PLACE IN RETURN BOX to remove this checkout from your record.
TO AVOID FINES return on or before date due.
MAY BE RECALLED with earlier due date if requested.

 

DATE DUE DATE DUE DATE DUE

 

 

 

 

 

 

 

 

 

 

 

 

 

 

6/07 p:/CIRC/DaIeDue.indd-p.1

 

MALAYSIAN HOUSING UNDER THE NEW ECONOMIC POLICY

BY

Norhayati Kamaruddin

A PLAN B PAPER

Submitted to
Michigan State University
in partial fulfillment of the requirements

for the degree of

MASTER OF URBAN PLANNING

Urban Planning Program

1990

ABSTRACT
MALAYSIAN HOUSING UNDER THE NEW ECONOMIC POLICY

BY
Norhayati Kamaruddin

There are no countries in the world without some form
of housing problem. In most of the developing countries,
housing is one of the major issues faced by the government.

This paper first examines housing conditions in
Malaysia. It looks at past and. present conditions, and
identifies some basic factors that have contributed to
housing problems. The effects these factors have had upon
the housing industry are also analyzed.

This paper also describes development and housing
strategies implemented by the Malaysian Government under the
New Economic Policy. Though provision of housing for low-
income groups has been given high priority by the
government, many policies have caused more harm than good.
This paper evaluates the housing policies to determine their
effectiveness.

The Urban. Development .Authority (UDA), a. government
agency which is given the responsibility to implement the
housing policy, is also examined. This study reviews
progress made by UDA and in what respects performance has

fallen short of target.

Based on the analysis and the data derived from the
secondary sources, recommendations are presented. The study
recommends a number of general policy strategies that will
reduce some of the present and future problems faced by the
government, housing developers, house seekers, and others

associated with the housing industry.

ii

For my Loving Husband, Shahriar, Our Future

Children, my Beloved Parent And Family.

iii

ACKNOWLEDGEMENTS

Many people have contributed. to the success of' my
study, many more than I can mention here. First and
foremost, I would like to express my humble gratitude to
ALLAH for his blessings, guidances, and for giving me the
ability and knowledge to get through this learning process.

I wish to record my grateful thanks to the Public
Services Department, Malaysia for giving me the opportunity
and financial assistance to further my study in the United
States of America.

Special acknowledgement and thanks goes to Dr. Frank
Zinn as my faculty advisor, for his willingness, relentless
guidance and scholarly advice throughout the process and
completion of this paper. I also am thankful to Dr. Roger B.
Hamlin for his academic guidance and advices. In addition, I
would like to thanks all the professors, staff, and personal
friends that have been graciously helpful in some way or
other.

My parent and family deserve more thanks and
appreciation than I could possibly convey. They
consistently display their understanding, concern,
generosity and critical acumen by sending me detailed and
always helpful comments.

Finally, my deepest appreciation and thanks goes to my

beloved husband, Shahriar, for his patience, sacrifice,

iv

inspiration, valuable suggestions, and constant
encouragement in the preparation and accomplishment of my

study.

PART

PART

PART

TABLE OF CONTENTS

page
Abstract .. ............................. . ...... . i
Acknowledgements .. .................... ......... iv
List of Figure .. ............................ ... ix
List of Tables ..... .. ............... .. ........ . ix
1 :IMALAYSIA.IN BRIEF

Location - Area . ...... . ...... .................. 1
Climate ............ ..... ....................... 1
Population .. ................................... 2
System of Government ........................... 3
Economy ...... ................................. . 4
2 : BACKGROUND

Housing Problems ...... . ....... ................. 6
Squatters and Slum Dwellers .................... 9
Housing Shortage ...... . ......................... 12

Cutback in Housing Allocation ............. 13
Reluctant Participation by Private

Sector ..... .......................... 14
Fewer Provision of Low Cost Housing ....... 15
Summary of Housing in Malaysia ................. 19

3 : MALAYSIAN NEW ECONOMIC POLICY

Introduction .......... ....... ......... ......... 20
Pre-Independence Era . ....... . .................. 23
Post-Independence Era ............... .... ...... . 24
1969 to 1975 Era .......................... ..... 25
1976 to Present ...... ..... ........... .......... 28
Consequences of New Economic Policy ............ 32

vi

page
PART 4 : URBAN DEVELOPMENT AUTHORITY
UDA's Functions .......... . .................. ... 38

Joint Venture ........... ..... .................. 40
Land and Property Development Programs .... 40
Industrial and Commercial Development

Programs ............................. 41
Guidelines for Negotiation and
Agreement............................. 42

Comprehensive Urban Development................. 43
Urban Development ....... .......... ........ 44
New Town Development ...................... 44

Project Management/Consultant Service .......... 45
Advisory and Consultant Services .......... 46
Project Management Services ....... ..... ... 46

AchiSition Of property 0 O O O O O O O O O O O O O O O O O O O O O O O 47
Commercial Property Acquisition ........... 48
Land Acquisition .......................... 48

Property Marketing ............................. 48
Advisory ........... ..... ......... ..... .... 50
Guarantor .. ..... .......................... 50

UDA Achievements ............................... 51
Low Cost Housing Projects ................. 52

PART 5 : RECOMMENDATIONS AND SUMMARY

Introduction .................. ...... ........... 56
A National Housing Strategy .. ...... . ..... .. ... 57
In Depth Housing Survey ...... ...... ....... 57
Mobilize Local Talent ..................... 58
Utilizing of Natural Resources ..... ....... 58
Balanced in the Development ..... ........ .. 58

Removal of Government Red Tape ................. 59
Industrialized Approach in Construction ........ 60

Better Cooperation Between Government
and Private Sectors ....................... 62

Rural Area Development ................ ......... 63

Rental Units 0......OOOOOOOOOOOOOOOOOO ......... O 64

vii

page
Price Control . .......... . ....... ... ..... ....... 65
Finance/Government Incentives .................. 66
Summary .. ........ ... ..... ..................... 67

Bibliography ........... ..... . ...... ....... ..... 71

viii

LIST OF FIGURE

page
Figure 1.1 : Malaysia ............................... x
LIST OF TABLES
page
Table .1 : Regional Population Distribution by
Ethnic Groups, 1970 - 1980 ....... ......... 7
Table .2 : Population Growth, 1970 - 1980 .. ...... .. 10
Table .3 : Malaysia Public and Private Sector
Housing Performance, 1981 — 1985 .......... 17
Table .4 : Malaysia Public Development Expenditure
for Housing Programs, 1981 - 1990 ......... 18
Table .1 : Budgetary Allocation for

Public Housing, 1971 - 1975 ............... 26

ix

MAUHSHK

Figure 1 . 1

30;

«?
OR}:
o...

DOW 3—3“

mCZ<;m_

SELL]:

.Q

< m

nrzija
....

     

_ w

30% 05.0%

m_

Z<FZ<§_J<V.

 

 

o 103.):- ..

  

is... groin .

3:3 8.

sash/I

2.5.. /$\/\H.\.\|II/.. ’

v71

 

3.8 ’57..- .

%

a

Q
€23...

 

 

 

GOO-ot.¢us( a...

... ow.
Stun—3&1».

   
      

(99¢ .t
(.11. .06.

0‘30...

.oaiocc‘b coi...¢£3$an..1¢o:.l$ c
- a
.....z .1" ...”... ....
.4. “one :33 x
.V. :07..-

       

.Z 3:0)
< ‘ = < .U/F5CZ at...“ .2 A. ..l Bait
Inn-bats 0:8 o .3... 303-01
.....v A? 9.3.. .3 .8.
2.0.0.3: 0.0: o.‘\
J.“ 5 o m 32.2.... 27:: x

8.0... 2.

PART 1
MALAYSIA IN BRIEF

Location - Area

Malaysia is located within the region generally known
as Southeast Asia and it is formed through the unification
of the Federation of Malaya and the previous British
Colonies of Sabah and Sarawak. The Federation of Malaya,
which is now called Peninsular Malaysia, is located to the
south of Thailand and to the north of Singapore. The other
parts which are Sabah and Sarawak, or East Malaysia, share
the border with the Indonesian territory of Kalimantan (see
Figure 1.1). Peninsular Malaysia, which is the largest of
the three, has a total area of about 131,794 square
kilometers, while Sarawak and Sabah cover roughly 198,000
square kilometers. All of Malaysia lies between 1 and 7
degrees north of the Equator and extends longitudinally 100

to 119.5 degrees east.

Climate

Malaysia's climate is uniformly hot and humid with an
average maximum temperature ranging from 85F to 90F during
daytime, dropping to an average of 72F to 75F at night.
However, at higher altitudes, the temperature might drop to

as low as 55F. The rainfall varies from heavy to very heavy

with an average ranging from 100 to 120 inches per year.
Over Malaysia as a whole, the change in seasons is marked by
the changes in rainfall caused by the cycle of the monsoonal
winds. From November to January, the Northeast monsoon from
the South China Sea dominates the air stream. It gradually
decreases in force during the period of April to May and is
followed by the Southeast monsoon. Slightly over 70 percent
of Malaysia is covered with forest; much of which is
tropical rain forest. Constant warm temperatures and heavy
rainfall provide an .excellent condition for the growth of

vegetation.

Population

In 1980, the population of Malaysia was approximately
13.46 million, 11.14 million of whom live in Peninsular
Malaysia. According to the 1970 census, the dominant ethnic
group is the Malay, who comprise 53.2 percent of the
population in Peninsular Malaysia. The Malay, who are
considered an indigenous people, are largely involved in the
bureaucracy and rural agriculture. Besides the Malays, there
are other small indigenous groups who are commonly called
Orang Asli (aboriginals). These people are undeveloped and
characterized by nomadic hunting and shifting cultivation.
Other ethnic groups include a range of different

nationalities, mainly the Chinese and Indians. The Chinese

represent 35.4 percent of the total population and are
largely urban dwellers active in the professions and the
commercial sectors. The Indians, who are largely from India,
represent 10.8 percent of the total population and work
prominently in the rubber estates, railway and the

bureaucracy.

System of Government

The Federation of Malaya was formed by the unification
of two former Straits Settlement of Penang and Malacca and
nine Malay states of Perlis, Kedah, Perak, Selangor, Negeri
Sembilan, Pahang, Johore, Kelantan, and Trengganu. The
largest city, Kuala Lumpur, is the capital of Malaysia.
Malaysia received independence from the British on August
31, 1957. In September of 1963, Singapore, Sabah and Sarawak
joined Malaya to form Malaysia. However, in 1965, Singapore
left Malaysia to become the Republic of Singapore.

Malaysia has unique constitutional system compared to
other countries within the region. Penang and Malacca are
ruled by an elected Governor, whereas the nine states have
hereditary rulers known as Sultans. The Yang Dipertuan
Agong, or King, will be elected from among the rulers of the
states for a five year term except for Penang and Malacca.
The parliamentary system has two houses which are the Dewan

Negara, or Upper House, and the Dewan Rakyat, or House of

Representatives, that form all federal matters. All of the
states have their own elected state assembly with their own
legislative power over state interests. The Yang Dipertuan
Agong is given the power to appoint the Prime Minister and
his cabinet. These people are chosen from the majority party
elected into the Dewan Rakyat. Since the formation of
Malaysia, the country has been governed by the National
Front which is a coalition of the political parties whose

objective is to unite the various ethnic groups.

