SSR2014: Basic concepts and issues in development LECTURE 12: Development in Malaysia

Objectives To discuss the challenges and issues in development in the Malaysia context; particularly looking at regional imbalances. To explain the various policies and strategies adopted by the Malaysian government in addressing local and global developmental issues.

Regional Inequality in Malaysia In Peninsular Malaysia West – more economically developed, multi racial states. East & North – less developed but predominantly Malay/Bumiputera states. Factors contributing to inequality Historical background – regionally and ethnically biased policies of the British. Concentration of industrial activities in certain areas Industrial activities being controlled by foreign companies.

Indicators of regional imbalances GDP per capita – urban and rural. Incidences of poverty by state. Other socio-economic indicators: infant mortality rate, % of population with piped water/electricity, unemployment etc). Linkages – communication and transportation network. Access to opportunities, and facilities (including education, health, employment).

Poverty: Comparison between sarawak & peninsular Malaysia Average household Income (RM) Poverty rate 2004 (%) Poverty rate 2007 (%) Malaysia 3249 5.7 3.6 Peninsular Malaysia - 2.3 Sarawak 2725 7.5 4.2 Source: Haslina Hashim & Garai (2009)

New Economic Policy (NEP) Launched in 1971 by (then) PM Tun Abdul Razak. Main objective is national harmony (after 13 May 1969). An ambitious action program to: Eradicate poverty ‘irrespective of race’. Restructure Malaysian society to reduce & eventually eliminate the identification of race with economic function. Abstract policies and goals of NEP: implemented in 2nd, 3rd, 4th and 5th Malaysian Plan.

Regional Development & NEP Regional development strategy under NEP is achieved through redressing economics & structural imbalances among regions within the country. Underlying assumption: equitable distribution not only in income, but facilities for health, education, recreation, housing and most importantly, opportunities for social & economic advancement (3rd MP 1976-1980).

Achievements of NEP By the end of the 1990s, most of the NEP’s ambitious goals have been achieved. - poverty in Malaysia have been reduced to 15% compared to 49% in P. M’sia. - the identification of race or ethnicity with economic function or occupation and sectoral activity had been generally reduced.

Note: Regional development is recognised as an important strategy for promoting the development in lagging regions, reducing pressures on the core regions, facilitating migration of labour from resource-poor areas to areas with high growth potentials and setting up new growth centres. NEP: ended in 1990; succeeded by National Development Policy (NDP) in 1991.

NDP: shift from NEP 1991 – 2000. More focus on relative poverty (inequalities in income and wealth). Growth based on private sector to achieve restructuring. Attention to human resource development to achieve growth and distributional objectives.

Vision 2020 In Feb 1991, the Vision 2020 was presented. Main goal – to achieve developed status mainly by accelerating industrialisation, growth and modernisation. Complementary to NDP.

Present day … Malaysia is now at halfway point in term of achieving Vision 2020. And now entering the phase of the next 5 year towards achieving Vision 2020.

However, Malaysia now stands at a cross roads as a result of challenges at both the global and domestic fronts. Firstly, challenge at global level i.e. forces of globalization, liberalization & information and communication technologies (ICT) have fundamentally changed the rules & nature of global trade & competition. Countries, which were once considered risky investment locations, have now become attractive to FDI after adopting the same macroeconomic & industrial policies that had made Malaysia successful. Secondly, Malaysia no longer has the comparative advantage as a base for low cost manufacturing. In the Information Age, value can migrate offshore to other locations with unprecedented speed and ease.

Other related issues Rural development in Malaysia. Equality between urban and rural areas. Growth of Informal Sectors. Empowerment – women & development in Malaysia

MALAYSIAN DEVELOPMENT STRATEGIES SINCE NEP – PRESENT DAY

New land development strategy In-situ rural development Industrial dispersal strategy Rural Growth Centre Regional Initiatives Strategies of social integration Strong human resource base

1. Development Strategy: New Land Development Strategy Govt sought to push the location of future growth in agriculture, manufacturing & services towards the underdeveloped regions & states. Advantage: greater utilization of available land. E.g. Federal Land Development Authority (FELDA) – largest land development agencies – opened up a total of 373,704 ha (43%) of all developed land between 1971-1980.

