Dev Asia HP PDF

APRIL 2013
A publication of the ASIAN DEVELOPMENT BANK
DEEPENING
April 2013 Development Asia 1

Meet Moyna. Living in Dhakas Kunipara
slum, Moyna is an enthusiast member of
BRAC's health and nutrition programme
operating in her community. She covers up
to 250 households and provides a range
of basic health services and products at
affordable prices to her neighbours. BRAC
sells its birthing kit to Moyna for 42 cents,
which she re-sells for about 52 cents, creating
a small income stream for her and, a low-tech
solution to sanitary home births. Saline and
iron tablets are the typical top sellers.
There are over a 100 thousand women
just like Moyna in Bangladesh, Afghanistan
and Pakistan, and many African countries
BRAC reaching to more than 120 million people in
recently some of the worlds hardest to reach places.
When BRAC does something, its always with
ranked
BRAC Communications/ 2013
one eye on developing community leaders

No.1 NGO like Moyna, and the other on scaling up to
by Global address the worlds biggest challenges.
Journal Small is beautiful, and scale is

Photo: BRAC
necessary.
www.brac.net
1 www.development.asia
Inside
SPECIAL REPORT : INEQUALITY 11 Dening Inequality
9
Settling on a denition has claried
The Wealth Gap 13

the issues at stake
Striking A Balance
Inequality is hitting alarming highs in Asia as A little incentive can go a long way
the fruits of growth skew to the rich 16 Inequality in Asia
Cover Illustration: Otto Dettmer Illustrating the inequality challenge
24 Raising Cambodia
The Growth Conundrum
Cambodia is winning
The economies of the Peoples Republic
its battle against
of China, India, and Indonesia are growing.
child mortality
But so is inequality
27-31
Proles of Inequality
Shanghai. Bengaluru. Jakarta
36
33
Opinion: Justin Yifu Lin
Sweeping market reforms would help
18 Beijing narrow wealth gaps
Q&A: The Reformer
Indias top nance official 34 39
P. Chidambaram discusses Less Unequal Than Others In Search Of A Cure
progress on curbing Some Asian countries have grown Solutions aplenty, but common
inequality without leaving anyone behind ground is rare
PUBLISHERS
NOTE
ASIAS INEQUALITY A publication of the ASIAN DEVELOPMENT BANK
PUBLISHER
CHALLENGE Ann Quon

MANAGING EDITOR
Andrew Perrin
SENIOR EDITOR
John Larkin
inequality in the Peoples Republic EDITORIAL ADVISOR
Juzhong Zhuang
of China (PRC). ASSOCIATE EDITOR
We discuss how some countries Jenina Alli
have managed to sidestep the PRODUCTION MANAGER
Miguel Paulino
inequality trap, and reveal how others COPY EDITORS
like Cambodia have made progress in Ma. Priscila del Rosario
Tuesday Soriano
curbing the symptoms of inequality DESIGN
in this case child mortality. Cleone Baradas
Rounding out our cover package
is a central question: What can be Development Asia features development
issues important to Asia and the Pacic. It is
done about inequality? While some published twice a year by the Asian Development
Bank (ADB). The views expressed in this
characterize inequality as a phase on magazine are those of the authors and do not
BENEATH THE GLOSS of Asias the path to prosperity, an emerging reect the views and policies of ADB. Use of the
term country does not imply any judgment by
newfound prosperity lies an unsettling consensus suggests otherwise and the authors or ADB as to the legal or other status
reality. Rising inequality has denied highlights the importance of inclusive, of any territorial entity.
the benets of Asias economic growth jobs-rich growth. Advertising of any specic commercial product,
In our Features section, we venture process, service by trade name, trademark,
to many millions of its citizens. The manufacturer, or otherwise, in this publication
problem is worsening as the regions into Asias sprawling slums for a close- does not constitute or imply ADBs endorsement,
up look at how hopeand economies recommendation, or favoring of any of the
rich get richer much faster than the product or the entity thereof.
poor, who miss out on the income, can take root amid the squalor. Many
education, and health care they need slums are now vital hubs in the broader COMMENTS
to lead fullling lives. economy of their cities, a positive step Send your feedback to the editor at
editor@development.asia
In this issues Special Report, but one that complicates plans for slum
Development Asia examines Asias redevelopment. ADVERTISING
To advertise in Development Asia, contact
widening inequality from many Closing this issue is Black & White, a advertising@development.asia
different perspectives. We look at new section that provides a space for SUBSCRIPTIONS
the role of globalization in producing some of Asias leading photographers Contact subscriptions@development.asia
inequality, and consider the disputed to display their work on a specic REPRINTS
relationship between inequality and development project or theme. In Material published in Development Asia and
on www.development.asia, including articles,
economic growth. this issue, Filipino photographer photos, graphics, and other content, is
Asia isnt the only region suffering Veejay Villafranca spent time with the copyrighted. Material may not be reproduced,
republished, or redistributed without
from a wealth gap, but unlike others garbage-pickers of Manilas Smokey written permission of Development Asia. For
it has failed so far to narrow the Mountain waste dump. Veejays reprint permission, please contact editor@
development.asia. Photographs not owned by
divide. Most of its large economies powerful image, on page 56, and the ADB require permission from the copyright
story of a project trying to improve holder for reprinting.
have shown rising income inequality
since the 1990s, and rural poverty is the lives of the pickers, suggests it was Development Asia
Department of External Relations
outpacing urban poverty across much time well spent. Asian Development Bank
of the continent. If left unchecked, the In pictures and words, Im 6 ADB Avenue, Mandaluyong City
1550 Metro Manila, Philippines
consequences of this trend could be dire. sure youll nd that this issue of editor@development.asia
Palaniappan Chidambaram, the Development Asia sheds new light on www.adb.org
Government of India Finance the strugglesand solutionsthat are Note: In this publication, "$" refers to
Minister, provides unique insights a daily fact of life for many people in US dollars
into Indias experience with Asia and the Pacic. Printed on recycled paper
inequality in a fascinating question- 2013 Asian Development Bank
and-answer session. In a forthright ISSN 1998-7528
opinion piece, former World Bank
chief economist Justin Yifu Lin Ann Quon
delivers his prescription for tackling PUBLISHER
Inside 46 Digital Dollars
Thousands of people in
developing countries are
earning real money working
in virtual worlds
50 Results First
An innovative development
aid model focuses on
outcomes over inputs
DEPARTMENTS
4 Situation Report
5 On The Record
6 On The Web
49 Review
55 Development Agenda
FEATURES
42
Slums Reconsidered
Slums may be eyesores,
but they can also be
dynamic economies
56
Black & White
CONTRIBUTORS
NIDHI DUTT JUSTIN

PHILIP
is a journalist YIFU LIN
BOWRING is honorary dean
is based in Hong based in Jakarta,
Indonesia. She and professor of
Kong, China
specializes National School
and is one of
in emerging of Development
Asias best-
markets and development and at Peking
known columnists. Over 40 years,
reports for a variety of international University. From 2008 to 2012, he
he has written on regional nancial
news outlets. Nidhi was previously served as chief economist and senior
and political issues for leading
the BBCs Mumbai correspondent vice president of the World Bank. His
international publications including
and presenter of India Business many books include Demystifying
the International Herald Tribune
Report. She has also covered India the Chinese Economy, The Quest
and the Wall Street Journal Asia.
for the Australian Broadcasting for Prosperity, and New Structural
He is a former editor of the weekly
Corporations Australia Network, Economics. He is a corresponding
Far Eastern Economic Review and a
reporting for television as well as fellow of British Academy and a
founder of www.asiasentinel.com
radio and online. fellow of the World Academy of
Sciences for the Developing World.
SITUATION
REPORT
PEAK PRESSURE
Central Asias vast mountain ranges can
play a decisive role in the regions future
prosperity if looming challenges are
addressed, according to a new report
on sustainable development in
mountain communities.
There are various economic and
environmental challenges that face
Central Asian nations emerging
from decades of Soviet control, says
Sustainable Mountain Development
in Central Asia, a report coordinated
by the University of Central Asia in
Bishkek, Kyrgyz Republic.
The report calls for the creation of
a mountain countries group under
United Nations (UN) auspices, and water resource disruptions challenge solutions should be promoted, and
an exchange of external debt for governments and, in some cases, pricing systems applied for services and
equivalent investments in sustainable international relations. resources provided by mountain areas
development, as rst steps to tackle The report, jointly produced by to downstream markets.
looming problems. nongovernment organizations The report highlights opportunities
Peaks spanning Central Asia provide and research organizations, says for better biodiversity protection
90% of the regions water supply and the challenges also provide through sustainable livestock herding,
help modulate climate across a wide opportunities for Kazakhstan, the Kyrgyz as well as economic gains from
area, notes the report. Republic, Tajikistan, Turkmenistan, community-based tourism, responsible
But global warming is slowly and Uzbekistan. mining, and hydropower.
decimating mountain glaciers, affecting Lowland countries affected by climate Strategies for mountain development
snow reserves, and at the same time change should account for mountain should be linked to broader agreements
increasing the water requirements ecosystems in their planning through on trade, economic development,
of basic agricultural crops, it says. afforestation and sustainable land conict resolution, and resource
The downstream and lowland use. Small-scale water management management, it says.
TEA TEAM
Leading Asian tea producers are shortages, the impact of climate
spearheading a new global organization change, and a need for better
ILLUSTRATION: SUSTAINABLE MOUNTAIN DEVELOPMENT IN CENTRAL ASIA
to promote the beverage and stabilize agricultural practices.
global tea prices. The International What we have just achieved is a
Tea Producers Forum was formed in historic landmark in the tea industry,
Colombo, Sri Lanka, earlier this year. Sri Lankas Plantations Minister
Sri Lanka will act as the groups rst Mahinda Samarasinghe told Agence
secretariat as members attempt to France-Presse. He said production
forge unity among tea producers for the quotas were not on the agenda, but
rst time in decades. maintaining price stability and product
Sri Lanka joins India, Indonesia, quality was a priority.
Kenya, Malawi, and Rwanda as founding Last year, the Food and Agriculture
members. Together, they produce 1.9 Organization of the United Nations
billion kilograms of tea a year, according predicted black tea consumption to
to Reuters news service. They face increase by 1.8% yearly until 2021, with
common challenges including labor prices rising marginally.
to more than double to 439 million,
ON THE
while Indias will likely triple to 323 RECORD
million. Bangladeshs elderly will rise
from 7% to 23% of the population by
2050, according to the United Nations Humanity has traditionally
Population Fund (UNFPA). Philip Guest, put its faith in advances
UNFPAs Bangkok-based assistant of technology to resolve
director for South and Southeast Asia, problems of resource
told IRIN news service that aging
demographics will severely affect
scarcities. However, there is
developing countries. Many workers now a growing realization
in these countries arent covered by that there may be no easy
social security, leaving them without alternatives for some
A GRAYING ASIA income later in life. Chronic illnesses like
dementia and cancer will become more
resources, particularly
environmental resources.
By 2050, one in four people in Asia will common as people live longer but not
be older than 60, as the gray population necessarily healthier lives.
Resource efficiency is, thus,
triples to more than 1.2 billion. Footing the bill to support the a necessary condition for
In East and Northeast Asia, the rise of vulnerable aged will fall on governments, sustainable development,
the older generation will be even more presenting them with grave scal and a key element of
dramatic, with one in three people aged challenges. In a 2009 report, Aging in the economic pillar of
over 60. Two-thirds of Asias elderly will Asia, the Asian Development Bank sustainability.
be women. (ADB) outlined broader impacts,
-India Prime Minister
This demographic transformation including slower economic growth and
Manmohan Singh, Jan. 2013
is unmatched in scale anywhere else lower savings.
in the world, says the United Nations UNESCAP recommends more
Economic and Social Commission for comprehensive health care for older
Asia and the Pacic (UNESCAP). people. ADB calls for better pension
The success of the MDGs
Falling mortality and fertility lie schemes, funded perhaps by long- means that there is a lot of
behind Asias age dilemma. Already term government bonds. It says labor interest in expanding them
home to 55% of the worlds elderly shortages could be blunted if barriers to include a broader set
population, Asias aging demographic to work for women are lowered, and the of issues. But many of the
has huge repercussions for countries mandatory retirement age increased. potential new goals dont
like the Peoples Republic of China There might even be a silver lining,
(PRC) and India, where most of the notes ADB, as developing countries with
have unanimous support,
aging will take place. UNESCAP younger populations export labor to and adding many new goals,
expects the PRCs over-60 population wealthier aging societies. or goals that are not easily
measurable, may
sap momentum.
-Bill Gates, Co-Chair of Bill &
ALL FISHED OUT Melinda Gates Foundation, Jan. 2013
Several Pacic island nations
have joined forces in a bid to stop
overshing of tuna amid a dramatic
decline in world tuna stocks. The global population has
Global tuna demand has soared, as increased by 2 billion in less
the sh proves increasingly popular States of Micronesia, Marshall Islands, than 3 decades, surpassing
with consumers in developed Nauru, Palau, Papua New Guinea, 7 billion last year. Another
countries. A recent study by the Pew Solomon Islands, and Tuvaluseek 2 billion is estimated to add
Environment Group found that the commitments by shing eets not to to this mark by 2050. Such a
population of Pacic bluen had operate in open seas between the
plunged by 96% in recent decades. island nations.
scale of population growth
This has pushed prices up and In return, boats will be allowed to sh will impact on our ability to
prompted eight Pacic states to in the territorial waters of each state. provide food, energy, and
launch a joint crackdown, according Straddling tuna grounds worth around other basic services.
to Public Radio Internationals $5 billion, the nations hope the eets -Indonesian President Susilo
PHOTOS: AFP
The World news service. The abide by the honor system as they lack Bambang Yudhoyono, Dec. 2012
states Kiribati, the Federated the means to enforce the ban.

ON THE
WEB
The world is MAKE EVERY CLICK COUNT

mobile. www.joinmyvillage.com
Many people want to make a positive to CARE by corporate sponsors General Mills
So are we. difference, but dont know where to start.

