Experts see dire poverty in East Asia cut sharply by 2020, new role for ADB

from The International Herald Tribune

MANILA, Philippines: Absolute poverty in East Asia could be largely eliminated by 2020, allowing the world's most populous region to enter its next stage of development, a panel of experts appointed by the Asian Development Bank said Monday.

As Asia develops, the Manila-based bank also needs to shift its focus from fighting poverty to supporting higher and more inclusive growth, according to a report prepared by the experts for ADB President Haruhiko Kuroda.

Between 1990 and 2004, the rate of absolute poverty — income of less than US$1 a day — declined from 29 percent to 8 percent in developing East Asia, according to the latest World Bank study cited in the report. At the same time, most economies grew near or above 5 percent a year.

That rate should drop to about 1 percent percent by 2020 — or fewer than 25 million of East Asia's estimated 2 billion will live in abject poverty.

East Asia includes Cambodia, China, Fiji, Indonesia, South Korea, Laos, Malaysia, Mongolia, Papua New Guinea, the Philippines, Solomon Islands, Thailand, East Timor and Vietnam.

The report did not project extreme poverty rates for nations in South Asia, such as India, Bangladesh and Pakistan.

But for all of Asia, 35 percent lived on less than US$1 a day in 1990, compared to 19 percent in 2003.

Meanwhile, the bank-appointed experts envisioned a new role for the Asia Development Bank, which "must evolve more rapidly to suit the region's new and fast evolving economic and political environment — or risk becoming irrelevant to its major clients."

When the ADB was formed 40 years ago, the Asia-Pacific region contributed about 20 percent of world gross domestic product. It now accounts for more than 35 percent of world GDP.

The bank's major role has been to channel investment funds from developed countries, mainly in North America and Europe, to underdeveloped Asia.

But the last decade has seen a rise in foreign exchange holdings across Asia "well beyond what is prudent to guard against potential financial crises," the report's authors said.

The ADB needs to shift its focus from fighting poverty to facilitating faster growth.

To achieve this, it should help Asian economies overcome major bottlenecks in transport, power, water and sanitation. Over the next 10 years, Asia needs to invest up to US$4.7 trillion (€3.5 trillion) in infrastructure — at least 50 percent higher than current investment rate, the report said.

At least one country — China — has moved from being a recipient of large amount of concessional financing to becoming a donor. By 2020, several ADB borrowers should become donors to their neighbors, the report said.

The ADB also should continue working with countries to eliminate the remaining pockets of poverty, it said.

Its current focus of transferring "capital surplus" from rich countries to poor "will no longer be central in a region that itself has a capital surplus," the report said.