A New Year, A New PLI for the Nation?

Posted on January 20, 2018



By Jayanath Appudurai

In June 2017 a government Report on Sustainable Development Goals stated:

Malaysia has successfully reduced absolute poverty, based on the national poverty line, from 49.3 per cent in 1970 to 0.6 per cent in 2014- a remarkable achievement made in just four decades. The national poverty line is estimated at US$2.02 per capita per day, which is above the US$1.90 per capita per day international benchmark.”[i]

The government is arguably proud of its success in eradicating poverty based on the Absolute Poverty Line Income (PLI). The national PLI based on the World Bank’s US$1.90 per person per day translates into the household PLI of RM 950 per month.

In short, any household with a monthly income of more than the national PLI of RM 950 would not be classified as ‘poor.’ In 2016, it is estimated that only 27,600 out of the 6.9 million total households in the country, are categorised as poor![ii]

Over the past decade, the government has consistently ignored the call from many quarters to adopt a more realistic poverty measurement based on the concept of Relative PLI. The proposition that a Relative PLI based on 50 to 60% of the median monthly household income would reflect the true state of poverty has elicited no response form the government. It has adamantly stuck to the World Bank’s absolute PLI to justify its poverty measurement methodology.

Interestingly, in October 2017 the World Bank announced that it will report “poverty rates for all countries using two new international poverty lines: lower middle income….set at $3.20/day; and an upper middle income…set at $5.50/day….Such lines would still be absolute poverty lines, just higher in value and potentially more relevant for middle- and high-income countries.” [iii]

Given that Malaysia is currently listed as one of thirty-two “Upper Middle Income” countries by the World Bank itself, the new international poverty lines would most certainly paint a different picture of absolute poverty in Malaysia. (See Table)

Table: Poverty Incidence by New International PLIs

COUNTRY CLASSIFICATION World Bank Per Capita PLI (US$/day) PER CAPITA PLI (RM/Month) * HOUSEHOLD PLI (RM/Month) * % of Poor Households * No. of Poor Households *
Low Income 1.90 228 950 0.6 27,600
Lower Middle Income 3.20 384 1600 8.0 550,000
Upper Middle Income 5.50 660 2770 11.0 760,000

[*] Currency conversion values and poverty incidence numbers are estimates

Now that the World Bank will be using the new PLIs will the government adopt the US$5.50 per capita PLI to measure absolute poverty?

Will a revised National PLI be used to report on the state of poverty in the Mid Term Review of the Eleventh Malaysia Plan [2016 -2020] due to be tabled in Parliament in July/August 2018?

Importantly, will the government use the new PLI to recalculate the Minimum Wage of RM 1000 per month due for review in 2018?

In the New Year can we hope for a new beginning to our real poverty story?


[i] Government of Malaysia, “Malaysia: Sustainable Development Goals, Voluntary National Review 2017”, Economic Planning Unit (EPU) 2017

[ii] Department of Statistics Malaysia, “Household Income and Basic Amenities Survey Report,” October 2017

[iii] http://blogs.worldbank.org/developmenttalk/richer-array-international-poverty-lines