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

04-6533161norazmawati@usm.my

http://drnorazmawati.blogspot.com

27 November 20121

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CONTENT1. Poverty2. Types of Poverty3. Poverty in Malaysia4. Poverty Dimension 5. Causes of Urban Poverty6. Why Poverty Occurs?7. Effects of Poverty8. Strategies of Poverty Reduction9. Development Project Approach.10. Local Development. 11. Main Characteristics In Local Development.12. Growth Process In Local Development. 13. Perspective Of Local Development In Rural Development Area.14. Aspect In Rural Development Area.15. Conclusions

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WHAT IS POVERTY???

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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 POVERTYTYPES OF POVERTY

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TYPES OF POVERTY

Extreme Poverty

Moderate Poverty

Working Poor

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

is left.

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POVERTY IN MALAYSIA

Controversial economic issue.

Government policies to address poverty, such as NEP (1976 RMK-3) have been met

with political protest.

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Rapid economic growth rates contributed significantly to poverty reduction.

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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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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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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.

Absolute Poverty……continue

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Poverty Line Income (PLI)

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.

Adjusted each year.

Useful as an economic tool

In developing countries, the

most expensive of these

resources is typically the rent

required to live in an

apartment.

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 Poor

Household

Overall Poverty Rate

(%)

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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Causes of Urban Poverty

Multi-dimensional ; structural, institutional & cultural

factors.

Inefficiencies in management due to

shortages in technical & managerial skills.

Limited access to employment opportunities.

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VIDEO 2VIDEO 2

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Why Poverty Occurs?

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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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.

DEMOGRAPHICS & SOCIAL FACTORS

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Effects of Poverty

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Good governance

Debt Relief

Sejahtera Programme

Perintis Project

Strategic Action Plan For Urban Poverty

Direct Relief

Strategies of Poverty

Reduction

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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My 1st Home Scheme

VIDEO 3VIDEO 3

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Bottom to up

Top to down

Development Project Approach

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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.

Top to down

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DESA

TEKUN

SHOP LOTS

VISTANA

HOTELAPARTMENT

TESCO

EXTRA

TERMINAL

BUS

SG.NIBUNG

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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.

Top to down ……continue

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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.

Top to down ……continue

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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.

Bottom to up

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Bottom to up ……continue‘Supply’ Factor

Human & original sources

Infrastructure

Environment

Perception & + value of local people

(Glasson, 1992)

‘Demand’ Factor

Play important role

Used growth regional analysis

Refer;export/outside demand Supply could not meet

demand & we must upgrade the traditional economics

pattern in a current necessities.

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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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Local IdentityAppearance

Local Culture Entrepreneurial

Active Involvement of People

& Local Institution Main Characteristics

In Local Development

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State people in 1 area

Encourage entrepreneurial

development

Tools to balance development

Support small centre growth

Increase skill & knowledge

LOCAL DEVELOPMENT

*Development area ; need,

•Effort.

•Monitor local economics.

49Sources : Coffey and Polese (1984)

GROWTH PROCESS IN LOCAL

DEVELOPMENT

Entrepreneurial Appearance & Local Firm

Local Firm Expansion

To Outside Market

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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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.

Strength Economics Sector Appearance & Controlled By Local People….continue

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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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REFERENCES1. Coffey, W.J. dan Polese, M. (1984). The concept of local development : a stages

model of endogenous regional growth, Papers of the Regional Science Association, 55: 1-12.

2. Coffey, W.J. dan Polese, M. (1985). Local development : conceptual bases and policy implications. Regional Studies. 19(2): 85-93.

3. 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.

4. Friedmann, J. dan Weaver, C. (1979). Territory and Function : The Evolution of Regional Planning. London : Edward Arnold.

5. Glasson, J. (1992). The fall and rise of regional planning in economically advanced nations. Urban Studies. 29(3/4): 505-531.

6. Hautamaki, L. (1993). Rural communities : Finnish find renewal in village action, Town Planning and Country Planning, 62(10); 283-285.

7. Perroux, F. (1970). Note on the concept of “growth pole”, translated by Linda Gates and Anne Marie McDermont, Perroux, F. “Note sur la notion de pole de croissance” Economi Appliquee (1955), in Mckee, D.L., Dean, R.D. dan Leahy, W.H. (eds.), Regional Economic Development : Theory and Practice. New York : Free Press.

8. Stohr, W.B. and Taylor, D.R.F. (1981). Development from Above and Below. Chichester : John Wiley and Sons.

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