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The priorities in the mid-term review of the 11th Malaysia Plan will support inclusive growth and sustainable development. FILE PIC

Among the new priorities in the 11th Malaysia Plan, as outlined in its mid-term review, is “enhancing inclusive development and wellbeing”. Such a priority is in line with the 2030 Agenda for Sustainable Development Goals (SDGs), which includes the goal of zero poverty, good health and wellbeing, gender equality and sustainable cities and communities.

The inclusive development approach will be implemented with emphasis on growth with equity, mainly for the overall wellbeing of all Malaysians, irrespective of gender, ethnicity, socioeconomic status and geographical location.

The key strategy lies in income growth, especially among the Bottom 40 per cent, as well as vulnerable groups, such as children, youth, women, the elderly and the disabled.

The income measures will be geared towards a self-reliant, innovative and industrious society, whereas the wellbeing measures will be reflected in higher purchasing power, quality and affordable housing, better healthcare, active lifestyle, safer and secure nation and a noble society.

At present, there are 24,700 poor households, defined as those that earn less than RM980 per month. This figure currently represents 0.4 per cent of total households nationwide. For the overall B40 category, there are 2.78 million households that earn less than RM4,360 monthly.

An interesting development in the mid-term review is the effort to improve the measurement of national poverty. In this respect, the Multidimensional Poverty Index (MPI) will be adopted to complement the existing Poverty Line Income (PLI).

MPI is considered to be an inclusive measurement of poverty as it takes into account other non-income dimensions with regard to poverty, such as education, health and standard of living.

Poverty has undergone its own evolutionary process, in tandem with social and economic developments. Economist and former Universiti Malaya vice-chancellor Royal Professor Ungku Abdul Aziz Ungku Abdul Hamid introduced the “Sarong Index” as a measurement for poverty. By dividing the number of sarongs in a household with the number of dwellers, an index of less than one indicates extreme poverty.

PLI was introduced in 1977 using the Household Expenditure Survey. It has hardly changed, even though the landscape of demography, economy and standard of living has undergone major changes.

For inclusive development, there is a need to move from absolute and hardcore poverty to relative poverty measurement. Absolute poverty is a condition where the gross monthly income of a household is insufficient to purchase certain minimum necessities of life, as expressed by PLI. While hardcore poverty is when the gross monthly income of a household is less than half of PLI.

In addition, relative poverty explains the income (PLI) disparity between groups. In Malaysia, it has been applied to address poverty among different income groups (such as M40, B40), ethnic groups or urban-rural dwellers.

In the past, poverty has been associated with rural areas. In the case of the Sarong Index, it helps to explain the links of poverty among rural Malays with low productivity of rural produce and trade exploitation issues.

Nowadays, poverty comes with various factors, such as urbanisation, inflation, disruptive innovation, unemployment and ageing society. For a more effective policy outcome, poverty needs to be addressed holistically and not merely on income alone.

Apart from the development of poverty measurement at household level, there is also a need to work out the wellbeing measurement at the national level. Focusing on income alone may result in a policy that emphasise more on the gross domestic product (GDP) and economic growth, rather than overall wellbeing.

The Malaysian Wellbeing Index in the mid-term review highlighted that economic wellbeing has increased faster than social wellbeing. The alarming part is that family wellbeing was in decline even though income was increased during the same period.

Just like MPI is being adopted to complement PLI in measuring poverty at the household level, there is also a need to have an index to complement GDP at the macro level. In this respect, the Genuine Progress Indicator (GPI), which has been applied by several developed countries, can be a way forward for Malaysia.

Would the aim towards “enhancing inclusive development and wellbeing” encompass Muslims’ wellbeing completely? Results indicate that income correlates negatively with spiritual and family wellbeing. Moreover, unpaid housework is the biggest positive contribution to economic welfare, which was not reflected in the gross domestic product. Malaysia also has a significant waqf contribution that enhances the economic welfare under GPI components.

Henceforth, MPI and GPI are necessary complements of PLI and GDP for an inclusive development and wellbeing approach. Nonetheless, the adoption and refinement of the measurements with Islamic values are vital moving forward.


Fellow, Centre for Economy and Social Studies, Malaysian Institute for Islamic Understanding (IKIM)

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