Tackling the myths of Asian poverty

Thursday, May 03, 2007
Asia Watch
By Brian Gomez
The National (Papua New Ginuea)

The communist regimes in Vietnam, Cambodia and Laos have recently managed to pursue rapid economic growth and the impact has yet to be felt among the broader populace.

Despite rapid economic growth, many developing Asian countries continue to confront the challenge of high levels of poverty.

China, which has enjoyed double digit growth rates for many years, has managed to rescue more than 200 million out of grinding poverty, but several hundred million people in that country still live in poverty.

The poverty scenario is possibly worse in India, where most cities contain massive slums and the country has been somewhat less successful in having the fruits of economic growth trickle down to the poorer segments of society.

Malaysia and Thailand have successfully lifted millions of people out of poverty, as did Indonesia until the massive setback during the Asian economic crisis in 1997.

The communist regimes in Vietnam, Cambodia and Laos have recently managed to pursue rapid economic growth and the impact has yet to be felt among the broader populace.

In the case of the Philippines, poverty levels have probably worsened in recent decades in the face of lacklustre growth and limited government efforts to foster rural development.

In all cases, foreign investment has played a key role in speeding up economic growth, with India probably an example where indigenous capitalists and entrepreneurs have been dominant.

These governments have also long recognised that untrammelled growth is not enough to address poverty and most have adopted various other strategies.

A recent study by Adrian T.P. Panggabean, an economist with the Asian Development Bank, noted that based on the standard of US$1 a day, as of 2000, the number of poor people in Asia was estimated at 720 million, making the region “home to some 60% of the world’s poor.

“The challenges look more daunting when considering the non-income dimension of poverty using the Millennium Development Goals,” according to his ADB Working Paper published last November on ‘Public-Private Partnerships for Poverty Reduction’.

Some countries in the Asia-Pacific may not meet any of the MDG goals but most will meet some but not others such as child immunisation and maternal mortality.

This shows Asia is not on track to reduce child mortality sufficiently to meet MDG targets.

Panggabean said there was evidence of a link between infrastructure and achievement of poverty reduction goals, with promotion of growth acting as a channel through which infrastructure contributed to poverty reduction.

He cited studies that diarrhoea was significantly lower for families with access to piped water in India, and another showing roads and telecommunications had played a critical role in reducing rural poverty in China between 1978 and 1997.

Panggabean said: “To make infrastructure interventions effective in serving the poor, both government and business need to take into account cross effects among targets in the MDGs.

“Health and nutritional status, for example, directly affect a child’s probability of school enrolment. Access to safe water and sanitation is critical for child survival.

“In order to meet the goal of universal primary education, the government not only needs to invest in schools, but should also provide better transportation networks (to ensure access) as well as basic electricity to allow school children to study at home.

“The existence of such interlink ages means that isolated infrastructure interventions may do little to achieve goals if bottlenecks remain in other sectors.

“Accordingly, national investment programmes must be built on multi-sectoral analysis and anchored in coherent country poverty assessments.”

Panggabean suggested that much more could be done to harness the potential of private sector investment for economic and social infrastructure.

The author said it was often assumed that people with low incomes have little to spend, and buy little beyond food and shelter, and that provision of infrastructure would not be a viable proposition for the private sector. But these assumptions are often challenged, he wrote, especially given the present state of technology.

Panggabean said multinational companies already service large numbers of poor people in developing countries.

He noted that in many Asian cities, urban slum dwellers often pay 10-20 times what the middle class pays for water and in Mumbai, the cost of a one minute phone call for slum dwellers could be double that of the middle class in the same city.

In many poor Asian communities, effective interest rates of 100% or even 1,000% per annum “are not uncommon”.

“In rural Bangladesh, villages have an income of less than US$1 a day, yet as the Grameen phone experience shows, the aggregated buying power of a whole poor community can be commercially significant.

“All these examples suggest that the poor have purchasing power. These also show that costs to the poor can potentially be reduced if they could benefit from a certain scale of provision. Business can potentially gain from serving the poor as well.”