Media Statement: The Embassy of the Kingdom of Belgium in Malaysia, Bait Al Amanah and the Center for Market Education launched the book “Assessing and Addressing Urban Poverty in Malaysia – Social Mobility Through Entrepreneurship”
Thursday – 6 October 2022: This morning, during a ceremony officiated at the Belgium’s House in Kuala Lumpur, the Embassy of the Kingdom of Belgium in Malaysia, the Center for Market Education (CME) and Bait Al-Amanah launched the book Assessing and Addressing Urban Poverty in Malaysia – Social Mobility Through Entrepreneurship (Monolateral, 2022), authored by Benedict Weerasena (Research Director at Bait Al Amanah) and Dr Carmelo Ferlito (CEO of the Center for Market Education).
In his introduction, H.E. Peter Van Acker, Ambassador-Designate of the Kingdom of Belgium to Malaysia, who recently took over from H.E. Pascal Gregoire, initiator and promotor of the study, welcomed the publication. “It makes us reflect on the role of the private sector, especially entrepreneurs, in bringing about upward social mobility in an urban context”, he said. “This study is holistic in its approach – he added. In order to facilitate entrepreneurship and to uplift the poor it reflects on classical economic concepts such as the role of property rights, free enterprise, savings versus consumption and direct versus indirect taxation. But it also considers, among other things, reforms in the education sector and in the housing market as a means toward empowering the urban poor to escape their penury. The study is rich in recommendations which have the potential to stir a good debate among policy makers before any such recommendation is translated in actual policy”.
The first co-author, Benedict Weerasena, focused on assessing the status of urban poverty in Malaysia, explaining how the experience of the COVID-19 pandemic – with its related movement restrictions – reversed decades of progress in successful poverty reduction, especially in urban areas nationwide. In fact, in comparison with the rural poor, the urban poor bore the brunt of the pandemic due to widespread commerce closures that impacted informal business activity in cities, the inability to transition to remote working arrangements, a substantial reduction of salaries and wages, elevated urban food insecurity, and cramped quarters in low-cost housing projects. “For instance, the number of hardcore poor households in Kuala Lumpur rose exponentially by 269 per cent from 1,048 in 2019 to 3,865 in 2021”, he explained.
Benedict also stressed the need to update and improve the current poverty measurement, in order to address several statistical issues, including undercounting, exclusion of pockets of poverty, and practical issues such as Inclusion and exclusion error.
Finally, he underlined the inadequacy of social protection schemes – especially social insurance mechanisms and active labour market policies; such a gap threatens to trap many more households in poverty in the event of an economic shock.
Dr Carmelo Ferlito, instead, explained that, in the analysis of how to address urban poverty, the approach embraced in the book is to move away from the idea of providing the urban poor with the resources they do not have, but to promote reforms that can place them in the conditions to earn the resources they believe they need. As the book subtitle suggests, the emphasis of the study is on how to promote social mobility through entrepreneurship.
While entrepreneurship is recognized as an important driver for social mobility, it does not fall off a tree. Dr Ferlito explained: “We believe that the more general reforms that are necessary to spur entrepreneurship among the urban poor are at the educational and institutional levels. In particular, the pillars we see as fundamental for a historical change are:
- Enhancing the protection of property rights and respect of the rule of law by:
- Fighting corruption;
- Improving political stability;
- Designing a bigger role for humanist disciplines within the pre-university education path”.
By spurring entrepreneurship, the authors believe these measures will help the system move toward a different growth model centred on savings and investments, rather than on consumption and government spending.
There are other measures that the book considers as playing a role in this paradigm shift, and they touch many aspects of the economy. They are:
- Housing policy reform: rather than providing homes to the poor, the government should focus on rent support schemes for moving the poor away from “ghettos” to areas where better job opportunities are available.
- Tax reform: a modified GST should be reinstated, paired with an income tax reduction; a capital gains tax should be introduced; percentage tax designation institutions should be designed to support bottom-up welfare initiatives.
- Liberalization of the labour market: a wider ASEAN job market would support Malaysian talents, offering better opportunities internationally and stimulating competition domestically.
- Improved access to credit: microbusinesses should be supported to emerge from the shadow economy; furthermore, higher competition should enter the credit market, together with government guarantee schemes that are supported by fees.
**The Center for Market Education (CME) is a boutique think-tank based in Kuala Lumpur, Malaysia. As an academic and educational institution, CME aims to promote a more pluralistic and multidisciplinary approach to economics and to spread the knowledge of a sounder economics, grounded in the understanding of market forces.
** Bait Al Amanah (House of Trust), is an independent research institute that seeks to improve policy-making through sound, independent, and multidisciplinary analysis, with our three research divisions: Development Economics, Politics & Advocacy, and Foreign Affairs. Bait Al Amanah also provides consulting services in Political & Economic Risk, Leadership, Social Development & Sustainability and Media, Big Data, & Technology.
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