Economy

Malaysia's rate of economic growth is somewhat higher
than other less developed countries within the region.
During the period of the Second Malaysia Plan (1971 to
1975), the average growth rate was 11 percent annually and
the per capital income was estimated to have increased by
2.8 percent per year. Malaysia's economic achievement
resulted from export trade that consisted primarily of
petroleum, rubber, tin, and palm oil. Oil exports accounted
for a significant share of the total national product. In
1980, the average oil production was about 180,000 barrels
per day with exports earning M$7.2 billion. Although natural
rubber has been replaced. by petroleum. as the principle
export, it continues to be a major source of export revenue.

Due to the introduction of synthetic rubbers the demand for

natural rubber has declined. However, natural rubber still
contributes 15 percent of Malaysia's National Product. In
1980, the rubber export earned about M$4.8 billion which put
it second to petroleum.

Manufacturing is the second important sector in
Malaysia economy. The output of this sector has increased
from 16 percent in 1973 to 19 percent in 1978. The major
development in the manufacturing sector has been partly due
to the government's new economic policy which emphasizes
industrial development as opposed to agriculture. The
government hopes to raise this percentage to 26.6 percent by
1990. Presently, Malaysia has stepped into a new industrial
era by producing it own automobile. The auto industry has
evolved and is fast becoming a major export earner for

Malaysia.

PART 2
BACKGROUND

Housing Problems

Malaysia, like any other developing country, is facing
serious housing problems. Since the beginning of the 19708,
the provision of satisfactory housing' has been. a :major
problem and continuous efforts have been made by the
Malaysian government to meet the ever-increasing needs of
each generation. Until 1970, there was no well planned study
conducted with regard to housing in Malaysia. Even though
the government recognized the need for adequate housing as
early as 1940, there was no full scale housing inquiry
undertaken to study the nature and extent of the housing
problem. The first full scale study undertaken was the
Population and Housing Census of 1970, which provided a
comprehensive view of the country's quality and quantity of
housing stock.

Malaysia's housing problems are mostly brought about by
-rapid urbanization, industrialization and general economic
growth which results in a massive rural-urban migration to
the major urban centers. The country's rapid development has
put heavy strains on the government to provide enough
satisfactory housing within reach of all income groups,
especially the lower income groups. In 1970, the Population

and Housing Census found that, "there were approximately 1.6

million private living quarters in Peninsular Malaysia with
an average of 6.1 persons per occupied living quarter".1 In
1980, the Population and Housing Census found that "the
number of private living quarters have increased to 2.63
million with an average of 5.5 persons per occupied living
quarter".2 In terms of number of persons per room, "the
average number was 2.4 in 1970, while it decreased slightly
to 2.2 in 1980".3

Table 2.1: Regional Population Distribution by Ethnic Groups
1970 - 1980 (in percent)

Region/State Malays Chinese Indian & Others
1970 1980 1970 1980 1970 1980
Northern States 38.1 36.8 8.4 8.1 9.5 11.2
Trengganu 8.1 8.2 0.7 0.7 0.2 0.4
Kelantan 13.6 12.8 1.2 1.2 0.5 1.2
Perlis 2.0 1.9 0.6 0.6 0.2 0.5
Kedah 14.4 13.9 5.9 5.6 8.6 9.1
Southern States 25.7 26 6 26.3 27 0 16.5 17.3
Pahang 6.6 7 5 5.1 5.6 4.0 4.4
Malacca 4.5 4 4 5.1 4.9 3.4 3.7
Johore 14.6 14 7 16.1 16.5 9.1 9.2
Western States 36.2 36.6 65.3 64.9 73.8 71.5
Perak 14.4 13.6 21.3 20.3 23.9 21.9
Selangor 12.0 13.5 24.2 25.6 32.0 31.4
Negeri Sembilan. 4.7 4.8 5.9 5.6 8.4 8.2
Penang 5.1 4.7 13.9 13.4 9.5 10.0

Actual Population 4,868 6,182 3,122 4,065 933 1,308
(,000)

Total Population 1970 - 8,939,000 1980 - 11,555,000

Source: Industrialization Policies and Regional Economic
Development in Malaysia, p. 159.

 

1300 Hai Tan and Hamzah Sendut, Public and Private Housing
in Malaysia, (Kuala Lumpur, Heinemann Asia, 1979), 3.
2Ibid., 8.

3Ibid.

 

 

The number of private living quarters has increased by
38 percent in the 10-year period between 1970 and 1980. On
the other' hand, the ‘total. population. has increased from
approximately 9 million to 11.5 million (see Table 2.1). The
average number of persons per occupied living quarter has
remained relatively stable over the 10 years. On the basis
of the available data, it is likely that in 1990, the number
of? private living' quarters ‘will triple, but the average
number' of' persons per occupied living' quarters and. the
average number of persons per room will remain relatively
high. According to the United Nations standard, a maximum of
1.4 to 2.2 persons in urban areas is considered to be within
the acceptable norms, and 3 persons per room is considered
overcrowding. Therefore, Malaysia's housing standard falls
outside the recommended standard, but under the limit of
overcrowding. However, in Malaysia's case, these comparisons
can be misleading. Overall, the living quarters in the rural
areas have large spaces with little or no partitioning. On
the other hand, in the urban areas, most living quarters
have a greater number of rooms but are less spacious. The
availability of modern facilities such as piped water,
lighting and toilets differ between the urban and rural
areas. For example, "81.5 percent of urban areas have access
to piped water compared to 36.8 percent in rural areas and
83 percent of urban areas have electricity as opposed to

31.4 percent in rural areas".4 Eventhough the NEP stress the

 

importance of regional development, the gap between rural
and urban areas still remains relatively high. Therefore,
Malaysia's housing condition. is probably 'worse than the

statistics indicate.
Squatters and Slum Dwellers

Malaysia, like many other developing countries, has to
deal with the problems of squatters and slum dwellers in the
cities and larger townships. In. Malaysia, squatters are
referred to as "all those who are in illegal occupation of
urban land and buildings, either private or public", whereas
slum dwellers are "those people generally living in the
older sections of the city, in substandard and deteriorating
buildings that have had no maintenance for many years".5 The
majority of people who live in these areas are from the
lower income and poorest classes of people. Many squatters
and slum dwellers have been there for a long time, and the
government has found it difficult to clear or evict them
without offering suitable alternatives or compensation.
There are several factors that stimulated or initiated the
emergence of squatters and slum dwellers in Malaysia.

The first factor is the rapid population growth
experienced by Malaysia over the last two decades. According
to the Malaysia's Department of Statistics, "the number of

people in Peninsular Malaysia has increased from

 

5Ibid., 180.

10

approximately 8.9 million in 1970 to about 11.6 million in
1980".6 Major urban centers, such as Kuala Lumpur, have
increased from 456,000 in 19707 to 919,610 people in 19808,
an increase of about 50 percent. Consequently, the total
population average growth rate has been 2.95 percent per
annum with major urban centers (Kuala Lumpur) having growth

rates of 10.2 percent (see Table 2.2).

Table 2.2: Population Growth 1970 - 1980

Growth of Population - Peninsular Malaysia
Increase (%) Per Annum Increase (%)
1970 8,923,000 - -
1980 11,555,000 29.50 2.95

Growth of Population - Kuala Lumpur
Increase (%) Per Annum Increase (%)
1970 456,000 - -
1980 919,610 101.70 10.20

Source: Public and Private Housing in Malaysia, p. 184, and
Pattern of Spatial Development and Regional Inequalities in
Peninsular Malaysia, p. 266.

A second factor is the rate of development and
urbanization in Malaysia over the last two decades. Rapid

development during the late 19608 through the early 19803,

 

6Dean Spinanger, Industrialization Policies and Regional
Economic, (London, Oxford University Press, 1986), 156.
7Tan and Sendut, Public and Private Housing in Malaysia,
184.
8Zainul Bahrain Mohd Zain, "Pattern of Spatial Development
and Regional Inequalities in Peninsular Malaysia," (Ph.D.
Dissertation, Michigan State University, East Lansing,
1987), 266.

 

which was largely centered around a few established urban
centers such as Kuala Lumpur and Penang, was accompanied by
a large population migration from rural to urban areas. "The
movement from rural to urban areas has been due to the low
productivity of agricultural areas, lack of employment
opportunities, lack of community facilities, absence of
public infrastructure and utility services, and a general
belief that employment opportunities are plentiful and
living conditions are better in the urban centers".9
However, most of the new urban migrants are young, less
educated and have agricultural skills, which are not
suitable for employment in urban areas. "In the early 19703,
according to one report, 21.7 percent of squatters' family
heads in Kuala Lumpur experienced non-regular employment
while. 12.9 percent were unemployed".10 As a result, there
exists an economically depressed group whose living
condition is well below the standard. "Some 50 percent of
squatter families are unable to afford the rents for even
heavily subsidized public housing".11

A third factor is the inability of the urban areas to
support the rural population demand in terms of land,
housing, job shortages. As the urban centers grow, so does

the number of people living or seeking better opportunities

 

9Tan and Sendut, Public and Private Housing in Malaysia,
184.

10Robert S. Aiken, Colin H. Leigh, Thomas R. Leinbach and
Michael R. Moss, Development and Environment in Peninsular
Malaysia, (Singapore, McGraw Hill International Book Co.,
1982), 226.

11Ibid.

 

 

 

11

in the cities. However, the rate of people seeking jobs and
housing is far greater than the rate of industrialization.
The imbalanced growth rate between population and
industrialization has resulted in high unemployment and a
high crime rate.

Today, squatters constitute a large portion of ‘the
urban population in Malaysia. The population surveyed
administered by the federal government, found that within
Kuala Lumpur alone, "the number of squatters has increased
from 100,000 in 1961, to 175,360 in 1977, which constituted

about 21 percent of the city's 835,050 total population".12
Housing Shortage

The most serious housing situation faced by the
Malaysian Government is the inability’ to provide enough
housing. to support its increasing population. The slow
economic growth in the late 19703 and early 19803 coupled
with the inability of the country to diversify its
resources, were the reasons that a sufficiently large
housing supply could not be generated. According to the
United Nations, "the target rate of construction to meet
replacement housing needs in developing countries has been
set at between 8 to 10 new dwellings per 1,000 persons per

annum".13 U3ing' the purposed 'target rate, about 116,000

 

12Ibid., 224.
1~3Tan and Sendut, Public and Private Housing in Malaysia,
15.

 

12

replacement units were needed in 1980 In: meet the
replacement housing needs. Based on the 1980 Population and
Housing Census, there were 744,000 new units built during
the period from 1971 to 1980, with an average of 74,400 per
year. The calculation shows that the number of houses built
were just barely adequate to meet the replacement needs.
Therefore, the increment of houses built each year did not
support the need or meet the requirements of population

growth.