Enter Join My Village, an online initiative
and Merck. Where you click determines
how much is donated. Watching a video for
in partnership with CARE International. instance, is worth $1, while sharing a video,
Join My Village lets internet users help the $3. Individual donations will be matched
needy simply by surng the web. For every by General Mills and Merck. The proceeds
link clicked on joinmyvillage.com, every help provide education, health services, and
video watched or shared, every Like of its jobs for girls in Malawi and India. The two
Facebook page, and every retweet from its companies have pledged to donate a total of
News Videos
Twitter account, a donation is made directly $1.6 million by 31 December 2013.
organizations in 60 countries. In Asia, it

has 14 partner countries including India
Features Regions
and Sri Lanka, which have their own Help
Age websites. Helpage.com features project
details and updates on relevant issues
including health, civil rights, social protection,
Events Social Media
and employment. Help Ages mission is to
inuence governments and international
ADB institutions to focus on older people. It says
it has helped 2.5 million aged citizens obtain
Contacts About ADB VOICE FOR THE ELDERLY social protection, and 350,000 to get better
www.helpage.org
health care. The website has infographics and
Its easy to forget that the elderly are often data on the rising number of aged people as
among the most needy. Help Age reminds a percentage of the global population, and
us with its online database on efforts to statistics on issues affecting their daily lives.
help senior citizens worldwide overcome There are also report cards on 195 countries
poverty and discrimination. It works with that monitor their track records on policies
ADB on
90 government and nongovernment directly impacting elderly citizens.
lendersall users of its websiteto fund

individual loans from multiple sources.
the Go
Kiva has a six-step process: 1. The borrower
requests a loan from an authorized Kiva eld
partner (usually an affiliate micronance
institution or nonprot organization). 2. The
A new mobile app from the eld partner loans to the borrower, aiming to
Asian Development Bank. minimize delays in dispensing the funds.
3. The eld partner sends the loan request to
Kiva, where it is reviewed and published online.
Download now MICROFINANCE GOES ONLINE 4. Site users who chose to lend through Kiva
www.kiva.org fund the loan request. The funds are sent to
Through its website and partnerships with the eld partner. 5. The borrower repays the
micronance institutions in ve continents, eld partner, which then sends the money to
nonprot organization Kiva grants interest- Kiva. 6. Kiva repays the individual lenders.
free loans to people who cant access Kivas website gives its users their choice
traditional banking. Its clients are mostly of borrowers, who each have a prole
people seeking funding for small businesses. detailing the loans purpose, amount, and the
Kiva aggregates loans from individual repayment schedule.
Asian Development Bank
www.adb.org
SPECIAL
REPORT:
INEQUALITY
Can Asias rapid growth
be enjoyed by all?
PHOTO: CORBIS IMAGES

SPECIAL
REPORT
The Wealth
Inequality is
GAP
MYLA IS ONE OF THE MANY
faces of worsening inequality in
a grim reality. The gap between Asias
haves and have-nots is growing as
globalization delivers prosperity
Asia. Trafficked at age 13 into a life
hitting alarming of misery as a domestic worker for to some, while others like Myla are
abusive employers, she is trying to denied the opportunities they need to
highs in Asia rebuild her life. lead fullling lives.
The streets outside the Manila Other developing regions have
as the fruits of shelter where she now lives are wider gaps between rich and poor.
jammed with shiny SUVs and new Gini coefficients, a common measure
growth skew to apartmentsjust some of the rewards of income inequality, show that Sub-
a growing economy offers those with Saharan Africa and Latin America and
the rich the right education and skills. the Caribbean all have higher levels of
Myla, not her real name, sacriced inequality than Asia. However, many
By John Larkin her dreams of attending school to countries in Latin America and the
become a child laborer. I was about Caribbean have seen Gini coefficients
to enrol but we didnt have money for decline in recent years.
school supplies, so I made way for my But Asia has failed to keep pace
younger brother, says the 17-year-old. when it comes to reducing inequality.
I had to provide for the family. A recent Asian Development Bank

Asias ourishing economies have (ADB) report notes that 11 of 28 Asian
lifted millions out of poverty in recent economies82% of the regions 2010
decades. But that achievement masks populationshowed rising income

Rising inequality in developing Asia is closely
associated with very rapid increases in the very
top income groupsthat is, the rich are getting
richer much faster.Asian Development Outlook 2012
inequality through the 1990s adds that weak protection of workers The deprivation is keenly felt in
and 2000s. and an increasing share of national developing countries where the poor
Higher Gini coefficients denote income that goes to owners of capital often miss out on public services.
greater inequality. Over nearly 2 make it even more challenging for The rest, including not only the
decades from the early 1990s, the Asian countries. poor but [also] the vast majority of
Gini coefficient of developing Asia The problem is compounded by the population, dont have access to
as a single unit, based on per capita the fact that inequality has different credit, schooling, the courts, and rule
consumption expenditure, increased causes and forms in each country, of law that would enable them to
from 39 to 46. The Gini coefficient which sometimes overlap. be productive, says Nancy Birdsall,
jumped from 32 to 43 in the Peoples Moreover, degrees of inequality president of the Center for Global
Republic of China (PRC), 33 to 37 in vary across the region. Many of the Development in Washington, in
India, and 29 to 39 in Indonesia. economies surveyed by ADB showed reference to India.
Inequality has risen despite declining Gini coefficients, though Many poor live in remote rural
aggregate economic growth and these were often smaller economies areas where low income is only one
poverty reduction, says Peter Warr, subject to shocks and rapid recoveries. of many problems. The ratio of rural
a professor of agricultural economics Larger economies enjoying strong poverty to urban poverty worsened in
at the Australian National University gross domestic product (GDP) 18 of the regions economies between
in Canberra. The poor have become growth often showed rising 1990 and 2010, according to ADBs
better off in most countries, but the inequality, with income gaps at Framework of Inclusive Growth
rich have become better off at an even the heart of the problem. Indicators 2012.
faster rate. Unequal earning power occurs The imbalance is especially
when those at the top of the income pronounced in the PRC, where the
WHAT IS INEQUALITY? A simple scale earn an increasingly larger ruralurban income gap accounts for
denition characterizes it as unequal share of the income pool than those nearly half of total inequality. Poverty
access to income and consequently at the bottom. has been cut signicantly in the PRC
to good quality education, health India, for example, has seen its but inequality is rising, leaving people
care, sanitation, and other building earnings gap widen along with strong less impoverished but also less equal.
blocks of a successful life (see economic growth. In the PRC, turbo- This kind of rising inequality in
Dening Inequality). charged economic growth has padded the PRC, India, and Indonesia shows
Increasingly across Asia, access some pay packets more than others. that the economic growth process has
to a decent wage and the social Rising inequality in developing not been sufficiently inclusive, says
benets it can bring depends on Asia is closely associated with Juzhong Zhuang, ADBs deputy chief
your skills, location, and gender. very rapid increases in the very economist. Growth is necessary, but
These disparities can occur between top income groups, says ADBs growth alone is not enough.
countries, but are particularly Asian Development Outlook 2012.
troublesome for governments when That is, the rich are getting richer THE BENEFITS OF economic growth
they occur in the same region, or much faster. are often diverted from those who
between different regions of the same The rich are also getting better need it most by inequalities of income,
country, as they can foster social and education for their children, cleaner location, and gender.
political instability. water, more reliable electricity, The deprivation is acute in access to
It is a challenging issue to the better access to immunizations, education and health care. According
governments of every country, says and access to health care at quality to household surveys , school-age
Haoming Liu, a labor economist at the facilities to keep themselves and their children from the poorest households
National University of Singapore. He families healthy. in some parts of Asia are three to ve
DEFINING INEQUALITY
Settling on a denition has claried the issues at stake
Inequality is inherent in all economic measure povertys links with effort and
systems. Some people are likely to opportunity.
have more money than others. But at But placing inequality in the context
what point does this inequality be- of effort and opportunity does clarify
come a negative or destructive ele- the policy implications. It underscores
ment in a society? the importance of delivering educa-
times more likely than their wealthier In a landmark 1998 study, Equality tional opportunities and good health
peers not to attend primary and of Opportunity, Yale University pro- care to everyone regardless of gender,
secondary school. fessor and political scientist John Ro- race, ethnicity, or any other character-
Access to education is the emer set the stage for the discussion istics that are beyond their control.
fundamental issue, says Peter Warr of inequality that continues today in One of the most common ways to
of the Australian National University. Asia and around the world. His study, measure inequality is the Gini coeffi-
To acquire skill, education is needed. which presented one of the rst algo- cient, which uses an algorithm to pro-
Throughout Asia, rural people rithms to examine societal inequality, duce a numerical rating for how far a
especially are disadvantaged in distinguished between inequalities society is from perfect income equal-
this respect. based on effort versus those arising itydenoted by a Gini of 0. A higher
Secondary school attendance from personal circumstances. Gini coefficient means greater income
in rural Bhutan and Pakistan was In this line of thinking, there is an inequality, with a Gini of 1 indicating
only half of that in cities. In the acceptable and perhaps even an ethi- maximum inequality. For convenience,
Philippines, children of wealthier cal level of inequality based on indi- Development Asia cites the Gini multi-
households were seven times more vidual effort. Those who work harder plied by 100. All Gini data used in this
likely to attend college. have higher incomes and can acquire issue of Development Asia is sourced
A study by the Organisation greater benets than those who ex- from ADB research.
for Economic Co-operation and ert less effort. Rewarding hard work
Development (OECD) on rising with increased income and benets is Many argue that
inequality in emerging economies, desirable in order to increase produc- inequality is best
released in 2011, found that while tivity and economic growth. measured by examining
primary education is available in The other form of inequalityas- the income and
many remote areas, secondary sociated with opportunity and fair-
nessis illustrated by an example in
opportunities of the
schooling can involve traveling or
even relocating, making it harder for Roemers study. He cites an instance poorest members of
children to attend classes. of two low-income individuals. One a society.
The problem compounds with was given a good education and
each generation. health care but did not work hard and
In Pakistan, a household head with ended up with a low income. The oth- The Gini coefficient is limited to
no formal education was likely to view er worked hard but did not have a good measuring income inequality, which
educating children as a waste of time, education or adequate health care and economists generally agree is too nar-
according to an ADB study in 2012. therefore also ended up with a low in- row a perspective. Other measures
The study notes that in Viet Nam and come. Ensuring equal treatment for include access to education, health
Sri Lanka, large households are less the second individual is the primary care, and basic social services, many of
likely to send their children to school. focus of policy makers concerned which can be found in the United Na-
Girls still nd schooling harder with inequality. tions Millennium Development Goals.
to come by especially in parts of the The distinction between lack of Many argue that inequality is best
Pacic, South Asia, and Southeast opportunity and inadequate effort is measured by examining the income and
Asia, though the gender-schooling gap complex and contested. Is this per- opportunities of the poorest members
has been narrowed considerably in son poor because of a societal bias or of a society. Regardless of a countrys
East and Central Asia. is he poor because he did not want to overall economic growth, or wealth at
Insufficient health care is also work hard? Agreement isnt expected the top end, those most affected by a
common at poor households. Infant anytime soon among economists and lack of opportunity will always be the
mortality rates among the poor in policy makers on a denitive way to poorest. BY FLOYD WHALEY

Infant death is
more likely in poor
households than
rich ones.
the region were signicantly higher, remote areas complicates attempts to

according to ADB data, than those of deliver basic services.
richer households; in the worst case,
infant death is 10 times more likely WHAT LIES BEHIND Asias rising
in poor households as opposed to inequality? The drivers appear to
rich ones. be the same forces propelling Asias
Lack of trained medical personnel is economic growth.
a factor, especially during childbirth. Globalization has opened up
Poor households often cant afford economies to global trade, introduced
top-notch treatment, and their new and more efficient technologies,
predicament is worse if they live in and enabled greater capital ows.
rural areas. It has generated tremendous wealth
World Health Organization (WHO) creation opportunities, but these
data shows that, despite reduced are often not shared equally. Prots
infant mortality region-wide, infants from increased market access skew to
are at greater risk in rural areas factory owners than factory workers;
a differential that has worsened in skilled workers get paid more than
recent years in several countries, the unskilled who may even lose their
including the Philippines and jobs to new technology; cities with
Viet Nam. decent infrastructure prosper while
People will only The lack of trained health care
workers in rural areas can reect the
remote ones lag.
For countries whose economies
be motivated desire of graduates to work at the best
hospitals, usually in cities. This is a
are export-driven, globalization
provides employment opportunities
to work harder problem particularly in large countries
like India with remote rural areas, says
for millions of workers and lifts many
of them from poverty, says
if there is Marika Vicziany, a political economist
specializing in Asia at Monash
Liu Haoming of the National
University of Singapore. However, it
some degree University in Melbourne, Australia.
The average doctor is trained in
also increases the income inequality
between those who participated in the
of inequality. an urban environment at urban
hospitals, says Vicziany. They dont
exporting industries and those who
were excluded.
But it has to be want to go back to the villages.
Lack of access to clean water,
This is not to argue that
globalization be reversed, were it
contained in a clean cooking fuels, proper
sanitation, and dependable electricity
even possible. In fact, globalization
has done much more good than harm,
certain range. can deepen health problems.
More than 90% of rural populations
especially in once-closed economies.
Globalization has been a terric
Haoming Liu, in 10 economies depend on dirty benet to India, says Monash
labor economist at the solid fuels like wood and coal for Universitys Vicziany. The problem
National University cooking and heating, with detrimental is that rural India has not beneted
of Singapore health consequences. from it. Liberalization has been an
In 2010, 14% of rural developing urban phenomenon.
Asia compared with just 3% of Still, impoverished communities are
city dwellers lacked access to often ill equipped to cope with sudden
clean drinking water, according changes that globalization can bring.
to Framework of Inclusive Growth Many workers in Asia are employed
PHOTOS: AFP
Indicators 2012. Open defecation is informally as domestic helpers,

common in rural areas. Patchy or construction workers, and the like,
nonexistent electricity supply to for small wages and meager prospects.
Myla earned only 500 pesos
(approximately $12) a month as
a domestic helper. She wanted to
quit but stayed on to fund medical
treatment for her sick grandparents:
I had no choice but to go back
to work.
Workers like Myla usually arent
covered by government employee
support schemes, which in any case
can be insufficient. The PRC and
Inequality can
India spend three to four times less encourage
on social protection than the OECD hard work and
innovation.
average according to the OECD, which
notes also that in 2008, only one-third
of Indonesian workers who lost their
jobs received severance pay. STRIKING A BALANCE
Technological change is another A little incentive can go a long way
challenge for Asias poor, according
to the International Monetary Fund For decades, some economists have But researchers have also found in
(IMF), as it favors workers with tech argued that inequality is an essential recent years that other forms of in-
skills and may extinguish the jobs of ingredient of economic growth. The equalityso-called bad inequali-
those lacking these skills. theory holds that the pursuit of equal- tiesnegatively impact growth.
The disequalizing effect of ity by government reduces incentives The poor generally do not have ac-
technological change is stronger in to work, save, and invest. cess to resources to invest in educat-
Asia, IMF researchers Florence Increasingly a body of data is emerging their children, to expand their skill
Jaumotte, Subir Lall, and Chris ing that indicates a broader view of the set, or to create a small business. These
Papageorgiou wrote in the working relationship between inequality and capabilities are all key drivers of eco-
paper Rising Income Inequality: economic growth. Good inequalities nomic growth that income inequality
Technology, or Trade and Financial support economic growth by encour- can eradicate.
Globalization? This possibly reects aging hard work and innovation, and High levels of income inequality can
the greater share of technology bad inequalities deter growth, par- also increase crime, which deters the
intensive manufacturing in Asia. ticularly over the long term. investment needed to create jobs and
An example of a good inequality is exports. It can also increase political
IT IS POSSIBLE that we are the Household Responsibility System unrest, which has a similar impact on
altogether too alarmed by rising introduced by the Peoples Republic investment and can threaten the entire
inequality. Surely, the argument of China in the 1980s. Before, farming economic system if it results in politi-
goes, the dramatic falloff in poverty was collective and all proceeds were cal upheaval.
more than compensates. Moreover, shared with the state. The new system Inequality also distorts the stabiliz-
isnt inequality just a phase in the allowed farmers to claim the output of ing qualities that a large middle class
development process? land they farmed. brings to society.
Some have argued that an efficient The result was that some farmers Large numbers of neglected poor can
inequality rangetypically between worked harder and innovated to in- demand populist economic policies
25 and 40 Gini pointscan promote crease their yields and income. This that the wealthysome of whom may
economic growth. caused greater income inequalities, subvert the political system through
People will only be motivated to as some farmers got wealthier while corruptionresist.
work harder if there is some degree of others did not. The program had long- These destructive forces rarely
inequality, says Haoming Liu. term implications but the early result produce economic policies that re-
But it has to be contained in a was a telling endorsement of the posi- sult in sustained, long-term growth.
certain range. tive power of some forms of inequality. BY FLOYD WHALEY

