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p. 77 of 95 BACK | NEXT Message from the Chairman of the Board of Directors Members, Capital Stock and Voting Power The Record Abbreviations 2004 in Review: Board of Directors' Report Special Theme: The Changing Face of the Microfinance Industry: Building Financial Systems for the Poor Part 1: Institutional Effectiveness Part 2: Poverty Reduction Strategic Priorities Thematic Priorities Regional Perspectives East and Central Asia Mekong The Pacific South Asia Afghanistan Bangladesh Bhutan India Maldives Nepal Pakistan Sri Lanka Southeast Asia Part 3: Financial Statements: Management's Discussion and Analysis

Annual Report 2004 : Part 2: Poverty Reduction

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South Asia

The year 2004 ended with the tsunami in India, Maldives, and Sri Lanka that are likely to increase poverty and retard progress toward achieving the MDGs. The economic toll in South Asia was highest in the Maldives and Sri Lanka; their projected growth rates for 2005 were accordingly revised downwards. Although India's death toll was in the thousands, the economic impact was limited. ADB pledged to assist all three countries and made considerable funding available to help finance reconstruction and rehabilitation.

The disaster marked the end of a year of mixed results. Robust economic growth helped to reduce income poverty substantially, but progress on the nonincome MDGs was mixed. Mortality rates for children under five were substantially reduced, and primary school enrolment and completion rates increased. At the same time, progress in child malnutrition, maternal mortality, and gender balance in education and health outcomes was not as significant. Tuberculosis and HIV/AIDS were also a cause for continuing concern.

Macroeconomic performance was robust although weaker than in the previous year. GDP growth slowed to 6.4% while inflation rose to 5.5%. Less favorable weather conditions, price increases for metals and petroleum products, and slower than anticipated growth in the global economy were the main causes behind the somewhat weaker performance.

The region continued to face economic challenges. Several countries recorded surpluses in their current accounts that reflected an excess of national savings over national investment. Measures should be taken to step up investment. In addition, the surpluses resulted in an unprecedented accumulation of foreign reserves.

The multifiber arrangement, a system of quotas that regulated the textile trade, came to an end in 2004 and could have an impact on the location of production. The quotas made a number of smaller South Asian countries heavily dependent on textile exports, raising concerns that producers could move operations. Adequate infrastructure investment will prove crucial for retaining competitiveness.

With the success of the South Asian Association for Regional Cooperation (SAARC) summit in January 2004 and improvements in relations between India and Pakistan, the prospects for regional economic cooperation have greatly improved and a program of cooperation with SAARC focusing initially on transport has started. Members of the South Asia Subregional Economic Cooperation program endorsed a plan for developing subregional tourism with great interest from potential development partners and the private sector. As part of the Subregional Economic Cooperation in South and Central Asia program, ADB assisted with the Central and South AsiaTransport and Trade Forum (CSATTF), focusing on developing corridors connecting landlocked countries with ports in the Arabian Sea and the Persian Gulf via Afghanistan. A CSATTF customs cooperation plan was developed for implementation during 2005–2007.

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