Urban & Regional Economics (RPK351)

Semester 1, Academic Session 2012/2013

TOPIC :
Urban Poverty & Initiatives of Local Economic Development
Dr.Norazmawati Md.Sani @ Abd.Rahim (Dr.Nora)
E08/102B
04-6533161
norazmawati@usm.my
http://drnorazmawati.blogspot.com
27 November 2012

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CONTENT

Poverty
Types of Poverty
Poverty in Malaysia
Poverty Dimension
Causes of Urban Poverty
Why Poverty Occurs?
Effects of Poverty
Strategies of Poverty Reduction
Development Project Approach.
Local Development.
Main Characteristics In Local Development.
Growth Process In Local Development.
Perspective Of Local Development In Rural Development Area.
Aspect In Rural Development Area.
Conclusions
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WHAT IS POVERTY???

POVERTY

is the shortage of common things, such as

food, clothing, shelter, & safe drinking
water; all of which determine the quality of life.

It may also include the lack of access to

opportunities, such as education &
employment, which aid the escape from
poverty & allow one to enjoy the respect of
fellow citizens.
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TYPES OF POVERTY

TYPES OF POVERTY

Working
Poor

Extreme
Poverty

Moderate
Poverty

when
someone
needs to live
on less than
US$1 a day.

when people
need to live
on less than 2
such dollars a
day.

World Bank
says.

In the developed world

this does not apply.
They have a job, but do
not earn enough
money. They need to
spend a lot of that
money for living
expenditures; so that at
the end of the day, little
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is left.

POVERTY IN MALAYSIA

Controversial economic issue.

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Government policies to address poverty,

such as NEP (1976 RMK-3) have been met
with political protest.

Rapid economic growth rates contributed

significantly to poverty reduction.

Overall incidence of poverty =

decreased 5.7% (2004) to 2.8% (2009)

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The impact is most critical on the urban

poor, the near poor, and migrant workers.

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12

Absolute Poverty

Def;
1. The absence of enough resources (such as
money) to secure basic life necessities.
2.

A condition characterized by severe deprivation of

basic human needs, including adequate food,
safe drinking water, sanitation facilities, health,
shelter, education, information, & access to
services.

3.

Synonym for extreme poverty.

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Absolute Povertycontinue

Measured; Poverty Line Income (PLI).

Households whose gross monthly incomes were
below half the PLI = Hardcore poor.
Quantifies the number of people below a PLI.
PLI is independent of time & place.
To be absolute, the line must be the same in
different countries, cultures, & technological levels.
Should look only at the individual's power to
consume & it should be independent of any
changes in income distribution.
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Poverty Line Income (PLI)

Useful as an
economic tool

Adjusted each year.

In developing countries, the
most expensive of these
resources is typically the rent
required to live in an
apartment.

Def; minimum level of income

deemed necessary to
achieve an adequate
standard of living
in a given country.

Determining;
finding the total cost of
all the essential resources that an
average human adult
consumes in one year.
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The definition of Poverty Line Income;

has been disputed.

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Table 1: Poverty Rate and No. of

Poor Household
Year

Total of
Household
(million)

No. of
Overall
Poor
Poverty Rate
Household
(%)

No. of
Hardcore
Household

Hardcore
Poverty
Rate
(%)

1999

4.8

409,300

8.5

91.700

1.9

2005

5.4

311,300

5.8

67,300

1.2

2007

5.8

208,800

3.6

40,600

0.7

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Table 2: Poverty Line Income at

Province
Province

Overall Poverty
(RM per month)

Hardcore Poverty
(RM per month)

Semenanjung

720

430

Sabah

960

540

Sarawak

830

520

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Table 3: Poor Household Rate With

Different PLI
PLI
(RM)

Daily Average
(RM)

No. of Poor
Household

Poverty Rate
(%)

1000

33

496,580

8.6

1500

50

1,218,000

21.0

2000

68

1,695,759

37.95

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It is clear that we need a realistic PLI based on our current

economy.
Example; If PLI RM1,000=8.6% categorized as poor,
which is different to the 3.6% decided by government.

Based on Household Expenditures Census (2004-2005),

Average urban household needs RM2,503 per month.
Average rural household needs RM1,209 per month.
Roughly, one household needs RM1,200-RM1,500 per
month.

So, the PLI decided by the government is not realistic.

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Relative Poverty

Def;

Inequality between groups.

Proportion of household earning in incomes < 1/2 the mean/median
income.

Measured; income disparity ratio of income groups ethnic urban &

rural.