Identification of areas to be developed. Agriculture support services & subsidies. Social development including social amenities & community development.

2. Development Strategy: In-situ Rural Development Redevelopment of existing under-utilized agriculture land. Through the implementation of Integrated Agricultural Development Projects (IADPs). Strategy designed to advance existing backward rural areas by providing sufficient infrastructural facilities. Identification of target groups (e.g. fishermen, farmers, estate workers) – to raise productivity and incomes

Example: IADA kalaka saribas projects RMK-9 Allocation Target Size Mangoes 2.555 million 511 ha Oranges 0.925 million 185 ha Pineapple 10 million 1000 ha

Agriculture Infrastructure Improvement: IADA projects

3. Development Strategy: Industrial Dispersal Strategy Seeks to encourage new manufacturing industries to move to selected areas in less developed regions/states. Ways of redistributing the spatial incidence of economic growth & development. MIDA (Malaysian Industrial Development Agency) – established in 1967 – to promote & co-ordinate industrial development in Malaysia (e.g. free trade zone, industrial estate planning etc)

4. Development Strategy: Regional Growth Centre (RGCs) An approach which emphasizes on the need to provide a total development of the physical, social and economic sector of a project area Objectives: To create a sizeable, viable and self-sustaining rural settlements with proper provision of facilities. To facilitate & accelerate the socio-economic growth & betterment of quality of life. To address rural poverty, max productivity & income. To facilitate greater local participation in development programs.

RGCs in Sarawak Padawan Complex Telaga Air Gedong Beladin Mid-Layar/ Ng. Spak Semop Balingian Long Lama Sundar Awat Awat Long Semadoh Opar

5. Development Strategy: Regional Planning Initiatives A series of regional initiatives was launched recently. Reasons for regional planning (traditionally):- To achieve balanced regional development To enable all regions to be involved in mainstream development To contain rural population Example: NCER (Kedah, P.Pinang, Perlis, Perak) ECER (Kelantan, Pahang, Terengganu) Iskandar (Johor), Sabah Development Corridor, SCORE (Sarawak).

6. Development Strategy: Poverty reducing policies Introduction of “Development Programmes for the Poorest” (PPRT) package for hardcore poor. Launched ASB-PPRT Loan scheme – 1992. Support efforts by NGOs, e.g. Amanah Ikthiar Malaysia (since 6th Malaysian Plan), Yayasan Basmi Kemiskinan (YBK). Group farming (Ladang Masyarakat- oil palm, rubber plantations)

Amanah Ikthiar Malaysia (AIM) NGO involved in reducing hard core poverty incidence by providing interest free micro loans to the poor to undertake income generating activities under close supervision. Similar to Grameen Bank and most participants are women. RMK-6: the Govt provided RM20 million loan to AIM, while AIM provided interest-free loans worth RM77.1 million to 36,200 poor & hardcore-poor households: Participated in poultry and livestock rearing, small scale businesses. Most of these businesses are successful (Rogayah Mat Zain, 2009) and household income increases and loan repayment is almost 100%.

Development strategy: How to be competitive??? Incentives Taxation Immigration policies Infrastructure support

Socio-economic Policies Focus on strategy of growth with equity to overcome the problem of exclusion. To strengthen the inclusion of the disadvantaged. Eg: Female-headed households, the bottom 40% (low income households), the disabled. Through interventionist affirmative actions and positive discrimination policies. Eg: Program E-kasih, 1Azam, BR1M, Projek Ladang Masyarakat, PPRT etc. To assist the indigenous population. Eg: Establishment of govt bodies such as JAKOA (to assist the Orang Asli community in Semenanjung Msia) To correct the economic imbalances between ethnic composition of the population

Thank You!!!! That’s the last slide of the last lecture for this semester …