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Thread: Economics: With zero savings, majority of Malaysians face dire straits in emergencies

  1. #1
    Join Date
    Oct 2008

    Economics: With zero savings, majority of Malaysians face dire straits in emergencies

    With zero savings, majority of Malaysians face dire straits in emergencies

    Published: 26 November 2014

    The majority of Malaysians will likely struggle in the event of income emergencies as they have no financial assets and no banking or financial account of any kind, the Malaysia Human Development Report 2013 revealed.

    More than half or 53% of Malaysian households have no financial assets, while one in three Malaysians do not have an account, the report commissioned by the United Nations Development Programme (UNDP) said.

    Rural households have the highest number of those without any financial assets (63%), compared to 45% of urban households, and by ethnic group, Bumiputera and Malays chalked up the highest figures as those without such assets.

    “Among ethnic groups, about 57% of non-Malay Bumiputera and 55% of Malays have no financial assets, with the figure for the Chinese and Indians at 45% and 44% respectively,” read the report which was released in Kuala Lumpur yesterday.

    “In other words, roughly one out of two Malays, non-Malay Bumiputera, Chinese and Indians have no immediate liquid financial assets, making them vulnerable in the event of an income or employment shock.”

    One in three Malaysians also had no banking or financial account, while among the bottom 40%, the figure was much higher, at 50%, said the report.

    “In other words, one out of two low-income Malaysians do not have any financial accounts. Access to formal credit (or lack thereof) may also be the reason for the absence of financial assets,” it said.

    The report stated that while Malaysia recorded a relatively high gross national savings rate, the bulk of the savings came from the corporate sector.

    Citing figures from the Household Income Survey (HIS), the report also noted that nearly 90% and 86% of the rural and urban households, respectively, had no savings, while the majority of households at 88% had zero earnings from their savings.

    Meanwhile, 57% of Malaysian households reported zero earnings from investments, with the figure for urban households at 50% and rural households at 66%, according to figures derived from dividend income earned.

    The report did not take into account forced savings, such as the Employees Provident Fund (EPF), as households do not have access to such savings in the event of immediate income or employment shock.

    But a breakdown of data from EPF savings as at 2013 showed equally worrying information: 90% of Malaysians nearing retirement age did not have enough funds to sustain a basic lifestyle for more than five years.

    “Data from EPF shows that as at end of 2013, about one-fifth of Malaysians who are nearing retirement age (between the ages of 51 and 55) have less than RM20,000 in savings, while nearly 70% of those at the age of 54 have savings less than RM50,000.

    “In other words, assuming a monthly expenditure of RM900 per month, the savings of the former could sustain their basic lifestyle for 1.8 years, while for the latter, the figure stands at 4.6 years.”

    “The monthly wage distribution from EPF shows that in 2013, one-third, or 2.1 million, active members earn less than RM1,000, slightly more than three-quarters (76.8%) earn less than RM3,000, and about 90% earn less than RM5,000 a month.

    “As expected, the inequality in compulsory savings is rather extreme, where the top 1.7% of depositors in EPF has more savings than the savings of the entire bottom 57% combined,” added the report.

    The authors said that the lack of financial assets, especially for the bottom 40%, severely limited their ability to borrow, invest, save and improve their economic opportunities.

    The report was written by Tan Sri Datuk Dr Kamal Salih, an adjunct professor of Economics and Development Studies at Universiti Malaya (UM); Dr Lee Hwok Aun, from the UM Department of Development Studies, and Dr Muhammad Khalid of the Khazanah Research Institute.

    The report was published for the United Nations Development Programme (UNDP), and was sponsored by both the UNDP and the Economic Planning Unit which is under the Prime Minister's Department. – November 26, 2014.
    Last edited by pywong; 1st December 2014 at 02:34 PM.

  2. #2
    Join Date
    Oct 2008
    Putrajaya claims reduced poverty but UN report shows more poor Malaysians

    Published: 1 December 2014

    Whether poverty has declined in Malaysia depends on how it is measured. An example is Putrajaya's reliance on absolute poverty figures, which according to a United Nations report, results in data that does not reflect reality.

