Kuala
Lumpur, Malaysia is a Southeast Asian city that is rapidly becoming a major hub
for finance, industry and commerce. (Richardson 1995: 1) However, in the midst
of economic growth, there exists a prominent division in Malay society whereby
a significant subset of the population lives in squatter homes and works in the
informal or unregulated economy, standing in direct contrast to the formally
employed, wealthy elite. (Johnstone 1983: 304) Being a multiethnic and largely
segregated society, Malaysia has historically struggled to assimilate its
indigenous Malay population with the substantial number of Chinese and Indian
immigrants who came to the city during the Colonial period. (Gurowitz 2000:
864) These immigrants had skills that afforded them the opportunity to
contribute to capital and labor intensive urban development; yet much of the
comparatively unskilled Malay population living in cities were forced to work
informally in the sense that they were not taxed, subjected to government
regulations, or provided with any benefits that would accompany government
oversight. (Gurowitz 2000: 866; Todaro 2000: 328) What is perhaps most
interesting to Kuala Lumpur’s informal economy is the response taken by the
government to its existence. Although at first, the government turned a blind
eye to informal workers, seeing them as an effectively unemployed pool of labor
that can be drawn from by modern industry on demand; policy later shifted
toward recognizing informal workers and seeking to empower them with
legitimacy. (Mustafa 2000: 4) This paper will analyze the growth of the informal
sector in Kuala Lumpur, as well as examine the evolving government response to
its existence.
As a country located along the
Strait of Malacca, a strategic waterway and transportation route connecting the
West to the East, Malaysia at various times in history found itself under the
colonial control of the Portuguese, the Dutch and the British. (Weightman 2006:
390) Under British rule in the late nineteenth and early twentieth centuries,
Chinese and Indian laborers were brought to the country to supplement domestic
labor and to engage in the labor-intensive production of tin and rubber.
(UNESCO 2003: 1) Malay peasants were perceived to be “lazy,” whereas Chinese
and Indian immigrants were seen as being “endowed with a capitalist sense and a
profit instinct” (Ryter 2005: 4, 7). Although initially perceived as temporary,
the immigrants established themselves as a permanent fixture of Malay society;
having brought with them their own unique culture, identity, and skill set.
(Gurowitz 2000: 874)
After Malaysia’s 1957 independence from Britain, immigration
continued to be encouraged by the Malay government, which viewed the
incorporation of knowledgeable and skilled foreigners into the Malaysian
economy to be a method by which to promulgate industrialization in its early
stages. (Castles 2003: 166) As a result, a stringent occupational hierarchy was
created in which the indigenous population worked in the traditional, rural
subsistence sector and as urban public sector employees, the Chinese worked in
the urban commercial sector, and the Indians worked as urban professionals and
in elite positions on plantations. (Blau 1986: 840) Thus, a legacy of
Malaysia’s colonial era has been the importation of foreign laborers, and
subsequently, their accumulation of capital. In modern times, it is clear that
this ethnicity-based hierarchy has been perpetuated, and while indigenous
elites have maintained a preponderance of political power, foreigners have
continued to hold the predominance of economic power. (Ryder 2002: 14)
The migration of Malay peasants from rural areas to cities in
the post-World War II era contributed to the growth of the informal sector.
(Johnstone 1983: 302, 304) After Malaysia gained its independence from Britain
in 1957, instability in commodity prices led many Malay peasants to abandon
their traditional agricultural activities and seek employment in cities.
(Weightman 2006: 395) Limited opportunities that became available to the Malay
population were jobs in the police force, the armed forces, and the civil
service; however many found jobs in commerce and industry to be unattainable.
