5 per cent. But instead of doing this, in 1999 the government abrogated the royalty that Terengganu state received. Terengganu is one of the poorest and least developed states in the country and, moreover, is overwhelmingly Malay. Instead of helping out these people who are ostensibly those whom the government is most concerned about, they are denied what income they get from their natural resources, simply because they had the audacity to exercise their democratic right to vote against the federal government. Neither is this a one-off blip. When the PBS dared to leave the BN in 1990, the federal government blocked timber exports from the state, which was its main source of revenue. Again, a predominantly bumiputera state with high poverty rates was financially strangled because its representatives refused to kowtow to Kuala Lumpur.

In fact, the poorer states in the country at the moment tend to be those that are predominantly bumiputera – Kelantan, Perlis, Sabah, Sarawak and Terengganu. So a development strategy that focused on eradicating regional disparities would automatically also alleviate ethnic disparities. On the other hand, action to alleviate ethnic disparities would not automatically reduce regional inequalities, as the experience of the past 30 years have shown.

Federal solutions for a regional problem?

So what could be done about regional inequalities? Well, Malaysia is a federation, lest we forget – which is easy to do given the dominance of the central government in Kuala Lumpur. Instead of treating state governments either as an annoying thorn – as opposition-controlled states are treated – or as little more than a training ground for wannabe BNsters – as in BN-controlled states – we could consider giving real power and – crucially – finances to state governments. Currently, funding for state governments beyond a bare minimum stipulated by the constitution is pretty much at the whim of KL, and states are often denied extra funding – or threatened with such denials – if they vote against the BN.

Other federations like Australia operate a ‘equalization formula’, whereby federal funding for state administrations is calculated on the average income of the state. If such an arrangement were implemented in Malaysia, this would mean that poorer states would get more money per inhabitant, irrespective of which party forms the state administration. Regional development would be on the basis of need, not on the basis of petty party political considerations. From 1975 to 1985, net revenues from Sabah to the federal government exceeded federal disbursements to the state, while at the same time per capita incomes in Sabah fell from above the national average to significantly below the national average. This means that while Sabahans were falling behind in the country’s development drive, they were nonetheless giving more to the rest of the country than they were getting back. An equalisation formula would prevent such unjust absurdities occurring.

Once again, it is worth pointing out that the states that would benefit most from this approach would be the predominantly bumiputera ones, so the federal government could in effect kill two birds with one stone.

A new national debate for a New National Agenda

Hishamuddin and his supporters are right in one respect: it is time for a New National Agenda in Malaysia. We are on the verge of joining the ranks of the highly developed nations, well ahead of the 2020 target. But ours remains a deeply inequitable society, across many dimensions. I have not even begun to consider gender inequalities in this article, mainly for lack of data.

Yet the evidence shows that since 1970, ethnic inequalities have reduced significantly, while regional inequality has increased consistently and individual inequality has, at best, stagnated. Is it not about time we started thinking about moving past the more-or-less exclusive focus on ethnic inequality and started thinking about other forms of inequality and other forms of injustice?

In this article, I have made one simple suggestion for how we might start to address regional inequalities. This may not turn out to be the most appropriate way for resolving this problem. But let us at least have an open and frank national debate about this and other issues – and one that takes place not just within the elite halls of the UMNO general assembly. If we are to have a New National Agenda, let us have first a national debate in which all Malaysians can participate, instead of just the same old faces raising the same old issues in the same old places.

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