REDUCING INCOME DISPARITY IN NCER: TRENDS, STRATEGIES AND CHALLENGES

(This article is an extract of my discussion at the NCER's SDG Summit recently in UTP, Tronoh, Perak).

I am truly honored to be here today at this significant summit. My gratitude extends to NCER for the opportunity to moderate and discuss our inaugural panel discussion, focusing on a critical issue: "Reducing Income Disparity in NCER: Trends, Strategies, and Challenges." Our gathering aligns with the Sustainable Development Goal, particularly SDG 1, which aims to eradicate poverty in all its forms globally, while we concentrate on the Northern Corridor Economic Region (NCER) of Malaysia.

Before we welcome our esteemed panellists to explore this subject, I would like to give you some context for our discussion. The NCER has experienced notable economic growth, establishing itself as a region of dynamic advancement. However, this development has been shadowed by ongoing income disparity and poverty challenges. These issues are complex in nature and deeply ingrained, affecting individuals, families, communities, and particularly the indigenous populations. Such disparities have left a profound mark on the socio-economic fabric of the region, which we aim to address and explore in today's session.

Gini Coefficient

The Gini coefficient is a widely recognised statistical tool used to gauge the extent of income or wealth distribution inequalities within a population. This coefficient is scaled from 0 to 1, where 0 denotes perfect equality (0%) and 1 indicates perfect inequality (100%). Essentially, a higher Gini coefficient signals a greater degree of inequality.

In the global context, South Africa has the most pronounced income inequality, exhibiting a Gini coefficient exceeding 63%. This statistic is particularly striking, considering that over half of the South African population lives in poverty. This trend of significant income disparity isn't isolated to South Africa but is also prevalent in other countries within southern Africa, such as Namibia, Suriname, and Zambia.

The pattern of high-income inequality is similarly observed in South America, with countries like Brazil and Colombia reporting Gini coefficients surpassing 53%. In Asia, nations including The Philippines, Papua New Guinea, and Malaysia also demonstrate considerable income inequality, with their Gini coefficients ranging between 40-50%. These figures highlight the widespread and varying levels of economic disparity across different regions and continents.

When examining regional comparisons, it's indeed concerning that Malaysia's income inequality remains relatively high compared to other nearby countries. However, the World Bank chart data offers a glimmer of hope. It shows a gradual narrowing of Malaysia's Gini Coefficient: from 0.411 in 2015, it decreased slightly to 0.407 in 2019 and to 0.404 in 2022.

This trend, albeit modest, is optimistic. It signifies that the income inequality gap in Malaysia was reduced by 0.3 per cent in 2022 compared to 2019. This progress underscores the need for ongoing and perhaps more robust efforts to tackle income disparity more effectively. The gradual reduction in the Gini Coefficient suggests that policies and strategies implemented during this period may have had a positive impact, but it also highlights that there is considerable room for improvement in addressing the challenge of income inequality in Malaysia.

The data on Malaysia's household income gap in 2022 reflects a nuanced picture, particularly when comparing the pre-COVID and post-COVID periods. Overall, there has been an improvement, marked by a decrease in the Gini coefficient. This indicates that income distribution has become more equitable in several areas, likely due to government policies, economic recovery efforts, and shifts in the labour market and industry dynamics following the COVID-19 pandemic.

However, this general trend of improvement is only uniform across some states, especially within the Northern Corridor Economic Region (NCER). In states such as Kedah, Perlis, and Penang, the inequality levels have increased, as opposed to Perak, where the trend aligns with the national improvement. This regional disparity suggests that the factors influencing income distribution are complex and vary significantly from one state to another.

The reasons behind these regional differences could include variations in industrial structure, the impact of COVID-19 on local economies, differing levels of government intervention and support, and the availability of employment opportunities. This underscores the importance of tailored economic and social policies that address each state's unique challenges and needs to effectively reduce income inequality.

Poverty Incidents

The analysis of poverty incidents in Malaysia, particularly when comparing pre-COVID (2019) and post-COVID (2022) periods, offers a detailed insight into the socio-economic landscape of the country, with specific attention to the Northern Corridor Economic Region (NCER).

Absolute Poverty: This is defined by a household income of RM2,589 in Malaysia. Absolute poverty represents the basic threshold of income necessary to meet essential needs for a decent standard of living, including food, clothing, shelter, and healthcare. The absolute poverty line is a fixed benchmark set by the government, reflecting the minimum income needed to cover these basic necessities and is adjusted periodically to reflect changes in living costs.

