Challenges to achieving pro-poor growth in Asia

Remarkable economic growth in Asia over the last two decades has led to unprecedented reductions in income poverty. However, this success varies substantially among and within countries. New development partnerships and policies are required to sustain current rates of growth in Asia without increasing income inequality.

In South-East Asia, the number of people living on less than a dollar a day fell from 94 million to 40 million between 1990 and 2003. In China this number fell by over 200 million. China, Indonesia, Malaysia, Thailand and Vietnam have met the Millennium Development Goal of 50 percent poverty reduction by 2015 far ahead of schedule – in 2003. But some of the poorest people in Asia have not benefited from economic growth. An article from the Institute of Development Studies (based on papers commissioned for the UK Department for International Development’s Asia 2015 Conference in March 2006) identifies infrastructure, energy and the environment as the three biggest challenges to achieving pro-poor economic growth.

Rapid growth places heavy demands on infrastructure and energy resources, and has negative impacts on the environment. Asian countries need to ensure that infrastructure benefits poor urban and rural people. Governments also need to secure sustainable new energy sources while improving energy efficiency in order to limit the pressure on the environment.

The author observes that:

• Private investment in infrastructure has been disappointing: in India only 20 percent of hoped-for private investment in electricity materialised between 1992 and 2002.
• Key infrastructure challenges include investment in water and sanitation (which have a huge impact on child mortality rates), roads to improve connectivity in rural areas, and regional (cross-border) infrastructure.
• Demand for electricity is outpacing supply in both South and East Asia and this is a major obstacle to growth: China experienced a 10 percent shortfall in 2004.
• There are substantial untapped regional energy resources – for example natural gas in Bangladesh and hydroelectric power in Bhutan and Nepal.
• The poorest people are most adversely affected by environmental degradation and most vulnerable to the impacts of environmental disasters.
• Private investors can profit significantly from environmental investment: in Thailand more than 600 firms achieved an average 47 percent return from an eco-efficiency investment programme.

Key recommendations for governments seeking to promote poverty-reducing growth include:

• providing coherent national frameworks for infrastructure and increasing public sector investment in utilities
• creating subsidies to meet the expanding water and sanitation needs of urban populations
• phasing out market-distorting energy subsidies and developing institutional capability for promoting energy efficiency
• developing alternative fuels (such as liquid petroleum gas) and investing more in renewable energy resources (such as biogas, wind, solar) to meet rising energy demands
• removing incentives that promote environmental degradation (such as logging subsidies), increasing involvement of poor people in natural resource management, and enforcing environmental regulations
• developing inter-country collaborations to improve environmental management across borders on a more efficient, large-scale basis.

Such collaborations and partnerships will be key to sustaining poverty-reducing growth throughout Asia. The overall goal for policymakers, therefore, is to identify new public-private and inter-country partnerships that can make growth work more effectively for poor people.

Source(s):
‘Prospects and Challenges for Growth and Poverty Reduction in Asia’, Development Policy Review, Vol.24, No.1, pages 29-49, by John Humphrey, 2006
Free online access to this article for HINARI subscribers Full document.

Funded by: Institute of Development Studies (UK)

id21 Research Highlight: 27 April 2007

Further Information:
John Humphrey
Institute of Development Studies
University of Sussex
Brighton BN1 9RE
UK

Tel: 44 (0)1273 678671
Fax: +44 (0)1273 621202
Contact the contributor: j.humphrey@ids.ac.uk

Institute of Development Studies

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