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Malaysia has been hit hard by the global financial crisis through the decline in global demand for its exports, but it has succeeded in containing the negative impact on its overall economy and on the labor market. The greatest impact on Malaysia’s economy came through the decline in global demand for Malaysia’s exported manufactures. Malaysian exports fell by 33.9 percent year-on-year in January and by 35.9 percent in April 2009 (Figure 1). Real GDP dropped by 6.2 percent in the first quarter of 2009, but real activity appeared to stabilize in the second quarter of 2009 (World Bank, 2009). The annual contraction in real GDP moderated to 3.9 percent in the second quarter (Figure 2). The high import content of Malaysia’s exports provided a buffer and private consumption and fixed investment were both up by around 3.5 percent quarter-on-quarter, with private consumption making a positive contribution to annual growth.
Оригинальное название
COUNTRY REPORT OF THE ASEAN ASSESSMENT ON THE SOCIAL IMPACT OF THE GLOBAL FINANCIAL CRISIS: MALAYSIA
Malaysia has been hit hard by the global financial crisis through the decline in global demand for its exports, but it has succeeded in containing the negative impact on its overall economy and on the labor market. The greatest impact on Malaysia’s economy came through the decline in global demand for Malaysia’s exported manufactures. Malaysian exports fell by 33.9 percent year-on-year in January and by 35.9 percent in April 2009 (Figure 1). Real GDP dropped by 6.2 percent in the first quarter of 2009, but real activity appeared to stabilize in the second quarter of 2009 (World Bank, 2009). The annual contraction in real GDP moderated to 3.9 percent in the second quarter (Figure 2). The high import content of Malaysia’s exports provided a buffer and private consumption and fixed investment were both up by around 3.5 percent quarter-on-quarter, with private consumption making a positive contribution to annual growth.
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Malaysia has been hit hard by the global financial crisis through the decline in global demand for its exports, but it has succeeded in containing the negative impact on its overall economy and on the labor market. The greatest impact on Malaysia’s economy came through the decline in global demand for Malaysia’s exported manufactures. Malaysian exports fell by 33.9 percent year-on-year in January and by 35.9 percent in April 2009 (Figure 1). Real GDP dropped by 6.2 percent in the first quarter of 2009, but real activity appeared to stabilize in the second quarter of 2009 (World Bank, 2009). The annual contraction in real GDP moderated to 3.9 percent in the second quarter (Figure 2). The high import content of Malaysia’s exports provided a buffer and private consumption and fixed investment were both up by around 3.5 percent quarter-on-quarter, with private consumption making a positive contribution to annual growth.
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THE SOCIAL IMPACT OF THE GLOBAL FINANCIAL CRISIS: MALAYSIA with the support of: i This volume is a product resulting from a project jointly implemented by the staff of the International Bank for Reconstruction and Development/ the World Bank and the ASEAN Secretariat, with fnancial support of the Australian Government. The fndings, interpretations, and conclusions expressed in this paper do not necessarily refect the views of the Executive Directors of the World Bank, the governments they represent, the ASEAN Secretariat, the Australian Government and/or ASEAN Member States. The World Bank, the ASEAN Secretariat and the Australian Government do not guarantee the accuracy of the data included in this work. The boundaries, colors, denominations, and other information shown on any map in this work do not imply any judgment on the part of the World Bank concerning the legal status of any territory or the endorsement or acceptance of such boundaries. 1 I. The ImpacT of The crIsIs and The GovernmenTs response malaysia has been hit hard by the global fnancial crisis through the decline in global demand for its exports, but it has succeeded in containing the negative impact on its overall economy and on the labor market. The greatest impact on Malaysias economy came through the decline in global demand for Malaysias exported manufactures. Malaysian exports fell by 33.9 percent year-on-year in January and by 35.9 percent in April 2009 (Figure 1). Real GDP dropped by 6.2 percent in the frst quarter of 2009, but real activity appeared to stabilize in the second quarter of 2009 (World Bank, 2009). The annual contraction in real GDP moderated to 3.9 percent in the second quarter (Figure 2). The high import content of Malaysias exports provided a buffer and private consumption and fxed investment were both up by around 3.5 percent quarter-on-quarter, with private consumption making a positive contribution to annual growth. The contraction in manufacturing continued, albeit at a slower rate of -14.5% year-on-year compared with -17.9 percent in the frst quarter. The services sector, up by 1.6 percent year-on-year in the second quarter, played a major role in the stabilization of GDP. The rate of contraction in the mining and quarrying sector also declined, with agriculture returning to growth and construction continuing its expansion. Monthly industrial production data also show improved real outputs, with the rate of contraction improving to a rate of -8.4 percent year-on-year in July. 1
The Social Impact of the Financial Ciisis anu the Social Piotection Response: Nalaysia
