Eco261 Notes.3

eco261.rg.uitmsabah 1

CHAPTER 3

SOCIO – ECONOMIC ISSUES


3.1 POVERTY

No exact definition 3 concepts:

1. Absolute poverty2. Absolute hardcore poverty3. Relative poverty

3.1.1 CONCEPTS AND MEASUREMENTS


3.1.1 CONCEPTS AND MEASUREMENTS

Measurement for povertyPLI (Poverty line Income) – an income which separate those who are poor from those who are not poor.

income/household/month

Household size of 4+

PLI

POVERTY

• PLI differs from country to country depending on their socio-economic development


Cont…

1. Absolute poverty A condition in which the gross monthly income of a

household is insufficient to purchase certain minimum necessities of life – income less than the PLI.


Household size of >4

PLI (Absolute Poverty)

The concepts:

RM 425


Cont…

2. Absolute hardcore poverty A condition in which the gross monthly income

of a household is less than half of the PLI.income/household/month

RM 425 PLI (Absolute Poverty)


½ PLI (Absolute Hardcore Poverty)RM 212.5


Cont…

3. Relative Poverty Income inequality between groups

i.i. Between rural and urban dwellersBetween rural and urban dwellers


RM 1600 Urban dwellers


Rural dwellersRM 900

RM 425 PLI


Cont…

ii.ii. Between high and middle income earnersBetween high and middle income earners


RM 2500 High income earners


Middle income earnersRM 1500

RM 425 PLI


Cont…

iii.iii. Between racesBetween races


RM 2000 Chinese


Indian RM 1200

RM 1000 Malay


3.12 Poverty from Islamic perspective


3.1.3 The incidence and profile of poverty

Table 1 Poverty rate : Rural (59%) > urban Rural : Agricultural activities – highest

poverty rate (68%) Agricultural activities : Padi farmers

(highest incidence of poverty)


Table 2 Malays : Highest poverty rate (46.3%)

Poverty in Peninsular Malaysia – rural, agricultural, and Malay phenomena

3.1.3 The incidence and profile of poverty


3.1.4 Rural Poverty

Causes 1. Rural and Agricultural2. Rapid rate of industrialization3. Imbalanced development4. Educational standard among children5. Rural families


Cont… Measures to eradicate

1. Implementing various policies2. Modernize their traditional methods of

production3. In – situ development4. Establishment of farmers market in

urban centers5. Training & education6. Government provide infrastructural and

basic amenities


3.1.5 Urban Poverty

Poverty among squatters, flat dwellers and hawkers who involved in over-crowded living conditions, illegal occupation of land, and trading in illegal & unhealthy areas.


Cont…

Causes:1. High cost of living2. Little access to basic amenities3. High cost of basic goods and amenities4. Lack of job opportunities in the rural

areas (migration)


Cont… Strategies to eradicate:

1. Housing – low cost housing2. Job opportunities

Ensure urban economy create job opportunities Encourage housewives to work part time Space provided – for hawking, pasar malam.

3. Educational facilities4. Better town planning5. (Other strategies?........)


3.1.6 Hardcore Poverty

Households who have been by-passed by the development process because of too poor, too old, or live in areas too remote to benefit from the development programs.


Cont…

Strategies to eradicate: Strategies implemented by the

government:1. Development program of the Hardcore Poor

(Program Pembangunan Rakyat Termiskin) Register and profile of the hardcore poor

household Delivery of appropriate project to meet their

specific needs


Project under the development program for the hardcore poor

Objectives Projects

1. Increase the quality of life Construction of new houses Electricity and water supply

2. Increase income Village industries Rearing poultry

3. Human resource development

Special training from families

Rural technology workshop


Cont..

4. Health & Nutrition Food supplement and subsidized milk for primary school children

5. Direct assistance Old folks’ home Allowance for handicapped

worker


Cont… Strategies implemented by the NGO

(Non Government Organization)1. Provide small business loan, industrial

training and job opportunities, educational support & better housing.

