Growth does not mean poverty reduction: Study

A RECENT study has revealed that Papua New Guinea has experienced an uninterrupted seven-year consecutive economic expansion for the first time since Independence.
During this period, the level of extreme poverty in PNG is estimated to have fallen by 8.8%, according to the study.
But the author of the study, Laurence Chandy, of the Lowy Institute for International Policy in Australia, said this did not mean that economic growth translates into poverty reduction.
Mr Chandy said there was little doubt that, by any standard measure, poverty existed in PNG affecting much of the country.
He said that by using the international poverty line of US$1 (K3) a day, 37.5% of the population lived in extreme poverty in 2004.
The study, “Linking growth and poverty reduction in Papua New Guinea”, also found that for PNG, many of the deprivations were defined in terms of lack of access to jobs and money, education, clean water, health care, transport, roads and others.
The research paper focuses mainly on who owns the money, how they intend to spend it (consumer habits) and the question of whether they would give their money to the poor.
It also reported that those with sudden high incomes did not necessarily turn their good fortune into poverty reducing activities.
Mr Chandy said that this was the important factor because it was not guaranteed that higher incomes would be spent on these activities.
But it is hoped that if it is, then this will contribute to the achievement of the first UN Millennium Development Goal – the eradication of extreme world poverty.
The study also found that PNG’s poverty is fundamentally a rural problem, where the rural poor are found to be further below the poverty line than their urban counterparts due to lack of basic services.
Mr Chandy also said that while the rural livelihood was dependent on the land, public infrastructure also isolated them.
Due to the geography of the country and the Government’s inability to meet and overcome the challenges posed, this means that environmental determinism has effectively won.
He recommended two possible strategies for increasing the impact of growth on poverty, which were to favour types of growth in which income accrues to high elasticity channels, and bringing the poor closer in connection to the country by strengthening these poverty elasticities.
He said that these strategies would only work if individuals, companies and the Government participate in translating these into policy recommendations.
“These will provide practical steps by which the Government can address poverty in PNG,” Mr Chandy said.