Mass Poverty in the Region

Before turning to discuss some specific issues of economic security in the region, I want to say a few words about what is perhaps the most challenging economic problem in Asia -- mass poverty. I want to discuss this topic briefly because in the view of many observers, overcoming mass poverty is one of the key steps needed to strengthen economic security in the region.

In recent decades we have seen much economic success across Asia -- not least here in Malaysia where strong growth-oriented policies have paid off in a remarkable way and have transformed the Malaysian nation. Yet while hundreds of millions of people across Asia have benefited greatly from the economic gains of recent decades and can now be regarded as living in reasonable prosperity, the cruel truth is that the cancer of mass poverty still hangs over the region. Thus while it is true that much encouraging progress has been achieved during the past 30 or 40 years, it is also true that the challenge of eliminating mass poverty is as urgent as ever.

How serious is the challenge? Earlier this year, a team of ADB specialists prepared a valuable overview of poverty in Asia (Asian Development Bank 2004a). The study provides a review of many important issues but there are three main conclusions that I would like to draw attention to today.

• First, the study notes that "the magnitude of poverty in the region is staggering". In terms of the most common international definition of extreme poverty -- those who live on less than $1 per day -- in 2002 almost 690 million Asians were poor. Moreover, using a more "generous" poverty threshold of $2 per day -- which is surely not very generous at all -- around 1.9 billion Asians were poor. That is, using the $2 per day figure, close to 60% of the 3.3 billion people living in the Asia-Pacific developing countries included in the study were poor.
• Second, the ADB study noted that "the existence of widespread extreme poverty makes its removal the region's greatest development challenge." Comments of this sort should, surely, give economists such as ourselves food for thought. Surely the fact that perhaps half or more of the population of the region live insecure lives in deep poverty both reflects a serious failure of economic policy and poses a range of threats to regional economic security. Mass poverty across the region reflects a failure of economic policy because as economists in the tradition of Adam Smith we know that good economic policies can go a long way to improving the wealth of nations quickly and bringing about rapid improvements in living standards. And mass poverty across the region poses threats to economic security because when the mass of people in a country are poor it is difficult to build the strong institutions needed to underpin the existence of a secure civil society.
• Third, the study paid close attention to both the impact of overall economic growth and the distributional aspects of growth in reducing poverty. As far as growth is concerned, the report noted that "Rapid reductions in poverty among [ADB's] developing member countries have virtually always taken place in the context of rapid economic growth." It concluded that "… policies that generate high, sustainable growth must be a key focus of poverty reduction strategies for the region's policy makers." At the same time, however, it is clear that the distributional aspects of the pattern of growth are important. Recognizing the need to ensure that pro-growth policies are also pro-poor, the ADB study noted the importance of adopting policies to tackle rural poverty and observed that the expansion of economic opportunities in rural areas has an important impact on poverty. The report also flagged the need for policies that would promote labor-intensive growth to expand employment opportunities for poor people.