In this system, if everyone's real income in an economy increases,

but the income distribution stays the same, then the rate of relative
poverty will also stay the same.

Example; households with an accumulated income < 50% of the median

income are living in poverty.
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Inefficiencies in
management due to
shortages in technical &
managerial skills.

Limited access to employment

opportunities.

Causes of
Urban Poverty

Multi-dimensional ; structural,
institutional & cultural
factors.

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VIDEO 2

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Why Poverty Occurs?

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Recession.

Economic
inequality.

Shocks of food
price (poor people
spend a greater
portion of their
budgets on food
than rich people).

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GOVERNANCE
Weak rule of law can discourage investment & thus perpetuate property.
Poor management of resource revenues can mean that rather than lifting
countries out of poverty, revenues from activities such as oil production/gold
mining, actually leads to a resource curse.
Failure by government to provide essential infrastructure worsens poverty.
Poor access to affordable education traps individuals & countries in cycles
of poverty.
High levels of corruption undermine efforts to make a sustainable impact
on poverty.

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HEALTH CARE
Poor access to affordable health
care.
Inadequate nutrition in childhood.
Disease; AIDS, malaria, etc

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ENVIRONMENTAL FACTORS
Erosion.
Climate change.

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DEMOGRAPHICS & SOCIAL FACTORS

Demography factors,
such as fresh water,
minerals, energy, etc.
Overpopulation ;Lack of
access to birth control
methods.
Crime in white-collar &
blue-collar areas.
Cultural causes;e.g.,war.
Discrimination on gender,
age, race, etc.
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Effects of Poverty

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Strategic Action Plan

For Urban Poverty

Perintis
Project

Good governance

Strategies of
Poverty
Reduction
Sejahtera
Programme

Debt Relief

Direct Relief

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Def; efficient & fair government, less corrupt, &

working for the long-term,interests of the nation
as a whole.

Decide the target to be achieved by all

executants agencies.

These strategies have to be gender sensitive,

pro-poor, participatory, & specific.

To meet the heterogeneous nature of poverty

groups.

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Debt Relief
Give innovative loan
to a person.

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Direct Relief
For veterans,
widows & disable
people, that cannot
perform any
economy activities
to provide income.

Sources are from

zakat, wakaf &
baitulmal.

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Sejahtera Programme
1,000 families were involved.
Allocation of RM40milion.
Eradicating hardcore poverty.
As part of government efforts to achieved
zero poverty by 2010.
For poor people, widows & veterans.
Provide income sources, increase
lifecycles, give employment & education,
attend courses, plant crops.
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Perintis Project
Give 20 houses with 3
bedroom to 20
families of hardcore
people & widow.

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Strategic Action Plan For Urban Poverty

Provide a house under the Low-Cost Housing Scheme;

My 1st Home Scheme (SRP),

Perumahan Rakyat 1 Malaysia (PR1MA),
1 Malaysia People-Friendly Home (RMR1M).

Generate income.
Give education & courses.
Sejahtera Centre- Give information & resources to poor people.

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VIDEO 3

My 1st Home Scheme

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Top to down

Development Project Approach

Bottom to up
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Top to down

Idea ; develop project

Expert.
Issues & development problem.
Development project ; capital intensive
pattern.

Impact ; project surrounding

Benefit spread effects.
Means,
Area ; no need to invest.
Passive waiting.
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TERMINAL
BUS

DESA

SG.NIBUNG

TEKUN

TESCO

SHOP
LOTS

EXTRA

APARTMENT

VISTANA
HOTEL

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Top to down continue

This approaches
Attract ; > economics.
Develop rural area.

From growth pole theory

Idea, French scholar. (Francois Perroux)
Promote by other regional sciences.
Year 1950 & 1960.

Approach effectiveness
Develop area/regional.
Critics on 1970.
Research ; spread effects the benefit development area
is not as good as expected.
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Top to down continue

Means,
Decline area + decline
& developed area + developed.

From critics,
Regional sciences & planning
Start focus the development ; decline area
Urban @ rural area.

So, they introduce more new development concepts &

strategies.

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Bottom to up

Planning should focus

Problem on bottom stage.
& opinion local people ; > important.
Know > the problem.
(Friedmann & Weaver, 1979; Stohr & Taylor, 1981)

Research shows,
> focus supply factor then demand factor.
Reasons ; attract industry & develop certain area.

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Bottom to up continue
Demand Factor

Supply Factor

Human &
original sources

Play important role

Infrastructure

Used growth
regional analysis

Environment
Refer;
export/outside demand

Supply could not meet

demand & we must upgrade
the traditional economics
pattern in a current
necessities.

