SOAS Research Online

Abstract

The debate surrounding the relationship between economic growth and income distribution continues to attract important discussion in the development literature. While the literature suggests that rapid growth causes income to be more unequally distributed, empirical evidence is mixed. It seems that the relationship between growth and inequality varies considerably depending on individual country characteristics and the determinants of growth. Malaysia is a pronounced pluralistic society and is often considered to have a dualistic economic structure. Ethnicity and regional imbalances play important roles in determining the pattern of poverty and inequality. Areas of greater than average dependence on agriculture appear to have lower income levels, and tend to be populated by Malaysia's indigenous races. Since the riots of May 1969, which were assumed to have some connection with economic development and economic imbalances, Malaysia has been pursuing redistribution through growth with the implementation of the New Economic Policy (NEP). Thus the purpose of this thesis is to examine the nature and extent of poverty and income inequality in Malaysia, with particular emphasis on the 1980s. This study first seeks to verify the presence of any systematic relationship between inequality and economic development. The trends in income distribution will then be examined by looking at overall, urban-rural and ethnic inequality for Peninsular Malaysia, Sabah and Sarawak. Given the fact that certain areas are predominantly inhabited by certain ethnic groups, which form "pockets of poverty", the regional aspect of inequality will also be addressed. The discussion on poverty begins with an explanation of the calculation of the official Malaysian poverty line, followed by a demonstration of how it has been updated over the years and ends by sketching a profile of the poor. As the NEP was launched to re-unite and rebuild the country after the traumatic 1969 experience, this thesis concludes with an assessment of the impact of its policy prescriptions on poverty and income inequality.