1. The Impact of the Ciisis anu the uoveinment's Response!!
"#$#%&'#!(#&!)**+!(',!(#-.!)%!,(*!/$0)#$!1'+#+2'#$!2-'&'&!,(-03/(!,(*!.*2$'+*!'+!/$0)#$!.*4#+.! 10-!',&!*560-,&7!)3,!',!(#&!&322**.*.!'+!20+,#'+'+/!,(*!+*/#,'8*!'46#2,!0+!',&!08*-#$$!*20+04%! #+.!0+!,(*!$#)0-!4#-9*,. 1he greaLesL lmpacL on Malaysla's economy came Lhrough Lhe decllne ln global demand for Malaysla's exporLed manufacLures. Malayslan exporLs fell by 33.9 percenL year-on-year ln !anuary and by 33.9 percenL ln Aprll 2009 (llgure 1). 8eal Cu dropped by 6.2 percenL ln Lhe flrsL quarLer of 2009, buL real acLlvlLy appeared Lo sLablllze ln Lhe second quarLer of 2009 (World 8ank, 2009). 1he annual conLracLlon ln real Cu moderaLed Lo 3.9 percenL ln Lhe second quarLer (llgure 2). 1he hlgh lmporL conLenL of Malaysla's exporLs!provlded a buffer and prlvaLe consumpLlon and flxed lnvesLmenL were boLh up by around 3.3 percenL quarLer-on- quarLer, wlLh prlvaLe consumpLlon maklng a poslLlve conLrlbuLlon Lo annual growLh. 1he conLracLlon ln manufacLurlng conLlnued, albelL aL a slower raLe of -14.3 year-on-year compared wlLh -17.9 percenL ln Lhe flrsL quarLer. 1he servlces secLor, up by 1.6 percenL year-on- year ln Lhe second quarLer, played a ma[or role ln Lhe sLablllzaLlon of Cu. 1he raLe of conLracLlon ln Lhe mlnlng and quarrylng secLor also decllned, wlLh agrlculLure reLurnlng Lo growLh and consLrucLlon conLlnulng lLs expanslon. MonLhly lndusLrlal producLlon daLa also show lmproved real ouLpuLs,!wlLh Lhe raLe of conLracLlon lmprovlng Lo a raLe of -8.4 percenL year-on- year ln !uly.
:'/3-*!;<!=560-,!/-0>,(!6*-!"0+,(!?%*#-@0+@%*#-A!
!"#$%&: Malaysla ueparLmenL of SLaLlsLlcs
2 on aggregate, the malaysian labor market has held up remarkably well during the crisis. The overall unemployment rate has increased only slightly since the beginning of the crisis, and overall employment has continued to increase for all but foreign workers. The unemployment rate dropped to 3.6 percent in the second quarter of 2009 after reaching 4.0 percent in the frst quarter. This is still close to the 2008 rate of 3.7 percent. The total number of unemployed individuals increased by 13.2 percent (52,700) year-on-year in the frst quarter of 2009 after increasing by 5.3 percent (17,600) in the fourth quarter of 2008. Overall employment rose by 2.2 percent in the frst quarter of 2009, very much in line with the 2.6 increase in total labor force. however, there have been signifcant sectoral shifts within the labor market, with jobs moving away from export- oriented sectors and into the sectors that have benefted the most from the stimulus measures that the government has taken in response to the crisis. Data on retrenchments, temporary lay-offs, and salary cuts in large enterprises 1
points in the same direction (Figure 3). This decline in employment in manufacturing and agriculture, however, was offset by an increase in the number of employees in the retail and service sectors as well as in the public sector. In those sectors, employment has increased by 6.8 and 10 percent respectively in the frst half of 2009. Employment in the health and social sectors has increased particularly strongly, with an increase of almost 25 percent year-on- year. 1 Large enterprises are those with more than 10 employees. The data are administrative data collected by the Ministry of Human Resources, as described below in the Monitoring subsection. 3 There were also important differences in the effects of the crisis on employment across different segments of the manufacturing sector. While overall the manufacturing sector shed roughly 5.7 percent more of its employees in the frst quarter of 2009 and 8.5 percent more in the second quarter than in the equivalent periods in the previous year, export-oriented manufacturing industries such as the semi-conductor, veneer sheets and plywood, and electronic valve industries experienced the biggest decline in employment (Figure 6). A notable positive exception from the 3
I|gure 3: ear-on-year Changes |n Lmp|oyment by Sector (1 and 2 2009)
!"#$%&: Malaysla ueparLmenL of SLaLlsLlcs
I|gure 4: ketrenchment by Sector (Cct 1st 2008-Aug 1Sth 2009)
!"#$%&: ueparLmenL of Labor