Cutback in Housing Allocation

 

There are several factors affecting the housing
industry in Malaysia. As mentioned earlier, the slow
economic growth which resulted from the global recession,
has hampered progress in the housing industry. During the
period. between 1981 and 1985, "the country 'was able to
provide 42.5 percent new units of the targeted amount of
923,300 proposed by the government".14 The global recession
of 1981 and 1982 was more severe than anticipated by the
government. Economic conditions at the time when the final
stage of the New Economic Program (NEP) was launched in
1986, turned out to be worse than expected. The government's
original ceiling of M$74 billion for the public sector
development expenditure was cut back to M$47.68 billion in

order to maintain financial discipline in view of the slow

 

14Harun Din, "Dasar Perumahan Negara," Urus Niaga Kearah
Professionalism, No. 1, Year 1, 25.

13

growth in government revenues.15 The initial allocation for
housingv by the public sector during 1980 to 1985, was
M$3, 399.12 million”, but the actual allocation, was

M$1,851.86 million”, was well below the projection.

Reluctant Participation by Private Sector

 

The recession and slow growth in the economy has
affected the government's plan of eradicating poverty,
restructuring society and balancing regional development.
The unfavorable situation and its deflationary impact on the
economy has caused an increase in unemployment and
restrained labor absorption and income earning
opportunities. Between 1984 and 1987, "the overall mean
income of all households had declined; especially for the
poor and low income people".18 As a result , private housing
industries felt reluctant to participate in the development
of housing projects. Private companies realized that, "as
housing construction is very speculative, requiring rapid
capital movement and flexible income opportunities, ready
access to capital is essential".19 According to the 1980

Population and Housing Census, the private sector was

 

15Malaysia Government, "Midterm Review of Fifth Malaysian
Plan", Kuala Lumpur, 1986-1990, 4.

16Ibid., 368.

3”Malaysia Government, "Fourth Malaysian Plan," Kuala
Lumpur, 1981-1985, 530.

18Malaysia Government, "Midterm Review of Fifth Malaysian
Plan", 37.

19Michael Johnstone, "Urban Housing and Housing Policy in
Peninsular Malaysia," International Journal of Urban and
Regional Research, Vol. 8, No. 4, (Dec 1984): 504.

14

expected to build about 524,730 units between 1981 to 1985,
but the actual units of homes constructed was only 204,200.
Therefore, a shortage of housing production for both the

public and private sectors exists.

Fewer Provisions of Low Cost Housing

 

Another major housing problem is the lack of low cost
housing for lower income people. In Malaysia, housing needs
in the urban areas have been met largely by private
developers and are beyond. the reach of the low income
groups. On the other hand, most of the public housing
projects cater to the needs of the low income groups,
irrespective of race. According to the Ministries of Housing
and Local Government, there is a high demand for low cost
housing at the present time. This is based on the finding
that "65 percent of ‘the household income in Peninsular
Malaysia is below M$6OO a month".20 Therefore, the
government estimated that the cost of the house should be at
about M$12,500 per unit for flats and M$8,500 for other
types of homes in order to bring the housing within the
means of low income groups.”- Based on the government
projected population growth and the replacement housing
needs, the public sector will construct 176,500 units and
the private sector is expected to build about 90,000 units

of low cost housing during the period of 1981 to 1985.

 

‘mDin, "Dasar Perumahan Negara," 37.
1“Malaysia Government, "Fourth Malaysian Plan," 361.

15

However the actual number of housing units constructed by
the public sector was about 71,310 units, and the private
sector was 19,170 units, a total shortfall of 66 percent
(see Table 2.3).

There are several factors that caused the situation to
occur but the two most important are the large cutback in
government allocations and the inability of buyers to
finance the houses. The cutback in allocations has caused
the government to reevaluate and institute certain specific
measures. The proposed cut-back can be seen in the public
development expenditure for housing programs. Between 1981
to 1985, the government allocation for' public low cost
housing was M$1,717.22 million. However, the allocation
between 1986 and 1990 was only M$691.79 million, less than
half of the previous 5 year's total (see Table 2.4). The
cut-back meant that the majority of the government programs
aimed. at jproviding adequate shelter for* its population.
Especially for low income groups, will be either abandoned

or delayed.

16

Table 2.3: Malaysia Public and Private Sector Performance,

1981 - 1985
(units)
Units
Program Planned No. of units Completed Total
1981-85 1981 1982 1983 1984 1985 1981-85

Public Sector 398,570 31,010 43,480 35,050 44,480 47,880 201,900

Public low
Cost Housing 176,500 12,900 20,100 11,500 12,590 14,220 71,310

Housing in
Land Schemes 110,010 8,930 10,220 5,780 5,740 4,310 34,980

Ins. Quarters &
Staff accom. 58,500 3,660 4,000 5,850 5,390 6,550 25,450

Med. & High
Cost Housing 53,560 5,520 9,160 11,920 20,760 22,800 70,160

Private Sector 524,730 37,600 44,330 37,710 38,600 45,930 204,170

Private Dev. Low
Cost Housing 90,000 5,800 4,860 1,820 4,150 2,540 19,170

Private Dev. Med. &

High Cost 259,470 11,690 19,270 15,980 15,020 23,670 85,630
Cooperatives
Societies 25,260 1,170 1,270 980 500 650 4,570
Individuals
& Groups 150,000 18,940 18,930 18,930 18,930 19,070 94,800
TOTAL 923,300 68,610 87,810 72,760 83,080 93,810 406,070

Source: Fifth Malaysian Plan, p. 522.

The inability of buyer to finance the houses was due to
several factors, and among them are slow income growth, high

interest rates, difficulty in obtaining housing loans and

rising houses prices. The government regulation that
restricted housing loans to first time buyers only, coupled
with the high interest rates has discouraged some buyers
from buying houses. At the same time, the escalating costs
of building materials, labor and financial costs caused the
developers to raise the price of homes. As a result, the
majority of potential buyers could not afford the houses and
this indirectly affected the supply of housing units. Due to
the low demand for housing, most of the developers either
stopped or postponed construction of their housing projects.
Table 2.4: Malaysia Public Development Expenditure for

Housing Program, 1981 - 1990
(S million)

4th Plan Estimated 5th Plan
Program allocation Expenditure allocation
1981-85 1981-85 1986-90
Public Low
Cost Housing 1,712.22 1,659.06 691.79
Site and
Services 1.61 1.21 78.41
Government
Quarters 89.29 44.47 56.62
Squatters
Control 3.36 3.36 17.00
SEDCs and
UDA 45.38 45.38 142.71
TOTAL 1,851.86 1,753.48 986.53

Source: Fifth Malaysian Plan, p. 530.

18

Summary of Housing in Malaysia

Overall, Malaysia's housing problems can be put into
several categories. First, the unbalanced growth between the
population and economic development has caused a shortage of
housing supply and the development of unhealthy residential
areas. Second, the recession and weak economic capacity of
the population does not generate a large enough housing
supply. Third, the enormous migration from rural to urban
centers has created an acute housing shortage and prices
have soared beyond the average citizen's reach. Therefore,
the government and private sector must to continue to
develop housing projects that are within reach of all
citizens in order to support and meet future housing

demands.

19

PART 3

MALAYSIAN NEW ECONOMIC POLICY

Introduction

Malaysia's economy, by developing countries' standards,
is strong and prosperous, but it is also subject to
imbalance. This is due to heavy dependence on a few key
products such as rubber, palm oil and more recently timber
and petroleum. These fluctuating export earnings yield more
than half of the export income. At the same time, there
exists a wide disparity of income between classes and
communities which pose not only economic but also political
problems. It is believed that three quarters of a million
households are below the poverty line and a majority of them
are Malays.

Since gaining independence from the British in 1957,
Malaysia has developed several programs in response to the
problems. None are more important than the Malaysian New
Economic Program (NEP). Since the NEP was established in
1970, there has been an active development program that aims
at growth, stability, and diversification and the gradual
eradication of poverty. The NEP is aimed at achievement of

two objectives:

20

21

-- "to reduce and eventually eradicate poverty by raising
income levels and increasing employment opportunities for
all Malaysian irrespective of race",

-- "to accelerate the .process of' restructuring .Malaysia
society' to eliminate the identification of race with
economic function".22

The main purpose of the NEP is to eliminate poverty, to
restructure property ownership on a more equitable basis and
to achieve the ownership by natives (bumiputra) of at least
30 percent of commercial and industrial activities in the
economy.

To achieve the NEP objectives, the government set out a
five year development plan that covered each decade in two
parts. The First Malaysia Plan was introduced in 1970, to
explain. the new approach, and the Second. Malaysia Plan
covered the years 1971 to 1975. The Third Malaysia Plan was
from 1976 to 1980, and the Fourth Malaysia Plan was from
1981 to 1985. The Fifth Malaysia Plan, the current and final
program, covers the period from 1986 to 1990. Each period is
a continuation of the previous plan and at the same time
introduces a new theme and emphasizes a main target for that
particular period.

The first plan was established in order to explain the

new program approach to development. The government believed

the ethnic ‘violence in 1969 indicated the existence of

 

inMun Cheong Yong, Trend in Malaysia II : Proceedings and
Background Paper, (Singapore, Singapore University Press,
1974), 114.

 

 

economic grievances and appropriate remedies needed to 1x3
spelled out without ambiguities.

The second plan emphasized the urgent needs of economic
improvement for the indigenous, better known as bumiputra or
Malay communities. The communal violence showed there was
serious Malay discontent with the continuing economic
backwardness of their community. The Malays were found
predominantly in the agricultural sector, where poverty was
exceptionally acute. Meanwhile, the Chinese and other non-
indigenous peOples dominated more prosperous activities,
such as business. Therefore, if there was to be stability,
there had to be major changes in the economic structure.

The third plan recognized that if political objectives
were to be attained, measures to relieve poverty had to
extend to all poor people regardless of ethnic background.
Therefore, there was an opportunity for the poor of other
ethnic groups to invade the land settlement plan that was
earlieravailable for only the poor Malays. At the same
time, rural improvement was also extended to all residential
areas irrespective of their races.

The fourth plan stressed the creation of "Malaysia
Incorporated" a plan which regarded the whole country as one
corporation. The private and public sector worked together
to promote development.

The fifth and final plan focussed on privatization of
Malaysia. The management functions previously performed by

the government were given to private enterprise. The

22

government hoped privatization would open up new
opportunities for the public, while at the same time

decreasing spending and increasing efficiency.

In terms of housing, the government approach has
evolved into several stages which can be categorized into

four broad periods.

Pre-Independence Era

The first period was the pre-independence era, where
the government approach was based on the concept of free
market or laisse-faire economics. Under this concept, the
government "permitted the unrestricted operation of market
forces in the housing system and implemented a range of laws
and by-laws that enhanced the activities of private
enterprise".23 During this period, most of the policies
implemented were targeted toward the benefits of private
industry. Squatting and similar living areas were considered
a 'threat to 'the concept of' private jproperty and. social
order. .In order to stop the increase in squatter
settlements, the government introduced the policy of
evicting and resettling squatters. However, the policy did

not achieve its objective because of the large number of

 

23Johnstone "Urban Housing and Housing Policy in Peninsular
Malaysia," 518.

