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p. 86 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 Southeast Asia Indonesia Malaysia Philippines Part 3: Financial Statements: Management's Discussion and Analysis

Annual Report 2004 : Part 2: Poverty Reduction

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Southeast Asia

Southeast Asia, comprising Indonesia, Malaysia, and the Philippines, contains 60% of the population and production base of ASEAN. Malaysia, with a GDP per capita of $4,175, is firmly established as a middle-income country and has laid a strong foundation for further development. Indonesia and the Philippines have also developed into middle-income countries but still face many of the problems of low-income countries including high poverty rates. Their challenges are compounded by their geography and ethnic diversity; together they contain over 21,000 islands and over 900 spoken languages.

GDP growth soared in 2004 fueled by a continuing surge in demand for regional exports and by solid domestic demand. All three exceeded projections with growth at 5.1% in Indonesia (up from 4.1% in 2003), 7.2% in Malaysia (up from 5.2%), and 6.1% in the Philippines (up from 4.7%). Strong economic growth in Japan and the United States (US) and only a moderate slowdown in the PRC created a very positive export environment though growth in Malaysia and the Philippines slowed in the second half of the year as sharply higher world market prices for oil and an uncertain outlook for the US economy moderated demand. Recent rankings showed declines in competitiveness for Indonesia and the Philippines that dampened foreign and domestic investment in the face of intense competitive pressures from other emerging economies of Asia.

Progress toward MDG 1, eradicating extreme poverty and hunger by 2015, was significant. Based on present trends, the incidence of poverty using the $1-a-day standard is expected to be close to zero in Malaysia and to be 2.5% and 7.2% of the population in Indonesia and the Philippines, respectively. The record of achievement of nonincome MDGs has been mixed. All three countries performed extremely well in primary education (MDG 2), in gender indicators for MDG 3, and in reducing the under-five mortality rate (MDG 4). The last was halved or nearly halved in all three between 1990 and 2001. However, all three have fallen well short of hunger indicators (MDG 1.2) as measured by the percentage of children who are moderately or severely underweight. Declines of 35–26% in Indonesia, 23–18% in Malaysia, and 30–28% in Philippines were registered during the period.

A key focus of ADB's work in 2004 was regional cooperation. A series of consultations in all three countries and in Singapore led to the preparation of the first Southeast Asian RCSP which focused on enhancing competitiveness and on building connectivity for more isolated parts of the region. The program is designed to support ASEAN's new Vientiane plan of action, and to mobilize resources inside and outside of ADB to promote economic integration.

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