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p. 2 of 5 BACK | NEXT Special Theme: Law and Institutional Reform: Catalysts for Inclusive Development in the Asia and Pacific Region The Challenge: Unleashing Human Capability in Asia The Role of Institutions in Inclusive Development ADB's Experience and Lessons Learned Conclusions and Challenges for the Future

Annual Report 2003

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The Challenge: Unleashing Human Capability in Asia

With over 3 billion people, Asia is home to a majority of the world’s population. It includes the two most populous nations, the People’s Republic of China (PRC) and India, as well as several small island states with populations of only tens of thousands.

The past several decades have ushered in major economic and social transformations. The Green Revolution has largely banished the specter of recurring famine, and immunization programs have reduced infant and child mortality. The phenomenal economic growth in some East Asian countries has been billed as the “East Asian Miracle.” For the first time in the history of Asia in the span of one generation, entire countries have been lifted out of poverty and now rank among the prosperous societies of the world. The rapid economic growth in the PRC since 1980 has significantly reduced the number of poor people in the world. As the growth of the Indian economy accelerates, and as the prospect for peace and stability in South Asia brightens, the potential for further economic and social progress in the region is indeed impressive.

Despite these successes, Asia confronts a sobering array of challenges. The region is still home to more than half of the world’s poor. Malnutrition, disease, violence, lack of education, and premature death haunt the lives of too many of those most likely to have been excluded from the surging economic boom. They may be women; uneducated; landless or unskilled; members of ethnic, religious, or cultural minorities; or simply people living in remote regions who are unable to migrate to settings with better economic opportunities. Such exclusion reinforces, often from one generation to the next, their disadvantages in society.

Deprivation is often an outcome of past policies and practices. To remedy this, the rules of the game must be re-examined and modified. At the beginning of the 21st century, the international community took a determined step in this direction in the Millennium Declaration.¹ The pursuit of the Millennium Development Goals outlined therein calls for a comprehensive re-examination of both the strategies for economic growth and the function and organization of institutions critical in meeting them. Consistent with this, ADB has defined poverty in a comprehensive manner.

“Poverty is a deprivation of essential assets and opportunities to which every human is entitled. Everyone should have access to basic education and primary health services. Poor households have the right to sustain themselves by their labor and be reasonably rewarded, as well as having some protection from external shocks. Beyond income and basic services, individuals and societies are also poor—and tend to remain so—if they are not empowered to participate in making the decisions that shape their lives.”²

For wider economic participation, people must be able to control their lives and to reshape the opportunities that are open to them. As long as the poor have low productivity jobs and the exchange of labor continues at near subsistence levels, they will remain extremely vulnerable. Widening employment opportunities in higher productivity jobs will, therefore, continue to be of paramount importance in economic development. At the same time, efforts must be made to ensure that jobs offer fair wages and provide some measure of security against the uncertainties of the marketplace.

Development efforts that bypass vulnerable people can hardly succeed. The challenge is to pursue economic growth through inclusive development that combines initiatives to expand and equalize opportunities, to combat discrimination, to enable and foster participation, and to provide all with a stake in managing common resources. Inclusive development uses political, economic, and social policies to reduce vulnerability in a framework of pro-poor, sustainable economic growth. By its nature, it helps build consensus on the vital issues facing a nation. ADB’s Poverty Reduction Strategy and supporting policy documents³ articulate precisely this challenge (see box).

The Poverty Reduction Strategy of 1999 was the culmination of a long learning process in which ADB transformed itself from a project lender in the 1970s to the institution it is today: a supporter of development in its totality. It provides a comprehensive framework for ADB’s approach to inclusive development and explicitly states that poverty reduction is ADB’s primary goal. This goal is pursued through country poverty reduction strategies.

The Strategy rests on three main pillars: (i) pro-poor, sustainable economic growth, (ii) inclusive social development, and (iii) governance for effective policies and institutions. It also recognizes the importance of strengthening the private sector, of regional cooperation, of gender, and of promoting environmental sustainability. The Strategy recommends that ADB increase partnerships with civil society, local governments, and other stakeholders including its bilateral and multilateral development partners. A major review of the Strategy was launched in 2003 and is still under way.

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