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4.01. The New Economic Policy (NEP) was implemented during the last twenty years with the aim of promoting national unity through the eradication of poverty among all Malaysians and the restructuring of society so as to eliminate the identification of race with economic function. Contrary to the ,belief in some quarters that its implementation had retarded economic growth, the NEP provided the required socio-political stability to attract foreign .investments and to enable the Government to develop the country. It has brought about significant progress in the alleviation of poverty among the various ethnic groups in all areas of the country. Furthermore, substantial improvements were also made in restructuring the Malaysian society, thereby contributing towards a change in the ethnic pattern of participation in the economy, with more Bumiputera being represented in the modern and urban sectors of the economy.
4.02. The efforts to further improve income distribution, eradicate poverty and restructure society will be continued in the post-1990 period through the implementation of the New Development Policy (NDP). The NDP is a broader policy framework which has the overall objective of attaining a balanced development based on the foundation laid down by the NEP to achieve the overriding goal of national unity. It builds upon the successes that have already been achieved in the past and takes into account new issues and concerns which have emerged to ensure that it is implemented in a manner which meets with the aspirations of all Malaysians for a just and equitable distribution of the benefits of economic development, as envisaged in the Rukunegara.
Existing Socio-Economic Imbalances
4.03. All communities and regions have benefitted from the growth of the economy and the substantial improvements in income and living standards. This has led to a marked reduction in poverty and a higher level of Bumiputera participation in the modern sectors of the economy. The expansionary policies adopted by the Government in the seventies and the liberalization and deregulation of the economy since the mid-eighties have helped to stimulate growth and provide the private sector with opportunities to expand business activities, in line with the Government's policies to attain the distributional objectives of the NEP within the context of an expanding economy.
4.04. A remarkable achievement of the NEP was that it significantly improved income distribution without adversely affecting growth. In fact, the economy was able to achieve a high rate of economic growth during the 1971-90 period on account of the social and political stability created by the NEP. The reduct' in income inequality is evident from the lowering of the Gini coefficient from 0.513 in 1970 to 0.445 in 1990 for all households. Another indicator of the improving income distribution is that the mean income of the bottom 40 per cent of households has been increasing at a faster rate than that of the middle and higher income groups. As a result, the differences in income between the highest 20 per cent and the lowest 40 per cent income groups have narrowed.
4.05. The achievements in reducing income inequalities reflect the significant progress made in reducing the national incidence of poverty from 52.4 per cent in 1970 to 17.1 per cent in 1990. This substantial reduction in poverty was only partly due to improvements in productivity and income levels among the target groups such as rubber smallholders, estate workers, padi farmers and fishermen. The main source of progress in reducing poverty especially during the eighties came from the growth of the economy which created expanding employment opportunities in the non-traditional sectors and enabled the poor to diversify their sources of income, thereby reducing their dependence on traditional low income and low productivity activities. As rural households gained more access to these new opportunities and with the tightening labour market conditions resulting in lower unemployment, wage incomes have expanded to account for a rising share of household incomes. The shift towards wage employment among rural households constituted the most important factor accounting for the reduction of poverty in the country.
4.06. The increasing shift towards the modern sectors as sources of employment and income was clearly indicated by the rising rates of labour force participation among the rural population, the growing number of Malay women seeking employment, especially in the electronic and textile industries, and the large migration of rural labour into the major urban centres. As a result, the share of Bumiputera employment in manufacturing and services increased substantially from 37.5 per cent in 1970 to 51.4 per cent in 1990, contributing towards the substantial improvements in income levels among the Bumiputera, the restructuring of employment and the reduction of ethnic imbalances in the economy.
4.07 The programmes under the NEP which have had the greatest impact in bringing about these changes were education, health, rural roads and communication. The vast expenditures allocated under successive development plans to these programmes as well as to social amenities such as electricity and water have played a major role in raising the employability and social mobility of the labour force and enlarging the capacity of the poor to seek alternative source of income. Education, in particular, has been the most important factor enabling the Bumiputera to enter into the mainstream of economic activities in the private sector and increasing their participation in the commercial and industrial sectors.