Arthur Lewis, the Nobel Prize- ASIAN GOVERNMENTS REALIZE to bridge wealth and skills gaps that
winning economist from Saint something needs to be done. Two- are currently widening.
Lucia, argued that development thirds of policy makers surveyed That should be seen as the
cant be egalitarian as it happens at recently by ADB agreed inequality canary in the mine, says Center for
different times in different parts of was high and had increased over Global Developments Birdsall. Pay
an economy. He attributed rising the past decade. More than half said attention and address it, since at some
inequality to uneven patterns in inequality is unacceptable even if point it probably reects inequality
growth, a trend that has been poverty declined. of opportunity and injustices in the
a feature of Asias economic Progress is being made. Earlier system that put growth at risk.
growth path. this year, the PRC unveiled reforms Latin America has successfully
Further complicating the issue, to narrow the wealth gap including tackled inequality by focusing on jobs-
inequality can sometimes arise measures to boost farm incomes rich growth, and boosting spending on
from differences in effort rather and deliver better public services to public services for poor households in
than entrenched social inequities. rural migrants in cities, according to lagging regions.
The axiomatic notion that people media reports. Asia is starting down that
who work hard are more likely to In India, girls are graduating with track, says Zhuang, who points to
achieve success has spurred debate information technology degrees and conditional cash transfer programs
over whether inequality should, to getting jobs in the booming tech to the poor in the Philippines and
a certain degree, be welcomed (see sector. These girls are getting the Indonesia that may produce social
Dening Inequality). right kind of education to be able dividends. Additionally, several
For many poor households to compete for jobs, says Monash Asian governments have taken the
however, no amount of effort will
lift them up the income scale as
they lack the educational and other
opportunities to improve their lot in
Inequality can breed social
life. In fact, these people are often
exposed to sudden income loss due
tensions and political instability.
to forces they may not understand.
Indeed, developing Asias rising Universitys Vicziany. The problem is ght to inequality through policy
Ginis indicate that inequality may there arent enough of them to make a pronouncements placing new
be exiting an efficient range and big difference. emphasis on inclusive economic
heading into dangerous territory. Inequality may indeed decline once growth. Funding is necessary for
This is not welcome, as most Asias economies mature, in line with these prescriptions to work
economists agree that excessive a decades-old theory proposed by effectively, however. That will be a
inequality can hobble efforts to US economist Simon Kuznets that challenge given that developing Asia
reduce poverty and to stimulate inequality declines once a certain level has the worlds lowest tax burdens
economic growth. An extra 240 of average income is attained, due to a due to small tax bases, inefficient
million people would have been lifted multitude of factors. This proposition collection, and high evasion. Asia
from poverty had inequality remained is not uniformly supported by needs better taxation to nd the
static during the 1990s and 2000s, empirical evidence, however. revenue to fund inclusive growth,
according to ADB data. The number The factors Kuznets considered says Zhuang. Rich people should
of people living on less than $1.25 a in formulating his hypothesis also pay more.
day would have fallen dramatically in include policy interventions, says While Asia gets to grips with its
the PRC, India, and Indonesia. Apart ADBs Zhuang. Thus, without policy inequality challenge, its poor wait for
from the waste of human capital, interventions, mere increases in the the chance to seize a better life.
inequality can breed social tensions average income level may or may not Mylas dream is to be an English
and political instability if elites are lead to declining inequality. teacher. She asks only for the chance
allowed to capture the policy-making As there is no guarantee that Asias to work for a new life. Im ready now
agenda at the expense of the poor. inequality will fall with economic to go to school, to start again, she
If the rising inequality is seen growth, Asias policy makers must nd says. Asias inequality challenge will
as a sign of injustice, that is really ways to promote economic growth be beaten only when most of its poor
dangerous, says Peter Warr. that is inclusive as well as impressive, get the same opportunity.
INEQUALITY IN ASIA
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Q&A
THE REFORMER
Indias Finance Minister Palaniappan Chidambaram talks to
Development Asia on the challenges of addressing inequality
F
or the past 2 decades, Palaniappan robust economic growth. But his lifelong concern for Indias
Chidambaram has played a central role in poor is reected in his most recent national Union Budget
steering national economic policy during three for 20132014, unveiled in February, which contained
appointments to the nance portfolio. measures to curb inequality and to boost the economy.
Chidambaram was born in 1945 to a He pledged the government would increase spending
prominent family of industrialists from Chennai in the on rural welfare, roads, and jobs. Also promised were food
southern state of Tamil Nadu. He trained as a lawyer and guarantees for the poor, programs to improve womens
obtained a masters of business administration (MBA) from safety, and a public sector bank for women to redress
Harvard Business School. In 1984 he was elected to the gender imbalances in access to nance.
Lower House of Indias Parliament, the Lok Sabha. Since These measures support Indias 12th Five Year Plan
then he has held various ministerial roles, and has rarely (20122017) which is focused on achieving a growth
been out of the national limelight. process that is as inclusive as possible. The plan states that
Known for his advocacy of market reforms, while inequality can be encountered in any country, it must
Chidambaram has been a driving force behind Indias be kept within tolerable limits.
economic reform program since the mid-1990s. He was The challenge facing Indias policy makers is formidable,
praised for his deft handling of the global nancial crisis but one that Chidambaram believes can be met through
during a previous four-year term as nance minister, appropriate policy adjustments. Here he discusses the
overseeing strong annual average economic growth. As causes of inequality in India, its impact on society, and how
nance minister, Chidambaram is tasked with delivering India is meeting the challenge.
DEVELOPMENT ASIA: Inequality is rising throughout Further, to ensure that there is no decline in consumption
Asia and the Pacic, despite the regions comparatively levels of vulnerable sections of society, India has adopted a
strong economic growth. How would you assess the comprehensive public distribution system that is targeted
current situation in India regarding inequality? Is at covering persons who are at the lower end of the income
economic growth acting to reduce or worsen inequality? distribution. Beside adequate supply of cereals to these
PALANIAPPAN CHIDAMBARAM: On the basis of persons, we have kept grain prices unchanged for the poor
information available from the surveys conducted by the since July 2002. This, in a way, has ensured some equality
National Sample Survey Organisation on Consumption in consumption levels.
Expenditure, it has been observed that while inequality has DA: Countries around the region have taken differing
not risen signicantly in the rural areas, the same cannot be approaches to tackle inequality, with some focusing
said about the urban areas. This is evident from the values on redistribution and others on faster economic
of Gini coefficient that remained generally stable. The Gini growth. Please outline Indias approach, and any recent
coefficient in rural areas was 0.28 in 19731974 and 0.29 in progress made on reducing inequality.
20092010. Inequality has indeed risen in the urban areas.
The Gini coefficient in urban areas increased from 0.30 in PC: India has taken different approaches to reduce various
19731974 to 0.38. It is difficult to say whether growth would dimensions of inequality and deprivations. Inequality
have affected inequality, as growth has taken place both could take the form of interpersonal inequality or regional/
in rural and urban areas in the country. One reason why spatial inequality. As far as spatial aspects are concerned,
inequality did not increase in rural areas could be attributed reducing interstate inequities has engaged the attention of
to various antipoverty programs being undertaken by the government for a long time.
government. Support initiatives to agriculture, such as Some of the policy measures taken in this connection
the Minimum Support Prices for agricultural crops, and include transfers of resources from the [national
increased ow of institutional credit and agricultural inputs
also played an important role. In recent years, programs
such as the Mahatma Gandhi National Rural Employment
Guarantee Act (MGNREGA), a government employment India is a large country.
guarantee program, and the National Rural Livelihood We have to improve the living
Mission have also provided income support in rural areas.
The increase in inequality in urban areas may be partly standard of several hundred
due to migration. There has, however, been a perceptible million persons. This is no doubt
decline in the poverty head count ratio (HCR) in both
rural and urban areas. The All India HCR declined by 7.3 a long-drawn battle.
percentage points from 37.2% in 20042005 to 29.8% in
20092010, with rural poverty declining by 8 percentage
points from 41.8% to 33.8% and urban poverty declining government] to states, favoring less-developed states with
by 4.8 percentage points from 25.7% to 20.9%. There is no additional grants, tax incentives for setting up of industries
evidence to suggest that worsening inequality in urban areas by the private sector in backward regions, implementation
is in any way associated with our growth process. of various centrally sponsored and state specic schemes
that give due weightage to backwardness of states, etc.
DA: Globalization is often blamed for delivering gains Most of the states have also emphasized growth- and social
to some while depriving others of income and access securityrelated transfers to address the issues relating
to key services like education and health. Do you to poverty.
believe that globalization has played a role in fostering
inequality regionally and in India? DA: Some argue that inequality is a necessary phase
PC: There are many who are of the view that globalization of economic growth and may even promote growth.
may have helped in reducing poverty levels by contributing Others counter that it corrodes growth. What is your
to higher growth rates. Let us take the Indian case. During view, based on Indias experience with inequality?
19511991, the pre-reform period, GDP [gross domestic PC: There is no conclusive evidence that rising inequality is
product] growth in India had averaged 4.1% per year. a necessary aspect of growth. Indeed, rising inequality may
This increased signicantly in the post-reform period and eventually damage the support for growth. At times, it may
averaged 6.7% during 19912012. There has indeed been a happen that the initial beneciaries of the reform process
sharp decline in the poverty HCR in both rural and urban could be ones who have better skills and resources. Even in
areas. Higher GDP growth in the post-reform period has this situation, however, policies need to be so designed that
indeed contributed to this improvement. the disadvantaged groups are not adversely affected.

There is no evidence to
suggest that worsening
inequality in urban areas is in
any way associated with our
growth process.
I agree that in ensuring inclusive and equitable
development, market forces in themselves are not
sufficient. Increased public funding for education, health,
and other basic services could, to a large extent, improve
the capabilities of individuals to benet from the reform
process. In India, there has been a signicant step-up in
expenditure on social services and rural development. Plan
and non-plan expenditure of the central government on
social services and rural development, as a proportion of its
total expenditure, has increased from about 5% in 1990
1991 to 18% in 20102011.
DA: Much of the regions inequality occurs either

between regions or within regions. Some of Indias
Chidambaram
inequality reects imbalances between states. on arrival at
What has driven this, and how is the government Parliament for
the Union Budget
responding? 2013-2014
presentation.
PC: The interstate differences in India have been there
for a long time and could be ascribed to various factors.
Our states are larger than some countries of the world. As far as interpersonal inequities are concerned, it
The same factors that create differences in incomes is being addressed mainly through scal instruments
between countries create differences in incomes between by allocating/spending a large proportion of public
the states. These include history, geography or location, expenditure on antipoverty programs. In recent years, we
natural resource endowments, etc. The government have observed that even the poorer states have
has been taking several steps to address the issue of started registering high growth, a phenomenon that was
regional imbalances. absent earlier. If such trends continue, this should lead to
reduced inequality.
DA: Income inequality is a growing problem across
Asia, with marked increases in the Peoples Republic DA: Typically, spatial inequality in Asia means that
of China and other countries. Income inequality has rural areas lag urban areas. In India, however, rural
increased in India as well. Is this a concern, and how is inequality is often lower than urban inequality. What
India meeting this challenge? factors account for this apparent contrast?
PC: Evidence seems to suggest that inequality, as measured PC: Talking of spatial inequality in Asia, where rural areas
by the Gini coefficient, has increased in a large number lag behind urban areas, I think in India we too face same
of OECD [Organisation for Economic Co-operation and problem, where the rural areas lag behind the urban areas
Development] countries. It also increased in [the Peoples in a large number of socioeconomic indicators. However,
Republic of ] China and some other emerging economies in interpersonal inequality is not only higher in urban areas
late 2000, vis--vis early 1990. compared to the rural areas; it is also increasing over time
The situation is similar in India, where there has been an in the urban areas, while in the rural areas it has remained
increase in inequality, particularly in the urban areas. We fairly stable over time.
in India are working on a number of fronts to address the Perhaps one should treat the two phenomena as
PHOTO: AFP
problem. I have already indicated the policy measures taken independent of each other. However, it may also be
in this connection. possible that inequality in the rural areas could be less
because of a relatively smaller and near-homogeneous industrial houses have focused on improving the living
consumption basket. conditions by forming charitable trusts. The new Company
Another reason why inequality could be higher in the Law envisages companies spending a proportion of their
urban areas may have to do with the pattern of migration. prots on corporate social responsibility activities.
It is quite likely that it is poorest of the poor who migrate
from the rural areas to urban areas in search of jobs. DA: Indians have rising expectations for better lives.
Often they land on getting low-paid jobs, thereby causing However, economic growth has slowed recently.
inequality to increase in the urban areas. How does this magnify the challenge of meeting those
rising expectations?
DA: Workers in the informal labor sector lack social PC: In order to meet the rising expectations of the people,
protection and job security that many in the formal we have to meet the basic needs of people. Everyone
sector enjoy. Does Indias large informal workforce pose expects, and rightly so, that there should be sufficient food,
any specic challenges to ensuring equality? education, good health, a decent place to live in, improved
PC: Over 90% of the workforce in India is in the informal connectivity, electricity, etc. for them and their families.
sector. However, in terms of the status of employment, Obviously these need resources and the recent slowdown
self-employment has a dominant share accounting for has affected the resources available as a result of lower
54% of total persons employed. Thirty-nine percent of the growth as well as lower tax-to-GDP ratios. Consequently,
workforce is casual labor, and the remaining 7% are regular the resources available for meeting the needs and
wage/salaried employees. Many of the self-employed expectations of people have not grown sufficiently. In order
persons are engaged in their current activities because of to meet the rising expectations of people, we need to raise
lack of gainful opportunities elsewhere. both the growth rate as well as the tax-to-GDP ratio, so that
The existence of such a large proportion of the workforce more resources are available.
in informal, low-paid, and relatively less-protected sectors
indeed makes equality issues both complex and difficult. DA: What is the role of the private sector in helping
The approach of the government has been to have special deliver inclusive growth?
support programs for the unorganized sector workers,
improve skill levels of the workforce to increase their Over 90% of the
employability in the formal sector, and provide some kind workforce in India is in
the informal sector.
of a guaranteed employment. The government is already
implementing a health insurance scheme, a death and
disability insurance scheme, and an old-age pension scheme
for unorganized sector employees.
DA: Indias 12th Five Year Plan commits the government

to a broad-based improvement in living standards of
all sections of the people. How long do you think this
process will take, and what are the largest hurdles in
the way of reaching this goal?
PC: India is a large country. We have to improve the living
standard of several hundred million persons. This is no
doubt a long-drawn battle. Therefore, it is difficult to give a
specic time frame to improve the standard of living for all.
However, we have to see it as a process and ensure that we
move in the right direction.
To achieve this, not only do we have to raise the growth
We have observed that even
rate of the economy but we also have to ensure proper the poorer states have started
implementation of various antipoverty and other programs
that aim at improving the health and education status of
registering high growth,
the people, ensure decent housing for them, and in general a phenomenon that was
improve the living standards of the people at large.
For this we have to raise the resources, growth rate, and
absent earlier. If such trends
tax-to-GDP ratio, and improve the efficiency of spending continue, this should lead to
and delivery mechanism, etc. In recent years, some
reduced inequality.
In order to meet the
rising expectations of the
people, we have to meet
the basic needs of people.
PC: The share of the public sector in Indias GDP is about

