Emerging and Transition Economies: Widening the Poverty Gap - Asia

In the early years of the twenty-first century several countries—most notably China and India—that had suffered long-term extreme poverty began to experience unprecedented economic growth. Reasons include rapidly expanding economies and increasing acceptance into the global marketplace; the burgeoning fields of technology and science in both East Asia and the Indian subcontinent that have allowed for greater educational and employment opportunities; the outsourcing of jobs from developed countries to the developing world; and the relative loss in value of the U.S. dollar, which has in general increased the values of foreign currencies.

Despite near record high oil prices around the world, a disappointing agricultural harvest in Southeast Asia, and a softening electronics market, all in 2006, economic growth in the developing countries of Asia is expected to continue. In 2005 the Asian Development Bank's Asian Development Outlook 2005 Update (http://adb.org/documents/books/ado/2005/ado2005.pdf) projected the region's gross domestic product (GDP) would continue to grow at an average of 6.6% in 2006, down from 2004's 7.4%, but still a high rate. (By comparison, the U.S. GDP grew at an annual rate of 3.8% in the third quarter of 2005, according to the Bureau of Economic Analysis, October 28, 2005). High oil prices have been a mixed blessing for Asia. The countries of Central Asia (as defined by the Asian Development Bank: Azerbaijan, Kazakhstan, Kyrgyzstan, Tajikistan, Turkmenistan, and Uzbekistan) have abundant oil supplies that make them a major region of net oil exports. In 2004 the regional GDP for the Central Asian republics grew at a remarkable 10.4%, according to the Asian Development Outlook, with a rate of 8.8% growth projected for 2006 and 9.2% projected for 2007. Turkmenistan, Kazakhstan, and Azerbaijan in particular have rapidly expanding economies and are experiencing growth in such industries as tourism, communications, and oil and natural gas. Furthermore, government investment in modern infrastructure has increased employment and exports in other industries.

In East Asia—which includes Hong Kong, Mongolia, the People's Republic of China, the Republic of Korea, and Taiwan—GDP growth has been strong since 2000 and was projected at 7% for 2006. The acceptance in 2001 of the People's Republic of China into the World Trade Organization (WTO) added to the economic expansion of East Asia, which was led largely by exports from China. In China relaxed government policies have allowed entrepreneurs to compete—many for the first time—in the global marketplace. In addition to the success of such exported products as steel, real estate in China has boomed.

The countries in South Asia (Afghanistan, Bangladesh, Bhutan, India, Maldives, Nepal, Pakistan, and Sri Lanka) have also experienced some of the strongest rates of growth, allowing many people in the region to attain relative prosperity in the early years of the twenty-first century. The resulting consumer spending in such countries as India and Pakistan has fueled the economies even further. Even war-torn Afghanistan—the least developed country in the world as of 2005—was estimated to achieve GDP growth of 7.5% in 2005, despite the massive social and political upheavals since September 11, 2001. In 2005 the Indian government announced its creation of the Building India program, which will invest $40 billion over four years in improving rural infrastructure, with the goal of moving more of India's rural population into the middle class.

However, despite Asia's unprecedented economic growth in the first few years of the twentieth-first century, extreme poverty persists in the region, and the Gini coefficient is actually rising. According to the report Enhancing the Fight against Poverty in Asia and the Pacific: The Poverty Reduction Strategy of the Asian Development Bank (December 2004, http://www.adb.org/Documents/Policies/Poverty_Reduction/2004/prs-2004.pdf), 720 million Asians lived on less than one dollar a day in 2000.

A majority of Asia's poor are concentrated in South Asia, mostly in the large economies of India, Bangladesh, and Pakistan, but the rest of the continent has many poor people as well. According to the Asian Development Bank in Poverty in Asia: Measurements, Estimates, and Prospects (2004), 1.9 billion Asians lived on less than two dollars a day in 2002, 690 million of them on less than one dollar a day.

Even with its strong economic growth, Kazakhstan maintains a high rate of poverty, at about 24% in 2002 ("Kazakhstan: Poverty Persists Despite Impressive Economic Growth," IRINnews.org, May 13, 2004). In Tajikistan, the poorest of the Central Asian republics, more than 83% of the population lives below the country's poverty line; in Kyrgyzstan 44% and in Turkmenistan 58% live in poverty. According to the United Nations, 70% of the population of Afghanistan lives below the poverty line; only 23% of Afghans have access to safe drinking water, and just 12% have access to adequate sanitation (http://www.undp.org.af/about_us/overview_undp_afg/default.htm).

In all regions of Asia the rapidly growing economies have actually increased the numbers of the working poor—that is, those who are steadily employed but still live below their country's official poverty line. Perhaps more troubling, the gap between the rich and poor has expanded dramatically, particularly in two of the most populous countries on earth: China and India.