human immunodeficiency virus/acquired
immunodeficiency syndrome
NGO
nongovernment organization
UNDP
United Nations Development Programme
I.
THE MISSION
A.
Poverty Reduction-the Overarching Objective
1.
Poverty is an unacceptable
human condition. It is not immutable; public
policy and action can, and must, eliminate poverty.
This is what development is all about.
2.
Close to 900 million of the
world's poor (i.e., those who survive on less
than $1 a day) live in the Asian and Pacific
region (Appendix1). Nearly one in three Asians
is poor. Although the proportion of people
below the poverty line had been declining, the
trends in poverty reduction have recently worsened.
Population growth is also adding to the absolute
number of poor. South Asia, one of the
poorest subregions in the world, now has more
than half a billion poor people, of whom 450
million are in India. The People's Republic
of China has 225 million poor, and about 55
million more are in Southeast Asia, (where in
the wake of the Asian crisis, over 10 million
have joined the ranks of the poor). Many
people in the Central Asian republics have slipped
into poverty with the economic disruptions of
transition. The small island countries of the
Pacific, despite their relatively higher per
capita income, remain vulnerable because they
are remote, prone to natural disasters, and
have limited ability to deal with external economic
shocks.
3.
Until recently, trends in
poverty reduction in the region had been positive,
especially in East and Southeast Asia. However,
since the Asian financial crisis in 1997, declines
in gross domestic product of the economies worst
affected, and carry-over effects in other countries,
have stalled progress. Absolute poverty
has increased in the crisis-affected countries,
and the poor (and particularly their children)
have suffered the most. More ominously,
the social consequences of the crisis are likely
to be felt long after these economies return
to solid growth.
4.
As an institution whose purpose
is the economic development of the region, the
Asian Development Bank (ADB) has always been
concerned with poverty reduction. Beginning
with a focus on economic growth, ADB has progressively
expanded its approach to encompass a wide range
of social and environmental concerns.1/
The experience gained in this process by ADB
and its members has given rise to confidence
unthinkable even a decade ago: that absolute
poverty can be eradicated. This realization,
and the knowledge that development continues
to bypass so many people in the region, calls
for an even sharper focus of our efforts.
These considerations drive ADB to make elimination
of poverty its principal raison d'être.
1/
As outlined in ADB's first Medium-Term Strategic
Framework (1992-1995), the five strategic
development objectives were promoting economic
growth, supporting human development, reducing
poverty, improving the status of women, and
managing natural resources and the environment
soundly.
5.
ADB supports the International
Development Targets established at a series
of world summit meetings in the 1990s (e.g.,
reducing by half the proportion of people in
extreme poverty). In November 1997, Asian
and Pacific ministers agreed to accelerate implementation
of the Agenda for Action on Social Development
in the regional members of the Economic and
Social Commission for Asia and the Pacific (ESCAP).
The agenda's targets (e.g., eradicating absolute
poverty in the region by 2010) set clear directions
for governments and the international community
(Appendix 1). However, these targets need
review in the light of the Asian crisis. ADB
will work with members to develop credible regional
targets for poverty reduction.
6.
Because the vision is an Asian
and Pacific region free of poverty, ADB has
a clear and single-minded mission. Reduction
of poverty is no longer just one of five objectives,
it is ADB's overarching goal. To this end, the
other strategic objectives (i.e., economic growth,
human development, sound environmental management,
and improving the status of women) will be pursued
in ways that contribute most effectively to
poverty reduction. The fundamental shift
will affect every aspect and level of ADB's
operations. This strategy paper sets out the
ways in which these changes will be implemented.
B.
Building on Success
7.
In attacking poverty, ADB
builds on the region's success over the last
three decades. While this success has varied
between and within individual countries, the
region overall has dramatically changed.
In the early 1970s, more than half the population
of the region was poor, average life expectancy
was 48 years, and only 40 percent of the adult
population was literate. Today, the percentage
of poor people has decreased to nearly one third
of the population, life expectancy has increased
to 65 years, and 70 percent of the adults are
literate. Despite an increase in total population
from 1.8 billion to 3.0 billion, the number
of poor people has fallen slightly from over
1 billion to under 900 million.
8.