1here were a|so |mportant d|fferences |n the effects of the cr|s|s on emp|oyment across d|fferent segments of the manufactur|ng sector. Whlle overall Lhe manufacLurlng secLor shed roughly 3.7 percenL more of lLs employees ln Lhe flrsL quarLer of 2009 and 8.3 percenL more ln Lhe second quarLer Lhan ln Lhe equlvalenL perlods ln Lhe prevlous year, exporL-orlenLed manufacLurlng lndusLrles such as Lhe seml-conducLor, veneer sheeLs and plywood, and elecLronlc valve lndusLrles experlenced Lhe blggesL decllne ln employmenL (llgure 6). A noLable poslLlve excepLlon from Lhe downward Lrend was Lhe compuLer and perlpherals lndusLry. 1hls 4 downward trend was the computer and peripherals industry. This was the only major export-oriented industry that experienced an increase in employment in the frst quarter of 2009 compared with the previous year, though nominal wages in the industry have declined steadily over the past 18 months. The labor market adjustment to the crisis also took place through prices, with declines in wages and working hours. For example, nominal wages in manufacturing industries dropped by 5 percent on average in January 2009 (Figure 6) but returned to pre-crisis levels within six months because of the rapid decline in employment. The governments stimulus policies (see below) and the tradition of labor dialogue in Malaysia both prompted employers to respond to the crisis by reducing wages rather than by laying off workers. 5 While the governments stimulus package has played an important role in the labor markets response, the role of the informal sector has also been important. Through its stimulus measures, the government has been successful in promoting employment in the public sector. Also, the informal sector has been growing, given that a large share of jobs in the retail and services sectors tend to be temporary and informal, with retail shops taking advantage of the increase in labor supply to hire cheap additional labor on an as-needed basis. This is borne out by the fact that the wage level for the retail sector has remained almost constant despite the increased labor supply. data from the ministry of human resources on retrenched workers also suggests that migrant workers and women have been hit disproportionately hard by the fnancial crisis. 2 Migrant workers represent a particularly vulnerable category during any economic crisis, and this holds true in Malaysia. Foreign workers make up about 10 percent of the total labor force, but they have suffered disproportionately from the impact that the crisis has had on the labor market. The number of foreign workers employed in Malaysia has decreased steadily starting in the 2 The Ministry of Human Resources collects data on retrenchments from frms with more than 10 employees. This provides only a partial picture because most frms have fewer than 10 employees and are, therefore, not captured in these data. 3
Wh||e the government's st|mu|us package has p|ayed an |mportant ro|e |n the |abor market's response, the ro|e of the |nforma| sector has a|so been |mportant. 1hrough lLs sLlmulus measures, Lhe governmenL has been successful ln promoLlng employmenL ln Lhe publlc secLor. Also, Lhe lnformal secLor has been growlng, glven LhaL a large share of [obs ln Lhe reLall and servlces secLors Lend Lo be Lemporary and lnformal, wlLh reLall shops Laklng advanLage of Lhe lncrease ln labor supply Lo hlre cheap addlLlonal labor on an as-needed basls. 1hls ls borne ouL by Lhe facL LhaL Lhe wage level for Lhe reLall secLor has remalned almosL consLanL desplLe Lhe lncreased labor supply.
I|gure 8: ketrenchment by Sector (Cct 1st 2008-Aug 1Sth 2009)
!"#$%&: Malaysla MlnlsLry of Puman 8esources
Data from the M|n|stry of numan kesources on retrenched workers a|so suggests that m|grant workers and women have been h|t d|sproport|onate|y hard by the f|nanc|a| cr|s|s. 2 MlgranL workers represenL a parLlcularly vulnerable caLegory durlng any economlc crlsls, and Lhls hold Lrue ln Malaysla. lorelgn workers make up abouL 10 percenL of Lhe LoLal labor force, buL Lhey have suffered dlsproporLlonaLely from Lhe lmpacL LhaL Lhe crlsls has had on Lhe labor markeL. 1he number of forelgn workers employed ln Malaysla has decreased sLeadlly sLarLlng ln Lhe Lhlrd quarLer 2008 on a year-on-year basls. 8eLween CcLober 1, 2008 and lebruary 18, 2009, 16,611 workers have been permanenLly reLrenched 3 by flrms wlLh more Lhan 10 employees, and 36 percenL of Lhese workers were forelgn workers (llgure 9). 1he same ls Lrue for wage reducLlons and, Lo a much lesser exLenL, for Lemporary lay-offs. ln Lerms of gender lmpacL, whlle a deeper analysls ls warranLed Lo capLure Lhe full effecL of Lhe crlsls aL Lhe household level, llgure 10 suggesLs LhaL women may have been more affecLed Lhan men. SlxLy percenL of Lemporary lay- offs and 37 percenL of all reporLed wage cuLs have been experlenced by women. Also noLable ls Lhe facL LhaL, ln Lhe case of boLh salary cuLs and lay-offs, Lhls gender dlscrlmlnaLlon ls hlgher among forelgn workers.