20% (20.5% in 20112012). The private sector, therefore,
becomes important in any strategy for an inclusive growth.
It has an important role in skilling people and creating
opportunities for their employment. Further, it has to
ensure that wages paid are fair and working conditions are
decent. The private sector has been playing an important Chidambaram in
role in inclusive growth through their corporate social conversation with Indias
Prime Minister Manmohan
responsibility initiatives. Singh.
DA: What role can the agriculture and manufacturing

sectors play in ensuring that Indias future economic what we do have are the details on the proportion of those
growth is inclusive? living below the poverty line for different social groups.
PC: Faster and inclusive growth would undoubtedly require The proportion of people living below the poverty line
an increase in factor productivity in both agriculture among scheduled castes, scheduled tribes, and others was
and manufacturing. With a share of under 15% of GDP, 48%, 52%, and 31%, respectively, in 19931994 for the rural
agriculture still employs more than one-half of the total areas, while it was 48%, 41%, and 28.5%, respectively, in
workforce. It means that the relative income per person the urban areas.
engaged in agriculture is just about one-sixth of the persons On a comparable basis, the proportion of those living
engaged in nonagricultural activities. below the poverty line in the year 20092010 was 32%, 34%,
Besides an increase in the productivity of agriculture and 21%, respectively, for scheduled castes, scheduled
by increasing the levels of investment, there would be a tribes, and others, while this proportion was 36%, 32%, and
need to shift part of the workforce away from agriculture 21% for these categories, respectively, in the urban areas.
to manufacturing and other sectors. Manufacturing These estimates are based on the surveys conducted
growth in an open economy cannot depend solely on by the National Sample Survey Organization. It may be
domestic demand. mentioned that these estimates are based on individual
Our corporates need to become competitive and sustain research and not on official estimates of the government.
the competitive edge to retain their domestic shares and What emerges from these numbers is that there has
increase their penetration in global markets. Indian industry been a signicant reduction in the proportion of people
also needs to graduate from being small scale to an optimal living below the poverty line across all sections of society
economic size. Many small and micro enterprises do not including scheduled castes and scheduled tribes. Poverty
grow to an optimal economic size because of the fear of declined somewhat faster for others than for scheduled
losing the benets associated with the small-scale tag. castes and scheduled tribes, but not signicantly so.
I have provided them a window to grow in the Union Incidence of poverty is still higher for scheduled castes and
Budget 20132014 by allowing them to retain the nontax scheduled tribes than for others.
benets and preferences for up to 3 years. We have also
taken initiatives to improve technology levels in industry, DA: Unequal access to social goods such as health
both at the aggregate and sector-specic levels, such as care and education are key indicators of inequality
textiles and leather. around Asia. Which would you say are the highest
priority policy areas in terms of reducing equality of
DA: Scheduled castes and scheduled tribes are opportunity in India, and why?
recognized as disadvantaged groups in Indian society. PC: There are three or four areas that are important to us.
What progress is being made in reducing income gaps Poverty eradication is possibly the most important among
between them and the general population? them. Providing jobs to people, adequate health services,
PHOTO: AP
PC: We do not have details regarding the incomes by and education that will focus both on reach and quality is
different socioeconomic groups in the country. However, very important.
Provision of health and education, along with
employment and poverty reduction, is the surest means for
inclusion. One major area of intervention for government
There is not one approach
is improving the skill levels and employability of the to reduce inequality. We have
workforce in nonfarm sectors. In the Union Budget 2013
2014, I have laid special emphasis on skill development. We
to focus on all the measures
are in fact targeting skilling of 50 million persons during the and on a multipronged
12th Five Year Plan and 9 million of these are proposed to be
covered in 20132014.
strategy in order to get the
A regular and gainful job is the best form of inclusion. desired results.
The absence of such inclusion is possibly the single biggest
source of interpersonal inequality. wages; there has also been a reduction in distress migration.
Together with the Swarna Jayanti Shahari Rozgar Yojana
DA: Has the Mahatma Gandhi National Rural and National Rural Livelihood Mission, the strategy for
Employment Guarantee Act (MGNREGA) reduced inclusive growth in India has witnessed a paradigm shift.
inequality in rural areas? If so, how?
PC: The MGNREGA aims at enhancing livelihood security DA: Policies to reduce inequality may include
of households in rural areas by providing at least 100 days interventions in lagging regions through scal
of guaranteed wage employment to every household. The transfers, higher spending on education and health,
program also focuses on strengthening natural resources more jobs-friendly growth, and reforms to broaden the
management through works that address the causes of tax base. Which do you believe are the most effective
chronic poverty like drought, deforestation, and soil erosion, and feasible approaches for developing economies?
and thus encourage sustainable development. PC: There is not one approach to reduce inequality. We have
This program has not only improved the bargaining power to focus on all the measures and on a multipronged strategy
of agricultural labor with an increase in private sector in order to get the desired results.

SPECIAL
REPORT
THE GROWTH
CONUNDRUM
The economies of the Peoples Republic of
China, India, and Indonesia are growing.
But so is inequality
By Edimon Ginting, Rana Hasan,
and Juzhong Zhuang
T
he Asia and Pacic region has led the
world in terms of economic growth and
poverty reduction over recent decades.
From 1990 to 2010, the average annual
growth rate of gross domestic product
(GDP) for the regions developing
countries reached a remarkable 7%.
During the same period, per capita GDP more than
tripled. More than 700 million people have been lifted
out of poverty by this rapid growth, according to the
Asian Development Bank (ADB).
But policy makers and leaders throughout the region
are increasingly concerned that hundreds of millions
have been left behind. Many of those people live in the
expanding and populous economies of the Peoples
Republic of China (PRC), India, and Indonesia.
How has inequality developed in the region and what
are policy makers doing to address the issue? Insights
into these questions are provided by an analysis of the
regions three most populous countriesthe PRC, India,
and Indonesia.
THE PRC HAS SEEN the fastest economic expansion,

but also the regions highest increases in inequality.
Between 1990 and 2012, the PRC experienced an annual
GDP growth rate of 10.2%. During the same period,
inequality increased more than 1.6% per year as measured
by the Gini coefficient, making it among the highest in
developing Asia.
Inequality in the PRC has manifested in various ways.
The urbanrural divide has increased signicantly, and it
now contributes nearly half (about 45%) of the countrys
overall income inequality. High urbanrural inequality
reects the countrys dual economic structure
comprising the urban economy based on modern
manufacturing and services, and rural areas dominated
by more traditional but less productive agricultureand
much higher urban growth. But the situation has also
been exacerbated by the hukou (residency registration)
system that limits labor mobility.
The PRCs regional inequality is also high. Coastal areas
have been the main beneciaries of economic reform and
have led the countrys export-driven economic expansion
in the recent decades, as investors built factories near
ports to put them closer to their markets overseas. This
created jobs and prosperity in much more abundance
than in the countrys interior areas.
Market-oriented reform has signicantly increased
PHOTO: AFP
earnings differentials among individuals, which, coupled

with the forces of globalization and technological

Rising levels of inequality are an additional
vulnerability to the regions economies
that warrants urgent action.
change, has led to a rising premium 5 years while expanding compulsory than in the PRC, and is a mainly
on skills and increasing returns to education, health coverage, pension urban phenomenon driven by higher
education. Differences in educational programs, and housing opportunities. earnings in skill-intensive sectors
attainment accounted for 30% of The PRC is also addressing inequality and occupations.
income inequality in 2007, compared through policy measures including Non-income inequalities loom
with only 10% in 1995. People with tax reform to improve income larger, especially in education
more skills and higher education have distribution, a sharper focus on the and health. About 5% of children
beneted far more from the economic service sector as a source of jobs and younger than 5 in the richest 20%
boom than those without. growth, and governance reforms. of households are underweight,
The share of wage incomes in the One direct intervention to address compared with 28% in the poorest
PRCs industrial output fell from inequality that has shown some results 20%. These inequalities, however,
nearly 50% in the mid-1990s to about is the Great Western Development reect historical imbalances in the
40% a decade later. This decrease Strategy. The plan covers 11 delivery of education and health care
was due to technological change underdeveloped western provinces services rather than the results of
favoring capital owners, and a large and autonomous regions, making up economic liberalization.
pool of rural surplus labor exerting three-fourths of the countrys land Both income and non-income
downward pressure on urban wages. area but only one-fth of the PRCs inequality vary widely between
This trend contributes to rising total economic output. regions, some of which have grown
inequality as capital incomes are less Under the strategy, about $349 faster than others. Incomes tend to
equally distributed. billion in infrastructure investments be higher in coastal states exposed
These pressures are exacerbated by have been made in the area between to trade opportunities, while the
unequal access to opportunities that 2000 and 2009 to attract foreign poverty rate varies from almost
people need to improve their lives investors. Education opportunities 54% in landlocked Bihar to 17% in
through hard work. The hukou system have been expanded to keep talented Tamil Nadu, a coastal state that has
limits access to benets for rural workers from migrating to more emerged as an important hub for
migrants looking for jobs in cities. prosperous regions. manufacturing of automobiles and
Employees of state-owned enterprises As a result, annual average GDP automotive components and exports
in certain sectors earn much more due growth in the western provinces of apparel.
to the monopolistic power of these reached 11.9% between 2000 and Indias growing income inequality
enterprises. Some people in control 2009higher than the national partly reects the common sense
of public resources can prot from average. Regional inequality has notion that when economic growth
rent-seeking due to loopholes and declined, which has helped stabilize ignites, it does so in some parts of
weaknesses in governance. national inequality levels. a country earlier than others, and
Policy makers in the PRC are is driven by certain sectors and not
addressing the problem of inequality LIKE ITS EAST ASIAN NEIGHBOR, others. However, to some degree
with the stated development goal of India enjoyed strong GDP growth increasing inequality exists because
building a harmonious society. This between 1990 and 2012averaging Indiaa labor-rich countrydid not
has been enshrined in its development 6.6% annually. These improvements exploit its comparative advantage
plans, including the Twelfth Five were also accompanied by an in sectors such as manufacturing,
Year Plan (20112015), which focus increase in inequality, with the Gini especially its labor-intensive
on high-quality, inclusive economic coefficient rising from 32.5 in 1993 to subsectors. This was a missed
growth rather than simply high 37 in 2010. opportunity to expand production
growth. The current plan seeks to However, the increase in income of labor-intensive products, thereby
create 50 million urban jobs in inequality has been less pronounced creating more jobs.
PEOPLES REPUBLIC OF CHINA:
SLEEPLESS IN SHANGHAI
Two jobs, 18-hour work days, still not enough
Just before midnight, as Shanghais neon-lit streets fade cover utilities, transport, and shop rent. Gaos income, on the
to black, Gao Changyi makes his way to nearby farm vil- other hand, continues to fall. He complains that most vegeta-
lages to fetch vegetables. While the city sleeps, Gao and his bles are 50% more expensive than they were a year ago; as a
wife sort vegetables to display on their grocery stall when result, people simply buy less.
it opens at dawn. In the afternoon, he works at a moving The price goes up and business goes down. The prot
company hauling beer crates and furniture by hand around doesnt change but sales are down by half. We make no more
the city. than $322 a month. We cant
Then its back to the market save much at all.
to help his wife shut the stall. I dont have time to get sick. Last year, he took a second job
A few hours later his long day If I catch a cold, I just ignore it. Going as a porter, hauling heavy boxes
starts again. to hospital is expensive. I havent up and down stairways for an ex-
I really want to quit because seen a doctor for 20 years tra $12 a day. Like most migrant
Im so tired but theres nothing workers in the Peoples Republic
else for me. I dont have much of China, Gao doesnt have social
education or skill. Factories security, medical care, or a pen-
wont hire me. If I dont work, -Gao Changyi, 50, sion. All four of his daughters
vegetable vendor and furniture hauler
no one will support us when are married and are no longer
we get old. obligated to nancially support
Life wasnt always this tough their parents.
for Gao. Business was plentiful I get 5 hours of sleep on an
and apartment rents low when average day and sometimes only
he migrated to Shanghai from his home province of Henan 3 hours. Im used to it. I dont have time to get sick. If I catch
more than 20 years ago. The 50-year-old believes things a cold, I just ignore it. Going to hospital is expensive. I havent
started changing a few years ago when prices started ris- seen a doctor for 20 years.
ing: I lost a lot of business. The rent also started rising Gao envies Shanghais well-heeled residents. At his age,
around that time. many of them have already retired and lead a comfortable life.
Gao and his wife now live in a 15-square-meter apart- They get a good pension and medical care. I have nothing.
ment near the market where they work. Rent costs $257 This is the difference between city people and countryside
a month and the couple has to nd an additional $418 to people. BY JOS QIAN
Infrastructure bottlenecks have enabled services and nancethat are growth in the Twelfth Five Year
been an important factor. Peak less affected by public infrastructure Plan (20122017). The governments
electricity demand outstrips supply by and by constraining regulatory approach to achieving greater
nearly 10% on average, and small and frameworkshave experienced a inclusion can be viewed as consisting
medium-sized enterprises have been boom in private investments and of two main channels.
the least able to cope with limited generated strong demand for well- The rst aims to enhance economic
supply of electricity. Similarly, poor educated workers. opportunities for the poor by
connectivity between rural areas and Indias challenge is to clear these improving agricultural productivity,
prosperous regions has hampered infrastructure and regulatory upgrading infrastructure, and
efforts to reduce inequality. About half bottlenecks. At the same time, revitalizing the manufacturing sector.
of Indias roads are not paved. better social protection schemes The second hinges on targeted
Burdensome regulations on are important. Indeed, reforming programs to develop the capabilities
issues like worker layoffs have made regulations on worker layoffs will of poor citizens to exploit economic
matters worse and have discouraged be difficult without such schemes opportunities. Examples of this are
investment in labor-intensive in place. But no amount of social the planned Right to Food and Right
manufacturing sectorsprecisely expenditure will alleviate inequality to Education programs, and the
PHOTO: QUAN FENG
those that generate demand for for long in the absence of economic National Skill Development Policy
relatively less skilled workers. opportunities for the poor. introduced in 2009 that aims to
In sharp contrast, modern sectors The Government of India has deliver skills training to 500 million
such as information technology reaffirmed a commitment to inclusive people by 2022.

INDIA:
TRAPPED TRIBE
A community trapped between two worlds. One is disappearing, the other unwelcoming
Jayamali is a member of the nomadic Hakki Pikki tribe, Most of the family income goes to food, bus fares, and pay-
whose name means catchers of birds. Thats how they ing off loans, with little left over. A monthly bus pass costs
traditionally made their living, trapping birds in the dense 900 rupees ($16), she says wearily.
forests that used to cover parts of the sprawling city of Once the tribe hunted at Banerghatta Park; now they
Bengaluru (formerly Bangalore) in Indias central south. are not allowed to enter it. They dont have deeds to their
That livelihood has been all but destroyed since the lo- land, which they are involved in a legal battle to recover. As
cal government banned trapping in the 1970s, forcing the property values soar, developers have begun grabbing land
Hakki Pikki to sell trinkets around the village.
and cultivate small parcels Jayamali points to new con-
of land. The forests they struction. These big apartments
once called home are dwin- Banks wont give us loans because are coming up right next to us,
dling as development con- we have no deeds. So we borrow and the price of everything
tinues apace. money from moneylenders who rice, vegetables, keroseneis
The tribe has been provid- charge us interest at 10%. going up. Before, we could grow
ed with land and housing by ragi (a type of grain) on our land,
the government, as well as or get rewood, tubers, honey,
subsidies, to help them ad- and greens from the forest.
just to city life. -Jayamali, 35, Jayamali must travel farther
Still, life is difficult for member of the Hakki Pikki tribe to nd customers as the city
and mother of three
Jayamali and her fellow expands. She travels across
tribespeople, and it is get- Bengaluru to sell her wares, but
ting harder despite Indias rising bus fares make it difficult.
growing prosperity. Some of her friends travel as far
Her village is perched on the border of Banerghatta Na- as New Delhi. Others have taken loans from loan sharks at
tional Park, only a few kilometers from Bengalurus bustling crippling interest rates. Banks wont give us loans because
Banerghatta road lined with software parks and gleaming we have no deeds, Jayamali adds. So we borrow money
skyscrapers. Most of the tribe is illiterate. from moneylenders who charge us interest at 10%. Many
Like many of her tribe, Jayamali, a 35-year-old mother elders, lacking skills, have resorted to begging.
of three who, like many women in southern India, goes by Jayamali fears for her childrens future. Unaccustomed to
one name, has had to adapt to survive. Her husband, who schooling, two of them are struggling in class. She hopes to
dropped out of school in grade 4, works as a cleaner in a dis- get her land back. Exactly when that might happen, if at all,
tant office, earning about $73 a month. Jayamali sells hair- is just another unknown in a life plagued with uncertainty.
pins, earning about $1.80 a day if she is lucky. BY KAVITHA RAO
INDONESIA HAS EXPERIENCED increase in its rates of inequality. Its The second factor is persistent
similarly strong GDP growth. Gini coefficient has increased from 31 unemployment. Although the
Between 2007 and 2012, real GDP in 1999 to 41 in 2011. unemployment rate has declined,
grew by an average of nearly 6% per There are a number of drivers about 7.7 million Indonesians in the
year. The country has made signicant behind rising inequality in Indonesia. labor force are still unable to nd jobs.
strides in terms of reducing poverty. First, economic transformation has Many of them are young people, aged
Based on the national poverty line, been much slower than expected. 15 to 24. Of those who are employed,
the proportion of Indonesians The agriculture sector, which absorbs about 62% (about 68.2 million) are
considered poor declined from 16.6% more than one-third of the labor force, engaged in the informal sector, where
in 2007 to 12% in 2012. has consistently grown at a slower wages are low.
Despite the progress, approximately rate than the countrys average GDP Third, regressive fuel subsidies
PHOTO: CHARUKESI RAMADURAI
30 million Indonesians continue to growth of 3.5% in 20012010. help spur inequality. These subsidies
struggle in poverty. Another 60 million At the same time, the manufacturing form the governments largest public
live just above the poverty line and sector has experienced slower growth, assistance outlay (2.6% of GDP
could fall back beneath it if they averaging 4.5% between 2001 and in 2012).
are hit with economic shocks. 2010. The manufacturing sector has Studies indicate that the richest
In line with other countries in the only started to rebound in the last 10% of households consume 40% of
region, Indonesia has seen a steady 2 years. the subsidized fuel and the top half

