Economic growth alone does not guarantee poverty reduction in developing countries. Evidence from Asia illustrates that rapid growth may not benefit poor and excluded groups of people, and could even threaten social stability and national cohesion. Governments and donors need to smooth these transitions and help poor people share in the benefits of growth.

Asia has achieved impressive economic growth along with poverty reduction in recent years. Between 1990 and 2001, the number of people living on less than a dollar a day dropped from 931 million to 679 million. But this growth – and its impact on different aspects of development – has been uneven across and within countries. An article in Development Policy Review draws attention to the structural and demographic transformations that accompany rapid growth, and the unique challenges they pose in Asia.

Accompanying rapid growth, the economic structure of countries tends to shift from one that is predominantly rural and agriculture based to an urban, industrial and eventually service and knowledge-based structure. This is happening in China, Vietnam and India. Only in the poorest and slowest growing economies such as Nepal, Sri Lanka and Cambodia does agriculture still generate more than 30 percent of Gross Domestic Product (GDP).

The demographic and age structure is also changing, with the fastest growing countries experiencing a rapid fertility decline, a growing proportion of elderly people, fewer children and an aging labour force. Poorer, high-fertility countries have large young populations, but also face new challenges.

Key areas of concern include:

• In high-fertility countries, growth may not be sufficiently labour-intensive to create the number of jobs required to employ a growing labour force.
• High-fertility countries are still predominantly rural with poor infrastructure, so maternal mortality, child mortality and access to basic services remain problematic.
• Changing economic structures in the faster growing countries require the labour force to become increasingly mobile and skilled.
• Rising incomes lead to changing consumption patterns and impacts on health (‘diseases of the rich’ such as obesity and heart disease) and environment (pollution, energy use), that in turn require changes to health care and environmental policy.
• The worst poverty and exclusion occurs in remote or resource-poor regions and in overcrowded urban environments.

The paper surveys regional approaches to combating poverty and exclusion within Asia, innovative programmes for financing urban development, and the use of social protection schemes (for instance, Thailand’s ‘30 baht health scheme’). Governments will need the political will to address concentrations of poverty while strengthening linkages between rural and urban areas. In addition to highlighting specific experiences and lessons, the paper concludes with three general messages for policymakers seeking to achieve economic growth with poverty reduction:

• Donor coordination, with participation from national governments, is crucial to reduce the costs of administering aid and adjusting to growth, particularly in aid-dependent developing countries.
• There is a need to support local processes, for example by building up local skills and capacities.
• It is important to incorporate a focus on poverty and exclusion into all aspects of bilateral relations, and not just into development assistance programmes.

Source(s):
‘Structural Change, Growth and Poverty Reduction in Asia: Pathways to Inclusive Development’, Development Policy Review, Vol.24, No.1, pages 51-80, by Sarah Cook, 2006
Free online access to this article for HINARI subscribers Full document.

Funded by: Institute for Development Studies (UK)

id21 Research Highlight: 12 April 2007

Further Information:
Sarah Cook
Institute of Development Studies
University of Sussex
Brighton BN1 9RE
UK

Tel: 44 (0)1273 678490
Fax: +44 (0)1273 621202
Contact the contributor: s.cook@ids.ac.uk

Institute of Development Studies

Other related links:
"Challenges to achieving pro-poor growth in Asia"

"Pro-poor initiatives to reduce poverty in southern Africa"

"Why development policy should be concerned with group inequalities"

Rights, claims and capture: Understanding the politics of pro-poor policy, Working Paper from the Overseas Development Institute, UK (PDF)

Growth, Distribution and Poverty in Africa: Messages from the 1990s, Research Paper from the World Bank (PDF)