INCLUSIVE GROWTH AND POLICIES: THE ASIAN EXPERIENCE. Thangavel Palanivel Chief Economist for Asia-Pacific UNDP, New York

Transcription

1 INCLUSIVE GROWTH AND POLICIES: THE ASIAN EXPERIENCE Thangavel Palanivel Chief Economist for Asia-Pacific UNDP, New York

2 Growth is Inclusive When It takes place in sectors in which the poor work (e.g., agriculture) It occurs in relatively backward areas It uses the factors of production that poor possess (e.g., unskilled labour) It keeps prices of food and other basics relatively low

3 Message 1: Rapid growth in Asia has been accompanied by significant reduction in poverty as well as significant increase in income inequality. Asia experience, therefore, is not a story of the rich getting richer and the poor getting poorer. Rather it is the rich getting richer faster than the poor. In the context, Asia growth has not been sufficiently inclusive

4 Growth in Asia has been not only high, but also accelerated over the period Income inequality widened in the same period Per capita GDP Growth Accelerating 197s 198s 199s 2s South Asia East Asia Africa Latin America Changes in Gini Coefficients between early 199s and 25-8 Sri Lanka China Cambodia Indonesia India Nepal Bangladesh Mongolia Lao PDR Vietnam Pakistan Philippines Thailand Malaysia

5 Rate of poverty reduction has been high in Asia; while it has accelerated in East Asia over the period, it has slowed-down in South Asia Growth impact of poverty has been low and declining in South Asia 2 Annual rate of poverty reduction slowed down in India and South Asia South Asia East Asia Africa China India 2 1 Relationship between growth and poverty Change in Poverty rate ( $1.25 a day) EAP SA LAC SSA Total

6 Message 2: Growth in Asia has been less-inclusive because 1. Growth has been uneven across sectors and locations 2. Demand for skilled and unskilled labour also uneven 3. Growth has been driven by capital-intensive sectors 4. Income of the poor eroded much more severely than the rich due to high food and fuel prices 5. High disparities in assets and access to infrastructure impede the poor from fully participating in the growth process

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10 The rate of growth of productivity has been higher in Asia compared to other regions; it has also accelerated Despite this, level of labour productivity is still low in Asia compared to the world average, which limits the creation of decent employment opportunities % Annual growth of labour productivity in Asia is relatively high Thousands in 25 PPP $ labour productivity is low in Asia in 29 2

11 45% of the global working poor live in South Asia due to large scale underemployment and low productivity Within South Asia, working poor rates are high in Bangladesh, Nepal and India 1 Working Poor ($1.25 a day) by Regions Others 8 Working Poverty Rates $1.25 working poor $2. working poor Million Africa Latin America South-East Asia East Asia % of total employment BGD IND NEP PAK SRL South Asia Source: ILO Global Employment Trends 211

12 High food prices reduce purchasing power of the poor more than the rich Higher food prices decreased poor households purchasing power by 24 % in Asia, while for rich households this decline was just 4%.

13 High inequalities in assets impede the poor from fully benefitting in the growth process Land holding and other assets including financial assets are highly concentrated in several Asian countries 75 6 Inequality in Distribution of Land Holdings (Gini) 8 6 Wealth Gini Bangladesh China India Indoneasia Korea Lao PDR Malaysia Nepal Pakistan Phillipines Sri Lanka Thailand Veitnam 2 Japan China India Korea Indonesia Thailand Pakistan Bangladesh Veitnam Mexico Brazil Source: ADB

14 High inequalities in educational attainment hinder the poor from fully participating in the growth process Percentage of children aged who have never attended school Bangladesh India Nepal Pakistan Cambodia Source: World Bank Bottom Quintile Rich Quintile Indonesia Phillipines Veitnam Bangladesh Percentage of Children aged years who have completed 1 Grade India Bottom Quintile Rich Quintile Nepal Pakistan Cambodia Indonesia Phillipines Veitnam

15 High gender inequalities limit women from fully participating in the growth process % of women own land Source: UNDP Women s labour force participation rate is low: 33 % in South and Southeast Asia compared to 77 % of men Women earn only 34 percent of men s wages in South Asia Women own only 7% of farms in Asia versus 18% in Africa;

16 Message 3: Public policies have also not been sufficiently inclusive Since the poor lack both human and financial capital, public policies that help poor to build their human capital, better manage their risks, and improve the access to credit are key for making growth more inclusive

17 Investing More in Basic Services Public Spending on education and health is low in Asia compared to other regions For health services, a very high proportion of private expenditure is out-of-pocket Health expenditure in Public spending on education (% of GDP) 27 (% of GDP) Total Public Private East Asia & Pacific Latin America & Caribbean South Asia Sub-Saharan Africa World Source: World Bank

18 Invest more to improve Agricultural Productivity Governments support to agriculture declined Level & share of ODA to agriculture also declined from $8 to $3.4 billion; 18% to 3.5% Good rural infrastructure, modern seeds, fertilizer, irrigation, R & D and farmer training are necessary for robust agricultural productivity & sustainable growth Agricultural Public Investment as % of Total Government Expenditure by Regions AFRICA ASIA LAC Developing countries Source: UNDP

19 Existing Social Protection Programmes are Not Sufficient to protect the poor from risks in Asia Current social assistance programmes are fragmented and not well targeted Coverage in A-P is low compared to Latin America and Eastern Europe Most of the programmes do not take risks into account Coverage of Social Protection is low Bangladesh Bhutan Cambodia China Fiji India Indonesia Lao PDR Malaysia Maldives Mongolia Nepal Pakistan Philippines PNG Sri Lanka Viet Nam Unem/under employed Elderly Health Care

20 Access to formal financial services is low in Asia compared to other regions The share of the people who have access to basic formal financial services in Asia is relatively less (24 % in South Asia and 39 % in east Asia) compared to that of Central Asia and Eastern Europe (42%), Latin America and Caribbean (45%), and OECD (84%).

21 Key Areas for Policy Interventions Improve poor s access to basic health care and basic education through increasing public spending as well as ensuring quality of social services Expand income earning opportunities for the poor by increasing employment opportunities and improving productivity of farm and non-farm activities Strengthen social protection systems to reduce risks associated with economic shocks/natural calamities Fostering rural non-farm and SME activities would create employment opportunities for unskilled labourers

22 Many countries are moving in the right direction The focus of recent development plans/strategies is on inclusive growth (e.g., 11 th Five-Year Plans of India and China). Conditional cash transfers in countries such as Bangladesh, Cambodia, Indonesia, and Philippines are designed to reduce disparity in gender, education and health indicators India s National Rural Employment Guarantee Scheme, China s Minimum Livelihood Guarantee Scheme,, and Thailand s Universal Health Insurance Scheme are good examples of social protection schemes designed to help the poorest and most vulnerable. Recently many countries are increasing resource allocation into agriculture and rural development