Poverty in Asia 

Sep 11th  2001

Widespread poverty and excessive inequality remain the principal challenges to the legitimacy of the process of globalization that has been underway during the last two decades. Even as economies and governments adjust to afford a larger role for markets and a smaller role for the State in development, the importance of public action to deal with poverty and vulnerability has only increased. It is for this reason that the 1995 World Summit for Social Development called upon countries not just to set "time-bound goals and targets" to substantially reduce overall poverty and eradicate extreme poverty, but to implement national anti-poverty plans to achieve these targets. This task is indeed daunting in the Asian region, where in 1998, 800 million people, amounting to 67 per cent of the world's poor, were below the international poverty line of $1 per day per capita at 1993 prices.
This measure focuses on the lack of monetary means to meet a specific set of needs, and usually takes the form of identifying consumption poverty. Within that definition, absolute poverty is identified as an income or expenditure level at which the food component of expenditure is inadequate even to meet the physiological needs for survival. That is, the poverty line is defined
"as the total consumption expenditure at which one can expect a person to be adequately nourished in the specific society under consideration." The identification of "needs" being subjective, the latter definition, which ties the required need down to a calorific requirement essential for subsistence, is seen as having an element of objectivity about it. Many "national" poverty line figures derive from such a notion of poverty. The arbitrary international poverty "standard", which identifies the poor as those earning less than $1 or $2 per capita per day in purchasing power dollars, also derives from a similar notion.
Once need and its relevant monetary equivalent are arrived at, a number of measures on the incidence of poverty can be worked out. The most widely used is the head-count ratio, which estimates the numbers below the poverty line and their proportion to the relevant total population. The problem with poverty lines tied to a specific calorific requirement is that they presume that at the point when expenditure is adequate to meet that requirement, the non-food component of expenditure is adequate to cover required
"basic needs". In reality, of course, it does not. In as much as a decent subsistence requires that other "basic needs" such as clothing, shelter, safe drinking water, adequate sanitation, and accesses to health and educational facilities are also met, over time the definition of poverty was expanded to include these, even though this involved some loss in measurability in the form of a single number capturing incidence. Poverty now was reflected not just in the per capita income of households being inadequate to meet specified consumption needs, but also in the inadequate access to a range of services that impacted on crucial indicators of health and morbidity.

The Achievements in the Asia-Pacific
With income and consumption surveys hard to come by in the case of most countries, assessments of the gains registered in the reduction of income poverty must necessarily be spotty. However, World Bank figures (Table 1), based on national surveys from which comparable estimates have been computed, indicate that between 1990 and 1998, while poverty reduction in East Asia, including China, has been quite significant (from 27.6 per cent to 15.3 per cent), it has been slow in South Asia (42.4 per cent to 40 per cent) and the incidence of poverty has risen in East Europe and Central Asia (3.95 to 5.14 per cent). The sharp reduction in the incidence of poverty in East Asia as a whole, as well as in China in particular, has meant that the number of income poor in these countries has also fallen quite substantially during the 1990s. However, in South Asia, which includes India that is characterised by a large population and a high incidence of poverty, the smaller reduction in poverty incidence has not helped prevent an increase in the number of income poor. Moreover, between 1996 and 1998, during which time East Asia was afflicted by the financial crisis of the late 1990s, poverty in fact rose marginally in the whole of East Asia and significantly in China, resulting in an increase in the number of income poor in those countries.
Table 1 >>
The unusually large reduction in East Asia between 1993 and 1996, does indeed render the East Asian figures suspect. It must be reported that the regional aggregates are based on global and regional aggregates computed by the World Bank using distributions from 265 national surveys from 83 countries, representing 88 per cent of the population of the developing world. Coverage varies geographically, ranging from 53 per cent of the population in the Middle East and North Africa to 98 per cent of the population of South Asia.
Unfortunately of the 83 countries in the data set 17 had only one survey, 31 had just two surveys and 35 had three or more survey over the period 1980 and 1998. This has meant that poverty estimates for individual reference years in many countries have been computed by extrapolation, using the figure on mean consumption from national accounts statistics and by assuming that the distribution has not changed since the previous or succeeding survey. This makes the figures yielded by the World Bank's exercise partially unsatisfactory, though it is the principal source of data for making international comparisons of poverty trends.
Needless to say, within the region and its sub-regions, individual countries have performed very differently in terms of the record of reduction in income poverty. Table 2, which provides figures on poverty computed by the World Bank using three different poverty lines in 8 countries in the East Asian sub-region, yields a number of pointers. First, the World Bank's poverty line of $1-a-day delivers in most countries poverty incidence figures that are far lower than that yielded by country-specific poverty lines. Second, poverty incidence is extremely sensitive to the poverty line, with poverty incidence rising dramatically when the poverty line is doubled to $2-a-day. Third, poverty in the rural areas tends to be far higher than in urban areas in all East Asian countries, with the exception of Mongolia. Finally, within East Asia, poverty differs substantially, falling from a high of  26 per cent to a low of 0 per cent on the basis of the $1-a-day poverty line in five countries for which figures are available.
Table 2 >>

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