Beating poverty a long and difficult challenge in Asia, Pacific : ADB report

Economy August 21, 2014 01:00


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POVERTY will remain a critical challenge for Asia and the Pacific in coming decades, requiring a greater focus on efforts to address food insecurity and economic vulnerability, according to an Asian Development Bank (ADB) report released yesterday.

Rapid economic growth in the region has led to a dramatic improvement in living standards. Extreme poverty, when measured as income or expenditure of less than US$1.25 (Bt40) per person per day in 2005 purchasing-power-parity terms, could fall to 1.4 per cent by 2030, if current trends continue. A poverty rate below 3 per cent is interpreted as poverty having been eradicated.

But the new report, “Key Indicators for Asia and the Pacific 2014”, says the $1.25-per-day measure does not fully capture the extent of extreme poverty.

That amount “is not enough to maintain minimum welfare in many parts of our region”, said ADB chief economist Shang-Jin Wei in launching the report. “A fuller understanding of poverty is needed to help policy-makers develop effective approaches to address this daunting challenge.”

Three additional elements should be factored into the poverty picture: cost of consumption specific to Asia’s poor; food costs that rise faster than the general price level; and vulnerability to natural disasters, climate change, economic crises, and other shocks.

The new report explores how including these elements in poverty assessments changes the region’s poverty landscape. Key findings include the following.

Broadly following the procedure used to determine the conventional $1.25 poverty line – but focusing on data from Asia – produces an estimated Asia-specific extreme poverty line of $1.51 per person per day. Using this poverty line would raise Asia’s poverty rate in 2010 by 9.8 percentage points – from 20.7 per cent to 30.5 per cent. The number of extreme poor would increase by 343 million people.

Rapidly rising food prices increase food insecurity. The poor spend far more of their income on food than the non-poor, so food insecurity must be accounted for when measuring poverty. Taking into account the fact that the increase in food prices is greater than the increase in the general Consumer Price Index, Asia’s 2010 poverty rate would increase by 4 percentage points, an addition of 141 million poor.

Many low-income households living just above extreme poverty can easily fall into extreme poverty because of natural disasters, financial crises, illness or other negative shocks. A vulnerability-adjusted poverty line adds about 11.9 percentage points to Asia’s poverty rate in 2010, adding 418 million poor.

While these factors are not necessarily mutually exclusive, the report finds the combined impact would increase Asia’s estimated extreme-poverty rate for 2010 by 28.8 percentage points to 49.5 per cent. This increases the number of poor by about 1.02 billion to 1.75 billion people.

The report projects that if recent economic-growth trends continue, the overall poverty rate would fall to 17.1 per cent in 2030, with most of the poor living in middle-income countries.

“To confront this challenge, the report urges a stronger focus on efforts to enhance food security and reduce vulnerability in addition to promoting growth,” Wei said.

Food security can be improved by enhancing availability through, for example, more rapid productivity and technological development, expanding affordability and access through targeted food aid for the poor and upgrading farm-to-fork infrastructure, and stabilising food supply through such steps as the creation of national or regional emergency-reserve stocks.

To manage increasing vulnerability, governments can invest in risk-mapping and disaster-risk-reduction efforts such as early-warning systems and livelihood diversification. Fostering the development of insurance products accessible to the poor, making infrastructure more resilient, and strengthening social safety nets are also important components of a poverty-reduction strategy.