Hardcore Poverty: With a household income of RM1,198, hardcore poverty is a more severe form of deprivation, falling under the broader category of absolute poverty. It denotes extreme hardship and severe deprivation, often coupled with a lack of access to fundamental services like clean water, sanitation, education, and healthcare. Individuals or households in hardcore poverty in Malaysia face particularly acute economic and social challenges.

The comparison of poverty rates pre- and post-COVID reveals some critical trends:

Increase in Absolute Poverty: Nationally, the incidence of absolute poverty rose from 5.6% to 6.2%. This increase might reflect the economic disruptions caused by the COVID-19 pandemic, affecting incomes and employment across various sectors.

Decrease in Hardcore Poverty: Interestingly, hardcore poverty declined from 0.4% to 0.2%. This decrease suggests that despite the economic challenges posed by the pandemic, the most severe forms of poverty were alleviated, possibly due to targeted government interventions and support programs.

Regional Variations in NCER States: Within the NCER, states like Kedah, Penang, Perak, and Perlis experienced a slight increase in absolute poverty levels. However, in terms of hardcore poverty, there was either a decrease or stabilisation (as in the case of Penang). These regional differences highlight the varying impacts of economic and social policies and each state's differing economic structures and challenges.

These findings underscore the complexity of poverty dynamics in Malaysia, particularly during the COVID-19 pandemic. They also point to the need for nuanced, region-specific approaches to tackle absolute and hardcore poverty effectively.

Targets to Addressing Poverty

The Malaysian government's commitment to addressing poverty and reducing inequality by 2025 is evident in its ambitious targets. These goals include reducing various inequality indicators and aiming to completely eradicate hardcore poverty, bringing it down to 0%. Additionally, there is a significant focus on improving the income and overall quality of life for the B40 segment, which represents the bottom 40% of income earners in the country.

Eradication of Hardcore Poverty: The goal of reducing hardcore poverty to 0% by 2025 is particularly challenging, given the severe deprivation and difficulties faced by individuals and households in this category. Achieving this will require targeted and efficient social welfare programs, economic policies that foster inclusive growth, and sustainable job creation strategies.

Improving the B40 Segment's Welfare: Enhancing the income and living conditions of the B40 segment involves a multifaceted approach. This includes creating more job opportunities, ensuring access to quality education and healthcare, and implementing social safety nets. The government's focus on this group is crucial for achieving more equitable economic growth and social development.

Measuring Relative Poverty: Unlike absolute and hardcore poverty, measured using the Poverty Line Income (PLI), relative poverty in Malaysia is assessed based on living standards derived from household income levels. This is gauged using data from the Household Income and Basic Amenities Survey. This approach recognises that poverty is not merely about earning less than a certain amount but also about having a lower standard of living than the broader society.

This comprehensive strategy reflects the government's recognition of the multi-dimensional nature of poverty and inequality. Addressing these issues is about raising income levels and improving access to essential services and opportunities, thereby ensuring a more inclusive and equitable society. These efforts are crucial for Malaysia's socio-economic development, especially in the post-COVID era, where many communities are still recovering from the pandemic's impacts.

Sustainable Development Goals (SDG) & Income Disparity

Baselining the Sustainable Development Goals (SDGs) in the context of reducing income disparity indeed involves a complex and dynamic process, necessitating a deep understanding of the goals and the socio-economic factors contributing to income inequality.

Understanding the SDGs: The SDGs, set by the United Nations, comprise 17 interconnected goals designed as a global call to action. These goals aim to end poverty, protect the planet, and ensure peace and prosperity for all. Each SDG targets specific areas, but collectively, they address the broad spectrum of social, economic, and environmental challenges facing the world today.

The Role of SDGs in Reducing Income Disparity: Income disparity, as a critical issue, intersects with several SDGs, notably Goal 1 (No Poverty), Goal 8 (Decent Work and Economic Growth), and Goal 10 (Reduced Inequalities). Addressing income disparity requires a comprehensive approach that not only focuses on direct economic interventions but also considers aspects like education (Goal 4), gender equality (Goal 5), and sustainable cities and communities (Goal 11).

