KUALA LUMPUR: Whether poverty has declined in Malaysia depends on how it is measured. An example is Putrajaya’s reliance on absolute poverty figures, which according to a United Nations report, produces data that does not reflect reality.

The Malaysia Human Development Report 2013 commissioned by the United Nations Development Programme (UNDP) instead says poverty is better measured against what households earn in general, rather than by a fixed minimum level.

The report measures relative poverty, which sets the threshold at half the national median income, and finds the number of Malaysians in this category has been rising since 2007, with one in five households considered relatively poor.

Absolute poverty, on the other hand, is a measurement based on the declared poverty line. In Peninsular Malaysia, this is fixed at RM763, and RM912 in Sarawak and RM1,048 in Sabah. But the relative poverty line in 2012 was RM1,813, or half of the household median income of RM3,626.

The report, released last week and prepared by Malaysian researchers, notes that in 2007, 17.4% of Malaysians were in relative poverty and this increased to 19.3% in 2009 and 20% in 2012. The figures fly in the face of Putrajaya’s claim to have successfully reduced absolute poverty to 1.7% in 2012, from 49.3% in 1970.

While Putrajaya relied on the declining absolute poverty rates, the UNDP report argues that relative poverty is “a better approach to assess inclusiveness”.  “Absolute poverty has decreased but relative poverty has emerged as a growing concern in recent years,” said the UNDP when releasing the report last Tuesday.

“Relative poverty, which measures the number of households living with less than half of the median income, is a better approach to assess inclusiveness compared with absolute poverty, which measures the number of households living below the poverty line.”

“If poverty is measured using the relative poverty rate [defined as less than half of the median income] as suggested in the New Economic Model, about 20% of Malaysian households are considered poor,” read the report.

This is not the first time a higher poverty line has been suggested by Malaysian researchers. In 2010, Jayanath Appadurai, who has worked for the Centre for Policy Initiatives, told The Malaysian Insider that a poverty line of RM1,886 was more accurate.

The Pakatan Rakyat-led Selangor government, meanwhile, recently raised the state’s poverty income threshold to RM1,500 to reflect the higher cost of living in the state.This was made in the state’s budget for 2015, which sees about 30% of Selangor’s five million residents classified as poor.

The Malaysia Human Development Report 2013 analyses the country’s current situation to spur policy reforms to ensure inclusive and equitable growth. Among ethnic groups, the report shows a higher relative poverty rate since 1989, the highest among the Malays at 19.1%, followed by the Chinese at 17.9%.

Meanwhile, the relative poverty rate in urban and rural households has remained stagnant since 1989. “This is in contrast to the normal convention of measuring poverty using the poverty line income, where the official data show the poverty rate decreasing for all ethnic groups, as well as among the urban/rural areas,” the report says.

It argues that broadening the concept of poverty, with more emphasis on relative poverty, is “more fruitful”.

It notes that Malaysia’s lower absolute poverty rate compared to many countries with higher income and lower inequality raised questions on the suitability and plausibility of Malaysia’s poverty line. “Aligning [poverty] measurement to international norms will certainly raise — possibly steeply — the poverty line and subsequently the poverty rate.”

The report further points out another shortcoming in the government’s method of measuring poverty: it does not indicate the different poverty rates within an ethnic group.

The UNDP report was written by Tan Sri Dr Kamal Salih, an adjunct Professor of Economics and Development Studies at Universiti Malaya, Dr Lee Hwok Aun, from the UM Department of Development Studies, and Dr Muhammad Khalid of Khazanah Research Institute. — The Malaysian Insider

This article first appeared in The Edge Financial Daily, on December 2, 2014.