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Tackling the myths of Asian poverty
Despite rapid economic growth, many
developing Asian countries continue to confront the challenge of
high levels of poverty.
China, which has enjoyed double digit growth rates for many years,
has managed to rescue more than 200 million out of grinding
poverty, but several hundred million people in that country still
live in poverty.
The poverty scenario is possibly worse in India, where most cities
contain massive slums and the country has been somewhat less
successful in having the fruits of economic growth trickle down to
the poorer segments of society.
Malaysia and Thailand have successfully lifted millions of people
out of poverty, as did Indonesia until the massive setback during
the Asian economic crisis in 1997.
The communist regimes in Vietnam, Cambodia and Laos have recently
managed to pursue rapid economic growth and the impact has yet to
be felt among the broader populace.
In the case of the Philippines, poverty levels have probably
worsened in recent decades in the face of lacklustre growth and
limited government efforts to foster rural development.
In all cases, foreign investment has played a key role in speeding
up economic growth, with India probably an example where
indigenous capitalists and entrepreneurs have been dominant.
These governments have also long recognised that untrammelled
growth is not enough to address poverty and most have adopted
various other strategies.
A recent study by Adrian T.P. Panggabean, an economist with the
Asian Development Bank, noted that based on the standard of US$1 a
day, as of 2000, the number of poor people in Asia was estimated
at 720 million, making the region “home to some 60% of the world’s
poor.
“The challenges look more daunting when considering the non-income
dimension of poverty using the Millennium Development Goals,”
according to his ADB Working Paper published last November on
‘Public-Private Partnerships for Poverty Reduction’.
Some countries in the Asia-Pacific may not meet any of the MDG
goals but most will meet some but not others such as child
immunisation and maternal mortality.
This shows Asia is not on track to reduce child mortality
sufficiently to meet MDG targets.
Panggabean said there was evidence of a link between
infrastructure and achievement of poverty reduction goals, with
promotion of growth acting as a channel through which
infrastructure contributed to poverty reduction.
He cited studies that diarrhoea was significantly lower for
families with access to piped water in India, and another showing
roads and telecommunications had played a critical role in
reducing rural poverty in China between 1978 and 1997.
Panggabean said: “To make infrastructure interventions effective
in serving the poor, both government and business need to take
into account cross effects among targets in the MDGs.
“Health and nutritional status, for example, directly affect a
child’s probability of school enrolment. Access to safe water and
sanitation is critical for child survival.
“In order to meet the goal of universal primary education, the
government not only needs to invest in schools, but should also
provide better transportation networks (to ensure access) as well
as basic electricity to allow school children to study at home.
“The existence of such interlink ages means that isolated
infrastructure interventions may do little to achieve goals if
bottlenecks remain in other sectors.
“Accordingly, national investment programmes must be built on
multi-sectoral analysis and anchored in coherent country poverty
assessments.”
Panggabean suggested that much more could be done to harness the
potential of private sector investment for economic and social
infrastructure.
The author said it was often assumed that people with low incomes
have little to spend, and buy little beyond food and shelter, and
that provision of infrastructure would not be a viable proposition
for the private sector. But these assumptions are often
challenged, he wrote, especially given the present state of
technology.
Panggabean said multinational companies already service large
numbers of poor people in developing countries.
He noted that in many Asian cities, urban slum dwellers often pay
10-20 times what the middle class pays for water and in Mumbai,
the cost of a one minute phone call for slum dwellers could be
double that of the middle class in the same city.
In many poor Asian communities, effective interest rates of 100%
or even 1,000% per annum “are not uncommon”.
“In rural Bangladesh, villages have an income of less than US$1 a
day, yet as the Grameen phone experience shows, the aggregated
buying power of a whole poor community can be commercially
significant.
“All these examples suggest that the poor have purchasing power.
These also show that costs to the poor can potentially be reduced
if they could benefit from a certain scale of provision. Business
can potentially gain from serving the poor as well.”
(Next week: Harnessing the power of the private sector)
 
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