(Aiken 1981: 164) The majority of these peasants lacked the skills possessed by
their foreign counterparts, and found themselves unable to secure positions in
the formal workforce. (Mustafa 2000: 4) This system was perpetuated by a
government of Malay elites, who saw it to be in their own best interest to
afford formal jobs to Chinese and Indian immigration to promote
industrialization and prevent Malay peasants from ascending in social status
and challenging their authority. (Ryter 2005: 11) Nevertheless, many Malay
peasants were satisfied by the prospect of participating in the informal sector
as such activities provided them with a source of continuous and sustainable
income. (Mustafa 2000: 7) The informal economic activities they engaged in
included jobs that ranged from domestic service to construction to petty
trading. (Gurowitz 2000: 865; Mustafa 2000: 2)
Street hawking is a prime example of an economic activity
that has contributed to the growth and sustenance of Kuala Lumpur’s modern
informal sector. (Zixin 2006: 1) Hawkers are those who peddle inexpensive
foods, goods and services to urban residents; and they often engage in their
trade without being subject to regulation and government oversight. (Aiken
1981: 161) The hawking business is composed largely of members of the
economically depressed Malay peasant population. (Mustafa 2000: 4) Kuala Lumpur
is believed to have upwards of ninety-six thousand hawkers residing in the
city, half of whom are unregistered, and therefore part of the informal
economy. (Kuppusamy 2006: 1) The primary reason for entering into this
workforce has been insufficient availability of jobs in the formal sector, and
the ability of informal work to secure them to the means to their own
sustenance. (Mustafa 2000: 4) Many hawkers hope that their work as hawkers will
act as a stepping stone in affording them the skills and training required to
become attractive to formal sector employers and gain a better position.
(Mustafa 2000: 4) Thus, the informal economy in Kuala Lumpur has thus been able
to absorb a significant portion of migrant laborers that would otherwise go
unemployed.
The Malay government has had a unique history of alternating
support and admonishment for informal economic activities. After gaining its
independence, the Malay government endeavored to control and limit the extent
of street hawking by requiring that vendors be licensed, operate at certain
times of the day and in specified areas, and be subjected to heavy fines if
found to be in violation of such rules. (Mustafa 2000: 2) These oppressive
measures served only to perpetuate the extent of inequality and limit the
ability of hawkers to earn a living. However, by the late 1960s, this was no
longer a reasonable strategy in satisfying the urban poor. In 1969, a series of
race-induced riots were propagated by the underprivileged Malay citizenry,
serving to propagate social instability and in the government, an understanding
of its dire need to establish policies to reduce economic inequality and to
help the predominantly unskilled, indigenous population ascend from the ranks
of relative poverty. (Gurowitz 2000: 874)
In a seeming change of heart, the 1971 New Economy Policy
(NEP) was established, and it advocated for improving upon the well-being of
the poor indigenous population by increasing their access to formal housing,
education and other public goods, while at the same time seeking to diminish
the income gap as well as reduce the extent to which ethnicity determined
economic outcomes and social standing. (Lim 1983: 620) In doing so, the NEP
sought to reduce ethnicity-based differences in income by endeavoring to create
a modernized business community in which the Malay population would own and
operate at least thirty percent of the total number of businesses. (Weightman
2006: 393) The NEP also provided the Bumiputra,
or Malay peoples with formal jobs by requiring that businesses adhere to a
system of quotas, by expanding educational and training opportunities, and by
giving them preferential treatment in the distribution of business licenses.
(Gurowitz 2000: 874; Jomo 1991: 474) The intended goal of the NEP was to bring
formal employment rates in line with the racial composition of the society at
large, and accordingly, fifty-four percent of the jobs were expected to be
afforded to the indigenous population. (Lim 1983: 620) Thus, the NEP sought to
diminish the extent of the informal economy in favor of expanding the formal
economy. The effect of this policy was that it instilled a perception of
newfound job availability among rural citizenry; encouraging a flood of
migration from rural areas to cities and serving only to accelerate the growth
of the informal sector even though the formal sector was placed on a trajectory
of expansion. (Murdoch 2007: 214)
Along with the expansion of the formal sector, the government
began to change its policy regimen towards unlicensed street hawkers, realizing
the extent to which such economic activities contribute to the well-being of
the urban poor. Encouraging the continuance and growth of the informal sector,
and legitimizing such activities with government support was believed to be a
method by which to reduce urban poverty and improve upon the distribution of
income between races. (Mustafa 2000: 4) Furthermore, government acknowledgement
was granted based on the perceived ability of hawking to motivate
entrepreneurial skills among the otherwise unemployed, with the hopes that such
skills would later be used in the formal sector to promote economic growth.