Multi-Stakeholder Involvement: Successfully reducing income disparity under the SDGs framework demands various stakeholders' active participation. This includes governments, who need to formulate and implement inclusive policies; private sector entities, which can foster economic growth and job creation; civil society organisations, which play a crucial role in advocacy and grassroots actions; and international organisations, which can provide the necessary support and guidance.

Adapting to Socioeconomic Contexts: Each region or country has unique socioeconomic challenges and strengths. Therefore, strategies to reduce income disparity must be tailored to these contexts. This involves understanding the local economic structures, cultural nuances, and existing social welfare systems to align efforts with the SDGs effectively.

In conclusion, linking the SDGs with efforts to reduce income disparity requires a multi-dimensional approach beyond economic measures. It calls for coordinated action across various sectors and levels, tailored to local contexts, to create sustainable and inclusive growth that benefits all sections of society.

The Sustainable Development Goals (SDGs) are indeed deeply connected to efforts to reduce income disparity globally, including in Malaysia and specifically in its Northern Corridor Economic Region. By addressing the underlying causes of poverty and inequality, the SDGs create pathways towards a more equitable society.

The Sustainable Development Goals (SDGs) are intricately linked to reducing income disparity globally, including in Malaysia and its Northern Corridor Economic Region, by addressing the root causes of poverty and inequality. Eradicating poverty (Goal 1) and hunger (Goal 2), ensuring health and well-being (Goal 3), providing quality education (Goal 4), and achieving gender equality (Goal 5) lay the foundation for a more equitable society. Access to clean water and sanitation (Goal 6), affordable clean energy (Goal 7), decent work (Goal 8), and robust infrastructure (Goal 9) drive economic growth that benefits all.

Directly focusing on reducing inequalities (Goal 10), building sustainable communities (Goal 11), promoting responsible consumption (Goal 12), taking climate action (Goal 13), and preserving terrestrial ecosystems (Goals 14 and 15) ensure sustainable development. Peace and strong institutions (Goal 16) and international partnerships (Goal 17) are essential for sustained efforts to close the income gap, fostering a stable and inclusive environment for economic advancement.

Here's how each relevant goal contributes to reducing income disparity:

1. No Poverty (Goal 1): Addressing poverty is a fundamental step in reducing income disparity. Initiatives focused on improving economic resources, access to vital services, and property ownership can empower the poor. This empowerment helps increase their income, narrowing the income gap.

2. Zero Hunger (Goal 2): Ensuring food security and nutrition directly impacts individual productivity and earning potential. We can close the income gap by elevating the poorest in society through improved nutrition.

3. Good Health and Well-Being (Goal 3): Access to health services is crucial for a healthy workforce, which is vital for economic stability and growth. Healthy individuals are more effective workers, leading to increased income and reduced disparities.

4. Quality Education (Goal 4): Education equips people with the skills and knowledge needed for better-paying jobs. Improving access to education can help bridge income disparities and foster economic mobility.

5. Gender Equality (Goal 5): Empowering women and ensuring gender equality can significantly boost economic growth. By expanding the labour market and introducing diverse skills and perspectives, gender equality helps reduce income disparity.

6. Clean Water and Sanitation (Goal 6): Access to these fundamental services is crucial for improving health and productivity. Enhanced health and productivity can lead to better economic outcomes and reduced income disparity.

7. Affordable and Clean Energy (Goal 7): Energy is vital for businesses and the economy. By fostering job creation and lowering energy costs, affordable and clean energy can reduce poverty and narrow income gaps.

8. Decent Work and Economic Growth (Goal 8): Promoting inclusive and sustainable economic growth and full and productive employment is crucial in reducing income disparities. This involves creating job opportunities that are accessible to all and ensuring fair compensation.

9. Industry, Innovation, and Infrastructure (Goal 9): Investment in these areas is crucial for economic growth. It creates jobs and promotes income equality by fostering a diversified and dynamic economic environment where innovation and infrastructure development play vital roles.

10. Reduced Inequalities (Goal 10): Directly targeting income disparities, this goal focuses on implementing policies that promote equality. It encompasses efforts to ensure equal opportunity and reduce inequalities of outcome, including eliminating discriminatory laws, policies, and practices.

11. Sustainable Cities and Communities (Goal 11): Developing inclusive cities and communities that offer equal opportunities for all is essential in reducing urban income disparities. This involves creating affordable housing, accessible transportation, and sustainable urban environments.

