What can Asean do to address rising poverty levels and social unrest

What can Asean do to address rising poverty levels and social unrest
The topic ‘What can Asean do to address rising poverty levels and social unrest’ is especially pertinent if the current global economic crisis is prolonged or worsens further. Even if the crisis abates during the next year, various forecasts point to a slower rate of growth in the Asean national economies.
Continuing ripple effects on various economic sectors, socio-economic groups and local areas already badly hit as a result of the worsening economic conditions during the past 18 months can be expected for some time to come.
To ensure that economic distress does not translate into sharply rising poverty levels and social unrest, policy makers in the region will need to be more proactive than they have been to date – both at the regional and national levels.
Unfortunately, at the regional level, the outcome of the most recent meeting of the Heads of State/Government of the Asean Member States in Cha-am Hua Hin on 1 March 2009 to discuss the global economic and financial crisis has provided little evidence or assurance that the governments at the regional level are focused on addressing the poverty and social impacts of the crisis. The press communiqué arising out of the meeting mainly affirmed “the necessity of proactive and decisive policy actions to restore market confidence and [to] ensure continued financial stability to promote sustainable regional economic growth”.
Emphasis was placed on “expansionary macroeconomic policies, including fiscal stimulus, monetary easing, access to credit including trade financing, and measures to support private sector, particularly small and medium enterprises (SMEs) undertaken by each Asean member state to stimulate domestic demand”.
Although the importance of “coordinating policies and taking joint actions that would be mutually reinforcing at the regional level” was mentioned, this was more focused on the regional grouping’s “determination to ensure the free flow of goods, services and investment, and facilitate movement of business persons, professionals, talents and labour, and freer flow of capital” rather than on alleviating the regional poverty and social impacts arising from the crisis.
In all, the meeting appears to have taken a hands-off approach in terms of a regional approach to the challenge of worsening poverty in the region arising from the global crisis, preferring – or at least it seems to the public – to opt for the national governments to deal with the impact in their own ways. Both at the national and regional levels, it is also noticeable that the immediate response packages to the crisis have been more directed towards stimulating growth and shoring up the banking, finance and manufacturing sectors with considerably less attention given to strengthening the social safety net and the introduction of special social protection programmes.1 In the last few months, governments in the region have stitched together a hodge-podge of modest social protection programmes in their fiscal stimulus response to the crisis but there is still little evidence of substantive efforts at formulating and implementing policies that systematically address the problem of rising poverty.2
Some major concerns when addressing poverty impact
What are the main concerns that should be uppermost on the minds of national and regional policy makers as they grapple with the economic crisis? There are at least three key sets of concerns which the region and impacted countries may want to prioritize in policy making and programming.
The first relates to the impact on poverty numbers and poverty levels. How many in the countries and region are affected? Who are affected and where are they to be found?
The second relates to the major ways in which the poor are affected by the crisis, and the types of remedial measures that can be of greatest benefit to the poor. This set also includes concerns on how to ensure that stabilization or social safety net assistance to regions, sectors and communities are well designed and robust, and are not affected by political bias or other forms of distortion that will reduce their efficiency and impact. Especially important to address is how to ensure that social safety net measures do not suffer from leakage, bias or are undermined by high administrative costs.
The last set of concerns relates to the relationship between poverty, inequality and the larger political economy in the longer run. This set is more complex than the first two and can cover a wide range of questions including
how much priority should governments give to issues of redistribution during a period of prolonged economic recession or crisis and/or when government revenues are sharply reduced.
how to ensure that spatial, occupational and group disparities are more efficiently addressed so that rising poverty does not lead to the destabilization of the economy or society.

The numbers issue: How many more poor?
On the first set which relates to estimates or measurement or the impact of the crisis on income levels, livelihoods and welfare, no data is available yet of the increase in poverty numbers for the Asean region partly because the crisis is still in the process of unfolding. However, the major international development agencies working in the Asian and Asean region are in general agreement that the impact of the crisis has plunged a very large number of people into poverty.
According to a February report from the ILO as many as 23 million people could lose their jobs in Asia whilst more than 140 million could fall into poverty. These figures cover the entire Asian region but they have not been accompanied by disaggregated country breakdowns. During the same month, the World Bank also issued a policy note entitled ‘The Global Economic Crisis: Assessing Vulnerability with a Poverty Lens’ on the impact of the crisis.
According to the Bank’s new estimates for 2009, lower economic growth rates will trap 46 million more people on less than US$1.25 a day than was expected prior to the crisis. An extra 53 million are expected to stay trapped on less than US$2 a day. This, according to the Bank, is on top of the 130-155 million people pushed into poverty in 2008 because of soaring food and fuel prices. In country terms, it was estimated that almost 40 percent of 107 developing countries were highly exposed to the poverty effects of the crisis and the remainder was moderately exposed, with less than 10 percent facing little risk.