2 1he MlnlsLry of Puman 8esources collecLs daLa on reLrenchmenLs from flrms wlLh more Lhan 10 employees. 1hls provldes only a parLlal plcLure because mosL flrms have fewer Lhan 10 employees and are, Lherefore, noL capLured ln Lhese daLa. 3 1he ueparLmenL of Labor dlsLlngulshes beLween reLrenchmenLs and lay-offs. 1he former refers Lo permanenL lay-offs, whereas Lhe laLLer ls a Lemporary measure where workers wlll geL back Lo Lhelr [obs afLer a whlle. 6 third quarter 2008 on a year-on-year basis. Between October 1, 2008 and February 18, 2009, 16,611 workers have been permanently retrenched 3 by frms with more than 10 employees, and 36 percent of these workers were foreign workers (Figure 9). The same is true for wage reductions and, to a much lesser extent, for temporary lay-offs. In terms of gender impact, while a deeper analysis is warranted to capture the full effect of the crisis at the household level, Figure 10 suggests that women may have been more affected than men. Sixty percent of temporary lay-offs and 57 percent of all reported wage cuts have been experienced by women. Also notable is the fact that, in the case of both salary cuts and lay-offs, this gender discrimination is higher among foreign workers. data on numbers of registered job seekers, job placements and open vacancies indicate that the labor market situation will ease somewhat over the coming months. The latest available labor market data as of mid-2009 suggest that there is light at the end of the tunnel (Figures 8 and 9). Although still growing by at about 65 percent on a year-to-year basis, the growth in registered active job seekers declined considerably in June 2009. The same is true for the number of newly registered job seekers. After increasing by more than 100 percent on an annual basis in February and March 2009, this number increased by only 55 percent in June. However, the number of registered job seekers placed in jobs by JobMalaysia (an automated online job matching service provided by the Ministry of Human Resources) is still decreasing on an annual basis. The number of registered vacancies is another green shoot on the Malaysian labor market. Year-on-year, the number of vacancies increased by almost 40,000 positions, with manufacturing industries contributing almost 25,000 of these vacancies. 3 The Department of Labor distinguishes between retrenchments and lay-offs. The former refers to permanent lay-offs, whereas the latter is a temporary measure where workers will get back to their jobs after a while. 6
I|gures 9:D|str|but|on of ketrenchment by Cr|g|n I|gure 10: D|str|but|on of ketrenchment by Gender
!"#$%&: Malaysla MlnlsLry of Puman 8esources
Data on numbers of reg|stered [ob seekers, [ob p|acements and open vacanc|es |nd|cate that the |abor market s|tuat|on w||| ease somewhat over the com|ng months. 1he laLesL avallable labor markeL daLa as of mld-2009 suggesL LhaL Lhere ls llghL aL Lhe end of Lhe Lunnel (llgures 8 and 9). AlLhough sLlll growlng by aL abouL 63 percenL on a year-Lo-year basls, Lhe growLh ln reglsLered acLlve [ob seekers decllned conslderably ln !une 2009. 1he same ls Lrue for Lhe number of newly reglsLered [ob seekers. AfLer lncreaslng by more Lhan 100 percenL on an annual basls ln lebruary and March 2009, Lhls number lncreased by only" 33 percenL ln !une. Powever, Lhe number of reglsLered [ob seekers placed ln [obs by !obMalaysla (an auLomaLed onllne [ob maLchlng servlce provlded by Lhe MlnlsLry of Puman 8esources) ls sLlll decreaslng on an annual basls. 1he number of reglsLered vacancles ls anoLher green shooL" on Lhe Malayslan labor markeL. ?ear-on-year, Lhe number of vacancles lncreased by almosL 40,000 poslLlons, wlLh manufacLurlng lndusLrles conLrlbuLlng almosL 23,000 of Lhese vacancles.
I|gure 11: ear-on-year Change |n the Number of Act|ve and New|y keg|stered Iob Seekers and |acements 7 monitoring The malaysian government produces good quarterly labor statistics as part of its regular data system and has implemented additional measures to track the impact of the crisis on the labor market. The Labor Force Survey (LFS) is conducted quarterly and collects standard data on employment and wages. The survey makes it possible to monitor in depth important sectors such as manufacturing and retail and wholesale trade with a very fne degree of granulation. Ministry of Human Resources (MoHR) collects data on jobseekers, open vacancies, and job matching on a regular basis, and these fgures are made available with only a short time lag. At the onset of the fnancial crisis, the MoHR established an Operations Room in which to track retrenchments, temporary lay-offs, and wage cuts. When employers wish to retrench any of their workers, they have to fle a report with the MoHR explaining 6
I|gures 9:D|str|but|on of ketrenchment by Cr|g|n I|gure 10: D|str|but|on of ketrenchment by Gender
!"#$%&: Malaysla MlnlsLry of Puman 8esources
Data on numbers of reg|stered [ob seekers, [ob p|acements and open vacanc|es |nd|cate that the |abor market s|tuat|on w||| ease somewhat over the com|ng months. 1he laLesL avallable labor markeL daLa as of mld-2009 suggesL LhaL Lhere ls llghL aL Lhe end of Lhe Lunnel (llgures 8 and 9). AlLhough sLlll growlng by aL abouL 63 percenL on a year-Lo-year basls, Lhe growLh ln reglsLered acLlve [ob seekers decllned conslderably ln !une 2009. 1he same ls Lrue for Lhe number of newly reglsLered [ob seekers. AfLer lncreaslng by more Lhan 100 percenL on an annual basls ln lebruary and March 2009, Lhls number lncreased by only" 33 percenL ln !une. Powever, Lhe number of reglsLered [ob seekers placed ln [obs by !obMalaysla (an auLomaLed onllne [ob maLchlng servlce provlded by Lhe MlnlsLry of Puman 8esources) ls sLlll decreaslng on an annual basls. 1he number of reglsLered vacancles ls anoLher green shooL" on Lhe Malayslan labor markeL. ?ear-on-year, Lhe number of vacancles lncreased by almosL 40,000 poslLlons, wlLh manufacLurlng lndusLrles conLrlbuLlng almosL 23,000 of Lhese vacancles.
