Redefining Poverty in Asia and the Pacific: ADB's Take

Article | 17 September 2014

Asia and the Pacific has reduced the number of people living on less than $1.25 a day by more than half, 10 years ahead of the 2015 global target set out in the Millennium Development Goals. Improving the well-being of the region’s poor, however, entails looking beyond the poverty line.

More than 700 million people in Asia and the Pacific live below the global poverty rate of $1.25 per day. Though comprising two thirds of the world’s poor, this number is a huge improvement from the 1.59 billion recorded in 1981. Yet, in the second decade of the 21st century, is $1.25 enough to cover a minimum standard of living?

ADB economists propose a broader definition of poverty in Asia that takes into account the challenges of improving the dire living conditions of a billion more people. In the 45th edition of Key Indicators for Asia and the Pacific released in August 2014, they say a more complete and appropriate basis for estimating poverty levels in Asia should factor in three major issues: the cost of living in the region, the impact of spikes in food prices, and the poor’s rising vulnerability to calamities, crises, and other shocks.

“$1.25 a day is not enough to maintain minimum welfare in many parts of our region,” said ADB Chief Economist Shang-Jin Wei in launching the publication. “A fuller understanding of poverty is needed to help policymakers develop effective approaches to address this daunting challenge.” Read the news release.

“$1.25 a day is not enough to maintain minimum welfare in many parts of our region. A fuller understanding of poverty is needed to help policymakers develop effective approaches to address this daunting challenge.”

- Shang-Jin Wei, ADB Chief Economist

The $1.25-a-day poverty line is based on internationally comparable prices or purchasing power parities in 2005 and an average of the national poverty lines of the 15 poorest countries in the world from 1988 to 2005, of which only two were from Asia. Using updated data focused on Asia, the report produced an estimated extreme poverty line of $1.51 per person per day for the region. The combined impact of this Asia-specific poverty line with food insecurity and rising vulnerability raises the number of extremely poor in the region to about 1.75 billion people.

Poverty is a complex, multidimensional problem. Though all but two of ADB’s developing member countries are expected to reach middle-income status by 2020, poverty will remain a serious problem in the region.

“The challenge for ADB is to help developing member countries eradicate remaining poverty, support greater inclusiveness to address inequalities, and become more relevant and effective in middle-income countries,” said ADB President Takehiko Nakao in a press statement in April.

Economic research and analysis play a key role in ADB’s mission to reduce poverty in Asia and the Pacific and in helping decision makers in the region make informed choices.

The book, Inequality in Asia and the Pacific, examines the trends, causes, and consequences of widening disparities in income and opportunities in the region. The authors note that “had Asian growth been achieved without rising inequality, an additional 240 million people would have been lifted out of poverty over the past 2 decades.”

The annual Framework of Inclusive Growth Indicators, published as a special supplement of Key Indicators, uses 35 indicators that measure the disparities in income and non-income dimensions of inclusive growth. Download the 2014 edition.

Fiscal Policy for Inclusive Growth, the special theme chapter in the Asian Development Outlook 2014, urges governments to proactively use fiscal policy to close widening income gaps, such as increasing spending on education and health care to bring these vital services to the poor.

Research work on the effects of economic shocks on poverty reduction is critical to forming policy responses to crises. A 2009 study assessing the impact of the 2008 global financial crisis estimated that the recession would prevent 64 million people from emerging from poverty under the $1.25 poverty line over the following 2 years, 2009 to 2010.

With 2015 nearing, ADB has played a leading role in the mapping out of a new global development agenda to succeed the Millennium Development Goal targets. It co-produced a study with United Nations agencies that proposes 12 specific goals to end not just poverty but other deprivations by 2030.

“The Millennium Development Goals have been a powerful tool for rallying global support around common objectives including poverty reduction,” said Kazu Sakai, Director General of ADB’s Strategy and Policy Department. “The report proposes the inclusion of new goals on zero income poverty and zero hunger and malnutrition by as early as 2030, as part of a broad post-2015 agenda.”

Learn more about the proposed post-2015 agenda.