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Friday, October 28, 2016, 09:50

Lifting the poor

By Carmen Ho and Alfred Romann in Hong Kong

Led by China, East Asia has been the biggest driver of the reduction in poverty rates globally.

Lifting the poor

Back in 1990, six out of 10 people in East Asia and the Pacific lived in what economists and policymakers call extreme poverty — defined as income of less than US$1.90 per day. By 2013, the number had dropped to just three in every 100, an enormous decline driven by extremely fast economic growth, much of it in China.

New data from the World Bank, released ahead of the International Day for the Eradication of Poverty on Oct 17, suggest that East Asia has been the biggest driver of the international decline in poverty rates.

Led by China, where efforts to alleviate poverty and extreme poverty over the past few decades have been astounding, East Asia has accounted for more than 70 percent of the reduction. And Asia as a whole has been a big driver in decreasing worldwide poverty.

“We saw a very strong, very bold reduction in extreme poverty because of GDP growth,” said Professor Bruno Sergi, who teaches emerging market economics at the University of Messina and Harvard University, where he is an associate at the Davis Center for Russian and Eurasian Studies.

Sergi said the effects of Asia’s economic expansion were being felt throughout the region. “Pakistan, Bangladesh and countries like Indonesia are doing a good job of reducing extreme poverty,” he said.

In Pakistan, for example, per capita GDP more than tripled from around US$400 in 1990 to US$1,428 in 2015. In India, the increase has been even more startling, growing fivefold in the same period to just over US$1,580. Even poorer Bangladesh has seen per capita GDP rise from US$298 to US$1,211.The World Bank says the first Millennium Development Goal to halve the world’s 1990 rate of absolute poverty by 2015 was reached five years ahead of schedule in 2010.

In 1990, more than a third of people in the world lived on less than US$1.90 a day. By 2013, only 10.7 percent of people did. In actual numbers, that is 767 million people in 2013, compared to 1.85 billion in 1990. Perhaps even more impressive, between 2008 and 2013 some 88 million people per year were lifted from the most absolute poverty.

All this is good news, but it is somewhat skewed. Many people around the world are still living in extreme poverty — 11 out of every 100. While in 1990 a majority of them were in East Asian countries, now only 9.3 percent of them are in the region. Today, the majority of the world’s poorest are living in Africa.

In late September 2015, the United Nations pledged to “eradicate extreme poverty for all people everywhere” by 2030. A few days later, the World Bank raised the “extreme poverty” line from US$1.25 to US$1.90.

It remains to be seen how this change affects the UN’s ability to reach its new goal, but the practical reality, said Sergi, is that the baseline of poverty will continue to go up even as countries work to improve their citizens’ quality of life.

China, for example, set its own poverty line back in 1978 at an annual income of 100 yuan (US$15) per year, but raised it steadily. By 2011 the China poverty line had hit 2,300 yuan, with plans to keep raising it.

Laos, one of the poorest countries in Southeast Asia, has been working to boost funding for its Poverty Reduction Fund, set in 2002, and to cut down on poverty. One of the goals there is to improve citizens’ quality of life, considering that 19 percent are undernourished.

Cambodia has been using cash transfers to the poorest to tackle the problem, and reduced the absolute poverty headcount from 34 percent of the population to 17.7 percent between 2008 and 2012. The headcount was about 50 percent in 2003.

According to the World Bank, the number of people living in extreme poverty fell by an average of 88 million per year between 2008 and 2013. Much of that happened in East Asia, matching relatively fast economic growth.

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