I|gure 11: ear-on-year Change |n the Number of Act|ve and New|y keg|stered Iob Seekers and |acements 8 why the worker needs to be retrenched, the type of work he or she did, the frms employment strategy, and the amount of unemployment compensation that the worker will receive. Following that, the MoHR will visit the place of employment & discuss with employer and workers on measures can be taken to avoid retrenchment. 4 These reports generate administrative information that can be tracked for the purposes of monitoring lay-offs in the economy as a whole. The Governments response The governments policy response to the economic crisis has been robust and has consisted of an expansionary fscal policy and an accommodating monetary policy. Two separate stimulus packages were announced in November 2008 and March 2009 consisting of 1 and 9 percent of GDP respectively over two years (the direct fscal injection is estimated to be about 3.5 percent of GDP over two years). The frst stimulus package (SP1) of RM 7 billion focused on infrastructure development and public investment. SP1 allocated resources mainly to building public infrastructure (police quarters, schools, roads, hospitals, public transport systems, abandoned housing projects, and micro-enterprises). Also included in the package were: (i) an extension of housing loans from 25 to 30 years and an increase in home loan amounts for civil servants; (ii) the opportunity for Employment Provident Fund members to reduce their contributions; and (iii) an allowance for foreigners (and companies) to buy commercial real estate without seeking the approval of the Foreign Investment Committee. 5 The second stimulus package (SP2) of RM 60 billion over two years was more comprehensive. SP2 aims to increase employment by providing training programmes and by supporting private sector investment and the development of small and medium-sized enterprises (SMEs) that will build Malaysias economic capacity for the future. It includes spending measures (RM 15 billion), guarantee funds (RM 25 billion), equity investments (RM 10 billion), private fnance and off-budget initiatives (RM 7 billion), and tax incentives (RM 3 billion). 4 Presentation of the MoHR: Management of Retrenchment of Workers, http://www.mohr.gov.my/pemberhentian/managing_retrenchment.pdf 5 ADBI Working paper 148, p14 9 9
J#)$*!;<!O,'43$3&!G#29#/*!;!#+.!O,'43$3&!G#29#/*!B!@!"#'+!"*#&3-*&! "*#&3-*&! U4,! \+8*&,4*+,!'+!63)$'2!'+1-#&,-32,3-*!#+.!,*2(+0$0/%! ubllc lnfrasLrucLure (schools, hosplLals, roads, publlc LransporLaLlon, eLc) - 8M 2 bllllon AcceleraLe lmplemenLaLlon of broadband lnLerneL - 8M 400 mllllon AddlLlonal low and medlum cosL houses and enhanced houslng schemes, 8M 1.4 bllllon Small malnLenance pro[ecLs, 600 mllllon 8M 4.4 bllllon (63) =.32#,'0+!#+.!,-#'+'+/! Lnhanced youLh programs and Lralnlng, preschool educaLlon, sklll Lralnlng funds. 8M 1 bllllon (14) S 1 8M 7 8llllon G-'8#,*!'+8*&,4*+,! lncrease prlvaLe lnvesLmenL and aLLracL buslness opporLunlLles for SMLs (8M 100 mllllon) 8M 1.6 bllllon (23) =46$0%4*+,!! '(#%)*+",-),(-.#/0+%-1&%*"$-&2.0"32&,*4-Skllls Lralnlng and [ob creaLlon (30,000 vacanL posLs and 13,000 conLracL posLs ln Lhe publlc secLor) 5&*$&,%6&(-7"$8&$1-),(-.$+9)*&-1&%*"$-+,%&,*+9&1: lncenLlves Lo employers Lo hlre reLrenched workers: employers who employ workers reLrenched from !uly 2008 are glven double Lax deducLlon on Lhe amounL of remuneraLlon pald. :#1+,&11-),(-&,*$&.$&,&#$-".."$*#,+*+&14-Lxpanslon of Lhe 8CSL8 CraduaLe rogram LhaL offers flnanclng Lo develop young enLrepreneurs ;$+"$+*3-<+9&,-*"-0"%)0-7"$8&$1- 8M 2 bllllon (3) O3660-,'+/!83$+*-#)$*!/-036&!! !#/1+(+&14- lood subsldles of 8M 674 mllllon, consLrucLlon of affordable houslng, lncenLlves Lo banks Lo allow borrowers Lo defer repaymenL of houslng loans. 5#$)0- =)$2&$1- ),(- &,*$&.$&,&#$14- *o lncrease households' dlsposable lncome, CovernmenL Savlngs bonds are avallable, plus mlcrocredlL programs for rural farmers and flsherman. 5&*$&,%6&(- 7"$8&$1: 1ax rellef on unemploymenL beneflLs for reLrenched workers (8M 60,000-8M 10,000 for each year of servlce) 8M 10 bllllon (17) U&&'&,'+/!,(*!6-'8#,*!&*2,0-!! >"$8+,<- ?).+*)0- @$),*- !%6&2&, Lo provlde SMLs wlLh guaranLeed worklng caplLal ln Lhe raLlo of 80:20 (CovernmenL: flnanclal lnsLlLuLlons). CLher measures and fundlng schemes have been lmplemenLed Lo lncrease flnanclal sLablllLy and lnvesLmenL ln Lhe fuLure, and reduce rellance on unskllled labour ln Lhe fuLure (8M 3 bllllon) SupporL Lo auLomoLlve and avlaLlon secLors, 30 percenL rebaLe on landlng charges for Lhe nexL Lwo years has been applled Lo alr carrlers Lo promoLe Lourlsm. 8M 29 bllllon (30) S 2 8M 60 8llllon c3'$.'+/!2#6#2',%!10-!,(*!13,3-*! 1elecommunlcaLlons (8M 2.4 bllllon), alrporL (8M 230 mllllon) and consLrucLlon of sky brldges and walkways beLween bulldlngs (8M 100). rlvaLe flnance lnlLlaLlve Lo lncrease publlc-prlvaLe parLnershlps ln sLraLeglc secLors such as educaLlon, healLh and Lourlsm (8M 2 bllllon). LlberallzaLlon of Lhe servlces secLor, wlLh Lhe ob[ecLlve of lncreaslng lLs conLrlbuLlon Lo Cu from 33 percenL Lo 70 percenL. 8M 19 bllllon (30) 10 II. socIal proTecTIon proGrammes aT The onseT of The crIsIs malaysia has a low poverty rate but grapples with the problems of relatively high inequality and pockets of poverty for which social assistance is an important tool. Its social services are generous, and it has numerous social assistance programmes. In 2009, the Malaysian Federal Governments budgeted current expenditure was at 21.3 percent of GDP, up from 20.4 percent in 2008. In 2009, budgeted development expenditure (economic services, social services, security, and general administration) accounted for 7.8 percent of GDP, a signifcant increase from the 5.7 percent in 2008. 6 Within social expenditure, spending on education and health constitutes over 60 percent of total spending. Welfare services received less than 1 percent of social expenditure between 2001 and 2010. 7
