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p. 3 of 6 BACK | NEXT Foreword I. The Asian Development Bank's (ADB) Mission II. A Framework for Poverty Reduction: Pillars of the Poverty Reduction Strategy III. The Strategy IV. Implementing the Strategy Appendix

Enhancing the Fight Against Poverty in Asia and the Pacific: The Poverty Reduction Strategy of the Asian Development Bank

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II. A Framework for Poverty Reduction: Pillars of the Poverty Reduction Strategy

13. The nature of poverty is complex, and its causes are diverse. The poor may not have acquired essential assets or capabilities because they live in remote, conflict-prone, or resource-poor areas. They may be vulnerable due to age, health, living environment, or occupation. Economic stagnation may limit opportunities for gainful or productive employment. The poor may be denied access to assets or services because they belong to an ethnic minority or a community considered socially inferior, or simply because they are female, disabled, or just different. At a broader level, poverty may stem from situations where gross inequality persists because of vested interests and entrenched power structures. The great diversity of the conditions and causes of poverty implies that interventions to reduce it must be tailored to particular circumstances.

14. An effective strategy for poverty reduction must help to achieve propoor, sustainable economic growth; inclusive social development; and good governance. These three pillars constitute the framework of the PRS and are closely linked and mutually reinforcing. Successful poverty reduction therefore requires policies that simultaneously strengthen all three. The relative importance of each pillar will depend on country circumstances at a particular time.

15. Within the framework of the three pillars, interventions for poverty reduction can be short term (such as those that sustain basic services to the poor); medium term ( such as targeted interventions); or long term (such as those that build human resources, stimulate pro-poor growth, and encourage expansion of the private sector). ADB’s main strengths lie in financing relatively large investments with medium- or long-term impact and in conducting dialogue with governments to support policy and institutional reforms that have a widespread, indirect impact.

A. Pro-poor, Sustainable Economic Growth

16. Rapid, broad-based economic growth is the single most important factor in sustaining poverty reduction. The experience of the East and Southeast Asian economies highlights the importance of a dynamic public policy and an active state role in creating enabling conditions for rapid economic growth.

17. The Growth-Poverty Nexus. The complex relationship between economic growth and poverty reduction is illustrated by long-term trends in Asia. From the 1960s until about the mid-1990s, the “miracle” economies of East Asia grew faster than any other group of developing countries in the world. By the 1990s, poverty had been virtually eliminated in the newly industrialized East Asian economies, while Indonesia, Malaysia, and Thailand had also made impressive strides. The social indicators of many of these countries are gradually converging toward industrial country averages. In contrast, South Asia experienced sluggish growth in the three decades preceding the early 1980s with per capita income growth averaging about 1.5–2.0% per annum. Poverty reduction was correspondingly lackluster.

18. The relationship between economic growth and poverty is two-way in nature. High, sustained growth increases labor demand and wages, reducing poverty. Better earnings lead to increased labor productivity and growth. Growth also improves public revenues and enables more public spending on physical and social infrastructure, helping reduce poverty as well as improving an economy’s productive potential.

19. Policies for Labor-Utilizing Growth. While economic growth favors poverty reduction, broad-based, labor-utilizing growth will have a stronger impact. A combination of sound macroeconomic management and policies that encourage steady growth in employment has proven to be a powerful pro-poor measure. Such policies include the gradual removal of marketdistorting interventions. Other policies in this category are those that develop a conducive environment for the private sector and those aimed at increasing employment and income-generating opportunities for women and other groups that may be outside the formal labor force. Similarly, opportunities for self-employment have made an important contribution to poverty reduction.

20. Growth and Private Sector Development. The private sector, the engine of growth, has a direct role in poverty reduction. It can participate in building physical and social infrastructure including provision of basic services that will benefit the poor. For the private sector to contribute more effectively to the delivery of such services, an enabling environment must be established, and the financial sector must be developed. As the role of the private sector expands, the role of the government should shift from the owner and producer of goods and services to that of a facilitator and regulator. An effective regulatory framework becomes critical to promote competition, enforce fair practices and standards, and ensure that essential services reach the poor.

21. Growth and Infrastructure. Infrastructure development has both social and economic effects. It can contribute to poverty reduction both indirectly by fostering growth and development, as well as directly through job creation and improving access to economic activities and basic social services. For an economy to grow, expanding infrastructure and related services that enhance capacity and efficiency are essential. Expanding opportunities at the local level requires integration with national markets which infrastructure can facilitate. Market-driven growth typically benefits better-off areas where infrastructure and human capital are already reasonably well advanced. In underdeveloped areas, poorer households may not be able to share in the expanding opportunities provided by growth elsewhere, and targeted public investment may be necessary.

22. Regional Cooperation to Underpin Growth. Another important way to accelerate growth is regional and subregional cooperation that offers larger markets, economies of scale, and division of labor. Such cooperation is especially useful for small countries with limited options. Cooperation may work best at the subregional level as in the Greater Mekong Subregion (GMS) and the “growth triangles” pioneered by ADB in the Association of Southeast Asian Nations, South Asia, and the Central Asian republics. In order to strengthen and support such cooperation, ADB prepares and implements regional cooperation strategies and programs (RCSPs). Several RCSPs have been prepared and are being implemented such as for the GMS and Central Asia. In 2003, ADB prepared its first RCSP for the Pacific.