Identifying priority poverty groups
Because the incidence of poverty and related socio-economic deprivation within the Asean region and at least eight of the region’s 10 countries are so large, it will be necessary for policy makers to prioritize which groups within the total population of the poor should require urgent attention.
On this issue, it may be useful at least in planning terms to distinguish between the two major groups of poor that will need attention — the traditional poor and the new poor. The traditional poor are those that have long comprised the bottom strata of the income and occupational distribution in the Asean countries. These are primarily people who live in rural areas and are unemployed or under-employed or work in the lowest rung of the agricultural or urban sectors.
The new poor consist of those who may have managed to climb above the poverty line but have now tumbled back below it as a result of the loss of jobs or income arising from the crisis. In the region as a whole, those most affected by recent job and income losses include the following3:
‘Flexible’ / migrant / undocumented foreign workforce
Contract workers or over-time dependent workers
Retrenched workers at the lower occupational rungs
Agricultural sector workers and owners of small agricultural holdings
Manufacturing sector workers Unemployed graduates, new entrants and under-skilled workers
Self-employed especially those severely affected by the ripple effects arising from the economic slowdown or recessionary conditions

Obviously not all who are identified as belonging to these groups fall into the category of the poor. Higher skilled manufacturing sector workers, unemployed graduates and more highly remunerated self-employed generally fall into the middle or higher income categories. They will have a greater capacity to withstand the challenges of the economic downturn on their own and could well do without the need for special state assistance.
National approaches in identifying poverty groups impacted by the economic crisis will vary considerably but all will need to take into account the key criterion of exclusion from productive resources, decent work and social security; as well as extreme vulnerability to higher food and fuel costs.4
Careful targeting can separate out the most vulnerable in key socio-economic and occupational groupings that have been affected from those who are better able to fend for themselves in coping with the loss of employment or income. Such targeting is necessary to ensure that the stimulus packages or remedial measures do in fact reach the most deserving and most needy amongst the traditional and the new poor, and are not deployed on groups or sectors that have the capacity and ability to overcome the dislocation without the need for outside assistance.
Social safety net, employment or other forms of assistance
Selected fiscal stimulus packages in South-East Asian region (Click on image to enlarge)

The next set of questions relates to what needs to be done to alleviate the plight of the poverty groups affected by the crisis. Here again, various approaches are available to policy makers. In the recent policy recommendations advanced by the various international development agencies to address the poverty impact of the crisis, what is discernible is the (understandable) tendency for each agency to prioritize approaches that are related to the mandate and work programmes of the agency concerned.
Thus the International Labour Organization (ILO) has emphasized that the crisis is likely to lead to stagnant or falling real wages, with the potential for increased incidence of wage-related disputes. It has also warned that the crisis was quickly evolving “into an employment and social crisis” with the region at the tipping point of seeing social unrest explode into the streets, as the jobless and marginalized demand greater government action.5
To avert this social unrest, the ILO has recommended that “social partners should be included in policy discussions in order to make sure that the most vulnerable and affected people are given the central attention”. Amongst some of the ILO’s priority policy prescriptions are programmes to protect employment and support household purchasing power, public expenditure on schools, hospitals and healthcare, and the boosting of worker skills for longer term productivity.6
For the World Bank, the crisis has highlighted the serious threat to the achievement of the U.N.’s Millennium Development Goals (MDGs), to which it is committed with specific targets to overcome poverty by 2015. According to the Bank’s research, the sharply lower economic growth rates will significantly retard progress in reducing infant mortality, for example. According to preliminary estimates for 2009 to 2015, an average 200,000 to 400,000 more children a year, a total of 1.4 to 2.8 million, may die if the crisis persists.
The Bank’s recent policy note on the impact of the global crisis also emphasized that it was critical for exposed countries to finance job creation, the delivery of essential services and infrastructure, and safety net programs for the vulnerable. At the same time, the Bank has cautioned that up to three quarters of these countries cannot raise funds domestically or internationally to finance programs to curb the effects of the downturn.
One quarter of the exposed countries also lacked the institutional capacity to expand spending to protect vulnerable groups. To meet this shortfall, the Bank note has urged financial support in the form of grants and low or zero interest loans for these countries. It has also called for the establishment of a ‘Vulnerability Fund’ in which each developed country devotes 0.7% of its stimulus package to the fund. Three priority areas for the Bank proposed Vulnerability Fund are: safety net programmes, infrastructure investments, and support for small and medium-sized enterprises and micro-finance institutions.