social protection programmes and policies in malaysia can be divided into three broad categories: (i) universal health and education services; (ii) welfare assistance schemes and social safety nets that are predicated on income levels and targeted toward specifc groups; and (iii) a mixed social security system for members of employment- based insurance and savings schemes. Universal health and education The government provides free access to primary and secondary education, as well as to primary health care. While these are not social protection programmes per se, they protect the human capital of the vulnerable population and, therefore, play an important role in the broader social protection system. Public expenditures on education, in particular, have been consistently high over the years in an effort to expand education, increase skills, and, ultimately, enhance productivity. While a number of small targeted programmes exist to support education and are described below, the largest support programmes in education are not specifcally targeted to the poor. 8 The government also heavily subsidizes access to tertiary education. Access to health care is provided on a universal basis fnanced from general government revenues. Yet, despite the availability of free or near-free services in the public sector, around 40 percent of total health expenditures are fnanced by out-of-pocket payments. This is because many patients, even among the poor, are using private providers, in most cases to get swifter access to services or due to their dissatisfaction with the public sector. Private health insurance is expanding rapidly, but it is also important for policymakers to consider other approaches to this problem, for example, by reforming public fnancing and service delivery (and improve the quality of public service) and/or establishing supplementary social health insurance. safety nets and Welfare The government supports a large number of safety nets. The majority of these are general consumer or producer subsidies (some of which are better targeted than others) and smaller social assistance programmes, of which some are targeted to the poor and others are targeted based on criteria other than poverty. The government has also put in place a variety of programmes to promote employment and entrepreneurship among welfare recipients 6 Economic Planning Unit, 2009 key fgures, Public Sector Accounts. 7 9th Malaysia Plan 2006 2010, Development Allocation, p529, http://www.epu.gov.my/html/themes/epu/html/rm9/english/allocation1.pdf 8 For example, a meals programme for students living in hostels, administered by the MOE, accounts for almost one-third of the total allocation for support programmes. 11 with the aim of reducing poverty and preventing welfare dependency. However, little information is available on how well these programmes are working. spending on safety nets is substantial, but a large share goes to un-targeted subsidies. The Government of Malaysia subsidizes the consumers (or producers) of several products in order to guarantee access to food and other essential commodities at affordable prices. In the past, the greatest share of these subsidies has gone to keeping the prices for oil products and rice low. However, the prices of palm oil, sugar, four, and bread are also controlled. Because they are universal, subsidies are not the most appropriate instrument to assist the most vulnerable populations. While the subsidy on low-quality rice can reasonably be expected to beneft these groups, subsidies such as fuel subsidies tend to favor higher-income groups who have larger energy needs. Some of the programmes for example, the one-off subsidy to car owners and some of the food subsidies are being reduced or phased out in the current budget. The IMF estimates that fuel subsidies in Malaysia will amount to 1.2 percent of GDP in 2009, down from 2.2 percent in 2008. 9 several ministries (the ministries of Women, family, and community development, of regional and rural development, of health, of housing and local Government, and of education) administer a large number of small targeted social assistance programmes. The Department of Social Welfare Malaysia (DSWM) manages many small programmes aimed at supporting specifc vulnerable groups such as poor children, the elderly, widows, and the disabled, mostly by providing them with cash transfers (Annex 1). These programmes tend to use simple means testing as their targeting mechanism, with social workers checking households self-reported against the national poverty line. A mobile unit, the Khidmat Penyayang, was established in 2002 to visit local communities, provide appropriate services and information, and register those needing assistance, particularly disabled people. The Ministry of Education manages school feeding programmes, tuition aid, federal scholarships, and the poor students trust fund among others. In the health sector, a medical assistance fund has been established to subsidize the use of health services by the poor, but it has only limited funding. Targeting is managed separately by each respective ministry, which means that there is a signifcant risk that programmes overlap each other in terms of benefciaries and spending. To improve targeting and reduce overlaps, the government has recently developed a centralized database to identify and manage a list of poor and hardcore-poor households. The new system, e-Kasih, was launched in November 2007 and is maintained by the Implementation and Coordination Unit in the Prime Ministers Department. This system represents a step in the right direction but some challenges remain. Some critics question the reliability of the data and the robustness of the data collection process. Partly due to these problems, agencies such as the Social Welfare Department of the Ministry of Women, Family, and Community still maintain a large cadre of local social workers who have been trained to assess household conditions according to a broader set of criteria (including identifying the disabled and other target groups that may include some non-poor households). Moreover, 9 IMF Article IV (2009) p.32 12 the measures taken to date have failed to address some of the more fundamental challenges associated with the current targeting system, in particular the diffculty of verifying households cash income, the risk of mis-targeting due to the high variability of cash income, and the failure to capture non-cash income. social Insurance/social security Both contributory and non-contributory social security schemes exist in malaysia, but they only cover those employed in the formal sector, which comprises approximately 60 percent of the total labor force. Public sector employees are covered by the governments Civil Service Pension, which is a non-contributory scheme funded by the government through tax revenues. The Civil Service pension is comprehensive and provides benefts for employment injury, disability, superannuation, and dependants pension in the case of the death of the policyholder. Formal private sector employees contribute to the Employees Provident Fund (EPF), which is a mandatory retirement saving scheme in which benefts are accrued from contributions from both the employer and employee. 