Examples of NGO:1. Yayasan Basmi Kemiskinan (YBK)2. Amanah Ikhtiar Malaysia (AIM)


3.1.7 Measures to eradicate poverty from Islamic perspective

1. Encourage people to work hard to fight against poverty

2. Government‘s role: Has to participate in social life Provide welfare services at its level best subject to

the resources constraints Has the right to step into the economy to establish

justice and harmony in the society Should introduce policies toward the establishment

of an equitable distribution system Entitled to interfere in the private right of ownership

to preserve social interests3. Those who have – help the have nots.


3.2 INCOME DISTRIBUTION 3.2.1 Income Distribution at independence

1. By ethnicity Malays – lowest mean income per month

2. By urban-rural strata Rural < urban Why? – the government focused on economic

growth, not income distribution. The ‘May 13th 1969 tragedy’ – signal of

dissatisfaction among the Malays, as they were not given many opportunities to upgrade themselves.


3.2.2 Income Distribution during NEP

1. By ethnicity Malay mean income improved the most Chinese and Indian mean income expanded

2. By urban-rural strata Urban & rural income increase The narrowing of the Chinese – Malay income

achieved:1. Through improving of rural income & migration of

rural poor to town.2. Economic development increase3. Improvement in income distribution among the

Malays


Cont……

3. By states All states had improvements in per capita

GDP & household incomes. Reasons for the persistent disparities

among states:i. Private entrepreneurs – prefer to invest in the

more developed statesii. Dependence of the poorer states on traditional

agricultureiii. Lack of basic infrastructure


3.2.3 Income Distribution during NDP

Mean monthly gross household income increased

Household income of all ethnic group increased

Rural household income increased Income inequality between rural & urban

areas widened due to:1. Slower growth of bumiputera household income2. Different rate of growth of rural & urban:

Urban double digit growth rate Rural – 2% p.a


3.2.4 Reasons for inequality

1. Reasons for inequality between races:i. Difference in human skills & ownership

of assetsii. Difference in access to capitaliii. Difference in educational attainmentiv. Difference in employment pattern

2. Reasons for inequality between areas?3. Reasons for inequality between states?


3.2.5 Measures to solve unequal income distribution

1. Employment restructuring2. Upgrading labor force’s education & skill level3. Private sector – provide greater job opportunities4. Increase bumiputera participation in SMI (franchising,

joint venture)5. Increase efficiency, productivity & income of

smallholding6. Government’s role:

i. Achieving 0 inflation rateii. Improve the quality of education, health and other

public servicesiii. Implement the public low cost – housing program


3.2.6 Distribution of wealth from Islamic perspective

Principles of distribution in Islam There should be more and more

production and distribution of wealth equitable division among the different section of the community – not to its concentration in few hands


Cont…

2 ways

Legal measures

Optional measures

Positive measures

Prohibitivemeasures

Optionalcharity

Charity ofsurplus

Law of Inheritance

Zakat

Prohibition of interest

Prohibition of hoarding wealth

Wasteful expenditure

Unhealthy business

Measures to solve unequal income distribution from the Islamic perspective


Cont…

Positive measures1. Law of inheritance

• The property of the deceased is divide among many of his near relatives. If no near relatives, the property is taken over by the state – distributed to the citizens.

2. Zakat • A compulsory levy – collected from the well to

be spent on the poor• The purpose

To meet the needs of the poor and the needy Helps spread wealth in the community


Cont…

Prohibitive measures:3. Prohibition of interest

• Interest is not allowed. Unjust, irrespective of the nature of the loan or the rate charged.

4. Prohibition of hoarding wealth• Wealth should be utilized to produce more

wealth for the benefit of the community5. Wasteful expenditure6. Unhealthy business

• Which are likely to create and increase inequality of wealth in the community are prohibited


Cont…

Optional measures7. Optional charity

• Spend wealth freely on the common good of society

• A moral duties on the rich members of the muslim community

8. Charity of surplus• Moral obligations on the muslims to spend the

nation wealth as guided by the principles of Infaq al – Afw (require the people to spend what they can spare out of their wealth merely for seeking the pleasure of God)

Eco261 Notes.3

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