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Articles, Commentaries, Penang Institute, Penang Monthly [formerly Penang Economic Monthly]

On Urbanity and Wealth, and the Future of the Countryside

By Ooi Kee Beng Editorial in Penang Monthly, May 2022

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URBANISATION IS AN oft-cited sign of radical socio-economic changes in a country.

The process at some point could be one of necessity, where the agricultural sector has undergone such huge disruptions that unemployed agricultural workers have to leave the pastoral lifestyle to live in squalid quarters in foul cities. This was definitely the case in the early years of industrialisation in the West, and urban poverty was a huge social problem.

Or it could be something that happens at a relatively slow pace. This could be due to many reasons as well. For example, the distance between rural areas and urban areas might be short, and so a move from one lifestyle to another would not have been marked by a sudden and huge uprooting. This would have been the case for Malaysia.

In Malaysia, the fact that economic functions have been largely divided along ethnic lines could have discouraged a rush by rural folk into the cities to seek their fortune. Instead that had to wait for a bigger group movement to happen. 

A Rush to the Cities

In 1970, when the New Economic Policy began, the urban population in Malaysia was at 26.8%, rising to 37.4% in 1980, to 50.7% in 1991, to 60.2% in 2000, to 71.0% in 2010, and reaching 76.6% in 2020, just when the Covid pandemic hit. The curve upwards has now slowed, which is natural enough, and the country’s urban population is expected to reach 88% only in 2050.

As is well known, poverty rates tend to drop as a country urbanises. In 1984, 32.3% of Malaysians were considered poor, and this fell only by three percentage points in 10 years to 29.4% in 1995, at the height of the boom years. A big drop began in the early 2000s, and by 2006-07, the figure had fallen to 16.7%. Officially, a sharp fall in the poverty rate took place after that, and by 2015, only 2.9% of Malaysians were considered poor. The Covid pandemic has pushed the poverty rate up markedly, though, and in 2020, it reached 8.5%.

Cities are now clearly economic engines of growth, and beyond a certain rate of urbanisation, comparing cities instead of nations would be a very relevant task for statisticians and economists.

But inequalities between the states remain high. This should not surprise anyone. Within a single country, certain cities grow faster than others, and generate more GDP for each of their states, than states that have minor urban centres.

In Sabah and Kelantan, the poverty rate in 2020 was 25.3% and 21.2%, respectively. While the latter is Malaysia’s least urbanised state, the former’s urbanisation rate actually ranks it alongside Sarawak, Pahang, Perlis, Perak and just below Terengganu, all of which have a poverty rate for that year of 9-13%. That observation alone tells us that urban poverty is unacceptably high in Sabah. Kedah, which has a higher urbanisation rate than all these states mentioned so far excepting Perak, retains a high poverty rate; this is partly because its urban population increased greatly only over the last decade or so. Perak shows somewhat better poverty figures despite an urbanisation rate that remains about 5% above Kedah’s by 2020; that state’s urbanisation began in earnest already in the 1980s.

Negeri Sembilan’s urbanisation rate lies between Kedah’s and Perak’s, but largely due to its proximity to Selangor, its poverty rate is as low as the more urbanised Melaka’s and Johor’s. The situation in Johor has to consider the fact that it is situated next to Singapore’s overflowing economy.

What’s left are the federal territories, all of which are highly urbanised and, except for Labuan, have poverty rates that are even lower than those of the highly urbanised states of Penang and Selangor.

How Strong is the Rural–Poor Connection?

What this apparently conventional description of how cities are vital to the economy of modern nations and how an urban, properly settled population is the backbone of the national economy, wishes to query is whether the wisest thing to do with the less urbanised places is to help them urbanise as well, or whether ruralism can be transformed into a future value instead, and not be seen as backward?

Should all states develop the same way, or should they each focus on their unique assets? The federal structure of Malaysia would suggest that the founding fathers did not mean for all states to develop the same way. The urbanisation of some states happens by slowing, if not stopping, urbanisation in neighbouring states.

As the world gets more and more crowded and cities sprawl, it does not take much to see that rural spaces are a not-too-distant-future treasure, whose rarity will make them precious. In urban states such as Selangor and Penang, for example, we already see how quietude and natural surroundings are becoming highly priced luxuries.

Furthermore, digital connectivity or effective transport infrastructure weaken the relationship between urbanity and wealth. In the near future, one should be able to live in a small town and earn big city pay checks.


About Ooi Kee Beng

Dr OOI KEE BENG is the Executive Director of Penang Institute (George Town, Penang, Malaysia). He was born and raised in Penang, and was the Deputy Director of ISEAS - Yusof Ishak Institute (formerly the Institute of Southeast Asian Studies, ISEAS). He is the founder-editor of the Penang Monthly (published by Penang Institute), ISEAS Perspective (published by ISEAS) and ISSUES (published by Penang Institute). He is also editor of Trends in Southeast Asia, and a columnist for The Edge, Malaysia.


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