An aerial view of the floods in Kampung Tersang, Rantau Panjang, following heavy rain. – BERNAMA PIC
FLOODS are a recurring natural disaster that annually affects the country and has impacted the livelihoods of thousands of people. According to a study, floods in Terengganu are estimated to reduce the Gross Domestic Product (GDP) potential by 1.5 per cent. Floods also have repercussions on the government’s fiscal position when direct assistance to affected households and repairs to public assets are necessary. Did you know that floods are one of the poverty traps in Malaysia? How does flooding affect the poverty cycle?
I will briefly discuss this in this article, along with some suggestions that can be considered. Hopefully, this will provide some benefit to the government’s efforts to alleviate poverty in Malaysia. Floods that occur in low-income areas can have adverse effects on communities. Floods destroy homes, infrastructure, crops and agricultural activities, impacting the lives and livelihoods of people.
The loss of property and livelihood assets can push individuals and communities into poverty or worsen existing poverty levels. Data indicates that low and moderate-income households living in densely populated and rural areas are more vulnerable to flood risks. If a significant portion of these groups rely on informal jobs like farming and agricultural activities and has limited social protection, this situation might lead them to be trapped in the disaster-related poverty cycle caused by floods. This cycle of poverty occurs when a pattern emerges where individuals are repeatedly exposed to floods, and the effects accumulate over time. Each flood disaster hinders any progress being made, creating a continuous struggle to break free from poverty.
Breaking the poverty trap associated with floods requires a shift in approach. The country needs a different approach to address flood disasters to reduce economic risks and safeguard jobs. The number of affected people and the damage caused by floods indicate our incapability to handle such disasters. It also indicates that we must seek new, more sustainable methods to alleviate the economic burden on those affected. Apart from infrastructure interventions, establishing social safety nets and insurance mechanisms can provide financial support to those affected by floods. Floods occur annually and have significant implications for household economies, yet social safety nets specifically related to floods are often overlooked.
We are aware that there are several flood insurance schemes or disaster insurance policies available in the market. However, these insurance schemes are designed only to cover the costs of damaged buildings and their contents (such as furniture and electrical appliances) affected by floods. Therefore, these schemes only provide partial assistance to households because they do not accommodate and support their livelihoods from an employment perspective, resulting from the economic losses of flood disasters.
In my view, there is a need to implement active intervention programmes, strengthening the current employment insurance scheme, which may be capable of offsetting income loss due to flooding.
Apart from reducing the government’s fiscal burden, the advantage of this intervention is that it provides a more sustainable assistance mechanism through active labour market policy intervention that considers flood disasters and hence making it more inclusive. Alleviating poverty is not an easy endeavour unless we genuinely understand the operations of the economic system and the influence of economic cycles.
Poverty exists due to inefficient economic responses that create market failures, including those affecting the environment. Poverty persists even in a country that has achieved advanced and high-income status. We have to face the reality that poverty can only be reduced, and the extent to which it can be reduced depends on how well we recognise the poverty traps and the efforts made to lift households out of these traps.
The writer is a Malaysian who currently serves as the Chief Labour Economist at the Ministry of Human Resources and Emiratis, United Arab Emirates
