Asia/Pacific Regional Consultation on IFAD Rural Poverty Report 2009
Keynote Speech by
Xianbin Yao
Acting Director General
Regional and Sustainable Development Department
Asian Development Bank
24 July 2008
Sofitel Philippine Plaza Hotel
Manila, Philippines
The Honorable Senator Edgardo J. Angara,
Dr. Arsenio Balisacan, Director of SEARCA
Dr. Ganesh Thapa, and other friends of IFAD
Distinguished Guests, Ladies and Gentlemen:
Good morning.
I thank the co-organizers to invite ADB to attend this regional consultation workshop. On behalf
of the bank, I would like to congratulate IFAD for initiating this important work on rural poverty at
the time when poverty reduction in rural areas is facing a reversal. The reversal, as we all know,
is closely related to fast rising energy prices and persistence of high food prices.
Given the energy-intensive nature of farming, high energy prices obviously have a detrimental
impact on rural poverty. The impact of rising food prices on rural poverty is somewhat
ambiguous as some farmers might gain while others would lose. Nevertheless, it appears that
on the whole rural poverty is likely to increase. This is due to two factors. First, food
expenditures comprise a large share of the poor’s total income, over 60% in Asia. In this region,
as many as 1.2 billion are vulnerable to soaring food prices. Food price inflation also may have
aggravated the severity of food deprivation and malnutrition. Second, a large segment of Asia’s
population, including rural residents, is net buyers, a majority of whom are poor or near-poor.
Soaring prices therefore hit them the hardest. Needless to say, higher cost on food reduces
spending on health and education and “squeezes” expenditures that are critical for the overall
welfare of the poor.
Recent ADB research indicates that for the Philippines, a 10–30% rise in food prices will lead to
3-9 million new poor. For Pakistan, the head count could rise by 7-22 million. The research
shows that the food crisis is caused not only by short-run cyclical factors, but also by structural
changes in both demand for and supply of food, implying that high prices will stay and persist.
Such structural changes include substitution of high-protein products for direct food grain
intakes, energy-related hikes in food production costs, reduced grain supply at global level due
to bio-fuel conversion, and deteriorating farming environment and the emerging effects of
climate change.
Ladies and Gentlemen, the ADB’s response to the food crisis is both immediate and longer term
in nature. Short-term response includes targeted interventions to protect the food entitlements of
the most vulnerable groups plus income and livelihood programs for the poor to mitigate the
immediate impacts of the crisis. ADB also provides budget support to hardest-hit countries to
alleviate the fiscal pressures and assist imports of food grains and agricultural inputs. Two days
ago, 22 July 2008, ADB approved a $170 million concessional loan to Bangladesh to cope with
the current food price crisis. The loan is part of broader food security package being extended
by international agencies and the Government of Bangladesh totaling $1.29 billion.
In the medium to long term, ADB’s assistance to the agriculture and natural resources sector
would seek to (i) enhance productivity growth; (ii) promote bio-security; (iii) improve access to
information and communication technology; (iv) improve market access and income
diversification; (v) encourage better risk management; (vi) continue the dialogue to deepen and
widen policy reform; and (vii) strengthen institutions, enhance capacity and skills, and promote
good governance. ADB recently adopted the Long Term Strategy or Strategy 2020, which
presents a comprehensive framework for the bank to step up its efforts of supporting inclusive
growth and sustainable development in the developing Asia.
Rural poverty in the Asia and Pacific, indeed, deserves special attention, even if the crises in
energy and food prices had not occurred. Rural poverty in the region has been acute and the
scale of deprivations of rural populations severe, calling for urgent remedial action. I would like
to highlight two facts which will make this assertion obvious.
Fact 1. Asia remains mainly rural and poverty is mainly a rural problem in the region.
Although economic development has changed the composition of the population, about twothirds
(64% in 2006) of the population of the Asia and Pacific region live in rural areas and even
in 2015, this percentage remain as high as 58%. Further, rural areas are home to around 80%
of the poor and they suffer from greater deprivations than the rest. Using the $1/day poverty
line, the rural poor in the region was about 483 million in 2005. Using the $2/day poverty line,
the rural poor amounted to a staggering 1,393 million in 2005.
Fact 2. Non-income poverty is even more severe than income poverty in rural areas. In 2005, Asia was home to 71% of the world’s people without access to improved sanitation; 58%
of those without access to safe water; 56% of the world’s undernourished; and 43% of total child
mortality. Despite Asia’s rapid economic growth, in some MDG areas it has more significant
deprivations than Sub-Saharan Africa. For example, the prevalence of underweight children is
higher in the Asia-Pacific region (over 30%) compared to Sub-Saharan Africa (28%). South Asia
had more individuals suffering from malnourishment and people living in slum conditions than
Sub-Saharan Africa in 2005. East Asia and the Pacific had more people without access to safe
water than Sub-Saharan Africa; and South and Southeast Asia had more individuals without
improved sanitation.