Urbanrural
inequality
accounts for
nearly half
of income
inequality in
the PRC.
of households use about 84%. This is economic reforms and leveraged the
essentially a huge subsidy to middle- forces of technological progress and
and high-income households at the globalization in recent decades. These
expense of the poor. have brought strong economic growth
Finally, inequality is worsened and great prosperity, but the growth
by poor access to nancing by has not been distributed
small businesses and bottlenecks evenly across their Indonesias
in infrastructure that discourage societies, leading to agriculture sector
absorbs more
investment and hamper connectivity greater inequality. than one-third
to rural areas and the countrys This has emerged of the labor force
but grows slower
impoverished eastern regions. in the form of a bias than the broader
The Indonesian government has in favor of capital and economy.
recognized the problems associated skills. In the case of the
with inequality and has enshrined PRC, for example, those
inclusive development in its 2010 who own factories
2014 development plan. have beneted from
Although progress has been slow, economic growth far
there is now a stronger recognition more than those who
of the need to reduce fuel subsidies work in them. In India,
and redirect resources toward a sharp rise in demand
infrastructure development, green for skilled workers in
growth initiatives, and developing the modern services has
countrys poorer regions. increased their earnings
In the 2013 budget, the government relative to those with
expanded its infrastructure spending skills in less demand.
commitments by 38%, with nearly Most noticeably,
half of this allocated to the eastern these forces have
part of Indonesia. afforded greater income
The government is also increasing and opportunities
its investments in education and to people living in
health care. Indonesias Constitution areas with superior
now requires 20% of the national infrastructure, market
budget to be allocated to education. access, and scale
A number of social safety net economies, such as
programs, rst launched after the coastal and urban areas.
economic crisis that hit Indonesia Asian governments
in 1997/1998, are in place with should respond to these challenges
renements to reect current with policy measures that reduce
conditions. These programs cover inequality while not endangering
food security, employment creation, economic growth. This includes
community empowerment, health, spreading basic infrastructure more
and education. widely, rebalancing policies and
regulatory frameworks so that sectors
THE COMMON DENOMINATOR that are intensive users of laborthe
PHOTOS: AFP
of the experiences of the PRC, most important asset of the poor

India, and Indonesia is that all are not disadvantaged, increased
three countries have initiated major spending on social programs, making
INDONESIA:
BITTER HARVEST
Nowadays, when Wani Hayati Solehin prays, its for higher onion prices
Six times a year, Wani Hayati Solehin plants a fresh on- Imported onions cost $0.50 a kilo, half the amount local
ion crop, spending $2,500 but making less than half that farmers need to break even. Smaller, locally grown onions like
amount when she sells her produce. Sitting cross-legged on the ones Wani produces cant compete with larger, cheaper va-
one corner of a dusty rug in her sparsely furnished living rieties from overseas. She spends $15,000 a year to plant her
room, she says she struggles to feed her family. crops, but makes only $7,200 at the market. Add to this the ris-
The 41-year-old mother of three owns just half a hectare ing cost of raw materials like seeds, fertilizer, and insecticide,
of land at Bojong Village on the island of Java. Falling on- all of which make life on the land increasingly unsustainable
ion prices due to competition for some farmers.
from foreign imports means Wanis two eldest children
she sinks deeper into debt ev- have nished high school, but
ery year. She lacks the land Last year we did not even she cannot afford to send them
and the know-how to switch buy new clothes for the children to university. She makes ends
to protable crops, so she just meet day to day through self-
for Eid. Buying clothes is a luxury. imposed austerity measures.
prays for prices to rise.
Above her, on the wall, is a Last year we did not even
black and gold tapestry of Mec- buy new clothes for the chil-
ca. It is the focal point of the -Wani Hayati Solehin, 41, dren for Eid. Buying clothes
room and helps Wani, a devout onion farmer and mother of three is a luxury. Wani wants more
Muslim, keep going during attention to be paid to the
tough times. We accept what poor, many of whom are disad-
we are given, she says. Maybe vantaged by global economic
this is a trial from God. dynamics they often dont
But her prayers have gone unanswered for years now. As comprehend. Governments face pressure to liberalize their
Indonesias economy liberalizes, many citizens are grow- economies on one side and protests from voters like Wani on
ing wealthier. Wani is among those who have not yet ben- the other.
eted, and she wonders whether or not life will ever get a Wani, however, hasnt lost hope. In fact, she believes
little easier. that one day her family will enjoy a better life in a prosper-
Wanis lot presents the ipside of globalization. While ous Indonesia. Onion farming is the only thing I know, she
consumers enjoy cheaper onions and other food items, says, glancing at the Mecca tapestry. I have no choice but to
small producers like Wani are left strandedunable to continue doing this. I will keep trying to send my children
compete with such low prices yet usually incapable of to university. I pray their future will be better than mine.
switching livelihoods. BY NIDHI DUTT
the tax system work better and fairer, Removing policies that favor capital Asia and the Pacic will continue
and targeting subsidies to those who over labor would also help, as would to face global uncertainties that will
are most in need. public employment programs to challenge the efforts of governments
In addition, programs should be temporarily ll gaps in private sector to maintain strong economic growth.
directed toward regions most affected job creation. Rising levels of inequality are an
by inequality. They should focus The Asia and Pacic regions strong additional vulnerability to the
on increasing connectivity to these economic growth has been undeniably regions economies that warrants
regions, removing barriers positive for many of its citizens. urgent action.
to migration, and improving But the region has not managed to
investments in human capital and emulate the example of the newly
access to public services. industrialized countries of the 1960s
As all three countries have and 1970ssuch as the Republic of Edimon Ginting is Deputy Country
recognized, it is vital to increase Korea and Taipei,Chinawhich were Director, Indonesia Resident Mission
employment opportunities in order to able to spread growth more broadly. of the Asian Development Bank
PHOTO: RONY ZAKARIA
address inequality. This can be done Moreover, the region has not kept (ADB). Rana Hasan is Principal
through growth that balances the pace with Latin America, which Economist, India Resident Mission
needs of manufacturing, services, and has high levels of inequality but has of ADB. Juzhong Zhuang is Deputy
agriculture, as well as by support for achieved some success in narrowing Chief Economist at the Economics and
small and medium-sized businesses. these inequalities since the 1990s. Research Department of ADB.

OPINION
the PRC was a poor, capital-scarce
NOW FOR THE HARD PART economy. Factor market distortions
and monopolies were required to
PRCs widening wealth gap needs a bold new approach deliver subsidies and protections to
By Justin Yifu Lin nonviable SOEs in key capital-intensive
sectors. With the successful transition
S
ince switching the government retains various price to a high middle-income country,
from central distortions in factor markets in order comparative advantages now exist in
planning to a to provide subsidies and protections many sectors including automobile
market economy more to SOEs. Major measures include the and heavy machinery. These products
than 30 years ago, the deliberate concentration of nancial are competitive in domestic and
Peoples Republic of services at the four large state-owned international markets. There is no reason
China (PRC) has staged a stunning banks and at the equity market that to continue the subsidies and protections
economic resurgence. Annual gross serves primarily large companies. they currently enjoy.
domestic product growth has averaged Additionally, royalty levies on natural In his report to the 18th National Party
9.9% and annual growth in international resource industries are kept at a Congress last November, former PRC
trade, 16.3%. The PRC has transformed nominal level, and major service President Hu Jintao highlighted the need
itself from one of the worlds poorest industries such as telecommunication to deepen economic structural reform
countries into a high middle-income and electricity are handed monopoly. and ensure that economic entities under
country. More than 600 million people One result of this skewed nancial all forms of ownership have equal access
have escaped poverty. structure is that small and medium- to factors of production in accordance
But this revival has been sized enterprises, which employ 80% with the law, compete on a level playing
accompanied by an alarming increase of workers, have minimal access to eld, and are protected by the law as
in income disparity. The PRC was a nancial services. This sties their equals. Such reforms, to be planned and
relatively egalitarian society when it growth, curbs employment, and exerts implemented by the new leadership,
began its economic metamorphosis downward pressure on wages. This make it more likely that the root of the
3 decades ago. From 1990 to 2008, means that ordinary wage earners and PRCs widening income disparities will
however, its Gini coefficient, a small and medium-sized companies be erased in coming years.
measurement of income inequality, have subsidized big corporations and To improve income distribution, Hu
increased from 32 to 43 according to the new rich through low wages and called for achieving efficiency and
Asian Development Bank (ADB) data. interest rates, contributing to widening fairness in both primary and secondary
The PRCs widening income disparity income disparities. Nominal royalty distribution, with particular emphasis
stems from its dual-track approach levies and monopolies at key industry on fairness in secondary distribution.
to becoming a market economy. On sectors further exacerbate gaps in By putting equal emphasis on achieving
one hand, the government continues earning power. efficiency and fairness in primary
to provide protections and subsidies To improve income distribution, distribution (the distribution of income
to nonviable state-owned enterprises it is imperative that the PRC deepen to owners of labor, capital, and natural
(SOEs) in old capital-intensive priority market-oriented reform to remove resources in the production process) and
industries that are not the PRCs distortions in factor markets and fairness in secondary distribution (the
comparative advantages. On the other eliminate service sector monopolies. distribution of income through transfers
hand, the government has exposed Necessary reforms include: the such as taxes), Hu signaled a marked
new labor-intensive industries to removal of policies that discriminate change from past practice.
private sector participation, leveraging against small and local nancing This is a positive sign. Inclusive
comparative advantages that were institutions including local banks, to Growth: Toward a Harmonious Society
neglected before the market reforms. boost access to nancial services such in the Peoples Republic of China, a 2008
The rst track has helped the as credit for family farms as well as report by ADB, recommends achieving
PRC avoid a transition collapse seen small to medium-sized enterprises in efficiency and fairness simultaneously
in some countries that embraced manufacturing and services sectors; in primary income distribution
economic shock therapy, notably the setting appropriate royalty taxes by refocusing the economy on its
elimination of subsidies and protections on natural resource industries; the comparative advantages, and eliminating
to nonviable rms. The second elimination of barriers to entry and product and factor market distortions.
track enables the PRCs economy competition in the telecommunication The PRCs new strategy of improving
to be competitive in domestic and and power sectors. income distribution, coupled with a
international markets and to maintain It is also the right time for the renewed commitment to structural
its dynamic growth. PRC to cancel the legacies of dual- economic reforms, is consistent with
PHOTO: AFP
The PRC has liberalized prices in track distortions. At the beginning of this advice and shows the government is
almost all product markets. However, its transition to a market economy, serious about tackling inequality.

SPECIAL
REPORT
governments are all but powerless to
stop it.
Yet the economies that powered
Asias economic miracleJapan;
the Republic of Korea; and
Taipei,Chinaall showed relatively
low and steady levels of inequality
during their rapid growth.
These economies remain relatively
equitable today, comparing well
on inequality with the developed
economies of the West. The Gini
coefficients of the Republic of
Korea and Taipei,China increased
only marginally through the 1990s
and 2000s. Their experience is
salutary for similar-sized and less-
developed economies looking to
minimize inequality.
Avoiding inequality starts with
getting agriculture right. Success in
raising agricultural productivity is not
just good for farmers. It underpins
the entire process of industrialization.
Getting agriculture right means
addressing problems of ownership as
LESS well as investment in irrigation,

roads, technology, and other
infrastructure.
UNEQUAL
In the Republic of Korea and
Taipei,China, post-1945 land reform
spurred the rst surge in rural
productivity. In the PRC and Viet
Nam, the return of family farming
THAN OTHERS and price liberalization marked the

rst steps in the reform process
and helped spur rapid rural growth.
However, ownership issues may
Some Asian countries have grown without now be hampering further rises in
productivity through consolidation
leaving anyone behind. Heres how they did it of farms and a substitution of capital
for labor.
By Philip Bowring After an initial surge in rural
W
incomes in the PRC and in Thailand,
hy do some Further widening of these they began to lag urban incomes
countries disparities could eventually provoke driven by huge productivity gains
experience social unrest as governments grapple from industrialization.
inequality, while with wayssuch as tax hikesto skew The Republic of Korea and
others sidestep the system toward the less affluent. Taipei,China did not follow this
it? Widening wealth gaps are a major The stakes are high. But a concerted path. Why? Those governments put
worry for governments throughout anti-inequality program should be huge effort into rural development,
developing Asia. Middle-income informed by how inequality hasand focusing not only on using technology
countries like the Peoples Republic hasntevolved across the region. to boost land productivity, but also on
PHOTO: AFP
of China (PRC), Malaysia, and Conventional wisdom views making farm workers more efficient
Thailand see wealth gaps as a threat to inequality as a by-product of to release surplus rural labor to work
economic growth and stability. rapid development, implying that at urban factories.
Additionally, these governments urbanization reduced the size of the of secondary education rapidly per
nurtured small-scale industries close rural sector, ensuring that regional student, and universal access
to farming communities to create wealth disparities did not become a that underwrote a high degree of
nonfarm earning opportunities. major drag on the economy. social mobility. In contrast, basic
In the Republic of Korea, this took Problematically, the rapid literacy issues have held back most
the form of the saemaul, or new urbanization seen in the Republic of of South Asia, while Southeast Asia
village movement. Moreover, early Korea and Taipei,China made possible presently grapples with the challenge
in their growth cycles they used by their early integration into the of raising the standards of secondary
import controls to keep farm prices global manufacturing system cannot and tertiary education.
above world market levels. While be replicated everywhere. Improving gender equality in
this solution would not work today, Large farm product exporters such education and social policies is
it helped to raise farm incomes at the as Thailand now face the challenge another key to reducing income
expense of urban consumers. of ensuring healthy farm incomes inequalityby bringing more women
The saemaul movement had without subsidizing prices. The PRC into paid labor.
an impact, says Donghyun Park, faces the same dilemma. Although Education is also a key to a solid
manufacturing base. Without it,
urbanization becomes merely
Avoiding inequality starts with a transfer of people from low-
productivity farm jobs to low-
getting agriculture right. Success productivity jobs in the informal
services sector.
in raising agricultural productivity Manufacturing industries must
reect the supply of labor. Inequality
is not just good for farmers. It rises when capital is cheap, funneling
investment toward capital rather
underpins the entire process of than labor-intensive industries.
The cost of capital was mostly
industrialization until the later high in the Republic of Korea early
in its development. Egalitarian
stages of urbanization. industrialization also demands that
plentiful labor does not boost formal
sector wages much higher than
those in the informal sector, due to
principal economist at the Asian farm exports are not signicant for minimum wage laws.
Development Bank. It allowed the economy overall, the nations Once labor is no longer abundant,
people in rural areas to do basic sheer size requires a high level of food union demands for higher
infrastructure improvements and help self-sufficiency. wages, along with better political
themselves. Many people still come For these middle-income countries, representation, tend to reinforce
to [the Republic of ] Korea to learn raising farm labor productivity equality and growth. Rapid wage
about this. remains a difficult but key hurdle in rises, like those in the Republic of
These achievements demonstrate the way of higher rural wages. Korea since the early 1990s, add to
the key role of government in setting Theres a lot of scope for raising growth by spurring consumer
goals and investing in transport, agricultural productivity in both demand and forcing companies to
irrigation, and other infrastructure. [the Peoples Republic of ] China improve productivity. The low wage
They also show how small-scale and India, says Park. It can be route to industrialization is not
industries can bring nonfarm a relatively cost-effective way of appropriate once labor is no longer in
employment to rural areas. Use of improving rural incomes. surplus. Indeed, it sties growth and
public funds to reduce regional spatial Investment in education and increases income inequality as income
inequalities, as the PRC has done health is another key ingredient of accrues to capital owners at the
with its western region development inequality-light growth. After World expense of average households.
strategy, can also yield dividends. War II, both the Republic of Korea There are no easy answers to
One corollary of success on the farm and Taipei,China had higher levels of reducing inequality that comes
was extra manufacturing jobs at cities. basic education and sanitation than with economic growth. But the
In the Republic of Korea, further most of Asia. fundamental lesson appears to be
investments into industry fostered They built earnestly on those implementing the right policies early
self-sustaining job creation. Rapid foundations, ensuring more years in the growth cycle.