A different tack on the approach necessary to alleviate the impact of the crisis can be arrived at if the results of a recent study undertaken by the Institute of Development Studies (IDS) are given serious consideration. Drawing on empirical work undertaken in Bangladesh, Indonesia, Kenya, Jamaica and Zambia, the study established that people living in the world’s poorest communities are eating less frequently and consuming worse food as a result of the global financial crisis. (The Guardian, March, 27, 2009) “Eating less frequently and less diverse and nutrient-rich foods was commonly reported,” the report states. Many poor people reported not being able to makes ends meet. Managing food, health and educational needs has been a struggle, and not only for the very poorest.
Secondly, many poor families hit by the economic downturn are also removing their children from school and pushing them into work much earlier. For some, particularly young children, the impacts may be permanent: children who drop out of school to work or because their parents cannot afford fees, books or breakfast, are unlikely to re-enrol even if food prices begin to decline. Researchers stressed that it was difficult to untangle which aspects of hardship could be directly traced to either the current economic crisis, the fuel and food price rise of the previous year or the local political situation. At the same time – drawing from studies of the impact of previous recessions – the IDS concluded that “poverty, malnutrition and infant mortality increased during every national financial crisis in the past 11 years.”
Whatever the programmatic approach and strategy – whether it is a focus on food security or on employment generation; whether the target groups are women or the most vulnerable amongst the young and elderly – governments need to act quickly since prolonged deprivation and the associated impact on health and physical and economic well being could result in the inter-generational reproduction of poverty, making it more intractable to resolve if it is permitted to languish or grow. In fact this is probably the most serious outcome of deepening poverty – the silent and insidious erosion or reversal of past gains in key health and other well-being indicators.
Lessons from the 1997 crisis and from best practices in poverty alleviation
The last set of concerns relates to the effects of rising and entrenched poverty in a context of prolonged economic recession or crisis. Here, lessons from the region’s experience with the last economic crisis in 1997 are instructive.7
Firstly, it should be noted that the negative effects on poverty generally extend beyond the period of the crisis itself. Although economic growth resumed fairly quickly after the 1997 crisis, in some countries it took as long as 10 years to recover lost ground in the national efforts to reduce poverty.8
Secondly, the increase in poverty is likely to bring about increased inequality. Income inequality levels in the Asean countries as measured by the Gini measure of inequality are already amongst some of the highest amongst countries in the world and an increase in inequality is not only unacceptable socially and politically, but it could also very well generate severe socio-economic dislocation and pain with attendant costs to the larger economy and society.
Thirdly, the potential for social unrest is especially pronounced in urban areas – not only in the mega cities but also in the smaller and equally crowded secondary cities. In these urban settings, the volatile combination of urban slums and squatters where the poor are concentrated, a growing unemployed population of low income wage workers and self-employed (including foreign and local migrant workers), and widening disparities and inequalities of income and wealth could very well prove to be the spark to ignite a tinder box of dissatisfaction and unrest.
Other lessons in tackling entrenched poverty systematically and efficiently have long been available. Some of these lessons9 include the following:
they emphasize women’s agency role in the development activity through a range of new freedoms such as the freedom women have to work outside the home, the freedom to earn an independent income, the freedom to have ownership rights, and the freedom to receive education. Beyond this, the focus on women has had an important (though underestimated but not yet well-studied) impact on reducing the inter-generational reproduction of poverty
there is relatively open access to information and transparency in decision making. Once information and knowledge are accessed by poor communities, it places them on a more equal footing when negotiating with others as well as enables them to realize their full developmental potential
they are often based on government-NGO-CBO (community-based organizations) partnerships or coalitions for change with project activities more geared towards control of resources and decisions by local communities than by outside parties
they have moved from project, periodic, supply-led and output driven approaches to programmatic, continuous involvement, demand-driven and outcomes-oriented approaches. In some of the cases below, considerable upscaling and replication have taken place of initially modest or small projects
they have ensured that sustainability is a key outcome through investments in networks of the poor and through the creation of organizational capabilities that have worked for the benefit of the many rather than the few
although initially focused on the creation of social capital, they have been able to bring about the rapid transformation of social capital into economic capital. This is particularly noticeable when comparing the East Asian with the South Asian experience where, in the case of the latter region, many initiatives have remained limited in their impacts as a result of the failure to move to the next stage of development after the achievement of social development gains
exit strategies have been mainstreamed into project design through effective cost recovery approaches, review of grant/subsidy components, and monitoring systems to ensure optimisation of grant/subsidy impact
Graft, leakage and corruption are major obstacles to progress
Bureaucratic elites in collaboration with political elites — rather than the traditional bogeymen of middlemen and private sector intermediaries — are just as or even more likely to cream off poorly designed and monitored programmes

Conclusion
The most important lesson perhaps to bear in mind is that the scourge of poverty can be successfully combated even in the most depressed of conditions.