Given the challenges relating to poverty reduction in the Asia-Pacific, what can be done?
The Asian experience suggests that focusing on promoting growth is as important as attempting
to secure the right pattern of growth. In other words, we must promote inclusive growth which
entails rapid and widespread employment growth and social development. Growth has
substantially reduced poverty owing to two key factors. First, from the 1970s onward, many
countries witnessed rapid rural growth during the Green Revolution and through reforms that
gave dynamism to agriculture. Second, beginning in the 1980s, relatively labor-intensive growth
in the non-agricultural sector (primarily industries) was able to absorb significant numbers of the
rural poor, typically at better wages than in agriculture.
The Asian experience also suggests that raising farm productivity and increasing non-farm
employment are both crucial. Focusing on one or the other alone would not be sufficient, since
the scope for the non-agriculture sector to grow fast enough to absorb vast numbers of rural
poor is limited in Asia’s poorest economies. There is growing evidence that current growth
processes in many countries are not generating sufficient employment. In this context,
development of human capital – the intellectual and physical capacities, skills, and knowledge of
the rural population is essential for adoption of new agricultural technologies, and the movement
of the poor into off-farm activity, whether within the rural sector or outside it.
To be more specific, reducing rural poverty in the region requires five general areas of
interventions.
First, raising agriculture productivity. Farming continues to be the mainstay of the rural economy
in the region, so improving the productivity of agriculture is crucial in any rural development
strategy. Complacency about agriculture and food security in the region must end. Indeed,
overall development in a country must have the strong backing from a vibrant and more
productive agriculture sector and rural economy.
Second, managing natural resources and the environment is a high priority in the region. There
is a strong poverty-environment nexus in Asia that requires interventions to improve productivity
of land and other natural resources through irrigation and better management of other
environment-related interventions. Poor farmers typically work on marginal lands characterized
by water and soil deficiencies. Degradation of soils, forests and watersheds poses a major
challenge for the poor, raising their vulnerability and making their exit from poverty even harder.
Third, expanding rural nonfarm economy and improving rural infrastructure are imperative for
broad-based growth in agriculture and non-agriculture sectors. Policies and carefully targeted
investments are needed to enable rural nonfarm enterprises to diversify and grow in size and
productivity; provide the infrastructure base such as roads, power, and water supply for greater
economic dynamism in the countryside and rural townships; and help workers make the
transition from farm to nonfarm activities.
Fourth, promoting social development in rural areas—quality education and health care remain
out of reach for all too many in rural Asia. Education and health promote the development of
human capital that is essential to increase rural farm and nonfarm productivity, and better equip
the rural poor for entry into the nonfarm workforce. Systems of social protection need to be
strengthened both to protect the poor from the risks they face, and to enable them to take risks
in order to transit from traditional activities to riskier but more remunerative ones. Social
exclusion based on gender, caste and ethnicity needs to be addressed proactively.
Finally, attention has to be paid to strengthening rural policies and institutions. Rural growth and
poverty reduction require a conducive policy environment and, particularly at the local level,
capable rural institutions. Rural farm and nonfarm entrepreneurs need better access to efficient
financial services, while good governance is essential in decentralized public agencies and
service provision. Improved quality of rural finance and public services will accelerate growth
and enable the region’s agriculture and rural nonfarm sectors to exploit the opportunities
provided by growing domestic demand and globalization.
Ladies and Gentlemen, we may know something about what to do to reduce rural poverty. But
the challenge we face is to turn “what to do” into “how to”. We need to work hard and learn how
those general ideas of interventions are effectively designed and implemented, that take into
account the differences in social and political situations. Indeed, we all must have the keen
interest of learning and searching for workable and adaptable solutions. Thank God, rural
poverty reduction is not a rocket science; the task is not left to technocrats alone. It requires
engaging all concerned. I must also add that rural poverty reduction is much harder a task than
rocket science. We need to develop a greater appreciation of the political economy perspective
to understand how rural poverty reduction is effectively moved onto the agenda of policy
makers, and how policy substance get deliberated and developed.
Let me conclude, the Asia and Pacific region has achieved much in reducing poverty in general
and rural poverty in particular. Yet the challenges ahead of us is daunting in both income and
non-income poverty. The likely persistence in food prices and continued turmoil in the energy
market may well reverse the declining poverty trend. Thus, concerted efforts must be instituted
to work with the poor, especially helping them to accumulate physical and human capital, and
thereby to enable and empower them to move up and move forward. With this, I wish the
regional consultation process for the IFAD”s flagship “Rural Poverty Report” successful and
fruitful.
Thank you all
.
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