12. Responsible Consumption and Production (Goal 12): Sustainable practices in consumption and production can stimulate economic growth and job creation. This, in turn, helps to level income disparities by promoting efficient use of resources and sustainable business practices.

13. Climate Action (Goal 13): Building climate resilience is critical to protecting the livelihoods of vulnerable communities. By mitigating climate-related impacts, we can reduce income disparities often exacerbated by such events.

14 & 15. Life Below Water (Goal 14) and Life on Land (Goal 15): Preserving marine and terrestrial ecosystems ensures that communities dependent on natural resources can sustain their livelihoods. This contributes to economic stability and growth for these communities.

16. Peace, Justice, and Strong Institutions (Goal 16): Societies with strong and accountable institutions tend to have more stable economies and fairer income distribution. This goal emphasises the importance of building effective, accountable institutions at all levels.

17. Partnerships (Goal 17): Collaboration among countries is vital for global development. This includes facilitating trade, growth, and investment, contributing to a global reduction in income disparities. International partnerships can help mobilise and share knowledge, expertise, technology, and financial resources.

By addressing these diverse yet interconnected areas, the SDGs create a comprehensive framework for reducing income disparity in Malaysia and globally. This approach recognises that tackling such a complex issue requires multi-faceted solutions and the cooperation of all sectors of society. Countries like Malaysia can make significant strides in tackling income disparity by strategically aligning national and regional policies with these SDGs. This alignment requires a comprehensive approach that addresses the economic dimensions of inequality and focuses on social and environmental factors. The Sustainable Development Goals (SDGs) further address income disparity through various other objectives, each contributing uniquely to economic equality and sustainable development.

Managing Stakeholders

In addressing the issue of income disparity and hardcore poverty in Malaysia, particularly within the Northern Corridor Economic Region (NCER), it's vital to acknowledge the distinct roles that various stakeholders play. These stakeholders include government agencies, developmental agencies, academia, the private sector, NGOs and civil society, international partners, media, and individual citizens. Each has a unique contribution to make, and their collective efforts are crucial for making significant strides in reducing income disparity and eradicating hardcore poverty.

1. Government Agencies: These entities are responsible for policy development, creating social safety nets, investing in infrastructure, and enhancing access to education and skills training. Their role is pivotal in formulating and implementing inclusive policies that target poverty alleviation and reduce income inequality.

2. Developmental Agencies: They provide funding, resources, and community development projects and are involved in monitoring and evaluation. Their support is essential for the initiation and sustainability of poverty reduction programs.

3. Academia: Involved in research, policy recommendations, public awareness, and innovation, academia is critical in understanding income disparity and developing practical solutions.

4. Private Sector: Responsible for job creation, corporate social responsibility initiatives, and fair practices, the private sector's involvement is crucial in providing employment opportunities and investing in community development.

5. NGOs and Civil Society: Their grassroots mobilisation, advocacy, and direct assistance are vital in reaching the most vulnerable populations and bringing about change at the community level.

6. International Partners: They contribute through global knowledge sharing, financial assistance, and creating trade opportunities, offering a broader perspective and resources for poverty alleviation.

7. Media: By reporting on poverty issues, highlighting successful initiatives, and holding stakeholders accountable, the media plays a significant role in shaping public perception and policy.

8. Individual Citizens: Community involvement, responsible consumption, and advocacy at the individual level are crucial for creating a society that is collectively engaged in reducing poverty.

Our panel today, comprising representatives from government agencies, developmental agencies, and academia, will delve into these issues. They will explore practical strategies, challenges faced, and future directions. Through sharing their experiences, insights, and visions, the panel aims to chart a path forward where NCER grows and thrives in a way that benefits all members of society. This discussion is essential for understanding the multifaceted nature of income disparity and the collaborative effort required to address it.

Panellist

Professor Dr. Vikneswaran Nair, appointed President of DISTED College, Penang, in November 2021 and Professor of Sustainable Tourism at Wawasan Open University, is a distinguished academic in sustainable tourism. Before his current roles, he spent five years in The Bahamas as a Professor and Dean of Graduate Studies and Research at the University of The Bahamas and consulted for their Tourism Development Corporation. With a 19-year tenure at Taylor’s University, Malaysia, as Director of Research and Development and full professor, he has over 350 publications and numerous awards. His consultancy work spans national and international projects, including an RM9 million grant for a rural tourism barometer in Malaysia, rural tourism development in Southeast Asia and the Caribbean, and collaborating with UNDP on the SDG Country Report for The Bahamas. He is also involved in ecosystem management projects in hurricane-affected areas in The Bahamas, funded by the Global Environmental Funding (GEF). Dr. Nair is an active member of various professional bodies in sustainable and rural tourism.

