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Poverty Remains a Major Challenge Despite Asia's High Growth

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TOKYO, JAPAN (26 August 2004) - Although Asia has made remarkable achievements in economic terms and in fighting poverty, 1.9 billion people, or 60% of developing Asia's population, still live on less than $2 a day, according to a report released today by the Asian Development Bank (ADB).

The report, "Poverty in Asia: Measurement, Estimates, and Prospects," tracks the incidence of poverty throughout the region and takes a hard look at the way in which governments and institutions identify who is impoverished. The report is contained as a special chapter in ADB's Key Indicators 2004 - annual statistical data book on economic, financial and social indicators.

The report notes that if the $1-a-day poverty line is used, the number of people living in extreme poverty totals about 690 million, or 21.5% of developing Asia's population. In Indonesia, for example, 7.5% of the population lives on less than $1 a day poverty line but 52% survive with less than $2 a day.

"Clearly, fighting poverty is developing Asia's most important challenge," said Ifzal Ali, ADB Chief Economist. "The measurement of poverty is a vital tool in helping to address poverty issues."

According to the report, 93 percent of the extremely poor in developing Asia are in India (357 million), the People's Republic of China (203 million), and other South Asian countries (77 million).

Despite the large number of poor, the region has made considerable progress in the fight against poverty. At the aggregate level, the incidence of extreme poverty declined from 34.3% to 21.5% and the number in extreme poverty dropped by 233 million between 1990 and 2002. However, this success masks substantial differences among countries.

The People's Republic of China (PRC) represented almost 174 million, or 75%, of the decline of 233 million in extreme poverty. Southeast Asia witnessed a fall of 48 million poor between 1990 and 2002. Unfortunately, the performance of South Asia in terms of poverty reduction was weaker, the report concludes, with the number of people living on less than $1 a day reduced by only 14 million.

The report points out that the driver of rapid poverty reduction in Asia has been economic growth and that policies should be geared in that direction to decrease further the number of poor people in the region. But the growth should be equitable among the various sectors and geographical areas of a country.

In South Asia, neglect of public investments in physical and social infrastructure, combined with policy and institutional rigidities in agriculture, has limited growth of the rural economy. Such neglect has perpetuated age-old inequities in the distribution of access to land, credit, and social services. The end result has been that even where aggregate economic growth has been reasonable, few opportunities are created for the rural poor.

What are Asia's prospects for reducing poverty? The report uses the links between growth, distribution, and poverty history to assess the prospects for poverty reduction over the next decade in developing Asia. Four scenarios are considered for each country. In the best scenario, it is assumed that most countries will maintain both the per capita gross domestic product growth rates seen over 1999-2003 in the period up to 2015 and the most favorable distribution of income experienced in the past. In this scenario, the number of people in extreme poverty would decline from almost 690 million in 2002 to 150 million in 2015 in developing Asia, with 140 million of them living in South Asia.

In the worst of the scenarios considered, per capita growth is 1 percentage point lower than in the best scenario and the least favorable distribution experienced in the past is assumed. In this scenario, the number of people living in extreme poverty would be 429 million in developing Asia, with 327 million of them in South Asia, 60 million in the PRC, and 36 million in Southeast Asia.

The insights from the scenarios and Asia's diverse experience with poverty reduction suggest that policy makers must focus on generating high rates of sustainable growth while ensuring that at a minimum the distribution of income does not worsen to any significant degree. As the scenarios suggest, the fight against poverty in Asia will be protracted.

Read the full report.

More at adb.org/media

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