Income Distribution and Poverty
4.08. Notwithstanding the significant achievements made under the NEP to improve income distribution, it must be noted that the income gaps and socio-economic imbalances in the country are still wide in terms of income and ethnic roups as well as regions. The income share of the bottom 40 per cent of the households was 14.5 per cent compared with 50.3 per cent for the top 20 per cent of the households in 1990. In terms of income differences in Peninsular Malaysia, this means a mean monthly household income of $421 for the bottom ) per cent compared with $2,924 for the top 20 per cent. In Sabah and Sarawak, a similar comparison shows a disparity between the low and high income groups by about seven times.
4.09. In ethnic terms, although the overall ratio of Bumiputera to Chinese nean income has improved from about 44 per cent in 1970 to 59 per cent in 1990, the inter-ethnic income disparity remains high in certain sectors and occupations. In the manufacturing sector, the mean household income of the Bumiputera and non-Bumiputera in 1990 is $958 and $1,635, respectively, ompared with $609 and $959 in the agriculture sector. In the professional and technical jobs, Bumiputera had a mean income of $1,919 compared with $2,940 for the non-Bumiputera. In the services job, the disparity was about twice.
4.10. Intraethnic income disparities are still sizeable, with inequality among the Bumiputera being higher relative to that of the non-Bumiputera. The Gini coefficient in 1990 for the Bumiputera was 0.428 while that for the Chinese was 0.423 and the Indians 0.394. As another comparison, whilst the mean income of the top 20 per cent of the Chinese households was about 8.6 times the income of the bottom 20 per cent, the disparity between the top and the bottom income households for the Bumiputera was about 9.2 times.
4.11. Although rural-urban income differentials have narrowed, the average rural income in Peninsular Malaysia represents only about 58 per cent of the urban income in 1990, indicating that the gap was still wide. In Sabah and Sarawak, rural mean income as a ratio of urban income was about 60 per cent and 54 per cent, respectively.
4.12. The above analysis essentially indicates that improvement of income distribution in the last two decades have not occurred evenly for all the three major ethnic groups. The explanation for this trend is mainly found in the differences in human skills and ownership of assets. There were also differences in access to capital as well as in educational attainment and the employment pattern, both sectorally and occupationally. The pattern of employment was strongly influenced by the level of educational attainment with the Bumiputera being more concentrated in the lower than in the higher occupational categories. However, as much progress has been made over the last 20 years to improve the educational level of Bumiputera, the wide disparities in the educational attainment among the younger age cohorts across ethnic groups are narrowing.
4.13. Absolute poverty in the country is measured on the basis of a poverty line income (PLI). The PLI takes into account the minimum requirements for food, clothing and shelter, and other regular expenditures that are necessary to maintain a household in decent standards of living. Using the PLI, the incidence of poverty is directly estimated by observing the number of households whose incomes are below the PLI. For 1990, the poverty line was $370 per month for a household size of 5.1 in Peninsular Malaysia, $544 for a household size of 5.4 in Sabah and $452 for a household size of 5.2 in Sarawak.
4.14. In line with the general increases in income and standards of living, as reflected in the growth of real mean income of the bottom 40 per cent of the household which increased from about $76 to $176 during 1970-90, the incidence of poverty in Peninsular Malaysia declined to 15 per cent in 1990 from about 49.3 per cent in 1970, better than the First Outline Perspective Plan (OPPI) target of 16.7 per cent. In Sabah and Sarawak, the incidence of poverty declined to 34.3 per cent and 21 per cent, respectively. In terms of hardcore poverty, defined as those households receiving less than half of the poverty line income, the number involved has been reduced to about 143,100 households or 4 per cent of total households. This level of poverty is low by international standards and is not comparable to the extreme forms of poverty found in some countries. The hardcore poor include households who have been by-passed by the development process either because they are too poor, too old, or live in areas too remote to benefit from the development programmes.