    The Malaysia Human Development Report 2013 commissioned by the United Nations Development Programme (UNDP) instead says poverty is better measured against what households earn in general, rather than by a fixed minimum level.

    The report measures relative poverty, which sets the threshold at half the national median income, and finds the number of Malaysians in this category has been rising since 2007, with one in five households considered relatively poor.

    Absolute poverty, on the other hand, is a measurement based on the declared poverty line. In Peninsular Malaysia, this is fixed at RM763,
    RM912 in Sarawak and RM1,048 in Sabah.

    But the relative poverty line in 2012 was RM1,813, or half of the household median income of RM3,626.

    The report, released last week and prepared by Malaysian researchers, notes that in 2007, 17.4% of Malaysians were in relative poverty, and this increased to 19.3% in 2009 and 20% in 2012.

    The figures fly in the face of Putrajaya's claim to have successfully reduced absolute poverty to 1.7% in 2012, from 49.3% in 1970.

    While Putrajaya relied on the declining absolute poverty rates, the UNDP report argues that relative poverty is “a better approach to assess inclusiveness”.

    “Absolute poverty has decreased but relative poverty has emerged as a growing concern in recent years,” said UNDP while releasing the report last Tuesday.

    “Relative poverty, which measures the number of households living with less than half of the median income, is a better approach to assess inclusiveness compared to absolute poverty, which measures the number of households living below the poverty line.”

    “If poverty is measured using the relative poverty rate (defined as less than half of the median income) as suggested in the New Economic Model, about 20% of Malaysian households are considered poor,” reads the report.

    This is not the first time a higher poverty line has been suggested by Malaysian researchers.

    In 2010, Jayanath Appadurai, who has worked for the Centre for Policy Initiatives, told The Malaysian Insider that a poverty line of RM1,886 was more accurate.

    The Pakatan Rakyat-led Selangor government, meanwhile, recently raised the state's poverty income threshold to RM1,500 to reflect the higher cost of living in the state.

    This was made in the state's budget for 2015, which sees about 30% of Selangor's five million residents classified as poor.

    More inclusive picture of poverty

    The Malaysia Human Development Report 2013 analyses the country's current situation to spur policy reforms to ensure inclusive and equitable growth.

    Among ethnic groups, the report shows higher relative poverty rate since 1989, the highest among the Malays at 19.1%, followed by the Chinese at 17.9%.

    Meanwhile, the relative poverty rate in urban and rural households has remained stagnant since 1989.

    “This is in contrast to the normal convention of measuring poverty using the poverty line income, where the official data show the poverty rate decreasing for all ethnic groups, as well as among the urban/rural areas,” the report says.

    It argues that broadening the concept of poverty, with more emphasis on relative poverty, is “more fruitful”.

    It notes that Malaysia’s lower absolute poverty rate compared to many countries with higher income and lower inequality raised questions on the suitability and plausibility of Malaysia’s poverty line.

    “Aligning (poverty) measurement to international norms will certainly raise – possibly steeply – the poverty line and subsequently the poverty rate."

    The report further points out another shortcoming in the government's method of measuring poverty: it does not indicate the different poverty
    rates within an ethnic group.

    “For instance, although the (absolute) poverty rate for Bumiputeras in 2009 is 5.3%, the poverty rate for the Kadazan Dusun and Murut in Sabah are four times higher at about 25%.”

    Even among states, the disparity in the absolute poverty rates showed “skewed distribution”, the report says.

    In Sabah, the absolute poverty rate of 8.1% was significantly higher than the state with the lowest poverty rate, Malacca, at 0.1%.

    The UNDP report was written by Tan Sri Datuk Dr Kamal Salih, an adjunct professor of Economics and Development Studies at Universiti Malaya, Dr Lee Hwok Aun, from the UM Department of Development Studies; and Dr Muhammad Khalid of Khazanah Research Institute. – December 1, 2014.

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