ADB has contributed to these
achievements. It has financed investments and
policy reforms aimed at promoting growth and
employment and, especially in the 1990s, focused
on human development, gender equity, and environmental
protection. In addition, ADB has supported projects
that directly target the poor (e.g., for basic
education, nutrition, health, and family planning
services) or establish mechanisms to protect
vulnerable groups (including the disabled).
It has promoted research on poverty issues,
led sector-focused policy dialogue on the causes
and impact of poverty, and strengthened institutional
capacity in government agencies.
9.
Over the years, ADB has learned
much about how to address the various dimensions
of poverty. For example, in the health sector,
instead of merely funding equipment and civil
works, ADB now invests more in training and
management systems.2/
And increasingly, emphasis is given to consulting
with beneficiaries. However, much more needs
to be done to involve stakeholders in project
design and implementation. When trying
to improve the status of women, ADB has found
its interventions to be insufficiently effective
because project design assumed institutional
capacity that did not, in fact, exist.3/
The paucity of female staff in project entities
was often overlooked; likewise, the difficulty
of recruiting or retaining women staff in rural
areas in the absence of women-friendly facilities
(e.g., housing, travel, security). Now, projects
pertaining to women are designed with these
problems in mind. In microfinance, which
is a powerful means of poverty reduction, ADB's
earlier reliance on subsidized credit has given
way to the realization that the poor were not
always the actual beneficiaries. The emphasis
now is on working with nongovernment organizations
(NGOs) and private sector institutions to improve
outreach and delivery of microfinance services.
2/
This was accompanied by a dramatic increase
since 1991 in the share of health sector lending
devoted to primary health care and population
activities. (Policy for the Health Sector,
February 1999). 3/Policy
on Gender and Development, May 1998.>
10.
In helping to reduce poverty
in the region, ADB draws on strengths that equip
it uniquely for the task. These include
the exclusive focus on Asia and the Pacific;
regional location; and majority shareholding
of regional members (and, hence, greater ownership
by them of ADB's strategic orientation).
At the same time, the participation of nonregional
members ensures that global perspectives are
brought to bear on regional development issues.
ADB undertakes grant-financed technical assistance,
public sector lending, and private sector operations
under a single roof, and can take advantage
of synergies that result. ADB's well-defined
policy on governance issues and its success
in promoting subregional cooperation are of
growing relevance in the fight against poverty.
ADB's response to the Asian crisis, in particular
measures to mitigate the impacts on the poor,
also demonstrated the institution's ability
to effectively address questions of social protection.
11.
While the primary responsibility
for poverty reduction rests with countries themselves,
as the region's premier development institution,
ADB can be a powerful ally of borrowing members
in their war against poverty. ADB's intellectual
and financial contributions can play a crucial
catalytic role in reinforcing national efforts
to reduce poverty. ADB therefore rededicates
itself to the eradication of poverty in the
region. The Poverty Reduction Strategy embodies
ADB's commitment to this massive task.
II.
THE CHALLENGE OF POVERTY REDUCTION
A.The
Nature of Poverty
12.
In the past, ADB relied heavily
on income level as the basic measure of poverty.
However, there is now universal agreement that
dimensions of poverty far transcend this traditional
definition. In ADB's view, poverty is a deprivation
of essential assets and opportunities to which
every human is entitled. Everyone should
have access to basic education and primary health
services. Poor households have the right to
sustain themselves by their labor and be reasonably
rewarded, as well as having some protection
from external shocks. Beyond income and basic
services, individuals and societies are also
poor-and tend to remain so-if they are not empowered
to participate in making the decisions that
shape their lives. Poverty is thus
better measured in terms of basic education;
health care; nutrition; water and sanitation;
as well as income, employment, and wages.
Such measures must also serve as a proxy for
other important intangibles such as feelings
of powerlessness and lack of freedom to participate.
13.
In practice, the most broadly
used standard for measuring poverty will continue
to be the adequate consumption of food and other
essentials. This yardstick (the poverty line)
varies from country to country, depending on
income and cultural values. While national measurements
are essential for measuring the impact of efforts
to reduce poverty, ADB's priority is on absolute
poverty, and international comparisons will
also be necessary.4/
4/
Despite inherent weaknesses, measures such as
the "dollar-a-day" poverty line and the UNDP's
Human Development Index and Human Poverty Index
of the United Nations Development Programme
(UNDP) will continue to be used (Appendix 1).
