Poverty and Insecurity

I have spent some time on the topic of poverty because the issue of economic security which I want to turn to is closely linked to mass poverty. Mass poverty is a major cause of insecurity, but insecurity in turn helps perpetuate poverty in Asia. There is therefore a circular relationship between the two. Policies should thus be designed to address both poverty and insecurity.

It is useful, when considering the implications of security and risk in developing countries, to distinguish between existing risks on one hand, and new risks on the other.

As far as existing risks are concerned, it is important to recognise that what might be called the "ambient level of risk" in developing countries is often quite high, especially compared with the conditions generally found in rich countries.

That is, in all sorts of ways, life for many people in developing countries, and especially for poor people, is often a risky business. Indeed the array of risks, ranging from personal risks through to risks arising from national and international factors, is often formidable.

At the personal level, poor people in developing countries frequently face relatively high risks from such things as domestic violence, crime, sickness, unemployment, and so on. To take just one example, maternal risks for women in developing countries are very high. UNICEF recently reported that in the mid-1990s women in South Asia faced a 1 in 54 chance of dying from pregnancy and childbirth while the risk for women in rich countries was only 1 in 4,085. And not only are mothers in developing countries at high risk, children are as well. According to a recent WHO report, in the late 1990s infant mortality (ie, deaths before age 1) in least-developed countries was 100 per 1,000 live births compared to only 6 deaths per 1,000 live births in rich countries.

Moreover, we know that official figures from developing countries are often unreliable and can significantly underestimate the real risks. For example, ADB statistics on road accidents released two weeks ago noted that the numbers of people killed and injured in road accidents in Southeast Asia are generally much higher than those reported in official statistics (ADB 2004b). In Indonesia last year, close to 14,000 road injuries were reported to police while ADB estimated that the actual figure was around 2.5 million -- or well over 100 times the numbers registered in police records.

Developing countries and their citizens are exposed to risks at a society-wide and national level as well because community and national institutions are often underresourced and unable to respond effectively to social and national problems. One example of this is the legal system. In many developing countries the legal system works very poorly and provides little legal protection to citizens. It is often difficult to enforce contracts through the legal system. The consequence is that the risks and uncertainty involved in economic transactions for both producers and consumers can be quite high. Firms and individuals often turn to various kinds of informal methods, some of them generally agreed to be rather undesirable, to conduct business negotiations and to have contracts enforced.

Developing countries in Southeast Asia also face a range of external risks that impose high economic costs. Examples include the risks of piracy in the Straits of Malacca, said to be one of the most dangerous places for ships and their crews in the world, and the private and public costs arising from forest fires in Sumatra and Kalimantan. To be sure, high-income countries are also exposed to external risks of various kinds as well but high-income countries are usually better able to mitigate the risks than developing countries can.

In addition to existing risks there are new risks. Changes such as globalization and internal liberalisation of various kinds (economic, administrative and social) pose, or at least are often perceived to pose, new risks for developing countries. In point of fact, it is often the case that the new risks are not really new but are, rather, old risks in a new or more threatening guise. Whatever the precise nature of these risks, the key issue is that while greater economic openness and liberalisation opens up many new opportunities, pro-market changes often bring new problems as well.

In the jargon of the "Star Wars" film series, markets can be said to have "light-side" activities -- they foster higher levels of productivity, and the existence of fair and legal markets expands economic freedoms for citizens -- but there are "dark-side" activities in markets too -- corruption, rent-seeking, and black market activities of many kinds (including trafficking in women and children, money laundering, illegal trade of weapons, and so on). Greater freedoms, including greater freedoms in markets, can significantly expand the room for illegal as well as legal behavior. The risk that so called "non-state actors" who want to create their own private "states within a state" will take advantage of expanded markets poses significant risks for regulatory agencies in developing countries. Understandably, concern about the implications of these risks sometimes leads policy-makers in developing countries to be cautious about signing up to proposals for pro-market reform.