23

squatters, high implementation costs and political

volatility.
Post-Independence Era

The second period was the post-independence era,
between 1957 and 1969. This period can be "characterized as
one in which the new Malay ruling class actively continued
the laisse-faire economic approach of the previous era and
sawr the government as the jprovider of adequate
infrastructure and services".‘24 At the same time, the
government also introduced the industrial and rural
development policies had the effect of increasing economic
differences between the urban/rural and indigenous/non-
indigenous development differentials. The rural areas had
limited financial resources and could. not be adequately
developed to attract industries. Indirectly, this situation
affected housing through the population migration into urban
areas and the stimulation of population migration. The new
policy allowed. direct government intervention. in Ihousing
provision which was previously dominated by private
enterprise. The government provided "loans at subsidized
rates of interest for public housing on condition that the
state provided loans and infrastructure".125 Even though

there was a direct government intervention, private

 

qubido’ 3190
25Ibid. , 519 .

enterprise benefited because the actual construction of

housing projects was still undertaken by private enterprise.

1969 to 1975 Era

The third period, from 1969 to 1975, followed the race
riots of 1969, believed to be initiated by the squatters.
During this period the government established and played an
important role in regulating the allocation of resources,
economy and activities of private enterprises. The period
was marked by the large scale clearance of squatters from
private and public owned land to make way for "the spatial
demands of the expanding modern sector and socio-political
needs of the vulnerable governing class".26 The evicted
squatters were either rehoused or moved into low cost public
flats. Generally this period exhibited four important
changes in the housing system. First, investment in public
housing increased. According to calculated budgetary
allocation for public housing in Table 3.1, between 1971 to
1975, the government public expenditures were approximately
M$815,548 million. During this period, a total of 72,088
public houses were built to support the increasing demand,

especially from low income groups.

 

26Ibid. , 520 .

25

Table 3.1: Budgetary Allocation for Public Housing

1971 - 1975

Sectors No. of Housing Amount Allocated
Units (in million $)

Public Low Cost Housing 13,000 $100.000
Urban Development
Authority 460 $ 13.600
Housing for Aborigines 579 $ 1.242
Federal Land Development
Authority 15,877 $ 24.160

(Housing for settlers)
DARA (Regional Development

Schemes in Pahang Tenggara) 44 $ 0.352
MARA (Council for Trust

for Indigenous People) 325 $ 1.397
FELCRA (Fringe Alienation

Schemes) 440 $ 0.704
Government Offices Housing |
Development Company 7,500 $179.000*

Institutional Housing

Ministry of Defense 8,512 $149.818
Customs Department 110 $ 1.305
Police 13,510 $214.452
Ministry of Education 992 $ 10.100
Ministry of Health 1,116 $ 19.966

State Agencies

Sarawak Land Development 1,080 $ 3.800
Sabah Land Development 2,978 $ 9.462
Jengka Development Corp. 683 $ 6.500
Ipoh Municipality 51 $ 1.054
State Development Corps. 4,831 $ 78.636

TOTAL 72,088 $815.548

* This includes money borrowed from a Consortium
of Commercial Banks.

Source: Public and Private Housing in Malaysia, p. 27.

The second change in the housing system was the
increase in government intervention in the private market.
The government realized that in order to attain the NEP
objectives, more regulations had to placed on the private
construction industry and its financial infrastructure. For
example, in order to increase the supply of houses for low
income groups, the government required a mandatory provision
of 30 percent low cost housing units be built in private
housing schemes. Overall, most of the new regulations were
introduced in hopes that both the private sector and the
government could work together to resolve the various issues
governing the housing industry.

Third, the establishment of several statutory
authorities and public enterprises to administer and
implement government policy, such as the Urban Development
Authority (UDA) and the Government Officers Housing Company
(GOHC). The Urban Development Authority is a special agency
whose function is to take all the necessary steps to
implement government proposals and. provide help for the
indigenous (bumiputra) to participate more effectively in
business and commerce in urban areas. These agencies have
been engaged in housing activities throughout the country
and complement other government agencies charged with the
implementation of the New Economic Policy.

The final change in the housing system was the

increased private sector participation in housing projects

27

due to investment of public funds in joint enterprises with
the private sector. This period saw an increase in the
number of housing development firms and by 1976, "there were
some 750 registered firms in Malaysia of which 62 percent
had completed one or more projects".77 These companies,
which benefitted from government support, were controlled by
Malays who were now able to compete in the housing market
previously dominated by private, mainly Chinese firms. For
example, "the majority who share capital in four large Kuala
Lumpur firms, which together built almost 6000 dwelling
units between 1969 and 1976, are owned by government or
statutory authorities".28

Overall, this period represented a new direction in
housing in which the government played an important role
helping_ foster aspects of the government New Economic
Policy. Each policy was introduced to alleviate the current

and future housing problems.

1976 to Present

The fourth period was between 1976 to the present and
saw a rapid implementation and expansion of all the policies
established in the previous period. During this period, "the

number of housing units built doubled from 259,810 units in

 

27Ibid. , 504 .
”Ibid.

28

1975 to 484,190 in 1980".29 This period. also emphasized
government commitment to the development of housing for low
income groups which included settlers in land development
schemes and some categories of' public sector employees.
During 1976 to 1980, the government allocation for public
expenditure for housing programs was M$3,195.19 million, of
which 58 percent was specifically for low cost housing
schemes. Private sector housing expanded rapidly and made a
positive contribution to resolving some of the housing
problems. Between 1971 and 1980, the private sector
constructed 264,350 units. In addition 49,470 units were
either' non-completion. or at ‘various stages of
implementation.

There were also more finance programs at reasonable
terms available through the provision of funds to ministries
and other statutory agencies. The government provided loans
for home buyers at a rate not exceeding 5.5 percent per year
with a repayment period of 25 years.“ In addition, the
government also set up a revolving fund for people who were
in government projects and who were affected by development
projects. Through the fund, people were able to get "housing
loans up to M$7,500 at an interest rate, of 5.5 percent,
repayable within 25 years".“- Furthermore, in 1976, the
government launched another financing program aimed at

public employees and people earning less than M$500 per

 

29Malaysia Government, "Fourth Malaysian Plan," 360.
3°Ibid. , 363 .
31-Ibid.

29

month. The program was a joint venture between the Malaysia
National Bank (MNB) and the Employee Provident Fund (EPF),
and was targeted toward houses costing below M$20,000 per
unit. By 1980, the program had "approved a loan commitment
of M$403 million for 27,410 units of low priced houses".32

At the same time, commercial banks and borrowing
companies, under Malaysia National Bank guidelines, had also
contributed substantial housing loans. The Malaysia National
Bank required "commercial banks and finance companies to
channel at least 10 percent and 25 percent respectively, of
the net increase in their loans and advances as housing
loans to individuals".133 This requirement was a significant
breakthrough in channeling funds to housing developments as
was evidenced by banks offering attractive terms to home
buyers and housing developers. "The maximum loan is usually
about 75 percent of the property value, not exceeding
M$100,000, the repayment period is 10 years and the interest
rate is 8.5 percent per annum".34 As a result, more peOple
were able to get housing loans and the number of approved
loans rose from. M$107 million by the end of 1970, to
M$2,797.9 million by the end of 1980.35

Since 1970, the number of commercial public enterprises
established to compete with the private sector has grown

significantly. By 1975, the government owned and managed 45

 

32Ibid.

331bid. , 364 .

34Tan and Sendut, Public and Private Housing in Malaysia,
41.

1”Malaysia Government, "Fourth Malaysian Plan," 364.

30

separate enterprises. tuna six major enterprises are:
Malaysian Industrial Development Finance Limited (MIDF),
State Economic 1Development Corporations (SEDCs), The
National Corporation (PERNAS), Federal Land Development
Authority (FELDA), National Petroleum Corporation
(PETRONAS), and Urban Development Authority (UDA). "Federal
funds to six major public enterprises between 1967 to 1979
amounted to M$16,412 million, of which PERNAS, SEDCs and
UDA, all involved in housing construction, took a
considerable proportion".36 These agencies have been
instrumental in developing numerous shopping and housing
complexes through direct investment in a wholly owned
subsidiary or in joint ventures with other private
enterprise. The government, through *these agencies, will
continue to develop housing projects either solely or
jointly with the private sector. As a result, the public
sectors' financial burden will be reduced and will lead to a
greater private sector participation in housing development.

Overall, the government's main objective in introducing
policies is to provide opportunities for all people,
especially for low income people so they will have access to
adequate shelter and related facilities. This objective was
realized through the development of public and private
housing schemes. In the early 19703, the government's role

and efforts were confined toward providing low cost housing

 

inohnstone, "Urban Housing and Housing Policy in Peninsular
Malaysia", 523.

31

and controlling the housing industry by introducing specific
regulations to foster the growth of the housing industry. At
that time, the private sector's contribution to housing the
industry was mainly concentrated toward developing medium to
high cost housing. However, in the late 19703 and early
19803, the government policy changed. which affected. the
private sector directly. The law that required the private
sector to build at least 30 percent low cost housing in
their housing scheme have increased the private sector
contribution in housing industry. The public sector
involvement in housing programs, especially for low income,
has also increased. The public allocation for housing
programs increased from M$716.4 million during 1976 to 1980,
to M$1,039 billion during 1981 to 1985. All these measures
will continue to be implemented in order to assure greater

success overall in the housing development programs.

Consequences of New Economic Policy

Despite government intentions in housing policies, the
growth of the housing industry in the 19703, with the global
recession has created several problems within the housing
industry. During the period of 1981 to 1985, the private
sector was expected to build 90,000 low cost houses, but at
the end. of' the period only 19,170 were constructed, a

shortfall of 78.7 percent. On the other hand, 85,630 units

32

out of 259,470 medium and high cost planned units were
completed (see Table 2.3).

The developers appear to be concentrating on high and
medium cost houses, although there is a need for more low
cost houses. The reason for the failure to build more low
cost houses was that the price at M$25,00037 per unit and
belOW' set by the government was just not attractive to
developers. With the present cost of land and labor and
increasing infrastructure costs, it is virtually impossible
to build houses at that price. The fast rate of development
and construction boom of the late 19703, gave rise to a
shortage of essential materials and skilled labor which, in
turn, led to an increase in construction costs. Therefore,
the developers feel it is no longer viable to sell low cost
units at M$25,000 . If the price is increased, the rising
costs of production will then be passed on to the home
buyers. Some of the developers may try to reduce cost by
doing away with certain fringes such as fencing of units, or
using low quality materials. As a result, there exists an
overwhelming' number' of' complaints against defaulting
developers and defective houses which were delivered to the
buyers. The problem of profit versus price has caused a
decline in private sector contributions in providing low

cost housing.

 

37800 Eng Shin, "Low Cost Condos and the Housing Problem",
Housing Properties Digest, Vol. 2, 1983, 46.

33

Furthermore, it is not easy to get financial
institutions to finance low cost housing. The government
guidelines which set maximum interest rates at 10 percent
per' annum. for loans not exceeding' IM$100,000, have
discouraged some financial institutions from approving
loans. They prefer to finance houses above M$100,000 since
they' are more jprofitable. Most. of' the Ibanks which. have
reached the government quota, channelling at least 10
percent of' their' net increase to ihousing loans, do not
entertain any more requests for low cost housing loans from
developers. Difficulty in getting low cost housing financing
has forced many developers to build the high and medium cost
units first in order to subsidize the cost of building low
cost houses. Even for some successful loan applicants, the
interest rate of 10 percent was high because some applicants
earned about M$200 a month. Therefore, the developer can not
hold up housing projects because the companies need money
for housing construction.