SPECIAL
REPORT
Raising
Cambodia
I
n the dusty village of Phum Making matters worse were limited
Thom, off Highway One access to modern health facilities,
is winning linking Phnom Penh with

Viet Nam, Siu Kimlong, a
poor hygiene, and a local preference
for village remedies over antibiotics
its battle matronly 46-year-old woman

sighs deeply. Shoes, we need
and painkillers for postnatal women.
Cambodias child mortality rate
against one children to wear shoes.

That shoes are her priority
was the worst in the region, three to
four times higher than neighbors Viet
of inequalitys illustrates Cambodias progress on

reducing child mortality caused by
Nam, Thailand, the Philippines, and
Indonesia, and approximately one-
most tragic inequality of access to decent health

care. Not long ago, ensuring a child
third higher than the global average.
But as United Nations (UN)
legacies: lived long enough to wear shoes was

Sius biggest challenge in her work for
programs under its Millennium
Development Goals (MDGs) began
child the government ghting mosquito-

borne diseases. Life has improved
to take effect, global mortality rates
started to fall. Reducing deaths of
mortality dramatically, she says.

Child mortality in Asia and the
Pacic is much higher among poor
children younger than 5 by two-thirds
by 2015 is the fourth MDG, and the
Government of Cambodia has been
families, especially if they live in rural collaborating with UN agencies
By Luke Hunt
areas lacking health care facilities and and international nongovernment
qualied personnel. organizations to reach that goal.
In 1990, Cambodia had one of Since 1990, Cambodias child
the worlds worst mortality rates mortality has fallen from 121 out
for children younger than 5. Out of of every 1,000 births to 51 in 2010,
every 1,000 children, 121 died before while infant deaths fell from 87 to
reaching that age, according to a 43, according to the UN Inter-agency
2011 report by the UN Inter-agency Group. Neonatal mortalitydeath
Group for Child Mortality Estimation. during the rst 28 days of lifehas
Villages swarmed with meningitis, dropped from 38 in 1990 to 22 in 2010.
beriberi, sepsis, and measles along
with a host of other infectious
diseases that caused malnutrition,
pneumonia, and chronic diarrhea.
PHOTO: AFP

Since 1990, Cambodias child
mortality has fallen from 121 out of
every 1,000 births to 51 in 2010.
By these numbers, Cambodia is bedevils efforts to save children breastfeeding rates climbed to
right on the global average of 51 in rural areas, where 80% of 74% from 11%.
under-5 child deaths per 1,000 births, Cambodians live. Early this year, Cambodia
according to the United Nations In Phnom Penh the mortality rate announced that it was on the verge of
Childrens Fund (UNICEF), putting it is lower than the average, while in the eradicating measles.
on track to meet a UN goal to reduce more remote areas it is a lot higher, Polio has been virtually eradicated
child deaths to 39 per 1,000 by 2015. says Dr. Maclennan. and malaria infection rates have
Weve seen a massive improvement dropped considerably, according to
in recent years in Cambodia and it CAMBODIAS MODERN-DAY an Asian Development Bank working
has surpassed its United Nations struggle with child health can be paper released in January this year.
Millennium [Development] Goals traced to 1975 when the communist In 2012, Cambodia launched a
for bringing down child mortality Khmer Rouge seized control and campaign to promote breastfeeding
rates, says Dr. Carolyn Maclennan, a marched the entire urban population for children under 2 years old, and a
Cambodia-based consultant with the into the countryside to face a life of joint program to reduce malnutrition
World Health Organization (WHO). hard labor. among children, pregnant women, and
Cambodias performance reects The Khmer Rouges brutal reign had lactating mothers was implemented
signicant regional and global the unusual side effect of eradicating in 2010.
progress on infant and child mortality. inequality, as private wealth and Villagers living in places like Phum
Globally, nearly 7 million children property were wiped out. Thom now have access to clean
died in 2011more than 5 million Tes Kimsan, now a sprightly 71-year- running water, sanitation, electricity,
fewer than in 1990. Infant mortality old, gave birth to her second child the modern medical centers, and sealed
rates among the poorest 20% in Asias same day the Khmer Rouge arrived. roads. A trip that might have taken 2
urban areas fell from 81 to 51 per 1,000 She was ordered out of her hospital days a decade ago now takes only a
births between the 1990s and the mid- bed to trek deep into the countryside. few hours.
2000s, according to WHO. There were dead babies on the The roads make it a lot easier to get
In the decade leading to 2010, street and dead mothers with their medical help, and not so many people
according to the World Bank, Viet babies. I was lucky. The village I went die now, says Siu.
Nams child mortality rate fell from to liked me because I worked hard and Cambodia is making progress,
34 to 23 deaths per 1,000 births, while they decided not to kill me. There was wrote Eng Huot, a secretary of state
Thailands eased from 19 to 13, and the no medicine but they allowed me to at Cambodias Ministry of Health in
Philippines, from 39 to 26. breastfeed my baby when she cried. an article published by The Phnom
Sam Phalla, a 26-year-old restaurant By the time the Khmer Rouge was Penh Post in 2010. A comprehensive
manager, faced an induced birth at a ousted in 1979, the damage had been approach to eradicating potential
public hospital in Phnom Penh 3 years done. For the next 20 years, Cambodia deadly diseases was helping save the
ago, when health care initiatives had remained near the bottom of the lives of our children.
started to bear fruit. international health heap. There is still a long way to go. The
I was worried my son wouldnt be Things began to improve in the late UN believes it will be at least another
healthy and that the nurse wouldnt 1990s. With the support of the UN, the generation before Cambodia has an
do her job properly, says Sam. After government launched immunization international standard of health care.
the birth I realized I did not need to programs against a range of diseases But progress has been made,
worry so much. The nurse did her job to which children are prone, like polio and many lives saved especially in
and the birth went well. and diphtheria. remote villages like Phum Thom. Siu
But the inability of many By 2010 fully immunized Kimlongs work is not yet done, but
Cambodians to afford good medical children had increased to 79% of for the rst time in decades, she sees
care or get to a decent clinic still the population from 40%, while reason for hope.
SPECIAL
REPORT
IN SEARCH OF
A CURE
Solutions aplenty, but
common ground is rare
By Anthony Rowley
A
s Asias economic rise continues, the rich of to recent trends in other developing regions, in particular
the region are getting richer while the poor in Latin America where income inequality has been
miss out on their fair share. narrowing since the 1990s.
On this point, there appears to be little Concerns over rising inequality are widely shared.
dispute among policy makers, economists, During the World Economic Forum in Davos in January,
and sociologists. International Monetary Fund (IMF) managing director
Views diverge, however, on what, if anything, can be done Christine Lagarde said that the economics profession and
about it, at least in the short term. policy makers had downplayed inequality for too long.
The broader question, though, is this: Can rising Now all of us, including the IMF, understand that a
inequality among individuals, communities, and countries more equal distribution of income allows for more economic
be cured by policy interventions, or is it simply a part of the stability, more sustained economic growth, and healthier
development process that needs to work its way through the societies with stronger bonds of cohesion and trust,
system before diminishing? she said.
Over the past 2 decades, developing Asia has reduced What is less clear, as Lagarde further noted, is how to
poverty faster than any other region of the world, at any achieve these goals. Universal access to decent education
time in history, says the Asian Development Outlook 2012, is the nonnegotiable starting point, she suggested. Social
a agship economic publication of the Asian Development protection, credit access, and minimum wages could help.
Bank (ADB). Focusing on inequality in Asia, the report Above all, inclusive growth must also be job-rich growth.
PHOTO: AFP
notes that the bulk of developing Asias population lives in This is a symbiotic relationshipwe need growth for jobs
countries with rising inequality. This is in marked contrast and jobs for growth. Right now, 202 million people are

Primary
education helps
reduce poverty,
but access
to college is
whats crucial in
Everything is
giving the poor
a fair chance at
employment.
geared toward
skilled workers
and the winner
takes all
phenomenon.
That naturally
means that
more rewards
go to the
more talented
people.
ADB chief economist
Changyong Rhee
looking for work and two in ve of the If growth momentum is to be that time technical progress was more
jobless are under [the age of ] 24, she maintained in Asian economies, labor-intensive and it favored blue-
said, citing global gures compiled then free competition must be collar workers.
for 2013 by the International Labour permitted, Rhee suggested. But scal But my belief is that technical
Organization. interventions are the starting point progress has changed and also foreign
Relieving this sense of desperation for any attempt to achieve income competition makes the winner
must be the overriding goal of redistribution. Using taxes to nance takes all phenomenon much more
everything we do. redistributive expenditures for the prevalent. Even with high growth
Ensuring that growth delivers less advantaged groups seems to be now, income inequality is rising.
jobs, and therefore income for all, is the only solution. But how much this That makes it even more
perhaps the closest thing to a silver will hurt growth momentum is important that economic growth
bullet to beat inequality. a question. be accompanied by targeted
ADB chief economist Changyong Taxes are rarely popular and interventions on education, health,
Rhee refers to the inequality issue as always difficult to impose. Rhee notes and household nance, says Haoming
the Achilles heel of Asian economies. that progressive taxes that aim to Liu, a labor economist at the National
He says the problem of job creation is redistribute income within a country University of Singapore.
a complex one. can easily provoke opposition from While rapid economic growth has
Many Asian countries, Rhee says, vested interests. successfully reduced the proportion
face a trade-off of having more rapid He believes a value-added tax of population living in poverty, it
growth versus a more equal society. might be the best rst step; though might not be an effective way [to]
Its more than a matter of having not progressive, it is easy to collect. address the inequality issue. Providing
equal opportunity. If we look at recent In the 1960s and 1970s when the opportunities to people from
technical progress and globalization, four Asian dragons were growing disadvantaged families is the key.
everything is geared toward skilled very fast, Rhee notes, referring to Education, says Rhee, must be
workers and the winner takes all Hong Kong, China, the Republic of integral to any lasting solution:
phenomenon. That naturally means Korea, Singapore, and Taipei,China, Previously, we emphasized basic
PHOTO: AFP
that more rewards go to the more Asia enjoyed high growth together primary education and it was very
talented people. with improving inequality because at effective in reducing poverty and in
protecting the very poor. But that Asian Development Bank Institute Poverty alleviation is an easier
does not solve the inequality problem. (ADBI) in Tokyo. In [the Peoples challenge than eliminating inequality,
To solve that, we have to provide a Republic of ] China, we distinguish says Rhee. Poverty reduction
chance for talented poor children between primary and secondary programs often address the symptoms
to go to college. So rather than income distribution. Primary refers rather than the cause of the problem.
spending all of your revenue on to [the] way in which income is In calling for jobs-rich growth
primary education, you provide distributed in terms of workers pay, at Davos, Christine Lagarde laid
tertiary school subsidies. capital, and land, while secondary emphasis on areas such as gender
Is widening inequality simply an refers to taxation and welfare equality, noting a recent study
inevitable part of the development payments. The PRC has not done showing that raising womens
process? US economist Simon well in secondary income distribution, employment rates to the level of men
Kuznets has argued that inequality says Liu, citing the absence of a would lift GDP by 5% in the United
is a phase that an economy must capital gains tax. Revenue for central States, 9% in Japan, and 27% in India.
endure on the road to maturity. government has improved, but the Her broader point was that reducing
Since most of Asia leads the central government should pay more inequality means leveling the playing
world on economic performance, is attention to social protection. eld for people who are often
worsening inequality inevitable? Under the new scal regime since excluded from growth. We need all
Kuznets may have a point so far the mid-1990s, local governments people to share in rising prosperity
as primary income distribution is are able to collect taxes and land sale and, by the same token, share fairly in
concerned, says Minquan Liu, a proceeds, but they have a long list of any economic adjustment needed to
researcher on inequality issues at the social responsibilities. achieve or restore prosperity.

FEATURES As of 2012, farmers in the PRC
migrating to cities ran in the millions.
SLUMS
Reconsidered
Slums may be eyesores, but they can also be
dynamic economies in their own right
By Nirmal Ghosh
S
aiyuud Diwong, a 38-year-old communities may still be relatively The old stereotype of slums as
mother of two, was born in and miserable places to live in, but they huddled shanties riddled with disease,
grew up among the cramped are often essential components of the crime, drugs, and violence still holds
lanes and fetid open drains of wider urban economy. true in key respects. Slums can be
Klong Toey, the biggest slum The double-edged nature of slums miserable and dangerous. In February
in Bangkok, packing 80,000-100,000 complicates the task of managing 2012, United Nations Childrens
people into 2 square kilometers. For them in ways that minimize their Fund (UNICEF) Executive Director
years she spent long days cooking negative impacts on the surrounding Anthony Lake wrote, An increasing
food at a roadside stall in the slum to city, while improving the lot of their number of children living in slums and
bring home around $4barely enough millions of residents. shanty towns are among the most
to keep her two young boys clothed, The answer may hinge on strategies disadvantaged and vulnerable in the
sheltered, and fed. that build on the inherent strengths of world, deprived of the most basic
Today, she is a successful slum life. There is no simple solution for services and denied the right to thrive.
entrepreneur, with tourists drawn to the dilemmas posed by sprawling slums. But this reality masks an alternate
her cooking classes for an authentic But strategies focused on equitable view of slums as vibrant economies that
Thai experience. Her story has been development, especially for children make a little-noted contribution to the
covered by international media and and community-based action rather larger urban society around them.
she has toured Australia giving cooking than solutions based on generalizations UN-Habitat has identied a unique
demonstrations, even appearing on imposed from outsideare increasingly sense of community at slums linked to
Australian TV. nding favor. their status as the rst stopping point
And she still lives in Klong Toey. Almost 1 billion people, or 32% of in otherwise expensive cities for rural
Saiyuuds story is remarkable but the worlds urban population, live in urban migrants.
no longer exceptional. From Bangkok slums mostly in the developing world, Against all odds, slum dwellers
to Mumbai, long-established slum according to UN-Habitat. have developed economically rational
and innovative shelter solutions for kilometershas long been recognized an Australian from Dandenong near
themselves, UN-Habitat says in a as an economic engine. It has produced Melbourne who has lived in Klong Toey
2003 report titled The Challenge of its fair share of millionaires and an for 10 years and has been working for
Slums. Most slum dwellers are people economic output estimated at $600 a Christian organization as a teacher
struggling to make an honest living, million to over $1 billion. in a local school. Baker had the idea
within the context of extensive urban In an article last year, The New York of converting her roadside stall into a
poverty and formal unemployment. Times aptly described Dharavi as a tourist draw.
The report marked a change in self-created special economic zone Bangkok and Mumbai offer good
attitudes toward slums by challenging for the poor. examples of entrenched urban slums.
clichs underpinning policy making Likewise, Klong Toey churns out Both are port cities, with the slums
that disparaged slum communities as legions of young people who smile over rising partly as living quarters for dock
eyesores and sordid dens to either be counters at customers in thousands of construction workers and becoming
evicted or at best redeveloped. bars, shops, and cafs in Bangkok. This permanent xtures. Both are economic
Instead, says UN-Habitat, policy riverside community supplies some hubs, drawing young people who dream
should refocus on in-situ slum 5,000 daily wage earners for the port of making it in the big smoke. One
upgrading rather than resettlement of facilities on its doorstep. penniless young man who moved to
slum dwellersa view that has gained Saiyuud encapsulates this aspirational Mumbai grew up to become the wildly
traction and, in some cases, has been energy. Her family now owns a van to popular lm star Shakrukh Khan.
reected in policy. ferry tourists from their air-conditioned Dharavi, immortalized by the 2008
Policies focused on upgrading are hotels nearby to her kitchen, recently lm Slumdog Millionaire, is a hive of
partly premised on the economic upgraded with air conditioners. She now activity with distinct neighborhoods and
value of slums. Mumbais Dharavi employs 3 to 10 people every day. informal networks and hierarchies. It
PHOTO: AFP
reputedly Asias biggest slum at close to All Saiyuud needed was a spark, forms a microcosm of Indias economy,
1 million people living in only 1.6 square which was delivered by Anji Barker, with small workshops producing a

