NEM: Will the poor remain in sight?

The New Economic Model (NEM) announced on 30 March 2010 has been lauded by Malaysia's mainstream press for its goal to move Malaysia from a middle income trap to a high income country within a decade.

The NEM has been hailed as a plan for "massive transformation of Malaysia both economically and politically, market friendly, transparent, merit based, and needs based."

The language seems right. It is needs based, not race based. It is transparent and market friendly.

But these elements are not enough to move the country from a middle income economy to a high income economy.

Some analysts have pointed out that our growth is "more perspiration than inspiration."We have not moved up the value chain.

I asked several ordinary Malaysians on Prime Minister Najib Abdul Razak's (right) vision for a just Malaysia through the NEM.

It did not touch them. Another government announcement, they concurred. Life goes on. "We have to work", and shrugged their shoulders when I probed for their views on the NEM.

A background of these ordinary Malaysians:

‘Kamala, in her fifties continues to clean homes as she has done since she was fifteen. She lives in a long house built for plantation workers who were displaced after the plantations were sold to developers. Her husband, a retired city council worker, now drives a taxi to support their children, who have yet to enter the labour market.

'Two have taken study loans to pursue courses in private colleges. Mok , a father of three, is in his forties. A taxi driver, he supports a wife and three daughters, two in school and one in a private college on a study loan. Noordin, in his fifties is a contract worker and has three children whom are still in school. A former meter reader, he says privatisation of water benefitted his bosses, not ordinary workers like him.'

Kamala, Mok and Noordin represent the 40% of households whose incomes the NEM plans to raise. How will this be done? What are the intervention strategies to build the capacities and skills of the 40%?

Where are the mechanisms to prevent people from falling into poverty traps ?

Wait for part two of the NEM in June. Will the poor be in sight in the NEM, part 2?

Safety nets

But there are measures that a just and caring government could have introduced without the NEM. The labouring community needs social safety nets to meet economic and social challenges.

We do not seem to have learned from the lessons of the 1997 Asian Financial Crisis. The crisis showed us the deficiencies of the social safety net system in Malaysia. The country was not prepared to deal with the serious economic consequences of the crisis on workers and the poor.

In responding to the Crisis, Asean countries at their sixth summit in Hanoi in 1998 declared that issues of unequal economic development ,poverty and socio-economic disparities must be addressed.

Social safety nets should therefore become a necessary agenda of a nation's development strategy whether it is ‘Vision 2020', ‘Caring Society', and now ‘NEM'.

Malaysia does not have an institutionalised social safety net programme to address the problems faced by the poor and disadvantaged during a crisis. Programmes targeted for the poor are often ‘ad-hoc' activities and politically motivated.

There are of course some institutionalised social safety net programmes like the EPF, Sosco and pensions (only for government employees).

If the NEM is based on needs, a key and initial area to be addressed would be social safety nets which will reduce poverty and inequality, reduce the uncertainty in standards of living, provide incentives to undertake "more risky and more profitable individual investment projects".

Safety nets will stimulate the growth of SMEs and individual entrepreneurial activities for farmers, hawkers, and petty traders.

Urban poverty

The informal sector which represents about 40 to 50% of the urban workforce would benefit from social safety nets. Urban poverty is a serious situation that has received scant attention in Malaysia's social development policies.

Many progressive countries in the developed and developing world have implemented various forms of social safety nets such as a minimum wage, unemployment benenfits, universal health care, free education, fee waivers, food security programmes, housing benefits etc.

The MTUC had submitted a memorandum on a minimum wage to the Government in May , 1998. A needs based NEM must include a minimum wage or Universal Basic Income, a concept adopted by countries like New Zealand which defines it as " a basic income that would ensure an income that would provide housing, healthcare, nutrition ,etc".

There are many social safety net instruments to choose from to alleviate poverty and inequality. Safety nets should be sustainable and support self -sufficiency among recipients.

Cash transfers are another form of social intervention. Such transfers help to increase real incomes of the poor and give greater freedom to recipients to make their choices on how best to improve their situations. There are risks in cash transfers as it may fall into the hands of wrong beneficiaries. Mechanisms for transparency, accountability and to prevent leakages need to be in place.

With Malaysians living longer and mandatory retirement at 55, post -retirement poverty is a developing phenomena in our midst. The first generation of industrial workers who transformed Malaysia from an agricultural economy to an industrial one retire on very low EPF savings, RM 70,000 according to MTUC. By their sixties, they live in post-retirement poverty.

Singapore , a developed wealthy nation is seeing a rise in post retirement poverty. Two weeks ago, a young Singaporean speaker at a conference in KL, showed some graphic pictures of elderly homeless Singaporeans working in poor conditions. She quoted her Iraqi friend on a visit to Singapore who asked, " How can you kiss your dogs and walk over your elderly and homeless?"

The NEM must not forget the generations who built this nation as it strives to move up the value chain.

JOSIE M FERNANDEZ is currently an Asian Public Intellectual Fellow, director of Philanthropy Asia, researcher and engages with Transparency International Malaysia in anti-corruption measures. An educationist, Josie moved on to citizen's advocacy working with national/international NGOs. She holds a masters degree in development management from the Asian Institute of Management, Philippines. Working on sustainability, philanthropy and anti-corruption actions are some of her current passions besides writing.