The public enterprise established by the government to
compete with the private sector has created much concern
among non-indigenous people, especially the Chinese. One of
the agency's objectives is to increase the indigenous
(bumiputra) ownership of capital assets in commercial and
industrial enterprise to 30 percent by 1990. For example,
one of UDA‘s main functions is to help indigenous people to
get licenses and tenders. The unfair competitive edge given

to Malay enterprises and individuals has caused. concern

34

among the non-indigenous business community. This concern
can be seen in the resistance of existing private firms to
cooperating with public enterprises. "According to Ministry
of Public Enterprise, of time 314 SEDCs companies, 103 had
made aggregate profits of M$346.8 million, while 125 had
combined losses <xf M$360.6 ndllion".38 This resistance has
not only increased the tension among the races but also has
hurt the housing industry as a whole. Instead of healthy
competition in the housing market, there exists a situation
where economic achievement of indigenous people was at the
expense of others. When a public enterprise enjoys
privileges in a particular business, the incentive to
maintain economic efficiency is reduced. As a result, there
exists some housing projects that were half completed and
abandoned due to inefficiencies and mismanagement of the
enterprises.

The Malaysian government has a valid reason for
intervening in the housing market. However, the large scope
of government intervention has and can cause delays. Many
developers have to wait longer in order to get approvals for
land conversion, subdivision and building plans. Some of the
applicants have to wait for two years before they are
finally given approval. This” is because of the several
stages the applicants have to go through such as, approval

from the Health Department, Board of National Light,

 

35

'”Ozay Mehmet, Development in Malaysia : Property Wealth and .

Trusteeship, (Australia, Croom Helm, 1986), 135.

 

Waterworks Department, Department of Public Work and Local
Authorities. However, most of the developers agreed that the
two main obstacles they had to face were the allocations of
low cost housing and the high planning standards set by the
authorities. The allocation of units is done by a government
balloting process. In this process, the buyers are asked to
select randomly any number that will match the lot number to
determine the buyers' specific lot. The problem arises when
the government does not do balloting for just one project
but instead accumulates a few projects because of the
shortage of manpower. This process can cause delays and
although some developers have suggested that the government
hold a separate ballot, they were unsuccessful. The shortage
of manpower and the government's inability to meet the
demand can also be seen in the provision of basic utilities
in housing projects. For example, some of the projects were
completed by the end of 1980, but the housing areas were not
provided with water supplies until 1982.

Another obstacle mentioned earlier was the high
planning standards required by the government. According to
the developers, specifications requiring housing projects to
have large open spaces and wide roads have decreased the
developers' profit margins. Furthermore, sometimes there may
be new requirements to meet even when plans have already
been approved. For example, the initial plan approved stated

that there was no provision for a water tank but later, this

36

was required. As a result, developers have to sacrifice
money and effort in order to meet the requirement.

The government's policy of promoting home-ownership has
resulted in a situation where home-ownership is regarded as
a status symbol and those not owning houses are regarded as
homeless. In Malaysian society, too much emphasis has been
placed on home-ownership. People become obsessed with owning
their own homes and neglect to look for other alternatives.
Moreover, the strict National Bank guidelines have caused
financial institutions to limit their' housing loans and
those wishing to invest in residential property have to
wait. On the other hand, in most states and large urban
centers, there are a large number of people seeking
temporary accommodations. With a high demand and low supply
of rental houses, it is inevitable that rental prices will

increase in the years ahead.

37

PART 4

URBAN DEVELOPMENT AUTHORITY

UDA Functions

As mentioned earlier in this paper, government
participation in the housing industry comes through direct
or indirect intervention. One of the Malaysian government's
approaches was to establish statutory agencies to compete
with the private sector in the economy. Among the many
agencies, the Urban Development Authority, or UDA, has been
instrumental in developing numerous housing and shopping
complexes. UDA was established on September 1, 1971, in
order to complement other government agencies charged with
the implementation of the New Economic Policy. The Urban
Development Authority Act of 1971 stated that UDA's main

functions are:

-- to promote and carry out projects in urban development
areas for the development, redevelopment, settlement,
resettlement, public housing and the improvement in
environment, service, amenities and other public
improvements for the promotion of national unity,

-- to promote and carry out projects in urban development
areas with a View to achieve the distribution of
opportunities among various races into the fields of
commerce and industry, housing and other activities,

38

-- to translate into action-program the government policy to
restructure society through urban development.39

UDA will play an active role in the housing industry.
As a government entity, UDA. will try to penetrate the
private market through partnership. According to UDA, the
stated functions are designed to achieve the government's
objectives of increasing indigenous property ownership in
terms of stock and value, and the provision of commercial
premises for Bumiputra in strategic urban areas. The 1970
Population and Housing census found that the population of
bumiputra in urban areas stood at 27.6 percent, while non-
bumiputra made up 70.8 percent. On the other hand, 65.7
percent of the total population in rural areas were
bumiputra compared to 34.3 percent non-bumiputra. Without
government intervention, the existing imbalance would
continue to widen between the two groups. Furthermore, there
exists a dominance of foreign and non-bumiputra interests in
property development in urban areas, which is due to their
control and. ownershir> of 'the strategic sites. and. lands.
According to one study, "in 1970, the foreign interests
controlled 62 percent, Chinese 23 percent, and Malay, who
constitute over 55 percent of the population, controlled 1.2
percent of the ownership of the stock of corporations that

operate in Peninsular Malaysia".40 Therefore, UDA, charged

 

3”UDA, "Functions and Background," Kuala Lumpur, 1980.
‘WWolfgang Kasper, Malaysia : A Study in Successful Economic
Development, (Washington, D.C., American Enterprise Inst.
for Public Policy Research, 1974), 43.

39

with carrying out various urban development programs, has

set out to remedy the imbalance between these groups.

UDA's approach toward attaining its objectives can be
seen through its programs whidh can be broadly categorized

into five groups.

1) Joint ventures

UDA recognized a need to penetrate property development
in the urban areas dominated. by the non-bumiputra. UDA
realized that through capital contribution methods, it had
found a way to facilitate the participation and development
of strategic sites. Therefore, UDA adopted a joint venture
strategy as one of its programs. UDA's joint venture program
can be divided into two areas which are: land and property

development and industrial and commercial development.

Land and Property Development Programs

 

The land and property development programs are designed
to "penetrate into areas which up to this time were
controlled. by .non-bumiputra in order' to obtain 'valuable
share in ownership of housing estates, shopping complexes
and other allied projects".41 In these programs, UDA's

partners can be individual land-owners, developers who

 

“UDA, "UDA Seeks Balanced Urban Community," Malaysian
Building and Construction, No. 1, 1976, 3.

invite the UDA to be a partner or vice-versa and state
agencies such as SEDCs or other corporations. UDA, with the
help of its partners, set out to acquire business premises
in strategic locations for bumiputra businessmen by creating
various development programs and controlling the
distribution of these program areas. As a result, bumiputra
firms receive some of the business, such as contracting and
supplying materials, and at the same time, the bumiputra
people are provided a path for acquiring skills and
expertise. Furthermore, through the joint venture programs,
UDA personnel and other bumiputra can be exposed to the
actual property development business. Aside from that, UDA
will be assured control of part of the company and, more
importantly, the control and ownership of strategic sites
and lands. Above all, UDA's contribution in terms of
expertise, capital, knowledge and facilities ensures that
the development of properties will be economical and

profitable.

Industrial and Commercial Development Programs

 

On the other hand, the industrial and commercial
development programs are designed to "ensure and also to
enhance the borrowing power of these companies through UDA's
direct support and by virtue of the broader equity base
following UDA's capital contribution"."2 At the same time,

the capacity and quality of management of these firms can be

 

42Ibids

41

upgraded through UDA's participation on their boards,
continudus monitoring and support of expansion programs. In
addition, through UDA's own supervision and sustained
support, these firms will have the capacity to utilize their
resources and realize their potential. Proper utilization
of manpower and assets coupled with a well-planned
management and operational system will put the company in a
better place to compete and succeed in the open market.
Therefore, UDA will provide assistance in terms of
expertise, training and consultation for both newcomers and
well established companies. Lastly, UDA's joint venture
programs with new partners can contribute directly and
dynamically toward the development of entrepreneurs and
hence increase the number of bumiputra businessmen in

industrial and commercial activities.

Guidelines for Negotiation and Agreement

 

Generally, UDA's guidelines for all negotiations and
agreements in the joint venture can be described as follows.
"UDA would participate in land and property development with
particular reference to the construction of shop-houses,
houses, shopping complexes, office spaces, housing estates,
and other pertainable allied development in strategic urban
areas".4§3 In the early years, UDA. activities were
concentrated in the big cities such as Kuala Lumpur and

Penang. However, as the agency grows, the scope of UDA's

 

43Ibid. , 4 .

42‘

activities has broadened to other state capitals and towns
all over Malaysia. In addition to the above guidelines, UDA
normally tries to control every aspect of the company's
activities and decision-making process by obtaining a
majority of the company's share holdings. However, UDA
sometimes agrees to participate in a situation where it only
controls 30 percent of the shares. In most cases, UDA tries
to have the final say in any decision by placing its
representatives on the board or in other high ranking
positions.

UDA's joint venture scheme is in direct response to the
existing imbalance between the bumiputra and non-bumiputra
property and industrial development in the urban areas. It
is hoped that through UDA participation on the boards of
joint venture companies, bumiputra will get equal access of

business and equal opportunities in related areas.

2) Comprehensive Urban Development

UDA's second approach involves a comprehensive urban
development program geared toward "bringing about an overall
impact on all levels of communities, and in particular on
the bumiputra".44 This program was implemented through two
sub-programs, Urban Development and New Town Development.
According to UDA, these two programs allowed projects to

intensify land use, increase floor space, and up-grade the

 

44UDA, "Functions and Background."

43

environment. At the same time, the program also permitted
bumiputra of all levels to participate in the construction
industry and. jprovided. opportunities for' jprofessional
bumiputra to show and use their knowledge and expertise in

development endeavors.

Urban Development

 

The Urban Development program involved the clearing of
inefficient structures that were located in strategic areas
of the cities. These places were then replaced. by new
structures meeting several of the following requirements:

-- more intensive use of land, providing for larger and
better quality of floor space, resulting in increased value
to the property,

-- better traffic circulation,

-- addition and improvement of'public amenities, and

-- general transfiguration of the environment.45
UDA's participation in the Urban Development program
has opened up opportunities for establishing new centers

with balanced racially mixed populations.

New Town Development

 

The New Town Development program is aimed "toward
building new towns within or at the fringes of the

established urban centers that have good potential for

 

45Ibid.

44

development".’46 Under this program, the new towns provide
facilities such as housing, commercial and industrial
activities. It creates opportunities for ownership of
properties by all races in more equitable proportions. UDA
will make sure that each group will be given a chance to
either own property or open new businesses and reduce some
of the lopsided economic conditions. Furthermore, the new
town creates housing opportunities for people in an effort

to meet the increase in housing demand.
3) Project Management/Consultant Service

UDA's third approach involves providing consultants and
project management services to individuals or companies who
do not have the facilities or expertise . According to UDA,
the objectives of the program can be categorized in four
major areas. First, the prOgram provides advisory services
to bumiputra landowners on the most efficient and economical
way to develop their land. Second, UDA trains and develops
new bumiputra developers who have little or no experience in
land development activities. Third, UDA helps accelerate the
development of abandoned bumiputra land. Fourth, UDA
increases and enhances the market value of the land owned by
bumiputra and at the same time increases the stock by
providing information about the feasibility and potential

development of the land.