(Mustafa 2000: 4) Among the provisions that have been made in support of
hawkers have included expanding the availability of business licenses, the
establishment of improved housing programs, and affording them social services
in exchange for taxes. (Gurowitz 2000: 874; Kirk 2006: 2) In addition, the
government has established a series of “hawker centres” in order to afford
vendors access to prominent marketplaces (Kirk 2006: 2). Thus, although the Malay
government previously sought to marginalize the poor indigenous population by
quelling the informal sector, it now saw such activities as conducive to the
well-being of the poor and beneficial to the society at large.
The establishment and perpetuation of “squatter” settlements,
or unregulated housing communities in which many informal sector workers live,
can provide insight into the government’s response to those informally
employed. In Kuala Lumpur, squatter settlements, or “kampung” arose in response to an increase in demand for a then
limited amount of formal housing perpetuated by economic growth during the
early twentieth century. (UNESCO 2003: 8; Murdoch 2007: 214) Contributing to
their augmentation was rampant migration from rural areas to cities by the
indigenous Malay citizenry, and the inability of newcomers to secure employment
and produce sufficient income to afford legitimate housing. (Johnstone 1983:
292) As opposed to formal housing, squatter communities have often lacked basic
amenities, including running water, electricity and waste disposal mechanisms;
and as such, their existence has contributed to the spread of diseases and
perpetuated unhealthy conditions. (UNESCO 2003: 9) Furthermore, squatter homes
have been prone to floods and fires, making such homes prone to environmental
destruction. (UNESCO 2003: 8) Squatter homes are often overcrowded, and in some
instances have been known to each house upwards of fifteen people. (Johnstone
295)
The government’s response to the existence of squatter
communities has traditionally been one of indifference, seeing them as
technically illegal, yet providing cheap housing to low-wage workers, both
formal and informal, and thus contributing to urban development. (Murdoch 2007:
214) However, by failing to make available safe and legitimate housing to a
large subset of the Malay population, the government in effect perpetuated the
marginalization of one economic class from the benefits of another. However,
government policy by the early 1980s had shifted toward explicitly supporting
squatter communities, realizing the extent of the contribution to urban
development brought about by their residents. (Aiken 1981: 170) A series of
policies were subsequently implemented, seeking to upgrade the living conditions
of the urban poor by relocating them to new homes, or installing various vital
services to existing squatter developments such as water pipes, sanitation and
electricity. (Aiken 1981: 170) Thus, the Malay government’s transformative
policy regimen toward squatter homes demonstrates a paradigm shift in its
overall view towards informal participation in the economy.
Traditionally, a significant proportion of informal sector
workers have been female. (Ludher 2007: 2)
Realizing their level of educational and skill attainment to be
undesirable to formal employers, women have often joined the informal sector in
an effort to supplement the income of their formally-employed husbands so as to
better provide for the needs of their families. (Ludher 2007: 1) Taking into
account the extent of female discrimination, the Malay government established a
“National Policy on Women” in 1989, designed to increase the extent of jobs
allocated for women in the formal sector, expand educational opportunities
available to women, and provide funding to non-governmental organizations with
women’s advancement as their intended goal. (Ahmed 2007: 1) In many respects,
efforts to alleviate female poverty have been successful. In modern times,
forty-seven percent of females have found work in the formal sector,
significantly higher than the Asian average. (Chow 2007: 1-2) Furthermore,
women in Malaysia have been able to attain a literacy rate of approximately
one-hundred percent. (Ahmed 2007: 2) Even so, there has remained a significant
portion of women that are employed informally, and as such, they suffer from a
lack of government protection, a limited ability to loan capital from banks,
and remain largely excluded from the policy-making process. (Ludher 2007: 3) Thus,
government policy has allowed many women to ascend from the ranks of relative
poverty and assume positions in the formal workforce; while at the same time, the
majority of women have continued to be relegated to informal work.