23. Environmental Sustainability. Environmental sustainability is central to pro-poor economic growth. Growth will be short-lived if it does not conserve the natural environment and resources. Although much damage in the past was caused by powerful vested interests, the pressures of poverty and population compound the threat through deforestation, overgrazing, and depletion of fish stocks. The rural poor are often forced to live on fragile lands and waters that require sensitive resource management in the face of increasing degradation. The urban poor are exposed to disease and illness resulting from overcrowding and polluted living conditions. Poverty reduction strategies need to incorporate policies and actions that enhance the quality and productivity of the environment and natural resources.

B. Inclusive Social Development

24. Economic growth must be accompanied by effective social development programs that enable disadvantaged groups in society to benefit from the expanding opportunities it provides. ADB supports the efforts of DMCs by helping them plan for human capital development and by developing the policies, institutions, and infrastructure needed to deliver basic social services to the poor effectively. Consistent with the MDGs, ADB recognizes that each person should have access to basic education, primary health care, and other essential services. Such access creates opportunities for poor people to improve the quality of their lives and to participate more fully in society. A proactive approach needs to be adopted to help reverse social and economic discrimination and to promote initiatives that meet the needs of previously excluded groups. The reach and sustainability of social development is improved when all people, especially the poor and excluded, have an opportunity to participate in shaping public policies and programs. Ensuring that the voice of the poor is heard at all levels of decision making is central to the success of social development efforts.

25. Human Capital. Human capital is often the only asset of the poor, and its development is of fundamental importance in poverty reduction. Building marketable skills, protecting the poor against health hazards and risks, and eliminating harmful practices like child labor are central to the development of human capital. It is necessary to ensure the relevance, quality, and quantity of social services to boost the productivity and participation of all members of society.

26. Population Policy. The correlation between family size and selfperpetuating poverty is generally strong, especially in rural areas. Most countries realize the need to reduce population growth by giving highest priority to

1. ensuring universal education for girls
2. providing accessible reproductive health services
3. increasing economic opportunities for women

27. Gender and Development. In many societies, women suffer disproportionately from the burdens of poverty and are systematically excluded from access to essential assets and services. Improving their status addresses a key aspect of poverty and provides important socioeconomic returns through reduced health and welfare costs and lower rates of fertility and maternal and infant mortality. Giving women voice and promoting their full participation can make important contributions to the overall development of society.

28. Social Capital. When poverty is pronounced, social cohesion is often weak, and communities suffer from conflict, marginalization, and exclusion. In such cases, strong, proactive policies are required to reverse perceptions of social and psychological inferiority, to foster a sense of empowerment, and to create genuinely participatory institutions. Social capital and a more inclusive society can be promoted through antidiscrimination legislation, land reform, legal recognition of user groups, and accessible systems of justice. Specific measures may be required to provide suitable social services and equitable access to economic opportunity for ethnic minorities.

29. Social Protection. Every society has people who are vulnerable because of age, illness, disability, natural disasters, economic crises, or civil conflict. Social protection comprises a cluster of programs designed to assist individuals, households, and communities to manage risks better and to ensure economic security. Such programs include old age pensions, unemployment and disability insurance, and social safety nets. Also included are policies to improve labor mobility and to enforce labor standards. Adopting efficient strategies and public programs for managing risk and vulnerability can help enable the poor and the excluded to participate in economic growth and development.

C. Good Governance

30. Public Sector Reform. Good governance is critical to poverty reduction as weak governance hurts the poor disproportionately. Public sector inefficiency, corruption, and waste leave insufficient resources for basic public services and antipoverty programs. Good governance facilitates participatory, pro-poor policies as well as sound macroeconomic management that encourages economic growth and maintains price stability. Better revenue administration and carefully prioritized and implemented expenditures, particularly for basic services, are essential. Lack of accountability, domination by local elites, widespread corruption, historic patterns of inequality, and lack of participation of the poor must also be addressed in public service delivery in order to raise the living standards of the poor.

31. Corporate Governance. Good governance is necessary in the private sector as well to protect depositors, investors, and consumers; to enhance competition; to increase efficiency; and to expand financial resources for all. As the Asian economic and financial crisis of 1997 has shown, good governance is also essential to avoid or reduce the severity of economic shocks in an era of increasing liberalization and globalization.

32. Mainstreaming Good Governance. ADB mainstreams good governance into its operations. It strives to devolve the provision of public services to the lowest appropriate level. ADB assists DMC governments to operate in a transparent and accountable manner, to uphold basic rights, to provide public safety, and to promote the rule of law and stresses the importance of legal reform. Participatory processes involving civil society and the poor in promoting and sustaining responsive, responsible government are emphasized.

33. Partnerships with Civil Society. Civil society has an important role to play in fostering good governance. Numerous nongovernment organizations (NGOs)—both national and international—are engaged in development work or in championing the legal rights of the poor. The establishment of the NGO Center in 2001 has greatly facilitated ADB’s coordination and collaboration with them. NGOs have also been closely involved in preparing ADB policies particularly in water, energy, environment, and social protection. ADB will continue to cooperate with NGOs to benefit from their experience and perspective and to take advantage of their grassroots networks.

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