Need for Inclusive Growth | Asian Development Bank

Need for Inclusive Growth

Op-Ed / Opinion | 9 January 2008

Rapid, sustainable growth remains the best weapon to combat poverty and merge the two faces of Asia.

Asia's economic success has caught global attention. It is a journey that began with Japan emerging as an industrialised nation, followed by ascension of Asia's "Newly Industrialised Economies" (NIEs), and more recently the emergence of new economic powerhouses - the People's Republic of China (PRC) and India.

The region has come a long way and shown tremendous resilience in overcoming famines, energy crises, market meltdowns and economic downturns. Based on a $1 a day poverty measure, poverty incidence declined from 34.6 per cent in 1990 to 18 per cent in 2005. Developing Asia galloped at an average rate of over eight per cent in the past three years.

Today, it is one of the most dynamic regions of the world, with hundreds of millions enjoying better incomes, health and greater opportunity than ever before. But it is not time yet to celebrate the region's economic triumphs. We have promises to keep and miles to go before we celebrate.

As Asia attains ever-increasing levels of prosperity, it faces a daunting dilemma: how can Asia enable its poorest to realise their rightful aspirations, providing them with jobs and a better standard of living, while also protecting the planet we all share? There are no easy answers or quick fix solutions.

The region still is home to two-thirds of the world's poor. Each year across the Asia and Pacific region over four million children die before reaching their fifth birthday and maternal deaths in the region account for almost half of the global total.

Asia and the Pacific accounts for about 65 per cent of the world's underweight children and many countries in the region are even lagging behind Sub-Saharan Africa. Over 1.5 billion in the region are living without basic sanitation facilities and more than 560 million in rural areas lack access to improved water sources.

Rising environmental pressures due to land degradation, poor water management, pollution in urban areas, carbon dioxide emission contributing to climate change could push more people into poverty. While climate change is expected to take many forms and affect populations everywhere, some of the most detrimental impacts will be felt in Asia and the Pacific, by the poor.

Rapid economic growth and existence of millions of poor have given birth to what we say are the "two faces of Asia" - one that is witnessed from the glitzy towers of Mumbai and Shanghai and the other seen in the gloom covering the slums of Jakarta, Manila and Mumbai. This growing economic dualism poses a threat to sustaining Asia's dynamic growth and social cohesion.

The challenge ahead for us is not to lose heart. We are at the half-way mark towards meeting the Millennium Development Goals target date of 2015 and have a historic opportunity to change the lives of millions living in abject poverty. The "two faces of Asia" need to converge to sustain growth and maintain social harmony in the region as well as within the countries. There can be only one Asia - one face of Asia, with opportunities open to all; an Asia and Pacific where every individual can live with dignity - free of poverty and sharing in prosperity.

The task of meeting this challenge should not be underestimated. Even by conservative estimates, there would be more than a billion in Asia by 2020 with incomes less than $2 a day. This means that a large number in Asia will still have to eke out a daily existence on less than the cost of a Starbucks latte.

Growth in Asia has helped to lift millions out of poverty in the past few decades but at the same time the earnings gap between the rich and poor has also widened in many parts of the region.

While rising inequality is indeed worrisome, waging an all-out battle against poverty is the only way to merge the "two faces of Asia" and close the development gaps. And in this battle, rapid and sustainable growth remains the best weapon to combat poverty and bring a change in the lives of the poor - bypassed and the marginalised of Asia. According to our estimates, every one per cent growth has been associated with an almost two per cent decline in poverty incidence on average.

Asia has to invest in creating opportunities that are needed to lift millions out of destitution and ensure that these opportunities are accessible to all. Redistribution of income is not the solution to reduce poverty. Rapid growth is necessary to create opportunities that can be accessed by all and help alleviate the misery and sufferings of millions living in abject poverty.

Poverty cannot be conquered without significant investments in health, education, human resource development and social safety nets to bring more people, especially the poor, into the process of growth. No doubt, Asia needs massive investments in physical infrastructure to sustain growth, but it also needs equally large, if not larger, investments in social infrastructure to provide the poor with access to services and employment opportunities.

Countries that generate rapid, environmentally sustainable economic growth and create decent and productive employment will beat poverty as well as build the foundations for political and social stability.

Governance reforms that strengthen and create institutions are also essential to ensure that poor can access economic opportunities created by rapid growth. Developing Asia has to keep its foot on the pedal to ensure that growth remains buoyant and helps to lift millions out of their daily sufferings. If we fail to address this challenge, the glitzy towers of Manila and Mumbai will continue to be ringed by slums and threaten both the economic progress and social cohesion of one of the most dynamic regions of the world.