 

46Ibid.

45

Overall, UDA's services can be divided into two areas.

Advisory and Consultant Services

 

UDA provides assistance in site investigation and
feasibility studies in order to make sure the areas can be
developed. It also assists in the preparation of lay out
plans and designs for the purpose of obtaining approval from
the state and local authorities. In addition, UDA provides
assistance in the preparation of proposals and financial
projections to help the company finance long term loans.
Furthermore, it provides financial advances to landowner and
developers to help pay initial expenses such as premium
payments and license and permit fees. Finally UDA provides
advice on the appointment of project consultants, the
procedures for appointment of contractors, and at the same
time, advises in the implementation and management of the

project until its completion.

Project Management Services

 

In this instance, UDA acts as a full time project
manager undertaking full responsibility for the success or
failure of the project. The project manager is responsible
for the appointment of the project consultant with. the
approval of the landowner or developers. UDA with its
experience and expertise would be able to find and choose
the best consultants who can provide quality work at a

reasonable cost. At the same time, the project manager is

46

also responsible for administration and supervision of the
project. He or she has to maintain control on time, cost,
and quality of the project and must be well informed on the
problems and progress of the project. Furthermore, the
project manager has to determine the marketing strategy for
the building. The important aspect of the strategy is
whether the building will be sold or rented. After that, he
or she is responsible for appointing lawyers for the
preparation of sales and purchase agreements and mortgage on
the residential land and manage the financial aspect of the
developers.

Overall, UDA's consultant and project management
services ensures the credibility of the companies and the
success of the project. With the guidance of UDA, decisions
can be made after considering all alternatives. Hence, the
company will be well managed and the chance of survival of

the company is much improved.

4) Acquisition of Property

UDA's fourth approach involves the acquisition of
property in the urban areas. According to UDA, the program
objective is to increase the number of business premises
that could be made available to bumiputra entrepreneur for
rental or purchase. UDA's property acquisition can be
divided into two major areas which are commercial property

and land.

47

Commercial Property Acquisition

 

The purchase of commercial businesses involves the
acquisition of shophouses and commercial premises in
strategic locations by UDA from private developers. These
places are then offered to bumiputra businessman and
sometimes non-bumiputra. The buildings do not have to be
already completed, but can be under construction or old
pre-war shophouses. These properties are normally rented to
a bumiputra businessman for a certain period of time before

being offered for sale.

Land Acquisition

 

On the other hand, the purchase of land is aimed toward
the future. The program is designed to enable UDA to own
land that is located in strategic urban areas or on the
fringes for future deve10pment. This would guarantee that
future ,bumiputra entrepreneurs have the opportunity to
compete with other established businesses. An adequate
reserve of land also ensures that future planning will be

systematic and at a reasonable cost.

5) Property Marketing

UDA's fifth and final approach is designed to assist

the bumiputra in renting and owning businesses located in

48

strategic locations. The three methods used by UDA to help
the bumiputra are rental, sales, and rental conversion.
Under the rental method, UDA rents premises at rates
lower than the prevailing market rates. The lower rates ease
some of the financial burden and give the new businesses a
chance to develop, expand and establish themselves in the
business communities. On the other hand, the sales method is
a way for UDA to encourage bumiputra to purchase business
properties operating a business or for investment purposes.
The bumiputra can either purchase the properties by cash or
loan. According to UDA, a down payment of 10 percent is
necessary, but with a interest free period of three months
in order to facilitate the procurement of end financing by
the purchaser. The rental conversion is introduced to allow
tenant to purchase properties that they are currently
renting from UDA. However, there are several conditions that
have to be met in order for them to qualify for the program.
First, the bumiputra tenant must have been renting for
business operation from UDA for a specific period of time.
Second, the tenant must have been keeping satisfactory
records with regard to his bmsiness and prompt payment of
rentals and other charges. If these conditions are met, the
rent paid through the years is taken as a payment toward the
purchase price. However, the balance of the purchase price
has to Ibe settled ‘within three months of 'the sale and

purchase agreement.

49

In terms of housing, UDA's activities are not confined
to helping bumiputra purchase new houses or to creating
equal opportunities to compete at the same level of
established companies. It is designed to help and advise
individuals or bumiputra companies to become successful
developers using his or her own identity. There are several
tools used by UDA to help home buyers and bumiputra

entrepreneurs.

Advisory

UDA provides advise to new bumiputra home buyers on how
to obtain financial loan. Normally, financial institutions
provide loans up to 70 percent of the house price with the
payment period of 8 to 10 years. However, with UDA's help,
the home buyer can receive a loan up to 90 percent with
maximum payment period of 15 years. At the same time, UDA
reserves a minimum of 30 percent of available houses to
bumiputra and therefore assures that future housing demand

for bumiputra can be met.

Guarantor

 

UDA provides help in terms of being guarantor for new
bumiputra developers. According tn) the standard regulation
established by the government, a new company has to have a
certain amount of money in its bank account in order to
obtain a developers' license. As a guarantor, UDA ensures

the credibility and integrity of the company. As a result,

50

new developers can easily obtain access to other facilities
such as bank loans and joint venture through equity
participation. Furthermore, UDA also provides management and
advisory services because it is essential for new comers in
order to survive in the business world. According to UDA,
the rate of failure of bumiputra business is due mainly to
poor management in the initial period rather then lacking of
financial assistance. Hence, this program is aimed toward

reducing the rate of such failures.

UDA.Achievements

One example of a UDA. housing' project was a joint
venture between UDA and the State of Selangor to provide low
cost housing. Beside providing low cost housing, the joint
venture is aimed toward strengthening the cooperation
between the state government and UDA. Under the program, UDA
has established two low cost housing projects in the area of
Kuala Kubu Baru and Jenderam Hilir.

Initially, Johawaki Sdn. Bhd. was given a contract to
build 201 units of low cost houses with a price of M$3.76
million in Kuala Kubu Baru. The company then asked UDA for
assistance because they were facing financial and management
problems. UDA agreed. to help the company under several
conditions. According to the agreement, UDA will provide the
capital to initially start the project. At the same time,

UDA will manage the project for Johawaki with a service

51

charge of M$94,000. Furthermore, UDA will get 40 percent of
the total profit made through the project.

The second housing project involved the construction of
219 units of low cost houses and five shop houses in the
Jenderam Hilir area. The contract was first offered to Taman
Setia Sdn. Bhd. by the State of Selangor with the price of
M$4.23 million. UDA was asked to help after the company
faced. the same jproblems as 'the [Johawaki Sdn. Bhd.. UDA
agreed to participate with the same condition established in
the Kuala Kubu Baru project.

With the completion of these projects, UDA hopes it can
convince the State of Selangor and other states to allow UDA
to continue to participate in the handling and building of

houses from time to time.

Low Cost Housing Projects

 

A study done by the Kedah State Government showed that
an estimated 5000 housing need to be built in order to house
low income groups in Alor Setar, the capital of Kedah.
According to the state government, an area in Simpang Kuala,
which is 4 miles from Alor Setar, had been targeted for
redeveldpment. This area is occupied with squatters who have
lived and worked there for decades. In order for the
redevelopment process to be implemented, people have to
resettle elsewhere. Most of the squatters are not regular
wage earners; average income being M$250 a month. Therefore,

the government has to enact a suitable plan for their

52

resettling because a majority of them cannot afford the
housing.

In.1982, the state government acquired 132 acres of
padi land in the district of Pumpong, located two miles from
Alor Setar, to be used to resettle the squatters and at the
same time satisfy the need of housing for low income groups.
According to the initial plan, the area was to be turned
into a new town to accommodate 10,000 people with complete
social and commercial facilities. The job of developing the
area was given to the National Housing Department (NHD), a
statutory agency established by the government. The NHD was
entrusted to implement the project and was given a free
hand to create a human settlement according to its belief.
According to the state government's plan, half of the
project would devote to the resettlement of the squatters,
mostly bumiputra, while the other half would build housing
for low income people of other races.

The houses were designed to be affordable and
comfortable for squatters and the low income earnersl
According to NHD, the houses would be small initially but it
had to provide for expansion as family incomes increase.
This expansion includes possible addition of two other
bedrooms to the initial two bedroom plan. However, the
expansion was limited and confined to the back portion of
the house.

The work started in March 1982 and was divided into

five phases, or five contracts, for simultaneous

53

construction. The project was expected to be implemented in
18 months but it went beyond the target period. The delays
were attributed to the weather, laying water pipes, and
additional work outside the scope of the original plan.
However, the project was completed faster than other
projects. This is due to the adoption of prefabrication to
speed up the project's implementation. The Mergong housing
project proved that significant time and money was saved by
adopting the prefabrication system.

The housing project was designed to be self-contained,
and self-supporting communities by incorporating many
interesting aspect of human settlement planning. The housing
project was located adjacent to the Mergong Industrial area
toensure that the low income dwellers have easy access to
job opportunities. Its closeness to town centers also
ensured minimum relocation of the squatters so that they can
retain their old jobs. Furthermore, the housing site itself
incorporated a variety of commercial spaces. The stalls and
cheaper shop lots have been designed to encourage the
bumiputra settlers to engage in commercial and. economic
activities. On the other hand, bigger shops were designed to
cater to the settlers' need for other goods and services. In
addition, the settlement also incorporated a school and
mosque within the vicinity.

The Mergong project has met demand for low cost housing
in Alor Setar. The problem of housing for the low income

earner has been approached by providing them with smaller

54

expandable houses and from profit obtained from selling the
shop lot units. The project was well-planned and should be
an example in providing a decent shelter to the nation's

poor.

55

IPAEUP 5

RIKRONDEENIUUPICHNS

Introduction

Overall, there has been. a conscious and. consistent
policy effort on the part of the Malaysian Government to
direct public and private investment to housing for the low
income groups. Several housing schemes, such as the
administration of mandatory provision of 30 percent low cost
housing units to be built in private housing developments
were helpful in bridging the gap between the supply and
demand for housing. Furthermore, the New Economic Policy
introduced by the government also emphasized housing for the
poor and low income as one of the planks of government
policy. Despite all the policies, the housing industry still
faces many problems. After 33 years of independence,
Malaysia is still far from solving its housing problems. The
housing demand is as acute as ever, while land and houses
are priced beyond the reach of the majority of the people.
For this situation, all of the people in the building
industry, federal and. state governments, local councils,
architects, planners, contractors, developers, and some
members of the public must share the blame. In this section

I will seek to address some of the problems and how these

56

may be rectified, in particular the role of government and
its statutory agencies such as UDA in the development

process.

A National Housing Strategy

 

As mentioned earlier in the paper, the government
should continue to play an important role in the development
process and should try to generate innovative solutions to
meet the changing times. First and foremost is the need for
an improvement in the housing strategy. Presently, the
government has not really established a National Housing
Strategy that can be used as a guideline. After 33 years of
independence, the country is still in the process of
defining a comprehensive housing strategy. Below are several

elements a comprehensive plan should cover.