However, the need to refine these measures in
the context of the Asian and Pacific region
will be examined.
The poor are not a homogenous
group. Just as the nature of poverty is
diverse, so too are its causes and victims.
The poor may not have acquired essential assets
because they live in a remote or resource-poor
area; or because they are vulnerable on account
of age, health, living environment, or occupation.
They may be denied access to assets because
they belong to an ethnic minority or a community
considered socially inferior, or simply because
they are female or disabled. At a broader level,
poverty may stem from situations where gross
inequality of assets persists because of vested
interests and entrenched power structures.
Finally, essential assets may not be available
to the poor because of the lack of political
will, inadequate governance, and inappropriate
public policies and programs.
15.
The primary responsibility for finding
solutions to poverty lies with countries themselves
(para.11), but success will depend on the united
efforts of government and civil society, and on
strong and sustained support from the international
community. For all stakeholders, the strategies
chosen to reduce poverty must be comprehensive enough
to address all of its many causes. For this
reason, ADB sees the twin pillars of pro-poor,6/
sustainable economic growth and social development
as the key elements in any framework for reducing
poverty. Successful achievement of either
element requires sound macroeconomic management
and good governance,the third pillar. Together,
the three pillars result in socially inclusive
development.
5/
This framework takes into account the conclusions
of Reducing Poverty: Findings and Implications
- A Report of Consultations in Selected Developing
Member Countries of the Asian Development Bank
(ADB, 1999, Manila). 6/
Growth is pro-poor when it is labor absorbing,
and accompanied by policies and programs that
mitigate inequalities and facilitate income
and employment generation for the poor, particularly
women and other traditionally excluded groups.
16.
However, for socially inclusive
development to be achieved, better understanding
is needed of the environmental implications
of policies to reduce poverty, and of the impacts
on the poor of environmental policies.
The poverty-environment nexus has, essentially,
two broad components. On one hand, are
the "brown issues" involving polluting industries
that locate in areas populated by the poor on
account of lax regulation and enforcement.
Also included in this category is the air and
water pollution that occurs in megacities, where
the poor live in the worst affected localities.
On the other hand, are the "green issues" of
deforestation, rapid depletion of natural resources,
and land degradation. Both sets of issues
have a direct bearing on the deepening of poverty.
17.
Within this general framework,
poverty-reducing interventions can be short
term, such as those that sustain the supply
of basic services to the poor during emergencies
(as in the recent Asian crisis); medium term,
such as those that help address structural issues
affecting delivery of basic services and other
targeted poverty interventions; or long term,
such as those that stimulate pro-poor growth
and encourage expansion of the private sector.
18.
ADB is mainly concerned with
interventions having medium- or long-term impact.
ADB's strength lies in financing relatively
large investments, as well as in conducting
policy dialogue with governments in support
of policy reform. While physical investments
contribute directly to poverty reduction, the
policy and institutional environment is also
of great importance for sustainable poverty
reduction. ADB will therefore adopt a
systematic approach to poverty reduction by
promoting policy reforms, assisting the development
of physical and institutional capacity, and
designing projects/programs to better target
poverty.
19.
Reducing poverty and inequality
is a humanitarian priority; it also promotes
economic growth. ADB's borrowers require
sound economic justification for the loans they
take. Experience clearly demonstrates,
though, that investments in areas such as education,
microfinance, and health not only have an impact
on poverty but also stimulate economic growth.
Developing human and social capital increases
political stability, raises productivity, and
enhances international competitiveness, leading
to faster growth.
C.
Key Elements of the Framework
1. Pro-poor,
Sustainable Economic Growth
20.
East Asia, where most countries
reduced their incidence of poverty by half or
more in just two decades, provides ample proof
of the importance of economic growth for poverty
reduction. Despite the Asian crisis, these
countries have shown how robust growth can reduce
poverty. Growth increased the demand for
labor, which in turn expanded economic opportunities
and raised worker productivity and wages.
