Making Poverty History in Asia by the Year 2015
Asia is a puzzle. China, India and several other countries are enjoying rapid economic growth. Yet some 600 million
Asians – more than the entire population of Latin America – live on less than a dollar a day. But this puzzle is also an opportunity: if China and India can sustain their 8-10 percent annual GDP growth, and bring the rest of Asia with them, the continent with the largest concentration of poor people in the world stands a very good chance of eliminating poverty by 2015. This issue among others was the subject of a conference held this week on the future of the region.
Keat Chhon
What will it take? The same factors that enabled Asia to achieve rapid growth in the past – domestic reforms and external assistance – but with some important changes.
All Asian countries, and especially China and India, grew rapidly by maintaining macroeconomic stability, opening up their economies to trade, and harnessing the dynamism of the private sector. The fiscal, trade, regulatory and financial sector reforms that made these possible should be continued and deepened.
Second, the growth needs to be more widely shared. Since 80 percent of Asia’s poor live in rural areas, agricultural growth will be key. Rural infrastructure, land rights, rural credit and better prices for agricultural products – something that will be helped by a successful conclusion to the Doha Round of trade talks – will contribute to higher incomes for Asia’s farmers.
Third, because of their recent rapid growth, all Asian countries are now facing infrastructure bottlenecks. From
Bangladesh to China, businesses rank infrastructure as a major constraint to investment. Estimates of the amount of new infrastructure needed are around $250 billion annually. But at least as important as building new infrastructure is managing existing infrastructure assets. Despite ample supply, no city in South Asia has 24×7 water. Water tariffs are politically manipulated, utilities are inefficient and a drain on the treasury, and crucial maintenance is neglected. Better management of infrastructure, and more conducive policies, can also attract private- sector funds for building new infrastructure as the public sector will not be able to finance all of the additional $250 billion.
Fourth, unless Asia has a healthy, skilled and productive work force, it will not be able to sustain its growth. Countries such as Pakistan and Cambodia are seeing slow progress in health and education. Regions such as northern India and western China have very high and stubborn rates of child mortality. And countries which have achieved basic human development, such as Sri Lanka, Bangladesh and Indonesia, are facing second-generation problems of education quality, secondary and tertiary education, and non-communicable diseases such as cancer, diabetes and heart disease.
Here too the problem is not just a lack of resources, but ineffective use of resources. In India, the absentee rate of doctors in public, primary health clinics is 40 percent. Tackling this problem will require strengthening the delivery of services in primary education, universities, clinics and hospitals to name a few by holding politicians and providers more accountable to citizens, especially poor citizens. Finally, the Asian continent has been hit with a series of man-made and external shocks, from the East Asian financial crisis of the 1990s to the tsunami in the Indian Ocean in 2004. While they have generally weathered these shocks and there have been very few episodes of sustained negative growth in the continent, Asian countries will have to protect the factors that helped them adjust to these shocks, including a diversified economy, low external debt, and a focus among policymakers on preventing crises.
The international community has also played an important role in fostering growth and poverty reduction in Asia. But the fact that aid has been successful in Asia means that the partnership will have to change in the future. As Asian incomes grow, financial assistance for “gap-filling” becomes less important, except in the poorest countries. What becomes more important is knowledge assistance. But this knowledge assistance too is changing, from traditional technical assistance to joint problem-solving with governments, civil society and the private sector; from prescriptions to empirically-based policymaking. To scale up poverty reduction, Asian governments need to know what works, and what doesn’t. Impact evaluations of innovative projects, often financed by the World Bank or the U.K. Department for International Development, can answer this question.
Of course, the main partnership between industrial countries and developing Asia is that of trade and investment. Not only has this fueled growth on both sides, but it will continue to flourish, as Asian countries become a bigger market for European, Japanese and American exports – and an excellent destination for foreign investment – while Asians continue to sell their products abroad.
Asia’s recent economic history shows that rapid, sustained growth is possible. If this growth can be accelerated and more widely shared by deepening reforms, improving infrastructure, building human resources, and managing risks, then Asia’s 600 million poor people will escape poverty in a decade. Asia’s development partners can support this transformation by strengthening knowledge assistance, while expanding trade and investment in Asia. Together in this giant continent, we can make poverty history.
Shantayanan Devarajan and Homi Kharas are the World Bank Regional Chief Economists for South Asia, and East Asia and the Pacific, respectively.
(Source: The World Bank Newsletter, Volume 4, Number 4, April 2006)