In depth housing survey

First, the government should conduct an in-depth
housing survey on housing needs for the whole country, state
by state, town by town, and village by village. Presently,
the government does not know the extent of the problems.
Most information is based on estimates, and there is no
comprehensive survey that has been conducted on a national
scale. With reliable data and information, the government
can properly plan and effectively implement a host of

measures to fight the problems.

57

Mbbilize local talent

The rich talents of Malaysian town planners,
architects, engineers, administrators, and developers should
be encouraged and mobilized to come up with better plans,
not only for housing, but also layouts of new towns and
urban centers. At the same time the government should
continue 'training’ and. up-grading' contractors and. skilled

workers in all aspect of housing.

Utilizing of natural resources

The government should conserves the country's rich
natural~heritage of fauna and flora and at the same time
promote the use of local products in the housing industry.
Greater utilization of the country's rich timber and other
natural resources such. as bamboo and rattan can reduce
housing costs and create a Malaysian style of architecture.
In Malaysia's case, good quality, inexpensive products are
available locally, yet 'the country' still. has substantial
imports. It is unfortunate that consumers have the attitude
that everything imported is superior than domestic products.
Therefore, the government and especially UDA should launch a
campaign to remove such attitudes in order to foster a

greater sense of pride for national products.

Balanced in the development
A more balanced development between housing and

commercial projects should be achieved in order to avert the

58

land of shortage in one and excessive supply in the other.
Presently, there is an excess of office and commercial
development in most parts of Malaysia. However, due to the
global economic recession, most of the facilities are vacant
and too expensive for small businesses. Therefore, the
government should reevaluate its priorities and. reinvest
some of the money and effort in providing affordable housing
for the people. UDA should invest more of its money and time
in the housing sector rather than building unnecessary

commercial spaces.

Removal of Government Red Tapp

 

As mentioned earlier, government red tape is a big
obstacle to housing construction and a major contribution to
housing cost. Under the present system, it takes inordinate
time for a developer to get building plan approval. The
government should ask itself whether these delays are
justified. Most of the unnecessary and redundant government
procedures should be eliminated. For example, the number of
stages developers must go through to get approval for the
projects should be minimized. The government should
establish one department that handles all applications and
set standard designs for houses. If there is a standard
plan, then developers needn't wait for a long time for the
building plans to be approved. This would cut down on the
delays in the construction process. Furthermore, the state

allocation of units by balloting should be given to the

59

developers. As a result, developers and the government could
save some time and money. However, it is important for the
government to keep a close eye on the process in order to
guarantee home buyers a fair and equal chance of getting
suitable lots. Consequently, many of the areas of delay
which not only cost money, but also encourage the developers
to inflate profit margins and create a poor climate of

confidence, can be eliminated.

Industrialized Approach in Construction

 

In the housing industry, more effort and research

60

should be devoted to building materials and building‘

construction so that cheaper but durable materials can be
substituted for conventional materials. With the ever-
increasing demand for housing and the backing of housing
units in Malaysia, the task of providing people with houses
in sufficient quantity is formidable and it is felt that the
problem can not be solved satisfactorily by conventional
construction methods. In Malaysia, most of the developers
use conventional construction approaches which are not only
expensive, but also time consuming. Therefore, the country
must take a new approach to save time and costs. Since there
is a need for houses which are more economical and are built
within a shorter time frame, ready-made building components
and industrialized building construction method might be an
ideal solution. In a broad sense, Industrialized building is

defined as "the planned coordination of design, quantitative

manufacture and construction within the discipline of price,
standards, acceptability, and the limits of available
skills".47

Among the many systems in the Industrialized approach,
prefabrication seems to be the most practical. This is
because the prefabrication system involves maximum economic
use of factory—produced components, mechanisms of on and
off-site production, and also the fullest application of
modern techniques of mass production. In fact, several local
contractors are already using the prefabrication system
successfully. According to the Managing Director of PKNS
Proton .Hous, a leading manufacturer of prefabricated
concrete building, the company was able to produce cheaper
houses than those constructed using the conventional
approach. Besides, the prefabrication method takes less
erection time and produces consistent and standardized
units. Furthermore, the system enables the company to save
30 to 40 percent in the field of skilled labor and finished
buildings were found to be of greater quanlity than
conventionally built housing units.

Therefore, the government should encourage the
developers to adopt the new building techniques. UDA should
play a role in introducing and educating the people on the
pros and cons of prefabrication. At the same time, UDA must

also continue conducting research and on new methods of

 

‘WMohd Nor Ismail, "Some Aspect of Industrialized Building
Construction," Kuala Lumpur, 1982, 115.

61

construction. It is hoped that the new technique can be used
to overcome the increased demand for housing units, the
shortage of skilled labor, the rising costs of building
materials and skilled labor, and the slowness of the speed

in the conventional construction method.

Better Cooperation Between Government and Private Sectors

 

The government should loosen some of the existing
restrictions on housing activities especially if the
private sector is to play a key role in achieving the plan
targets. The current relationship between the government and
the private developers could be categorized as an adversary.
The private developers resent the government's interference
in their projects, whereas the government, who believes that
the developers make profits higher than they should,
continues to impose conditions which increase the costs of
the final product either through delays or required
subsidies. In order to alleviate the housing problems, there
must be a change to a cooperative attitude between the
government and the private sector. There must be flexibility
on both sides with developers and government frankly
discussing their positions and taking the required actions.

The flexibility mentioned above means that the
government officers at various levels will readily give help
and support to developers within their areas of competence.
This flexibility works both ways and developers must have

the expertise to relate to government technical staffs.

62

Small developers that have been left out of this process
should consider requesting the government to provide
technical backup. Therefore, UDA should initiate or
introduce programs that can strengthen the relationship
between both groups. More dialogue between both groups on
problems related to the housing industry should take place
frequently. As a result, better coordination and

implementation of housing strategies will occur.

Rural Area Development

 

While government efforts to develop rural areas through
land schemes are commendable, a close watch should be
maintained over the progress and problems in these areas.
The New Economic Program which relocated and resettled large
numbers of landless urban dwellers into new areas was
obviously helpful in reducing some of the housing problems
in the urban areas. However, as time passes and the
structure of the communities change, the government's
obsession with developing these lands for agricultural
purposes has contributed to the problem of urban migration.
Younger generations grow up and start demanding more
amenities and. facilities. However, due 'to financial
constraints, the government, and the village in particular,
is not able to meet the demand. Failure to do so has
resulted in a large migration of the younger generation into
the urban areas. In order to slow this trend and in order

for the land scheme to work, the government should bring

63

urbanization to the countryside. This can be done by
spreading out the development and creating large urban
communities within reasonable travel distance of rural
settlement. In doing so, more job opportunities could be
made available to the people while entertainment,
opportunities for higher education and other facilities
could be brought within their reach. Furthermore, people who
are living in the urban areas, would be likely to move out
of the city to a more comfortable home. As a result, the gap
between the supply and demand for housing can be made closer
and more balanced in terms of adequate provision of

amenities in relation to the density of the population.

Rental Units

 

The encouragement of more rental units can also help to
bridge the gap between the supply and demand for housing in
urban areas. The Malaysian housing industry as a whole is
not in a position to build houses which all income groups
are capable of buying. The government, through its agencies
such as UDA, should realize that fulfilling the basic need
of decent shelter can be done not only through home-
ownership, but also on a rental basis. Therefore, it is
suggested that the government and especially UDA reevaluate
and. modify the government policies if they are denying
individuals additional housing loans to buy second or third
houses for investment and rental purposes. Instead of

curtailing the rental market, the government should

64

encourage homeowners to provide housing for low income

people on a rental basis.

Price Control

 

The present rising trend in prices of land, building
materials and. related. materials hampers the government's
effort to attract investments in housing development.
Consequently the price of houses and some of the economic
advantages that could be gained may disappear. The
government, therefore, should direct its efforts toward
stopping this trend. A. majority of the basic building
material and a considerable amount of sophisticated
materials were manufactured locally. Therefore, the
government price control should not be difficult to
exercise. However, if the local manufacturer, suppliers, and
dealers try to raise the price by resorting to artificial
storage, the government should import foreign-produced
materials without restrictions. In addition, the industry
associations and the professional associations should
promote a greater utilization of local products. A closer
interaction between the groups in the housing industry is
essential in order to facilitate the development of new
products in the building industry. Therefore, UDA should use
its position to bring the groups together to tackle the

present and future problems.

65

Finance/Government Incentives

 

The federal government should create and regulate
monetary instruments and institutions to draw more capital
to offset the shortfall in housing finance. There are
several basic instruments that can be used. First,
homeownership can be accelerated by the government through
the provision of incentives. For example, home buyers should
be given tax relief by the government. Such incentives can
be seen in United Kingdom where the owner is given help
through the mortgage - the taxable income is reduced by the
amount he is paying as interest.

Second, a system of mortgage insurance would make home
purchase more attractive to investors. Mortgage insurance
serves two significant purposes which facilitates access to
private capital markets by making the mortgage instrument
more secure and therefore marketable and improving the terms
of finance and longer amortization periods. The insurance
obviously will help secure the acceptability of' housing
within the means of a larger number of families.
Furthermore, a secondary mortgage market will enable
original lenders to convert the whole or part of this loan
portfolio to cash or other securities so that funds can be
channelized to other areas.

In addition, subsidized tax concessions to encourage
developer interest in loW" cost housing' design and
construction should be examined closely. Current

profitability in the housing industry is believed to

66

fluctuate between 15 percent and 50 percent with a tax free
incentive to those who build a certain number of units
within a set price range and observing agreed upon building
standards.

Lastly, a concept of property trust should be
introduced. Under the property trust concept, a unit is
created for investment in immovable property. These property
trusts therefore enable investors, especially small
investors to put their savings and instruments in real
property for which they would not be able to do
individually. In this way, property trust can pool funds
from individual interested in property investment to partly
fund new property development projects. At the same time,
property trusts provide an equity feature to its
contributors in that any profit or loss will be shared by

each contributors.

Summary

This paper has focused. on the problems of' housing
provision and housing policies in Malaysia, especially in
Peninsular Malaysia. Some of the achievements of housing in
Malaysia to date is attributable to the combined efforts of
the public and private sectors. The government has tried to
provide the necessary framework and has set policies which

allows the optimal use of land. However, due to the

67

fluctuating economic conditions, the government objective of
achieving full homeownership is still beyond reach. Since
the beginning of the 19703, home-ownership has been
emphasized by the official policy. Coupled with the age
structure of the population, this has generated tremendous
demand for housing. The ensuing years saw extreme resilience
in the housing and construction sectors. Even though private
sector played an important role in the provision of houses,
the demand outstripped supply which resulted in spiraling
prices and other undesirable practices by unscrupulous
developers. However, the 19803 saw a significant change in
the housing industry. Instead of being a sellers' market,
the condition change to that of a buyers' market. This
change has caused the developers to reorientate their
projects to fit into the affordable market segment. However,
the hou3ing price in Malaysia is still comparatively high by
international standards. Therefore, the ‘government should
create a free enterprise system that is designed to
encourage a large amount of low and medium cost housing. In
this respect, the regulations should be reviewed and at the
same time, the government should continue to introduce
measures that will. help 'the country solve any immediate
problems and free itself from pressures and discontentment,
allowing sufficient time to plan workable avenues of
attaining full ownership.