It also expanded public revenues that could
be used for basic education, health care, and
infrastructure. Outward-oriented policies
in East Asia led to labor-absorbing growth,
and the resulting expansion in employment opportunities
brought large numbers of women into the labor
force, with important consequences for poverty
reduction and the status of women. The
rise in female participation in school and the
workforce slowed population growth through lower
fertility rates. The increase in national
income was used to expand investment in human
capital and improve access of the poor to basic
services. Further increases in productivity
and declines in population growth followed.
21.
The lesson is clear: growth
can reduce poverty by generating employment
and incomes, and labor intensive growth can
reduce it even faster. Thus, policies
that encourage labor intensive growth are powerful
pro-poor measures. Such policies include, in
particular, the removal of market-distorting
interventions, such as overvalued exchange rates,
import and/or export restrictions, credit subsidies,
and reliance on state-owned enterprises.
Other policies that fall in this category are
development of a conducive environment for the
private sector, and programs (e.g., microfinance
and "workfare"7/)
aimed at increasing employment and income generating
opportunities for women and other groups that
may be outside the formal labor force.
Infrastructure development can also make a considerable
contribution to growth through job creation
and improvement of access to economic activities
and basic social services. Similarly, opportunities
for self-employment by the poor must be promoted.
Inflation and (as seen recently in the region)
economic crises also have a severe impact on
the poor. Consequently, sound macroeconomic
management is essential for sustained reduction
of poverty.
7/
Workfare programs seek to reduce poverty by
providing low-wage work to those who need it.
Such programs have often been used in times
of crises, when large numbers of the able-bodied
poor become unemployed.
22.
The private sector, the engine
of growth, can also play a direct role in poverty
reduction. It can participate in physical
and social infrastructure, including provision
of basic services that will benefit the poor
(thus freeing resources for the public sector).
For the private sector to contribute more effectively
to the delivery of such services, an enabling
environment must be established and the financial
sector developed. As the role of the private
sector expands, that of the government should
shift from owner and producer to facilitator
and regulator. Indeed, an effective regulatory
framework becomes critical to promote competition,
enforce fair practices and standards, and ensure
that essential services reach the poor. Governments
must also monitor the social impacts of privatization
to see that retrenchment, redeployment, or compensation
programs are appropriate. ADB's Private
Sector Development Strategy is thus timely and
directly relevant to poverty reduction.
23.
Market-driven growth processes
typically benefit richer areas, where infrastructure
and human capital are already reasonably well
advanced. For poorer areas, public investment
is generally necessary, especially in rural
areas, which generally have excess labor.
Similarly, specific interventions are needed
to provide the rural poor or urban unemployed
with access to key services and opportunities
for self-employment.
24.
Another important way to accelerate
growth is regional and subregional cooperation,
which offers larger markets, economies of scale,
and division of labor. Such cooperation
is especially useful for small countries with
limited options. Cooperation may work
best at the subregional level, as in the Greater
Mekong Subregion, the "growth triangles"8/ pioneered by ADB, and in the Central Asian
republics. It is also useful in other
ways, such as in the fight against disease (e.g.,
tuberculosis, malaria, and HIV/AIDS), and in
the sharing of ideas.
8/
Such as the Brunei Darussalam-Indonesia-Malaysia-Philippines-East
Asian Growth Area and the Indonesia-Malaysia-Thailand
Growth Triangle.
25.
Environmental considerations,
including natural resource management, are key
elements in sustainable economic growth. Growth
will be short-lived if it does not conserve
the natural environment and resources.
Although much of the past damage has been caused
by powerful vested interests, the pressures
of poverty and population compound the threat
through deforestation, over-grazing, and over-fishing.
The rural poor are often forced to live on fragile
lands and waters that require sensitive resource
management in the face of increasing degradation.
The urban poor are exposed to disease and illness
resulting from overcrowding and polluted living
conditions. Poverty reduction strategies
need to be accompanied by policies and actions
that enhance the quality and productivity of
the environment and natural resources.
2. Social
Development
26.
Economic growth can effectively
reduce poverty only when accompanied by a comprehensive
program for social development. Just as some
targeting of economic development is necessary
to reach bypassed areas, so social development
must be targeted. Therefore, every country
needs to have a comprehensive national poverty
reduction strategy that provides for (i) adequate
budgetary allocations for human capital, (ii)
targeting of basic social services to the poor,
(iii) removal of gender discrimination, (iv)
an effective population policy, and (v) social
protection. Beyond developing human capital,
the aim must be to strengthen social capital,
especially for people subjected to some form
of exclusion. Accordingly, targeted programs
will be required in five areas.