Nevertheless, it cannot be denied that progress has been realized in terms of
women’s education and advancement over the past few decades.
In recent years, the government has continued in its effort
to implement the goals of the New Economic Policy with a series of five-year
plans designed to reduce poverty and race-based inequality by contributing to
the economic well-being of the Bumiputra.
(World Bank 2000: 1) By the early 1990s, progress had been shown, as the share
of employment of ethnic Malays in the professions increased five-fold since
before the implementation of the NEP. (Jomo 1991: 476) Furthermore, the
indigenous population has been able to accumulate substantial wealth and place
a significant share of its students in higher education. (Jomo 1991: 475)
However, there is still substantial room for improvement. As a result of the
economic instability brought about by the Asian financial crisis in the late
1990s, many lost their jobs in the formal sector and were forced to become
undocumented street vendors, thus greatly expanding the size of this workforce.
(Kuppusamy 2006: 1) The goal of affording the Bumiputra ownership and control of at least thirty percent of
businesses has not been achieved, perpetuating the extent to which they must
rely on the informal sector for work. (Weightman 2006: 393; Jomo 1991: 476)
Even in the midst of setbacks, the Malay government has
continued to work toward achieving equitable goals. Embedded in its “Vision
2020” policy, the government outlines a series of goals for further eradicating
poverty and improving employment opportunities for the Malay citizenry. (World
Bank 2000: 1) Among its objectives are that Malaysia become a fully developed
country by the year 2020 by expanding the reach of educational programs so as
to accumulate human capital in the forms of technological know-how and
entrepreneurial expertise. (Badawi 2007: 4) Recently, the government has sought
to establish policies so as to ‘formalize’ Kuala Lumpur’s informal sector by
increasing the number and extent of “hawker centres,” reducing the fees
required of them to operate their businesses formally, and mandating that
hawkers participate in educational programs to encourage cleanliness and
hygiene. (Zixin 2006: 1) The issue of informal sector employment continues to
be at the heart of current political debate in Malaysia, with Prime Minister
Abdullah Badawi advocating for the expanded legalization and regularization of
hawking to reduce the aggregate rate of unemployment, with his opposition
alleging that the Prime Minister’s intention is simply to establish regulations
so as to place the informal workforce under his bastion of control. (Kuppusamy
2006: 2) Thus, it cannot be doubted that the government’s response to the
existence of informal labor has played a prominent role in public-policy formation,
and its largely positive perspective on informal economic activities
demonstrates the extent to which its existence has improved the lives of many
underprivileged Malay citizenry.
In conclusion, Kuala Lumpur can be
seen as a city of dualisms. On one hand, its skyline boasts a series of
modernized buildings, symbolizing the extent of its vibrant and growing
economy; whereas on the other hand, significant proportions of its population
work in the informal economy without access to government protection and labor
benefits. Perpetuated by a legacy of colonization, ethnic discrimination, and a
seemingly unmanageable amount of internal migration, Malaysia has struggled in
its effort to close the gap between the rich and poor. Informal economic
activities such as street hawking have provided the urban uneducated poor a
method to secure survivable living conditions. Their activities have promoted
the growth of industry by affording formal employers a source of willing and
able laborers on-demand, and have provided informal workers with valuable
skills. The income that the informal sector has brought to its participants has alleviated the extent of the
burden otherwise placed on the government to provide them with social services.
Although initially opposed to the continuance of the informal sector, the Malay
government has gradually shifted its approach by endeavoring to support it. A
series of policies since the 1970s evidence the extent of the government’s
effort to incorporate informal workers into the formal economy by supporting
women by providing them with formal education and jobs, legalizing hawking and
licensing hawkers, and upgrading the living conditions of informal employees.
An analysis of Kuala Lumpur’s evolving informal sector can provide insight into
its benefits and drawbacks, and the role that government planning can play in
its empowerment.
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