range of items from daily ready-to-eat Mehta. When your one asset is your
meals for professionals across the city, jhopdi (shack), you are not going
to luggage trolley wheels that trundle to ignore a tempting offer for a lot
around airports across the world. of money.
Dharavi exemplies it, but there are The end result? Development has
other slums where a lot of work goes on, taken place in pockets and along the
and its a huge employment hub so you main roads at the slums fringes. But
cant just treat it like a housing project, areas deep inside Dharavi are exactly
says Kalpana Sharma, columnist and the same as they were 20 years ago.
author of the book Rediscovering
Dharavi: Stories From Asias Largest Slum. THE DHARAVI EXPERIENCE
Unfortunately, slums like Dharavi too illustrates the intractability of Asias
often get the housing project treatment. slum problem. The Asian Coalition for
Innovative redevelopment plans for Housing Rights (ACHR), in an October
Dharavi rst drawn up in the mid-1990s 2011 report on its Asian Coalition for
are still stuck on the runway. Located Community Action (ACCA) program
deep inside the core of the sprawling in 150 cities throughout 15 Asian
city of 13 million, Dharavi is a potential countries, said: Its no exaggeration to
real estate gold mine. Anticipating say that most externally propagated
redevelopment, speculators bought up development interventionsby
houses; some 60% of people living in governments, NGOs, and development
Dharavi are now tenants. They include institutionsno matter how well
young professionals and executives intended, are failing miserably to
saving on the sky-high rents in more provide the solutions that are needed. Extralegal settlers share with
salubrious districts. The ACHR blamed scattered, wealthier citizens the desire
for a stable, happy life.
What the plan essentially did was supply-driven projects, which are not
parcel off the land on which Dharavis even coming close to responding to the
residents...have lived and even real dynamics or the real scale of the Wong, an anti-eviction coordinator for
prospered for several generations, to problems of poverty, land, and housing Leaders and Organizers of Community
private developers, wrote Sharma in in Asian cities. Organizations in Asia, a group of
The Hindustan Times in December 2011. The ACCA focuses on helping community leaders supporting slum
Dharavis people would get their slum dwellers design solutions at the dwellers. The system is loaded against
houses, the government would get grass roots. In 2011, Mike Shanahan them; the solution is to give them the
the funds to lay the infrastructure, of the International Institute for toolseducation and access to capital,
and the private developers would go Environment and Development wrote: for instance.
home happy with prots from lucrative ACCA has allowed people to take Another key issue is property rights.
commercial property. Everyone would charge of their own development and Slum dwellers exist in a permanent state
be happy. make changes as quickly as possible of insecurity, which breeds short-term
Nothing of the kind happened, and on a city-wide scale. This contrasts thinking. When speculators bought
she wrote. An economic slowdown with the islands of development that shacks in Dharavi, the deals were off
forced the government to pause. But governments and donors tend to create, the books because original owners
expectations remained among residents and which rarely engage poor people as lacked title deeds. The property market
that they, too, would one day live in a active participants. remains a gray market free for all where
new high-rise apartment block. Across Asia, ACCAs investment of cash is king and uncertainty a way of
Further complicating matters, the $2.3 million has unlocked $35.6 million life. That kind of environment fosters a
plan has helped launch Dharavis land worth of government land for poor day-to-day, edge-of-seat existence.
prices into the stratosphere. Enticed by peoples housing, says ACHR. A certain cultural poverty can
visions of a new middle-class suburb, This type of community-led emerge in which people dont think long
construction companies and loan sharks approach is a key to successful slum term; they internalize the temporary
moved in to buy out local residents. redevelopment, experts say. nature of their neighborhood, says
The latter can hardly be blamed, The key is primarily to have as Ashley Barker, international director
says the original proponent of the much participation from the affected of the Christian organization Urban
Dharavi Redevelopment Plan, Mukesh community as possible, says Jeff Neighbors of Hope. Barker, whose wife
Most slum
dwellers
are people
struggling to
make an honest
living, within
the context
of extensive
urban poverty
and formal
unemployment.
UN-Habitat report,
The Challenge of Slums
Anji helped Saiyuud rise to fame, gentried. Whereas the houses of the important, because then you can plan,
has written six books on slums and poor in advanced nations lose value and you can look at infrastructure.
poverty and is working on a seventh, over time, the buildings in the poor He cautions against a navely
Slum Life Rising. settlements of the developing world romantic view of slums. The idea is
become more valuable, evolving to have the sense of communitybut
SLUM DWELLERS MAY THINK their within decades into the equivalent it should be a healthy place as well.
lives are transient, and at an individual of working-class communities in Most, if not all, slums fail on that
level they may well be. But the reality is the West. count. UN-Habitat characterizes slum
quite different at the community level. He notes that, contrary to their life as the most intolerable of urban
Almost all slums have roots in rural lawless image, extralegal settlers share housing conditionsfrom insecurity
urban migration. The UNs State of the the desire of civil society to lead happy of tenure to lack of basic services,
Worlds Population 2007 noted that and productive lives. unsafe structures, overcrowding, and
efforts to curb or regulate this A major absence from these lives hazardous locations.
migration have proven futile. is property rights. Quoting eminent Solving this riddle, however, requires
As a result, slums are becoming as historian Richard Pipes, de Soto deeper thought about what slums
embedded as upscale neighborhoods identies private property as the single represent to the people who live in
in the urban social fabric. In his 2000 most important factor of social and them. At Dharavi and most other
book The Mystery of Capital, economist political integrations as it helps create slums, listening to residents might
Hernando de Soto wrote, The a commitment to the political and be a good place to start, says
extralegal settlements the migrants legal order. Kalpana Sharma.
inhabit may look like slums, but they Barker agrees: Because slums are In Mumbai, each slum area has its
are quite different from the inner-city outside the law in a sense, some other particular genesis and kind of people
slums of advanced nations. power will ll the vacuum. Wherever who live there and the work they do, or
In the developing world, the basic you have slums, you have organized dont do. You have to make sure that
PHOTO: AFP
shelters of the poor are likely to be crime preying on them. Slums are whatever is done in terms of re-housing
improved, built up, and progressively complicated, and land rights are them is what works for them.

FEATURES
With a college degree and skills

as a writer, she responded to an
advertisement on a Pakistan website
offering freelance opportunities
writing content for websites in the
United States (US). Before long, she
was earning the equivalent of $400 a
monthmore than three times her
salary as a full-time school teacher.
Maria was able to offer her skills
to companies on the other side of
the world and improve her familys
nancial situation through the nonprot
organization Samasource.
The organization connects
underprivileged people with work via
the internet by providing a variety of
services to clients in the US.
Some of these clients are high-prole
outts like LinkedIn and the US State
Department. It maintains a sales office
in San Francisco and work centers in
Haiti, India, Kenya, Pakistan, South
Africa, and Uganda, in partnership
with local entrepreneurs. In Africa,
some work stations are adjacent to
refugee camps.
On its website, Samasource says that
it brings dignied, computer-based
work to women, youth, and refugees
living in poverty.
DIGITAL The organization is a leader in using

the digital economy to bring income
opportunities to the poor around
the world, but it is not alone. Digital
DOLLARS
worksometimes called micro work
or virtual workis a fast-growing
employment opportunity for people in
developing countries.
This emerging industry even
Thousands of people in developing countries encompasses online gaming, with
people in the developing world
are earning real money working in virtual worlds accumulating points for gamers located
mostly in developed countries. This
increasingly popular but controversial
By Floyd Whaley practice was worth an estimated
$3 billion globally in 2009 according to
ILLUSTRATION: ISTOCKPHOTO
M
aria worked as a teacher in Islamabad, Pakistan until she gave birth a study funded by the Department for
and needed to stay home to take care of her child. Once she left International Development (DFID) of
her teaching job, she hoped to nd another way to earn but had the United Kingdom.
few options. Amassing spoils such as gold or
For women in Pakistan, our choices for working outside the farmland in games like Farmville, which
house are limited, she said in an interview. are then turned over to a player in the
A happy customer.
Samasource aims to help
120,000 women, youth,
and dependents by 2016.
developed country for a fee, is called estimated to
gold farming. reach about
It sounds like harmless and protable 144,000 workers as
fun. But it has been linked with employment income.
sweatshop conditions for the gamers This is estimated
in developing countries, and has to increase to $20
spurred lawsuits against gold-farming billion, with half of
companies by game makers. It has also that going to 780,000
been blamed for a variety of social ills workers by 2015.
among young people, a concern that Thousands of
prompted the Republic of Korea to men and women
announce a ban in 2012 on the trade of in countries such
virtual goods for real money. as India and Kenya
Other potentially negative aspects of earn primary and
micro work include companies hiring supplementary
intermediaries that contract legions of income by
Facebook users in developing countries completing simple human intelligence positions in the value chain, and to offer
to click Like on their corporate pages. tasks, such as assessing whether two a more diverse range of services with
This drives up the ranking of those images are of the same product, or higher value added, notes Knowledge
companies in Facebook search results, transcribing a fragment of handwritten Map of the Virtual Economy.
but also dilutes the value of actual text, states the 2011 infoDev report Gaming can generate dividends
users opinions. Knowledge Map of the Virtual untainted by social and legal
Those seeking to use micro work Economy. complications. All aspects of the
for development purposes should be Large companies such as Amazon third-party gaming services value
careful to monitor the activities of have found that computers are not able chain, from production to marketing,
their partner organizations, says Vili to do many simple tasks required to can now apparently be carried out
Lehdonvirta, a researcher at Helsinki power their complex digital operations. from countries such as [the Peoples
Institute for Information Technology Micro work can be as simple as labeling Republic of] China and the Philippines,
who has studied the issue. photos or as complex as writing text. the report states.
Entrepreneurs should focus on Impact sourcing employment As a result, the industry may employ
digital micro work that benets society, provides measurable increases in as many as tens of thousands of skilled
she says. Examples include transcribing income levels, notes Job Creation customer service and management
books, translating documents, and Through Building the Field of Impact staff in these locations.
improving search-engine results. Sourcing, a working paper published The development community
When undertaken responsibly, micro by the Rockefeller Foundation in can support micro work and virtual
work can provide income for people 2011. The benets of formal, stable economy work in developing countries
in developing countries on par or employment also increase family by focusing on activities that offer social
exceeding farm or mining work, as well investment in health care benetsin other words, support tasks
as being considerably less physically and education. that ll a legitimate need or add value to
taxing and dangerous. a company or process.
Today, a growing mesh of digital ACTIVITIES ON THE HIGHER One potentially important role
services is giving rise to a new layer of end of the pay scale, such as of development organizations is to
entrepreneurial opportunities with very marketing and quality control, are support the role of mobile phones in
low entry barriers, said Valerie DCosta, done in developed countries where micro work.
program manager with infoDev, a the customer-facing operations There are real earning opportunities
grant program that has partnered with are centered. Lower labor costs are in the virtual economy that will become
the World Bank on information and what draw businesses to workers in accessible as mobile technology
communication technology. developing countries, so incomes are develops, said Tim Kelly, lead ICT
not likely to rise quickly.
PHOTO: SAMASOURCE
policy specialist at infoDev. This could

MICRO WORK, ALSO CALLED For a sustained development signicantly boost local economies and
impact sourcing, generates an impact, it may be necessary for micro support further development of digital
estimated $4.5 billion in revenue work entrepreneurs in developing infrastructure in regions such as Africa
worldwide; $1.2 billion of this is countries to nd ways to upgrade their and Southeast Asia.

:ZDQGHV
The benefits of achieving universal access to modern energy services are transformational:
lighting for schools, health clinics, pumps for water and sanitation, cleaner indoor air,
faster food-processing and more income opportunities.
The United Nations Development Programme (UNDP) supports access to electricity based on
clean energy technologies, access to clean fuel and devices for cooking and heating, and
increased access to mechanical power.
48Visit http://asia-pacific.undp.org/Video/PSA-EnergyAccess.html www.development.asia
REVIEW
THE GREAT CONVERGENCE: THE GREAT REBALANCING: FROM THE RUINS OF EMPIRE:
ASIA, THE WEST, AND TRADE, CONFLICT, AND THE THE INTELLECTUALS WHO
THE LOGIC OF ONE WORLD PERILOUS ROAD AHEAD FOR REMADE ASIA
THE WORLD ECONOMY
By Kishore Mahbubani, Public By Pankaj Mishra, Straus & Giroux,
Affairs, February 2013, $26.99. By Michael Pettis, Princeton University November 2012, $27.00.
Press, January 2013, $29.95.
The fourth book by Kishore Mahbubani, How should Asia respond to
a Singaporean former diplomat, calls As a former banker teaching economics modernity? This question animates
for an update of the global rule-based in the Peoples Republic of China Pankaj Mishras latest book, which
order to account for the rise of Asia. He (PRC), Michael Pettis is well placed chronicles Asias cultural clash with
expresses faith in those rules, but also to pronounce on the ills of the global Western colonial powers through the
concern that the institutions enshrining economy. In The Great Rebalancing: life stories of three Asian thinkers:
them properly reect the ongoing power Trade, Conict, and the Perilous Road Persian activist Jamal al-Din al-Afghani,
shift toward Asia. Ahead for the World Economy, he offers Chinese reformer Liang Qichao, and
Mahbubani is a professor of public new food for thought on how the global Indian poet Rabindranath Tagore.
policy and dean of the Lee Kuan Yew economy might regain equilibrium. Mishra is an Indian writer of ction
School of Public Policy at the National Pettis is a senior associate at the and non-ction. He also writes political
University of Singapore. He served for Carnegie Endowment for International and literary essays for Indian, British,
more than 3 decades with the Singapore Peace and a nance professor and US publications.
foreign service. specializing in PRC nancial markets Mishra shows how, like their
Mahbubanis essential argument is at Peking Universitys Guanghua School European and American counterparts,
not for the creation of new institutions of Management. Asian intellectuals of the 19th and 20th
that enshrine the global power shift, but One countrys trade decit must be centuries responded to the colonial
rather closing the democratic decit matched by other countries surpluses, encounter by constructing a binary
by lling up the old bottle of the Wests and cannot be blamed only on a decit opposition between East and West....
rule-based system with the new wine of countrys supposed failings. These Mishras astute and entertaining
the rising rest. For Mahbubani, the old arguments are familiar. But Pettis synthesis of these neglected histories
institutions should remain, but under book stands out in its emphasis on goes a long way to substantiating his
new management.South China the surplus countries responsibility claim that the central event of the last
Morning Post for producing these imbalancesand century for the majority of the worlds
For all the clash of civilizations that the role they should play in correcting population was the intellectual and
denes the modern era, Mahbubani them. Financial Times political awakening of Asia.
argues, things arent necessarily A painful reckoning awaits an out-of- The New York Times
all that bad out there. ... The trick whack global economy, according to this It has become commonplace
now, writes the author, is to shed insightful treatise Pettis erudite, but that Asia is once more becoming
ideas of supremacy. Mahbubani lucid and very readable, analysis brims economically and politically condent.
offers practical steps, including a with surprising ripostes to conventional Mishras book is an invaluable
recomposition of the UN Security wisdom he thinks excessive companion to that process because
Council to encourage one-worldism. national thriftiness is at least as sinful of its detailed and rigorous historical
An interesting exercise in geopolitical as extravagant consumption. emphasis The Times Literary
wonkiness. Kirkus Reviews Publishers Weekly Supplement

FEATURES
We know
there are
lots of things
governments
can do to
get more
results from
the money
theyre already
spending.
Nancy Birdsall,
president of the
PHOTO: AFP
Center for Global

