Towards A Competitive Malaysia #40

Chapter 6: People: Our Most Precious Asset (Cont’d)

Recent Phenomenon of Urban Poverty

An accompaniment of economic growth is urbanization. This is a worldwide phenomenon, and Malaysia is no exception. In 1970, 27 percent of Malaysia’s population lived in urban areas; by 2000 the figure shot up to 62 percent, and increasing rapidly.

Officially, urban poverty is under 2 percent, a ridiculously low figure. A visit to any major city will quickly disabuse one of this smug illusion. The government defines poverty as a family of four with a monthly income of slightly over RM500. To make ends meet in one of the small towns, let alone in highly urbanized areas, would realistically require a family to have at least double or triple that. One academic survey showed that 25 percent of the residents in Kuala Lumpur live in squatter settlements where they lack access to the normal urban amenities and public utilities.13 This is a more realistic indicator of urban poverty.

That study also showed that these settlers have large families, low educational achievements (most had only primary schooling), and poor job prospects. With their high population density and lack of basic public health facilities, these urban settlements are social and public health time bombs. Social pathologies like crime, drug abuse, and dysfunctional family dynamics are endemic. The daily headlines of incest and child and spousal abuses attest to this grim reality. Urban poverty was previously an essentially non-Malay phenomenon. Today it transcends race, but Malays are disproportionately represented. This ethnic shift occurred gradually, escaping the attention of Malay leaders who because of their background are more familiar with the traditional rural poverty.

There are no specific urban poverty reduction programs except for low-cost housing projects; in contrast, rural poverty is generously funded. The problem is confounded by the legendary incompetence and corruption of municipal governments. As local councilors are not elected, they have zero accountability to the public they serve. This is particularly pernicious as this is the government closest to the people. Even the issuance of simple hawkers’ stalls and restaurant permits are tangled with corruption. Gross breaches of the building codes are obvious; simply visit any town.

Employees of local governments are part of the larger civil service. They could potentially be very efficient, as they would not be subjected to the usual petty local politics. Unfortunately, the opposite is the reality. Municipalities are hotbeds of petty and blatant corruption.

The many low-cost housing projects are inefficiently run and poorly maintained; they have degenerated into high-rise slums comparable to the housing ghettos in major American cities. Where there are subsidized affordable housings, they are bought by other than the poor, again through corruption, and then rented to the poor at outrageous prices.

There are successful pilot projects in alleviating urban poverty. One, the Sang Kancil project, integrates pre-school program, maternal and child healthcare, and income-generating activities.13 Sadly they are poorly funded and the program has not been duplicated or improved.

The major contributor to urban poverty is lack of employment and educational opportunities. The bulk of the employment is through the informal sector, the simple one-person hawker stalls selling sundry goods and prepared foods. It contributes significantly to bettering the lives of these low-skilled and lowly educated urban dwellers. Yet it is not recognized, much less encouraged, by the authorities.

These micro enterprises are indeed sustainable and provide much-needed services to the community. They have all the elements of a legitimate business, and could provide splendid learning opportunities for the novice on the rudiments of business and self-employment.

They need to be nurtured by providing “soft” as well as “hard” support. One “soft” support would be teaching them the simple elements of running a small business (rudimentary bookkeeping and cash flow management, controlling costs through inventories and supplies, and elementary marketing).

Take cash flow management. They must understand that the money they collect selling their fried banana is not yet income. It is revenue, and there would not be any income until their expenses and overhead like rent and supplies had been put aside. This is elementary, but it is amazing how this concept escapes these simple hawkers. These are often their first business ventures, and they are not born with intuitive business knowledge or skills. They are also new to the money economy, having just migrated out of the village.

Another “soft” support would be “micro-credits.” There are numerous governmental lending programs but they are poorly administered.14 They expect too much from the poor, who are often first-time borrowers ignorant of the dynamics of money and debt handling. These borrowers often treat loans as income and would splurge as soon as they get the money. They forget that loans have to be repaid, meaning they must earn a profit greater than the cost of servicing that loan. These people need lessons on borrowing and credit management. Their ignorance often leads them to unscrupulous loan sharks as traditional lending institutions ignore their needs.

For Malays, the problem is compounded by the fact that the charging of interest is forbidden in Islam; consequently Malays are ignorant of elementary knowledge of debt management. The religious establishment frowns upon such classes; they would be viewed as encouraging Malays to borrow and incur debts and thus interest payments.

The micro credit and other loan programs run by the government under its various poverty reduction and rural development schemes are unimaginatively designed and poorly executed. The loans are simply handed out without any counseling. The rural poverty program to equip poor fishermen with diesel motors illustrates this folly. The bank simply handed the money to the poor fishermen to buy the engines. The distributors came to know of the program and promptly hiked up their prices.

A smarter way would have been for the lending agency to negotiate a fleet discount on behalf of the fishermen, and then pass on the savings directly to the fishermen. The agency could also include a maintenance contract with the purchase and have the dealers train the fishermen on the simple maintenance chores. With the way it was administered, only the distributors were raking in the profits at the expense of the lending agency (which could never recover its loans) and the poor fishermen. When the project inevitably failed, the minister in charge blamed the poor hapless fishermen for “lacking initiative.”

Another effective soft support would be to provide childcare services in poor urban neighborhoods so mothers could go out to work. By having these mothers enter the workforce, whether as factory workers or domestic help, they would learn useful social skills, while their children would get good care and nutrition, better than what they would get at home.

The “hard” support would be to provide the necessary infrastructures. There are hawker stalls built by the government and MARA, but there are not enough and poorly maintained. Their allocations are riddled with corruption. The fact that those stalls fetch thousands of dollars indicates the potential value of such “informal” businesses. If those stalls were provided with their own power and water supplies, they would vastly improve their hygiene and thus business prospects. Visit the shopping malls, airports, and public places in America, and you will find single-owner stalls selling such things as juices, flowers, cell phones, chocolates, and magazines. These provide splendid opportunities to introduce the young into the world of business. That may just be the ticket to lift them out of poverty.

The urban poor cost the nation doubly, one in their potential not being fully developed because of their low education and skill levels, and two, through their dysfunctional activities like crime and drug addiction. As Malays constitute an increasing proportion of the urban poor, I would have expected the UMNO government to give the problem its highest priority.

Next: Educating and Training Malaysians