CHAPTER 3

SOCIO ECONOMIC ISSUES

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3.1 POVERTY
3.1.1 CONCEPTS AND MEASUREMENTS

No exact definition 3 concepts:

1. Absolute poverty 2. Absolute hardcore poverty 3. Relative poverty

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3.1.1 CONCEPTS AND MEASUREMENTS

Measurement for poverty PLI (Poverty line Income) an income which separate those who are poor from those who are not poor.
income/household/month

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

PLI
POVERTY Household size of 4+
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Cont
The concepts:

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.

income/household/month

RM 425

PLI (Absolute Poverty)

Household size of >4

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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 RM 212.5

PLI (Absolute Poverty)

PLI (Absolute Hardcore Poverty)

Household size of >4

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Cont
3. Relative Poverty
Income inequality between groups
i. Between rural and urban dwellers
income/household/month

RM 1600 RM 900 RM 425

Urban dwellers
Rural dwellers PLI

Household size of >4

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Cont
ii. Between high and middle income earners

income/household/month

RM 2500 RM 1500 RM 425

High income earners

Middle income earners PLI

Household size of >4

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iii. Between races

income/household/month

RM 2000 RM 1200 RM 1000

Chinese
Indian Malay

Household size of >4

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3.12 Poverty from Islamic perspective

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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)

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3.1.3 The incidence and profile of poverty

Table 2
Malays : Highest poverty rate (46.3%) Poverty in Peninsular Malaysia rural, agricultural, and Malay phenomena

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3.1.4 Rural Poverty

Causes
1. 2. 3. 4. 5. Rural and Agricultural Rapid rate of industrialization Imbalanced development Educational standard among children Rural families

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Measures to eradicate
1. Implementing various policies 2. Modernize their traditional methods of production 3. In situ development 4. Establishment of farmers market in urban centers 5. Training & education 6. Government provide infrastructural and basic amenities
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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.

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Cont
Causes:
1. 2. 3. 4. High cost of living Little access to basic amenities High cost of basic goods and amenities Lack of job opportunities in the rural areas (migration)

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Cont
Strategies to eradicate:
1. Housing low cost housing 2. Job opportunities Ensure urban economy create job opportunities Encourage housewives to work part time Space provided for hawking, pasar malam. 3. Educational facilities 4. Better town planning 5. (Other strategies?........)

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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.

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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

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Project under the development program for the hardcore poor

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

2.

Increase income

Village industries Rearing poultry

Special training from families Rural technology workshop

3.

Human resource development

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Cont..
4. Health & Nutrition Food supplement and subsidized milk for primary school children Old folks home Allowance for handicapped worker

5.

Direct assistance

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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)

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3.1.7 Measures to eradicate poverty from Islamic perspective

1. Encourage people to work hard to fight against poverty 2. Governments 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 interests 3. Those who have help the have nots.
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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.
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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 increase 3. Improvement in income distribution among the Malays
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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 states ii. Dependence of the poorer states on traditional agriculture iii. Lack of basic infrastructure

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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 income 2. Different rate of growth of rural & urban:
Urban double digit growth rate Rural 2% p.a

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3.2.4 Reasons for inequality

1. Reasons for inequality between races:

i. Difference of assets ii. Difference iii. Difference iv. Difference in human skills & ownership in access to capital in educational attainment in employment pattern

2. Reasons for inequality between areas? 3. Reasons for inequality between states?
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3.2.5 Measures to solve unequal income distribution

1. 2. 3. 4. Employment restructuring Upgrading labor forces education & skill level Private sector provide greater job opportunities Increase bumiputera participation in SMI (franchising, joint venture) 5. Increase efficiency, productivity & income of smallholding 6. Governments role: i. Achieving 0 inflation rate ii. Improve the quality of education, health and other public services iii. Implement the public low cost housing program
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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

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Cont Measures to solve unequal income distribution from the Islamic perspective

2 ways Legal measures Positive measures Law of Inheritance Zakat Prohibitive measures Optional charity Optional measures Charity of surplus

Prohibition of interest
Prohibition of hoarding wealth Wasteful expenditure Unhealthy business
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Positive measures 1. Law of inheritance

2. Zakat

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.

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
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Prohibitive measures: 3. Prohibition of interest

4. Prohibition of hoarding wealth

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

5. Wasteful expenditure 6. Unhealthy business

Wealth should be utilized to produce more wealth for the benefit of the community

Which are likely to create and increase inequality of wealth in the community are prohibited
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Optional measures 7. Optional charity

Spend wealth freely on the common good of society A moral duties on the rich members of the muslim community 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)
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8. Charity of surplus