Dato’ Sri Mustapa Mohamed began his illustrious career as a PTD Officer in the Economic Division of the Ministry of Finance, making a significant transition into politics in 1987. He retired from active politics in September 2023, having served in various high-profile roles, including as Minister of Entrepreneur Development, Second Finance Minister, Minister of Higher Education, Minister of Agriculture, and Minister of Trade and Industry. His extensive experience in governmental positions, especially as Minister in charge of the Economy, has been pivotal in shaping Malaysia's economic landscape. Currently, he contributes his expertise as a Distinguished Fellow at the UN Sustainable Development Solutions Network, Sunway University, and serves as an Adviser to the All Party Parliamentary Group, focusing on sustainable economic development.

Datin Shahdee Ahmad, with over 30 years of experience, is the Director of Human Capital and Secretariat at the Northern Corridor Implementation Authority (NCIA), joining in 2017. She leads Rakyat Centric Human Capital programmes, positively impacting over 100,000 individuals, including women, youth, and Orang Asli, and has supported nearly 23,000 micro-enterprises and SMEs in NCER. Her prior experience spans leadership roles in Operations Control, Procurement, and Performance Monitoring in a prominent engineering-based Infrastructure GLC. Shahdee holds an MSc in Business Leadership from the University of Northumbria, an MBA in Strategic Management from Universiti Teknologi Malaysia, and a BSc in Business Studies from City University, London. She attended the Harvard Business School Senior Management Development Programme and has been active in speaking engagements across Southeast Asia. A trained facilitator in Balanced Scorecard and Seven Habits of Highly Effective People, Shahdee co-authored “Mencari Cinta Sejati,” published in 2010.

Professor Dr. Russayani Ismail, with a 27-year tenure in higher education, is currently the Deputy Vice-Chancellor (Research and Innovation) at Universiti Utara Malaysia. Beginning as a tutor in 1995, she specializes in economics of education, poverty and income distribution, and social capital. Dr. Russayani holds degrees from the International Islamic University Malaysia and the University of Exeter, including a PhD in Economics. Her management roles at Universiti Utara Malaysia, coupled with her positions as an Associate Research Fellow and Think Tank member at various institutes, highlight her extensive academic and research expertise. Her work includes significant research contributions on national and international levels in education and economics.

Conclusion

In conclusion, I extend my deepest gratitude to our three esteemed panelists for their insightful contributions to our discussion on reducing income disparity and eliminating hardcore poverty, a topic of paramount importance not only for the Northern Region but for Malaysia as a whole.

Government Initiatives: As highlighted by Dato Sri Mustapha, the government's role is pivotal. They have taken the lead in formulating policies that promote equitable growth. Their focus on providing social safety nets for the vulnerable, coupled with significant investments in infrastructure and education, lays a strong foundation for sustainable development and long-term economic stability.

Role of Development Agencies: Datin Shahdee, representing the Human Capital in NCIA, provided valuable insights into the various programs that offer financial and technical support. These programs ensure that initiatives are not only well-funded but also grounded in practical expertise. The involvement in community development projects and the crucial task of monitoring and evaluating poverty reduction efforts underscore the importance of their role.

Academic Contributions: Prof. Yani illustrated the vital role of academia in understanding poverty. Through rigorous research, academia offers evidence-based recommendations for policy and practice. They also play a crucial role in raising public awareness and fostering innovation, developing new solutions and methodologies to tackle economic disparities.

The collaboration between these entities and other stakeholders ensures that policies are not just well-informed and resource-backed but also effectively implemented and adjusted. This is based on rigorous evaluation, research, and a deep understanding of the local context.

In conclusion, the SDGs provide a comprehensive framework for tackling income disparity through a multi-pronged approach that includes poverty reduction, enhanced health and education, gender equality, and sustainable economic growth. Implementing these goals in Malaysia and specifically within its Northern Corridor Economic Region addresses local and global inequalities, paving the way for a more equitable distribution of income and resources.

With this, I would like to express my profound appreciation to our panellists for their valuable contributions today. Thank you and "terima kasih."