4.15. While the incidence of poverty has declined for all states, poverty was still high in certain states. Terengganu had the highest incidence of poverty at about 31 per cent in 1990, despite its Gross Domestic Product (GDP) per capita being among the highest in Malaysia because of the contribution from petroleum. In Kedah and Kelantan the incidence of poverty was about 30 er cent. In Sabah, about 34 per cent of the households lived in poverty in 1990, while in Sarawak, the incidence of poverty was 21 per cent. Wilayah Persekutuan Kuala Lumpur and Selangor, on the other hand, continued to have the lowest percentage of poor households estimated at less than 10 per cent.
4.16. Although accessibility to basic services among low income households has increased during the OPPI period the progress has not been evenly shared among the states. Thus, in 1990, while about 82 per cent of the poor households in Peninsular Malaysia had access to electricity, in Sabah and Sarawak 47 per cent and 50 per cent of households, respectively, had such access. With regard to piped water, the coverage was relatively low, benefitting only about 57 per cent, 20 per cent and 15 per cent of the total poor households in Peninsular Malaysia, Sabah and Sarawak, respectively. Accessibility to educational facilities continued to increase among the poor with about 94 per cent of poor households in Peninsular Malaysia, 85 per cent in Sabah and 64 per cent in Sarawak receiving textbook assistance.
4.17. In terms of access to health care, about 71 per cent of the poor in Peninsular Malaysia, 35 per cent in Sabah and 20 per cent in Sarawak were located within 5 kilometres of rural clinics. In this connection, in 1986, the Government identified isolated cases of acute malnutrition among children where 12,000 were severely underweight. They were mostly found in the states of Sabah, Sarawak, Kedah and Kelantan. By 1990, significant progress was made in solving the problem, particularly through more focussed food and nutrition programmes for children, regular visits and consultative services extended by the medical staff.
4.18. Despite the progress made under the NEP to restructuring the employment pattern so as to reflet the ethnic composition of the population, imbalances in employment continue to exist at the professional and managerial as well as technical and skilled occupations. Although Bumiputera employment in the manufacturing sector has increased to about 50.3 per cent of the total in 1990,they were more concentrated at the lower levels of occupation. Bumiputera accounted for only about 26 per cent of the total professional and managerial employees and about 36 per cent of the total technical and supervisory employees in the sector.
4.19. Overall, Bumiputera employment in the professional and technical category was about 60.3 per cent but nearly half of them were in the nursing and teaching professions. In certain high-paying registered professional jobs such as architects, occountants and doctors, the Bumiputera only accounted for 29 per cent of the total in 1990. In the administrative and managerial category, the share of the Bumiputera was about 33.3 per cent compared with about 58.7 per cent for the Chinese and 5.3 per cent for the Indians. This unbalanced pattern of occupational structure is evident in the private sector where most jobs were found. The share of Bumiputera in managerial occupations in major industries, such as plantation, mining, construction, manufacturing and financial services, improved from 11 per cent to 27.9 per cent , while that of the Indians remained at about 6.4 per cent, indicating a wide scope for improving the employment pattern in the private sector.
4.22. Although the Bumiputera have not achieved the 30 per cent equity ownership target by 1990, the progress made by them has been substantial. In terms of growth rate, Bumiputera equity ownership grew by an average of 29.6 per cent per annum over the OPPI period, higher than the average of 16.3 per cent for the corporate sector as a whole. This growth was contributed mainly by the trust agencies and institutions such as the National Unit Trust Scheme (ASN). It was this growing equity participation by the agencies and institutions which enabled the Bumiputera to have larger control in the corporate sector and which provided opportunities for them to be represented at the management and decision making levels in companies.
4.23. Of the amount under Bumiputera ownership, about $13,300 million was owned by the trust agencies and institutions involved in mobilizing Bumiputera funds such as the ASN, MARA Unit Trust, Muslim Pilgrim Saving and Management Authority (LUTH) and cooperatives, and the balance about $9,000. million, by Bumiputera as direct investors. The amount held by Bumiputera ps direct investors represented about 8.2 per cent of the total equity. In this connection, of the total newly issued shares registered with the Registrar of Companies during 1981-90, only about 6 per cent was taken up by Bumiputera individuals.