27.
Human Capital Development.
Human capital is the primary asset of the poor,
and its development is of fundamental importance
in the war against poverty. Every person
must have access to basic education, primary
health care, and other essential services.
Without such access, the poor, and their children,
will have little opportunity to improve their
economic status or even to participate fully
in society. It is also necessary to ensure that
the relevance, quality, and quantity of education
provided is designed to effectively increase
participation, both in the workforce and in
society at large.
28.
Population Policy.
The correlation between family size and self-perpetuating
poverty is generally strong, especially in rural
areas.9/
Most countries see the need to reduce population
growth to a rate where all children can be assured
adequate investment in their future. To
do this, a major effort is needed to enhance
the quality of women's lives by giving highest
priority to (i) ensuring universal education
for girls, (ii) providing accessible reproductive
health services, and (iii) increasing economic
opportunities.
9/
Population Policy Paper: Framework
for Bank Assistance to the Population Sector,
July 1994.
29.
Social Capital Development.
Social capital defines the fabric of society
and strongly influences the rate of economic
progress and the manner in which its benefits
are distributed. In practice, strengthening
the social capital of the poor largely means
increasing their opportunities for participation
in the workings of society. For historical
reasons, social cohesion is often weak and many
communities suffer from systematic social exclusion.
In such cases, strong, proactive policies are
required to reverse feelings of social and psychological
inferiority, foster a sense of empowerment,
and create genuinely participatory institutions.
The promotion of community-based groups to undertake
microfinance, health, and natural resource management
is an important first step in this direction.
Social capital, and a more inclusive society,
can also be promoted through antidiscrimination
legislation, land reform, security of property
and tenure rights, legal recognition of user
groups, and accessible justice systems.
For ethnic minorities, special education curricula
and self-managed health and other services may
be necessary.
30.
Gender and Development.
In many societies, women suffer disproportionately
from the burden of poverty and are systematically
excluded from access to essential assets.
Improving the status of women thus addresses
a priority area of poverty and provides important
socioeconomic returns through reduced health
and welfare costs and lower fertility and maternal
and infant mortality rates. Giving women voice
and promoting their full participation makes
an important contribution to the overall development
of society. Poverty reduction programs
involving microfinance (Appendix 2), water and
sanitation, and environmental restoration consistently
demonstrate the substantial benefits from ensuring
the full participation of women (Box 1).
31.
Social Protection.
Every society has people who are vulnerable
because of age, illness, disability, shocks
from natural disasters, economic crises, or
civil conflict. Social protection comprises
a family of programs designed to assist individuals,
households, and communities to better manage
risks and ensure economic security. Such programs
include old age pensions; unemployment and disability
insurance; and social safety nets to cushion
the adverse impacts of disasters, economic crises,
or civil strife. Also included are policies
to improve labor mobility and the enforcement
of labor standards.
Box 1: Gender and
Poverty
While nearly two-thirds
of the world's poor are in the Asian and Pacific
region, two-thirds of the region's poor are
women. And poverty is particularly acute
for women living in rural areas.
In poor families, the
gender division of labor, and responsibilities
for household welfare, mean that the burden
of poverty falls most heavily on women.
Given gender disparities in education, health
care, economic participation, and incomes,
women are the most vulnerable category.
The number of women
living in poverty has increased disproportionately
over the past decade, compared to the number
of men. Male migration in search of work,
and consequent changes in household structures,
have placed additional burdens on women, especially
those with several dependents. In the
Asian and Pacific region, the proportion of
households headed by females ranges from 20
to 40 percent.
The increasing feminization
of poverty is now a well-recognized trend.
It has intensified with the recent Asian crisis,
where adjustment programs tend to exacerbate
women's hardships, and in the economies in
transition as a short-term consequence of
political, economic, and social transformation.
The disproportionate
numbers of women among the poor pose serious
constraints to human and social development
because their children are more likely to
repeat cycles of poverty and disadvantage.
