Poverty in Malaysia

World Bank Supports Malaysian Education, Social, & Technology Projects

The World Bank today approved three loans to Malaysia totaling over US$400 million for social, education, and technology sector projects to help the government of Malaysia improve efforts in these areas.

"Malaysia has a very strong track record on developing its education and health sectors and has made important gains in the past. The World Bank is keen to support Malaysia to ensure that none of the gains are lost because of the crisis in the region," said World Bank Southeast Asia & Mongolia Country Director Ms. Ngozi Okonjo-Iweala. "We want to do all we can to ensure that the human development agenda that underpinned the country's long-term development plan Vision 2020 is supported and sustained."

Malaysia was one of the countries hardest hit by the Asian financial crisis. In June of 1998, the World Bank approved a fast-disbursing US$300 million single-tranche Economic Recovery and Social Sector Loan (ERSL) to protect vulnerable groups in society and support structural reforms in the banking and corporate sectors. However, as the crisis deepened, additional support became necessary. Therefore, in order to prevent the erosion of certain sector programs in Malaysia the World Bank is preparing a set of loans to assist the government.

Poverty in Malaysia Pre-crisis: During the last quarter of a century, poverty (using the poverty line of $2 international dollars per day at 1985 prices) decreased from slightly over half the population to about 5 percent of households in 1997. Hare core poverty, (households with incomes 50 percent below poverty line, concentrated in rural areas) was reduced from 7 percent in 1985 to about 1 percent in 1997. Impact of Crisis: Preliminary data shows that the social impact of the financial crisis was enough to reverse some of the recent gains made in poverty reduction. The poor are disproportionately impacted by rising prices, unemployment has increased, and health and education data indicates a substantial switch in demand for public sector services from private sector services.

The main objectives of the US$60 million Social Sector Support Project are to provide access to essential social services such as basic health and social assistance to the needy, and to strengthen the monitoring of poverty and of effectiveness assessments for programs.

The social development project is divided into several components:

• rural development;
• health clinics;
• social assistance for disadvantaged groups; and
• poverty monitoring and impact assessment.

This IBRD loan is at the Bank's standard interest rate for fixed rate US dollar single-currency loans, with a maturity of 15 years, including a three-year grace period.

The US$244 million Education Sector Support Project will assist the completion of the Seventh Malaysia Plan (1996-2000) in the education sector whose objectives are to: expand access to and equity in education; promote quality and excellence; and improve the efficiency of sectoral management.

This project will help the government of Malaysia maintain past education sector achievements by reinstating programs that were cut as a result of the crisis. The project provides funding to the Ministry of Education's core basic education programs, such as the construction of facilities, teacher training, and a pilot program for the extension of basic education. It will continue to assist the country in producing middle-level technical specialists with high skills and productivity, through support to the polytechnic system. Such skills are necessary for the medium-term recovery. It will also support institutional strengthening activities including improved sector management, staff development, and project management.

This IBRD loan is at the Bank's standard interest rate for fixed rate US dollar single-currency loans, with a maturity of 15 years, including a three-year grace period.

The US$100 million Year 2000 (Y2K) Technical Assistance Project will minimize disruptions in the country's social and economic infrastructure and to coordinate efforts in key sectors. This includes monitoring progress and contingency planning to deal with possible disruptions.

There are two components to the project:

• Government Sector Remediation. To assist the government of Malaysia, in a rapidly narrowing window of opportunity, to contain the disruption in the country's social and economic infrastructure that would be caused by the failure of critical central government systems to process dates after December 31, 1999. Agencies selected for financing will implement their remediation subprojects financed from this loan. Technical assistance will be provided by the Malaysian Administration Modernization Planning Unit in the Prime Minister's Department for Y2K diagnostics, technical and impact analysis, implementation planning, preparing terms of reference, supervision of consulting firms, preparing equipment specifications, and other activities
• National Y2K Task Force Activities. To strengthen the capabilities of the pre-existing National Y2K Task Force to carry out national monitoring, verification, legislative planning, national contingency planning, and knowledge sharing.