Perception & + value

of local people 45
(Glasson, 1992)

LOCAL DEVELOPMENT

Coffey & Polese (1984) ; 2 aspect

1. Area/ locality & regional.
2. Development process ; internal sources & not
external sources.
A particular form of regional development in which
local factors i.e., the local spirit of entrepreneurship,
local firms, or local financial institutions, constitute the
principal bases for regional economic growth, within a
mixed market context.

(Coffey and Polese,1984)

* Local factor; Not physical/geography characteristics,

but culture-socio & people habit = Main factor determine
regional growth.
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Active Involvement
of People
& Local Institution

Local Identity
Appearance

Main
Characteristics
In Local Development
Local Culture
Entrepreneurial

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State people in 1 area

Increase skill
& knowledge

Encourage
entrepreneurial
development

LOCAL
DEVELOPMENT

Support small
centre growth

Tools to balance
development
*Development area ; need,
Effort.
Monitor local economics.

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GROWTH
PROCESS
IN LOCAL
DEVELOPMENT

Entrepreneurial
Appearance
& Local Firm

Local Firm
Expansion
To
Outside
Market

Sources : Coffey and Polese (1984)

Monitor
Appearance
Regional
Economics
By
Local People

Strength
Economics
Sector
Appearance
&
Controlled
By
Local People
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Entrepreneurial Appearance & Local Firm

Determine; Entrepreneurial & their talent.

Analyze ;
Potential
& circumstances factors
Effect entrepreneurial appearance ;important
on this stage.

If fail ; planner action only looked into project top to

down.
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Local Firm Expansion To Outside Market

Encourage factors.

Positive element ; area

Information expanded,
Knowledge,
Skill,
Talent.

Increased highest entrepreneurial.

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Monitor Appearance Regional Economics

By Local People

To make sure ; local firm, growth &

development effect, benefited to local area.

A part of regional economics are monitor by

local people.

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Strength Economics Sector Appearance

& Controlled By Local People

From outcome of development process & regional

economics structure;

local firm can match & change regional economics

outcome.

Local development ; complement for regional

approach & theory. Example;
Capital & infrastructure role.
Migration mechanism for economics correction.
Development centre approaches.
(Coffey & Polese,1985)
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Strength Economics Sector Appearance

& Controlled By Local People.continue
Mankind development;
Important aspect,
Complement ; capital fiscal investment,
Basic ; local development.
Research shows; productivity power - regional,
Effected by quality of people,
& Migration causes - inequality of regional
growth.
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Perspective of Local Development

In Rural Development Area

Infrastructure investment & capital subsidy

- not enough ; Rural Development Area.

Should ;
- Consider local development aspect (Identity,
Business & People).

Development ; small industry @ rural industry

- monitor by local people.
- must focus > ; not encourage investment from
outside industrial.
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Aspect In Rural Development Area

Effort ; increased management & productivity power.

Needs resident commitment & good leadership.

Commitment;

government-resident. (give basic necessities,

infrastructure, courses & allocation of enough money).
private-government.
This approach ; ideas from below, money from above.

(Hautamaki,1993).

Many example ;

Resident involvement ; planning & application.

Development project ; based on potencies.
Give a better outcome ; compare others project with local area.
(Ferguson,1992)

Decline area can develop;

By this approach commitment spirit & entrepreneurial.

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Conclusions

Co-operation from parties; Government, private & Non-government organizations.

Decreased nation poverty = 5.7% to 2.8%, by 2010.

Abolish Hardcore Poverty= by 2010.

4 factors = before set up policy & program.

(Demography, life cost, PLI & allocation sources)

Development project planning;

-Not only plan & provide physical facility,
-But ; consider mankind development.

Planner & executants ; understand development concept & process.

Local development concept ; (Identity, Business & People)

-suitable to strength the concept of Rural Development Area.
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2.
3.
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Coffey, W.J. dan Polese, M. (1985). Local development : conceptual bases and policy
implications. Regional Studies. 19(2): 85-93.
Ferguson, B.W. (1992). Inducing local growth : Two intermediate-sized cities in the
state of Parana Brazil, Third World Planning Review, 14 (3):245-265.
Friedmann, J. dan Weaver, C. (1979). Territory and Function : The Evolution of
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Glasson, J. (1992). The fall and rise of regional planning in economically advanced
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Hautamaki, L. (1993). Rural communities : Finnish find renewal in village action, Town
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