The New Economic Policy will enter a concluding phase

in 1990. The progress to date indicates that while some of

68

the objectives will be achieved, others have not. The
government should continue to provide the support for the
policy through the 19903, while at the same time,
consolidating its resources and programs. Since the
introduction of the NEP in 1970, the accessibility of low
income households, especially the poor peoples in both the
urban and rural areas to basic services such as education,
health, housing, water and electricity has increased. The
greater accessibility of rural population to these
facilities contributed to the improved living status of the
people. At the same time, the quality of life of the urban
poor continued to improve under the NEP, mainly through a
range of infrastructural development activities undertaken
to maintain and up grade urban standards. Urban Development
Authority (UDA) squatter resettlement and area up grading
programs should continue to be actively pursued in major
urban areas. Previous squatter resettlement programs
introduced by UDA have significantly reduced the number of
squatter dwellings in urban areas. Despite the improvement
in the quality of life, the government programs for poverty
eradication continue to be of concern. The twenty years
period of NEP set by the government was not enough to solve
the problems. Furthermore, original plan allocation for
overall poverty eradication programs was cut-back due to the
global recession and slow economic growth. However, recent
trend shows that the economy was on the path to recovery.

Taking advantage of the economic recovery, the government

69

should continue to implement the NEP. With the easing of
economic pressure, greater attention can be devoted in
making the economy realize its potential for growth so as to
raise income, create new jobs, and thereby facilitate the
process of reducing the imbalances in the economy as
envisaged under the NEP.

While initial. progress towards (providing' Ibetter
housing, education and basic infrastructure have been made,
a wider impact could be expected with a healthy economy.
Government agencies such as UDA should continue to operate
and provide financial and physical facilities in order to
generate new employment opportunities and promote greater
bumiputra participation in economic related activities. In
order to implement the restructuring of ownership in the
cooperate sector, a large time span will be required. Under
the better environment, restructuring through growth could
be done more effectively and would not require much time.

The difficult economic environment of the late 19703
and early 19803 has interrupted the attainment of the NEP's
objectives. Although the NEP's objectives could not be
attained by 1990, efforts should continue to reduce the
occurance of poverty and restructure the economic condition.
The success of the NEP in the future depends on the self
reliance, resoursefulness, and positive commitment among all

Malaysians.

70

71

BIBLIOGRAPHY

Aiken, S. Robert; Leigh, H. Colin; Leinbach, R. Thomas and
Moss, R. Michael. Development and Environment in
Peninsular Malaysia. Singapore: McGraw Hill
International Book Company, 1982.

Ali, Husin. The Malays : Their Problems and Futures.
Kuala Lumpur: Heinemann Asia, 1977.

Anand, Sadhir. Inequality and Poverty in Malaysia :
Measurement and Development. London: Oxford University
Press, 1983.

Andaya, Watson Barbara and Andaya, Y. Leonard. A.History of
.Malaysia. New York: St. Martin's Press, 1982.

Appa, Rao Chandriah; Ross, Larson Bruce and Sopiee, Nordin.
Issues in Contemporary Malaysia. Kuala Lumpur:
Heinemann Asia, 1977.

Cheong, Kee Check and Lim, Lin Lean. Demographic Impact on
Socio-economic Development : The Malaysian Experience.
Australia: The Australian National University, 1982.

Din, Harun. Dasar Perumahan Negara. Urus Niaga Kearah
Professionalism, Kuala Lumpur, No.1, Year 1.

Federation of Malaya. Second Five Year Plan 1961-1965.
Kuala Lumpur: Government Press, 1961.

Gore, Charles. Regions in Questions : Space and Development
Theory and Regional Policy. Methuen and Co. Ltd. 1984.

Gould, W. James. The United States and Malaysia.
.Massachusetts: Harvard University Press, 1969.

Gullick, John. Malaysia : Economic Expansion and National
Unity. London: Ernest Benn Limited, 1981.

72

Hua, Wu Yin. Class and Communalism in Malaysia : Politics in
a Dependent Capitalist State. London: Zed Books Ltd,
1983.

Ismail, Mohd Nor. Some.Aspects of Industrialized Building
Construction. Kuala Lumpur, 1982.

Johnstone, Michael. Urban Housing and Housing Policy in
Peninsular Malaysia. International Journal of Urban
and Regional Research, Vol. 8, N0. 4, December 1984.

Kanapathy, V. The Malaysian Economy : Problems and
’ Prospects. Singapore: Asia Pacific Press Ltd, 1970.

Kasper, Wolfgang. Malaysia : A.Study in Successful Economic
Development. Washington. D.C. :American Enterprise
Institute for Public Policy Research, 1974.

Lim, Lin Lean. Population and Development : Theory and
Empirical Evidence. Kuala Lumpur: International Book
Service, 1983.

Malaysia Government. Mid-term Review of the Fifth.Malaysian
Plan. Kuala Lumpur, 1986-1990.

Malaysia Government. Fourth Malaysian Plan. Kuala Lumpur,
1981-1985.

Malaysia Government. Fifth Malaysian Plan. Kuala Lumpur,
1986-1990.

Meerman, Jacob. Public Expenditure in Malaysia : Who
Benefits and Why. London: Oxford University Press,
1979.

Mehmet, Ozay. Development in Malaysia : Poverty, Health and
Trusteeship. Australia: Croom Helm, 1986.

Milne, R.S. and Manzy, K. Diane. Malaysia : Tradition,
Mbdernity, and Islam. London: Westview Press Inc.
Boulder, 1986.

73

Mohan, T. Innovative Approaches to Low and Medium Cost
Housing. Housing Property Digest, Vol. IV, 1985.

Mohd Zain, Zainul Bahrin. Pattern of Spatial Development and
Regional Inequalities in Peninsular Malaysia. Ph.D.
Dissertation, Michigan State University, East Lansing,
1987.

Rao, vgv. Bhanoji. Malaysia Development Pattern and Policy
1947-1971. Singapore: Singapore University Press,
1980. -

Rudner, Martin. Nationalism, Planning and Economic
Modernization in Malaysia : The Politics of Beginning
Development. California: Sage Publication, 1975.

Seong, Kyu Ha. Housing Policy and Practice in Asia. New York
Croom Helm, 1987.

Shin, 800 Eng. Low Cost Condos and the Housing Problem
Housing Property Digest, Vol. 2, 1983.

Snodgrass, R. Donald. Summary Evaluation of Policies Used
to Promote Bumiputra Participation in the Modern
Sector in Malaysia : Development Discussion Paper No.
38, February 1978. Massachusetts: Harvard Institute
for International Development, Harvard University,
1978.

Spinanger, Dean. Industrialization Policies and Regional
Economic Development in Malaysia. London: Oxford
University Press, 1986.

Tan, Soo Hai and Sendut, Hamzah. Public and Private Housing
in Malaysia. Kuala Lumpur: Heinemann Asia, 1979.

Thalka, Mohamad. Organizing, Programming and Financing
Medium Cost Housing. Housing Property Digest, Vol.3,
1984.

Urban Development Authority. UDA.Seeks Balanced Urban
Community. Malaysian Building and Construction, No.
1976.

Urban Development Authority. Functions and Background.
Kuala Lumpur, 1980.

Yong, Mun Cheong. Trends in Malaysia II : Proceedings and
Background Paper. Singapore: Singapore University
Press, 1974.

1,

74

“'7? straws“.

 

 

 

 

 

Cairn irr- fiwkvntgt- r... w.» .4.- W.”
. m 8.. .‘.. ‘. ..'.'.' .' '~.
. . .. . . . . . . .
_ . . . . .' . . .
. . . . -'. . .‘ .
e 'I. ‘
. . . .
. . .. .
.
‘.
. . . .
.
. ' '.
' .
.
- - d n s
n l "
. .
. . 2 .
. .~ \
e I I
I‘
a t '
, .
. . ’ .
. . -
. .
n O .
. . . .
_ .fi .. . _.. . .
. .
. . I u I I .
I , If
. .. . .
. ‘ . ._ . . . ' .
. . I
. . . .
. . . . . . . _ .
. ‘ - n e
a - _ .-' 0' - - . .
_ . . . . . ,
. ; '
. ' '. I ' .
. , . . 1'. -'

.. ~ " , . . .r.
. . ‘1- . . . - 4
. .

. ~ .-.l

._ . . . ’ . _
‘ .... . . _: . .
s g. . - -
. . o- ' -‘
, .. .. . . . .
. _ . . .. . .
. . . . . - ..
. . . .
. k a . g I
. - e I -u - .
. . .
s ..- ‘ a I
. . ; ._ . .' ‘1‘. . .
. .. .. .
.. . -' ’4'. .
_ . - . ...
v I s I
.. . . - .
. .. .
O l' .
. u ‘ '
. .
. - . "_ . ' ..
. . ..
_. . , . . : . .
‘ . . .
. ..
c‘ _ —
.. - - . .. .
u. u ‘ .._‘ ~ o' a n v
‘ ' - .‘a- ' I
. n.
, ., . .
' .. .
. .. . t ... " . ';-j
. .
_ . : . . . .
. . . . _ .
. ‘ . ‘. .. '
. I ‘
. . .
.
I
. o e a <
. . . .
I " .
_. ' u
. .
. .
.. ... ._ .
.. . .
. .
. .
o ‘ a: .
1" ~-
o.'
. .
. .
0.. Q
. . .
‘ .
,1 ..
,_
l . '
6 ’0 '
. .
. .. ‘
y .
.:.. . ‘
4 .'
. . .
, .
'_ . . . . '
. . . .. ,
.
-
- -
o. .‘
. . . . ,
. , .
. .
.
I e '
.
. -
. .
, .
.
.
- I.
. .
‘ I
.
.
.
. .
.
' O
,.
.
. D
. I
v' . ;
.
- v . .
‘ I
, .
.

 

a
.
a
u. .
.
.
,.
a
l
. - x
'4
u
. . -
-e
a
o .
. ...
..
e
e.
s .
.'.o '
s.
..
a .
, .
. -o
o
.
n.
e- .
3.
—
e
. e
.
e
a
.
..
s
.
.
.
a
.
al«

 

..
.
.
..
..
I . a
.
{ .
..
..
.

. .

. .

\

..

.

. .

..
., .

. .
.
.
. .
..
, .. .
l . .-
. -
-‘r.'.' .
. .
.
. .. .
. .
.. ,.
.
.
..
.
.. . .
.
, .
. .
.
..
. . .
..
. .. ,
..
. .
..
. . .
. .
e ...
.
... .
-. - .
..
... .
..
. .
.
' s
.
. .
.
.
..
-.

. .

. .
_ y. a.
, ,..

. .
..
. ..5
-.
._
. .
I
.
.
.
.
.
.
.
.
.
.
, .
..
.
. .
, .
.
.
'9

 

g 0 r.
-
a
a
e
x .
s
.
s
1
II
o
a.
n
.
4
-
a
s
,I

 

., I l WNW .1
3 1293 02645 9200 '