Development
RESULTS FIRST
An innovative development aid model
enables donors to pay for results over inputs
By William Branigin
A
fter decades of Three years in the making, the results- the effectiveness of programs by
development aid based lending program will impact every sharpening their focus on results.
programs that rigorously stage in the lending process. Results-oriented programs still
tracked expenditures Program design will include mean different things to different
and prescribed assessments of program systems before people, and go by a variety of different
implementation procedures, a new launch; results will be veried over names, explains Mark Pearson, an aid
approach is gaining tractionone that the course of the program; and a new effectiveness specialist at London-
pays for results rather than input. focus on institutional development based health sector consultancy rm
The new focus aims to ensure at recipient countries will ensure that Health and Life Sciences Partnership
that funds delivered to development program systems - the crucial building (HLSP), in a recent paper.
assistance programs lead to on-the- blocks of successful programs - are as What they have in common, he
ground progress. This is done by linking strong as possible. notes, is a commitment to paying only
assistance payments to results, marking A strong focus on results was a core for achieved results. In recent years
a departure from the standard practice theme at ADB under former President the emphasis has been on country
of paying once evidence is provided of Haruhiko Kuroda, who left the bank ownership of programs, in the context
spending on program inputsan often- in March this year. In a speech last of jointly agreed strategies and goals.
illusory measure of progress. September, he called for a sharper A formative inuence on these
A groundswell of support for focus on results, to more effectively programs has been an aid model called
quantiable results over the past meet the needs of our Developing Cash on Delivery (COD), which was
2 decades has gathered strength Member Countries (DMCs). We need pioneered by the Center for Global
amid global economic turmoil that to take our efforts to the next level to Development (CGD), a nonprot think
has pushed governments toward scal ensure that every ADB project and tank based in Washington, DC.
austerity and foreign aid cutbacks. program measurably enriches our The CGD rst proposed what came
Linking payments to measured DMCs and especially the lives of to be known as COD aid in a paper,
results makes it more likely that aid the poor. Payments for Progress: A Hands-Off
objectives will be met even in uncertain The World Bank has made a similar Approach to Foreign Aid, published in
economic times. journey toward results-based programs. 2006. Donors would bind themselves
Bilateral development agencies In 2012 it unveiled its Program for as a group to pay a specic amount
such as the United Kingdoms Results, which demands more for clear evidence of progress against
(UK) Department for International accountability from partner countries one or more agreed goals in low-
Development (DFID) have been quick in return for funding aimed at delivering income developing countries, it said.
to embrace the results agenda. Their positive results long after the banks Payments would be determined
multilateral cousinsmost notably the involvement has ended. as a function of the outcomes, and
Asian Development Bank (ADB) and not linked to the implementation
the World Bankhave followed suit THE QUEST FOR better results has of any particular policies, any other
by enshrining results-based funding in been a core theme of development intermediate outputs, or tied to
their aid and nancing activities. nancing since the 1990s. At successive purchases from particular suppliers
This year ADB will begin a 6-year international development forums or companies.
pilot of results-based lending for over the past decade, development The center developed the proposal
government-owned sector programs. agencies have committed to enhancing in a 2010 book, Cash on Delivery: A New

The recipient would be free to devise its
own means of achieving the result, but the
donor would contract with an independent
third party to verify the measure of
progress that triggers payments.
Approach to Foreign Aid. It outlined an application to primary usually develop over time as a result of many factors and
schooling in which a contract would be signed for a donor to stakeholders. This, it is argued makes value-for-money
pay a recipient government for a measurable outcome, such evaluations difficult and sometimes misleading.
as an assessed completerdened as a student enrolled The concern across the NGO sector is that it pushes you
in the last year of primary school who takes an approved toward doing whats measurable rather than whats important,
standardized assessment test. said Duncan Green, head of research at Oxfam Great Britain.
In this example, the funder would agree to pay $20 for In a paper on COD aid, Paolo de Renzio and Ngaire Woods
each assessed completer up to the total enrollment in a base of the University of Oxford argued that the new mechanism
year and $200 for each additional assessed completer over 5 is fraught with potential contradictions, and still needs to be
years. Payments would be offered regardless of test scores to validated by solid empirical evidence. Among other pitfalls,
minimize the temptation to misreport progress or teach to the they said the program may lead to distortions in resource
testrecurring problems with high-stakes testing worldwide. allocation and attempts to manipulate the data.
Under the hands off approach at the core of the proposal, However, those who support closer tracking of impact
the recipient would be free to devise its own means of and results contend that improvements in the way data is
achieving the result, but the donor would contract with an collected can make complicated projects more quantiable.
independent third party to verify the measure of progress that They also hold that development agencies have a dutynot
triggers payments. The COD aid contract would be publicly just to the accountants back at the home office, but to people
disseminated to encourage scrutiny and transparency. struggling to escape povertyto aim higher and use their
According to Birdsall, COD aims to change the relationship limited resources in the very best way possible.
between donor and recipient countries. Goals are simplied You cant just take people at their word that what they are
so they can be broadly understood, allowing the recipient doing is transformative and a better use of resources than
government to choose the best way to achieve them. something else. They have to have some evidence. Otherwise,
This is intended to increase local accountability while its like a religious argument, said Claire Melamed, head of the
reducing transaction costs and encouraging innovation. The growth and equity department at the Overseas Development
program also scraps complex mechanisms so that no aid Institute, a UK think tank. Just because measuring
money goes astray through corruption and other diversions; something is difficult doesnt mean they should give up
instead, it relies on civil society to hold the beneciary before they even start.
government accountable. Criticism of the focus on results begs the question
Its the government that takes responsibility and takes the whether any foreign assistance can make a difference,
risk associated with trying to achieve a specic outcome, according to William Savedoff, a senior fellow at the CGD.
Birdsall said in an interview. We know there are lots of things People who design, fund, and implement aid programs are
governments can do to get more results from the money more comfortable with rewarding effort than rewarding
theyre already spending. results, despite all the rhetoric to the contrary. Yet our ability
to measure effort is probably much worse than our ability to
THERES BROAD CONSENSUS on that point, but less measure outcomes.
agreement on whether current results-based models offer the This ability to measure outcomes is particularly strong in
best solutions. health and education. Accordingly there has been a strong
Critics worry that funding agencies may impose demands focus on these areas by development agencies.
for quick and concrete results as if development were always The GAVI Alliance (formerly the Global Alliance
a linear, cause-and-effect process. Lasting improvements for Vaccines and Immunization), a nonprot publicprivate
Financial
incentives have
been found
to improve
performance in
maternal and child
health programs.
partnership based in Geneva and Washington, has been Its only the third type of lending instrument that theyve
using pay-for-results programs for a decade to immunize had in their history, so its potentially a rather large departure,
millions of children in 53 of the worlds most impoverished said Lawrence MacDonald, CGD vice-president for
countries. DFID is funding a results-based pilot project in communications and policy outreach.
Ethiopia to get more girls to complete secondary education. Similarly, ADB has framed its results focus as a potential
A paper published in February by researchers from the win-win for all parties, delivering cost-effective development
Massachusetts Institute of Technology and the World outcomes as well as better operations and stronger
Bank suggested that results-based models hold promise, recipient institutions.
particularly in health. The paper described an experiment Recipients of ADB results programs will get to choose
in more than 3,000 Indonesian villages to test the role between the new approach and existing lending instruments.
of performance incentives in improving the efficacy of In its policy paper, ADB says results-based lending will
aid programs. complement ADBs existing lending modalities, help ADB
The experiment found that nancial incentives helped better meet the needs of its developing member countries,
improve performance in maternal and child health programs support good governance, increase accountability and
and that there was little downside from the paymentsthat incentives for development results, and contribute to the
is, no evidence of multitasking problems, manipulation of aid effectiveness agenda.
records, or the channeling of funds to richer areas. The broad aim of the ADBs approach is to deliver better
But the study found no differential impact of incentives results through greater accountability, and ensuring those
on education. results are sustained and expanded over time.
The World Bank has approved a 2-year phase of Program Whether the pilot succeeds in achieving that goal will
for Results that limits programs to 5% of the banks annual be assessed through an internal review of the programs
lending, or about $2 billion a year. This is estimated to be performance at the pilots 3-year halfway mark, and around
enough for 10 to 20 programs a year, depending on their size. the time of its completion in 2019.
The development landscape has changed, the World Bank In fact, the next few years could be crucial for the results
said in a paper on its program. agendas future prospects everywhere, as the global
Among 34 client countries included in consultations last development community assesses and renes its impact
year on the proposed program were Indonesia, the Lao at program level in differing contexts. The road to optimal
Peoples Democratic Republic (Lao PDR), the Philippines, results will likely be a long one, but at least a start has
and Viet Nam. The ADB was one of nine development been made.
partners consulted.
Among the rst 6 programs that used Program for Results
nancing in the rst year after its approval are a $200 million
PHOTO: AFP
rural water program in Vietnam, and a $60 million bridge

maintenance and construction project in Nepal. Additional reporting by John Otis

NOW
I AM A LEADER
Women own less than once percent of Earths land but produce eighty percent of the developing
worlds food. Sita Poudel is one of those women. With help from Heifer International, Sita
formed self-help groups in Nepal that are allowing women a voice, a way to take charge of
their own lives and secure their rightful places in leadership. Their children are able to go
to school, they are no longer hungry and Sita has a voice. Since 1944, Heifer International
has provided livestock, tools and training to more than 15.5 million families. We will keep
working until we END hunger and poverty around the globe. Join us.
888.5HUNGER
Learn more at Heifer.org/Now 888.548.6437
DEVELOPMENT AGENDA
2-5 MAY JUNE AUGUST
Delhi 2013: 4: Day of Innocent Children
46th Annual Victims of Aggression
Meeting of the Asian 57: World Economic Forum on East
Development Bank, Asia, Nay Pyi Taw, Myanmar
India Export Mart 69: Asian Conference on
Limited, Greater Sustainability, Energy and
Noida, Delhi, India Environment, Osaka, Japan 11: World Population Day
8: World Oceans Day 18: Nelson Mandela Day
12: World Day Against Child Labor 23: International Day for the
16: Day of the African Child. Remembrance of the Slave Trade
3: World Press Freedom Day 1718: G8 Summit, Enniskillen, and its Abolition
5: International Day of the Midwife Northern Ireland 29:International Day against
20: World Refugee Day Nuclear Testing
810 MAY 27: 20th ASEAN Regional Forum,
Bandar Seri Begawan, Brunei
SEPTEMBER
25-28 JUNE 17: WHO World Breastfeeding Week
16: World Water Week, Stockholm,
Sweden
Regional Conference on Integrating
Domestic Industries with Global
Production Networks and Supply
Chains (ADBI), Singapore
BETTER POLICIES FOR BETTER LIVES
8th Asia Clean Energy Forum 2013 -
13: UN Human Rights Council, 23rd
ADB headquarters, Manila, Philippines 56: G20 Summit, St Petersburg,
Session, Geneva, Switzerland
Russian Federation
13-14: Cities for Children Conference, 26: Day Against Drug Abuse and Illicit 8: International Literacy Day
Stuttgart, Germany Trafficking 9: International Day of the Worlds
15: International Day of Families
Indigenous People
1923: United Nations International
9-27: UN: Human Rights Council,
Strategy for Disaster Reduction
Global Platform for Disaster
JULY 24th Session, Geneva, Switzerland
1113: World Economic Forum: The
Reduction, Fourth Session, Geneva, 6: International Day of Cooperatives Annual Meeting of the New
Switzerland 7 10: ICPD (International Conference Champions, Dalian, PRC
2021: EE Global 2013 - Energy on Population and Development) 12: International Youth Day
Efficiency Global Forum, Walter E. - Review International Conference 16: International Day for the
Washington Convention Center on Human Rights, The Hague, Preservation of the Ozone Layer
Washington, DC, US Netherlands 17: Global Launch of the MDG
2028: WHO World Health Assembly, 8 11: Third APEC Business Advisory 2012/2013 report, The Post-2015
Geneva, Switzerland Council (ABAC) Meeting, Kyoto, Development Agenda in Asia and
2122: Aid and International Japan the Pacic: Regional Perspectives,
Development Forum, 10-12:Third International SIDS New York, US
Washington DC, US (Small Island Developing States) 19: World Humanitarian Day
21: World Day for Cultural Diversity for Conference - Pacic Region 21: International Day of Peace
Dialogue and Development Preparatory Meeting, Republic 2022: UNEP Clean Up the World
29: Day of UN Peacekeepers of Fiji Weekend
2931: 5th Delft Symposium on Water
24: 68th UN General Assembly,
Sector Capacity Development,
New York, US
Delft, The Netherlands
29: World Heart Day

BLACK
& WHITE
PHOTOGRAPH: VEEJAY VILLAFRANCA
RECYCLED LIVES
It has been nearly 25 years since the last garbage costing nearly $25. Still, a sense of community is as
truck unloaded at Smokey Mountain. But the huge, palpable as the poverty.
smouldering mound of trash near Manilas old city still The challenge now is to provide livelihoods.
provides a home and livelihood for 30,000 people, Sustainable Project Management, a Geneva-based
many of whom grew up scavenging through trash for nongovernment organization working at Smokey
plastics and metal to recycle. Mountain, is helping improve recycling through better
The scavenging continues, though nowadays collection and sorting at a new material recovery
pickings are slimmer. The mountain itself has changed, facility. Rainwater is used to clean the recycled material,
lush vegetation now covering its crest. A small group boosting its value.
of local residents live on top, growing corn and burning The organization is a partner in a cooperative
wood for charcoal to sell as cooking fuel. employing 40 peoplemany of them former waste
Soot-covered children play with dirty water bottles pickersto turn trash into fashion accessories such as
and plastic bags, breathing in smoke from smouldering handbags for export overseas. Some of the coops office
charcoal. Most residents live in apartment towers employees are former waste pickers too. I like it here,
at the foot of the mountain. Most living spaces are says Letty Reyes, who handles the coops nances after
cramped, and money is short with monthly rent returning to school as an adult. It has changed my life.
JOIN THE
CONVERSATION
www.development.asia
Analyzing issues that matter in Asia and the Pacic A publication of the ASIAN DEVELOPMENT BANK

EMPOWER
or exclude.
The Asia and Pacic economies are growing but so is the divide between the rich and the poor.
ADB is committed to turning the economic momentum toward inclusive growth by creating access
to social services, education, and opportunites for allyoung and old, female and male, urban and
rural. Join the conversation at ADBs 46th Annual Meeting, Delhi, India, 2-5 May 2013.
For more information: www.adb.org
ASIAN DEVELOPMENT BANK

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APRIL 2013

A publication of the ASIAN DEVELOPMENT BANK

April 2013 Development Asia 1

one eye on developing community leaders

Journal Small is beautiful, and scale is

SPECIAL REPORT : INEQUALITY 11 Dening Inequality

The Wealth Gap 13

ASIAS INEQUALITY A publication of the ASIAN DEVELOPMENT BANK

CHALLENGE Ann Quon

NIDHI DUTT JUSTIN

April 2013 Development Asia 5

The world is MAKE EVERY CLICK COUNT

So are we. difference, but dont know where to start.

organizations in 60 countries. In Asia, it

lendersall users of its websiteto fund

April 2013 Development Asia 7

I had to provide for the family. A recent Asian Development Bank

April 2013 Development Asia 9

April 2013 Development Asia 11

the region were signicantly higher, remote areas complicates attempts to

Indicators 2012. Open defecation is informally as domestic helpers,

April 2013 Development Asia 13

These three forces have created tremendous wealth.

Rural populations often lack access to jobs, infrastructure,

91% are from rural areas.

3% of city dwellers. !,(!#!*!.(,.%!/1/% %!/3%0$targeted

EDUCATION, HEALTH, INTERVENTIONS IN LAGGING REGIONS

April 2013 Development Asia 17

April 2013 Development Asia 19

DA: Much of the regions inequality occurs either

DA: Indias 12th Five Year Plan commits the government

PC: The share of the public sector in Indias GDP is about

DA: What role can the agriculture and manufacturing

April 2013 Development Asia 23

THE PRC HAS SEEN the fastest economic expansion,

earnings differentials among individuals, which, coupled

April 2013 Development Asia 25

April 2013 Development Asia 27

April 2013 Development Asia 29

of the experiences of the PRC, most important asset of the poor

April 2013 Development Asia 31

April 2013 Development Asia 33

LESS well as investment in irrigation,

THAN OTHERS and price liberalization marked the

April 2013 Development Asia 35

is winning linking Phnom Penh with

its battle matronly 46-year-old woman

against one children to wear shoes.

of inequalitys illustrates Cambodias progress on

most tragic inequality of access to decent health

legacies: lived long enough to wear shoes was

child the government ghting mosquito-

mortality dramatically, she says.

April 2013 Development Asia 37

April 2013 Development Asia 39

April 2013 Development Asia 41

April 2013 Development Asia 43

April 2013 Development Asia 45

With a college degree and skills

DIGITAL The organization is a leader in using

policy specialist at infoDev. This could

April 2013 Development Asia 47

April 2013 Development Asia 49

3% of city dwellers. !,(!#!*!.(,.%!/1/% %!/3%0$targeted