10 The EPF provides retirement benefts 11 but no invalidity, injury, or death benefts. In 2008, there were around 12 million members of the EPF, with a total of 5.7 million active members. The EPF estimates that it covers around 50 percent of the workforce (almost exclusively in the formal sector), leaving many workers uncovered by formal pension arrangements. Moreover, due to gaps in the contribution periods of some workers (during which they may have been working in the informal sector) and the early retirement age in Malaysia (55-60 years in the private and 58 years in the public sector), the accumulated savings can often be inadequate to fnance a workers retirement. Finally, there are three government unit trusts that offer guaranteed savings schemes 12 targeted to different groups. In particular, in an effort to increase the contributions of the very poor to savings schemes, the government established the Bumiputera Unit Trust loan scheme in 1992 to provide interest-free loans to households earning less than RM 5,000. 13
accident and invalidity benefts and invalidity pensions for employees and their families are provided by the social security organization (socso), the main social insurance scheme for private sector workers who earn less than rm 3,000 a month. 14 contributions are 1.25 percent and 1 percent respectively by the employer and employee. 15 The most recent data for the SOCSO are for 2006, when there were 5.5 million active employee members and around 269,000 beneft recipients. Foreign workers are not allowed to participate in the SOCSO or to take part in the Workmens Compensation Scheme, which was established in 1993. 10 Between 2004 and 2008, the total contribution rate was 23 percent of employees wages, of which 11 percent is by the employee and 12 percent by the employer. 11 In the past, most withdrawals (95 percent) from the fund have been in the form of lump sums, but since 2007, members have been able to take funds in installments and on an ad hoc basis from the age of 55 years. 12 The National Unit Trust and the Amanah Saham Bumiputera (ASB), which are only open to Bumiputera, the Amanah Wawasan 2020, which is open to all Malaysians between the ages of 12 and 29, and the Amanah Saham Malaysia, which is open to all Malaysians. 13 Ragayah Haji Mat Zin, East Asia Development Network, p30 14 The SOCSO consists of an Employment Injury Insurance scheme for medical benefts, a temporary disability beneft, a permanent disability beneft, a dependents beneft, a death beneft, and a rehabilitation beneft and of an Invalidity Pensions scheme that provides coverage against invalidity or death due to any cause. 15 Ragayah Haji Mat Zin, East Asia Development Network 13 III. adjUsTmenTs made To socIal proTecTIon proGrammes In response To The crIsIs The governments response to the crisis was strong and multifaceted. Through the stimulus packages, the government focused on creating employment and on providing the kind of training necessary to accompany the sectoral shift in the labor market. As previously described, the government was able to contain the extent of the negative impact of the crisis on the labor market by creating a signifcant number of jobs. However, the jobs that were created were in the construction, services, and public sectors, while jobs that were lost came from the manufacturing sector. The stimulus packages included fnancing for training and skills development, as well as incentives for employers to retain/rehire employees. Apart from the direct incremental stimulus measures that gave employers incentives to retain their employees, the government also encouraged mediation and consultation among employers, employees, and the MoHR as a way to minimize retrenchments and save jobs. In this process, if retrenchment turns out to be inevitable, then the government [check] provides the worker with additional education and vocational training in order to increase his or her skills and to bring him or her back into the labor market. The safety net response of the malaysian government was not large in fscal terms but was nonetheless notable. The government focused on expanding cash transfers, accompanied by additional measures to increase households disposable income. The interesting question with respect to these measures is the extent to which they will be only short term or whether they will be retained as part of a longer-term strengthening of the social protection system in Malaysia. The malaysia social safety net, or jaringan Keselamatan sosial malaysia (jKsm), a cash transfer programme, was relaunched in february 2009 with expanded eligibility criteria for fnancial assistance. Annual funding for the programme was increased to RM 850 million from RM 350 million in 2008. for receiving social safety net funds were raised from RM 400 to RM 720 (per month) for Peninsular Malaysia and from RM 830 to RM 960 for other regions. It is expected that these reforms will extend benefts to at least 110,000 families, which will be 50,000 more than in 2008. 