Often though, it is precisely the great wealth of technical expertise and human resources brought to bear on anti-poverty work – especially in terms of the administrative apparatus used for planning, processing and targeting – that turns out to be a liability by diverting resources from the important work of empowering the poor and unblocking access for the needy. This problem is compounded by leakages through inefficient or corrupt practices.
At the end of the day, it is the intangibles that result in desirable outcomes in anti-poverty work, namely the combination of strong political will, good governance, empowerment of the poor, commitment and stamina, and focused and targeted idealism, rather than technical inputs.
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References:
ESCAP, Economic and Social Survey of Asia and the Pacific 2009, United Nations, New York 2009
http://web.worldbank.org/WBSITE/EXTERNAL/NEWS/0,,contentMDK:22067892~pagePK:64257043~piPK:437376~theSitePK:4607,00.html
http://www.adb.org/Documents/Events/2009/Poverty-Social-Development/default.asp
http://www.google.com/hostednews/afp/article/ALeqM5jYxfcKF30-iYHsHUv5GVXUS10F3Q
ILO, Labour and Social Trends in Asia and the Pacific 2007, Bangkok 2007
ILO, Global Wage Report 2008/2009, Geneva 2008
Lim Teck Ghee, “Best Practices in Poverty Reduction in the UNESCAP Region”, unpublished note, 2005
Lim Teck Ghee, “Global Economic Crisis and Impact on Malaysia”, Presentation to Malaysian Parliamentarians, Kuala Lumpur, 29 October 2008
UNDP, Human Development Report 2007/2008, New York 2007
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Footnotes:
1 In Malaysia, the government’s first stimulus measure to cushion the shock was to increase the capitalization of a government investment company by $5 billion, in part to stabilize the stock exchange. The move was heavily criticized by the major workers union in the country which argued that the government agency disbursing the funds “is the custodian of people’s money” and “not the ATM for the government” to bail out state-linked firms. “This is the hard-earned money of the workers, their retirement plan. How is this bailout plan going to benefit the workers?” See Lim Teck Ghee, “Global Economic Crisis and Impact on Malaysia”, Presentation to Malaysian Parliamentarians, Kuala Lumpur, 29 October 2008
2 Details of stimulus packages in various Asean member countries can be found in Annex 1.
3 The listing here is based on a Malaysian country presentation on the “Global Economic Crisis and Impact on Malaysia”. See Lim Teck Ghee, Presentation to Malaysian Parliamentarians, Kuala Lumpur, 29 October 2008
4 According to the latest UNESCAP annual report, “when people are affected by sudden shocks, the ones most at risk are the poor, women who are labourers in the manufacturing sector, the youngest and oldest populations and socially excluded groups”. Not only have these groups fewer resources such as real assets and savings to cushion the shocks, “but they also have less influence on economic and political decision making”. See “Economic and Social Survey of Asia and the Pacific 2009 – Addressing Triple Threats to Development”, United Nations, New York, 2009, p.13.
5 Migrant workers with short-term contracts as well as women working in small and medium sized factories and firms are particularly vulnerable. “From India to China to Vietnam, large numbers of internal migrants have lost their jobs, generating a reverse migration to the countryside in search of rural employment,” Yamamoto said.
6 The ILO’s policy recommendations appear to be in line with or supported by the major regional developmental agency, the Asian Development Bank. According to the ADB’s vice president for sustainable development, Ursula Schaefer-Preus, any stimulus packages would need to include job creation and infrastructure needs that will most benefit the poor. See http://www.google.com/hostednews/afp/article/ALeqM5jYxfcKF30-iYHsHUv5GVXUS10F3Q
7 A recent ADB media note issued in connection with a forthcoming high-level policy meeting to evaluate the impact of the global economic slowdown on poverty and sustainable development in Asia and the Pacific has stated that “the causes and impacts are different from the Asian Financial Crisis in 1998 in several respects. The current crisis concerns not only the very poor (i.e. those living under the US$1.25 poverty line) but more so the vulnerable poor, mostly uneducated youth in the export sectors (and backward industries and services). Impact channels are going through labor markets, migration and remittances, social budgets, social protection, gender, health, education and training, among others.” See http://www.adb.org/Documents/Events/2009/Poverty-Social-Development/default.asp
8 ILO, Global Wage Report 2008/2009
9 This is drawn from Lim Teck Ghee, “Best Practices in Poverty Reduction in the UNESCAP Region”, unpublished note, 2005
* This paper was delivered by Dr Lim Teck Ghee at the Asean Roundtable in Singapore — ‘The Global Economic Crisis: Implications for Asean (June 18, 2009) – in his capacity as Professorial Fellow, Malaysian Institute of Asian and Development Studies at University College Sedaya International.
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