16 The existence of e-Kasih is likely to have helped to identify and target assistance to the most vulnerable households. additional measures have been implemented to increase households disposable income and facilitate access to housing. The employee contribution rate to the EPF was reduced to 8 percent in February 2009 to continue until December 2010, so that the total contribution rate is currently 20 percent. However, approximately half of the active members chose to maintain the original 11 percent contribution rate. Rm 5.6 billion was allocated to increase food production for 2008 to 2010 on unused land. In addition, marginal tax rates were reduced for high and middle income groups, and the tax deduction was increased for travel expensed to and from the workplace. Also, a new childcare allowance for children of employees earning up to RM 2,400 per year was implemented. To facilitate access to housing, the government enhanced the Housing Programme by introducing a 50 percent stamp duty exemption on loans that fnance the purchase of medium-cost houses. Also, the existing Housing Credit Guarantee 16 Liza Wong, Help for the needy, the star online, http://thestar.com.my/lifestyle/story.asp?fle=/2009/3/30/lifefocus/3355711&sec=lifefocus 14 Scheme (SJKP), which assists those with no fxed income to own affordable houses, was increased. 17 Finally, the fscal stimulus contained RM 50 million to build and repair houses. Iv. polIcy IssUes for fUrTher consIderaTIon The global fnancial crisis has highlighted a number of policy issues that need to be addressed in malaysias social protection system. Even in the absence of the crisis, the government of Malaysia would have had to confront these issues soon as Malaysia social protection needs are changing now that it is becoming a middle-income country. Social protection policies have an important role to play as the government strives to maintain a fexible and competitive economy without exposing the population to serious poverty risk. Some of the issues on which the government is focusing and on which it will need to continue focusing as Malaysia consolidates its post-crisis recovery include: ExpandingcoverageoftheSPsystemtoincludevariousgroupswhocurrentlyhavelittleornocoverage,in some cases under social assistance programmes and in others under social insurance. This includes workers in the informal sector, elderly people, and foreign workers in the case of social insurance. The coverage of social assistance for a country of Malaysias income level and administrative sophistication is particularly low by international standards. An important policy question is the extent to which the government intends the recent crisis-related expansions in coverage to be the beginning of wider reform of the SP sector or whether these expansions are meant to be temporary. DevelopingacommontargetingmechanismforSPprogrammesthatiscoordinatedacrossagencies. Resources and programmes to protect the poor are available, though transfers and benefts do not always reach the most vulnerable households because a large share of these programmes is untargeted. More accurate identifcation of vulnerable households would make these programmes more effective and help policymakers to prioritize resources, which will be particularly necessary given the fscal impact of implementing two large stimulus packages. There may also be some scope to shift the policy emphasis away from generalized subsidies and towarbds new and more accurate targeting mechanisms, which would increase the effectiveness of individual programmes and reduce leakage. RationalizingtheadministrationofthewiderangeofinstitutionsinvolvedintheSPsysteminMalaysia. Many different ministries and agencies are involved in providing social protection, and the many SP programmes differ widely in terms of their targeting mechanisms (and sometimes criteria), benefts, and administrative arrangements. For example, the Ministry of Women, Family, and Community Development, the Ministry of Regional and Rural Development, the Ministry of Health, the Ministry of Housing and Local Government, and the Ministry of Education all operate programmes to assist the poor. This fragmentation at the national level is compounded by fragmentation between levels of government (states also provide social assistance in coordination with the Ministry of Women, Family, and Community Development). This fragmentation is likely to result in signifcant 17 Economic Planning Unit, 2009 Budget, http://www.epu.gov.my/html/themes/epu/images/common/pdf/bajet/Budget2009-theme_and_strategies.pdf 15 ineffciencies. The lack of coordination contributes to two possible problems. First, the fact that each agency has their own institutional mechanism for identifying benefciaries increases the possibility that the selection of benefciaries is not uniform across programmes, even if the same income criteria are applied. Second, there is currently no system in place to fnd out which programmes are servicing which household and whether there are any overlaps. The centralized database, e-Kasih, may become a useful monitoring tool for this purpose, but it still suffers from several programmes, as discussed in the previous section. 16 references Asian Development Bank Institute (2009). Working paper 148, Malaysia and the Global Crisis: Impact, Response, Rebalancing Strategies Department of Statistics, Malaysia: Labor Market report Q1 2009 Department of Statistics, Malaysia: Labor Market report Q4 2008 Department of Statistics, Malaysia: Labor Market report Q3 2008 Department of Statistics, Malaysia: Labor Market report Q2 2008 Department of Statistics, Malaysia: Labor Market report Q1 2008 Economic Planning Unit, 2009 Budget, http://www.epu.gov.my/html/themes/epu/images/common/pdf/bajet/Budget2009-theme_ and_strategies.pdf Economic Planning Unit, 2009 key fgures, Public Sector Accounts 9th Malaysia Plan 2006 2010, Development Allocation, http://www.epu.gov.my/html/themes/epu/html/rm9/english/allocation1. pdf IMF Article IV (2009) International Labour Organization (2009) The effect of the Global Economic Crisis on Asian Migrant Workers and Governments responses, February Ministry of Human Resources, Presentation: Management of Retrenchment of Workers, http://www.mohr.gov.my/pemberhentian/ managing_retrenchment.pdf World Bank (2009), Malaysia Real Sector Update September 2009 Ragayah Haji Mat Zin, East Asia Development Network Liza Wong, Help for the needy, the star online, http://thestar.com.my/lifestyle/story.asp?fle=/2009/3/30/lifefocus/3355711&sec=lifefocus 17 17
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