Improving the political, legal, cultural,
economic, and social status of women is thus
pivotal to escaping the poverty trap.
3. Good
Governance
32.
The quality of governance
is critical to poverty reduction. Good
governance facilitates participatory, pro-poor
policies as well as sound macroeconomic management.
It ensures the transparent use of public funds,
encourages growth of the private sector, promotes
effective delivery of public services, and helps
to establish the rule of law. A sound
macroeconomic framework is needed to encourage
efficient and productive domestic investment
and to keep inflation low to protect real incomes
of the poor. Likewise, it helps prevent
interest and exchange rate distortions that
artificially reduce the cost of capital and
discourage the use of labor. Good public
expenditure management is necessary for fiscal
discipline, economic growth, and equity. The
latter is achieved through an effective, progressive
tax system and adequate allocations for basic
education, primary health care, and other public
services. Effective regulation and supervision
of the financial sector is needed to protect
depositors, enhance competition, increase efficiency,
and expand availability of financial resources
for all members of society. As the Asian
crisis has shown, good governance is also essential
to avoid, or reduce the severity of, economic
crises in an era of increasing liberalization
and globalization.
33.
Since effective and efficient
delivery of basic services by the public sector
matters most to the poor, weak governance hurts
them disproportionately. Public sector
inefficiency, corruption, and waste leave insufficient
resources to support the requisite level and
quality of public services and targeted antipoverty
programs. However, denial of basic services
to the poor is not just a matter of lack of
investment. Often, it is the result of (i) institutional
structures that lack accountability, (ii) domination
by local elites, (iii) widespread corruption,
(iv) culturally determined inequality, and (v)
lack of participation by the poor. Where
such problems exist, systemic changes are needed
to move from poor governance to government accountable
to the poor. Such changes are difficult
to bring about, since existing arrangements
that exclude the poor reflect prevailing economic
and power inequalities. Yet unless these
issues of inequality are tackled, it will be
difficult to raise living standards of the poor.
34.
Action must proceed at two
levels. Public administration and expenditure
management at the national level must be strengthened
to promote pro-poor growth and social development.
At the same time, responsibility for provision
of public services should be devolved to the
lowest appropriate level of government.
Unfortunately, institutional capacity tends
to be weak in local governments and there is
danger of capture by local factions. Devolution
may therefore have to be pursued in a phased
manner, preferably starting with priorities
such as basic education and primary health care.
The long-term objective, however, should be
to empower the poor and develop institutional
arrangements that foster participation and accountability
at the local level (Box 2).
35.
In achieving this objective,
as well as in poverty reduction efforts generally,
a diversified range of stakeholders is involved.
Apart from the government and the private sector,
civil society institutions have an important
role to play. Numerous vibrant and responsive
NGOs-both national and international-are engaged
in development work or championing the legal
rights of the poor. ADB will actively
seek cooperation with such NGOs to benefit from
their experience and perspectives, and take
advantage of their closeness to the poor and
vulnerable.
Box 2: Linking Governance
and Poverty Reduction
Indonesia's recent financial
crisis caused a multitude of problems, especially
for the poor. In responding to this
emergency, ADB sought not only to help the
government mitigate hardships incurred by
the poor, but also to tackle some long-standing
issues of governance. The Local Government
and Community Support Sector Development Program
promotes important reforms in decentralization
and local government. A primary objective
is the creation of a genuinely participatory
system, with levels of transparency and accountability
notably absent in the past. Under new
electoral laws, villages will elect councils
to take responsibility for local development
planning and execution, and village nominees
will manage a district-level community development
forum.
To maximize impact on
poverty, the Program focuses on 35 districts
and 6,000 villages that have been worst hit
by the crisis. Funds provided allow
local community organizations to identify
high priority, small-scale infrastructure
projects that provide long-term community
assets and create immediate employment opportunities
for the poor. In developing and managing
these subprojects, local communities gain
a sense of empowerment and responsibility
in decision making, which will be institutionalized
under the new local government regulations.
Recognizing that social transitions are complex
and potentially threatening, facilitators
will help villagers gain confidence in dealing
with the new opportunities. The Program also
specifies minimum participation rates for
women in facilitation, decision-making, and
employment.
III.
THE STRATEGY
36.
To ensure that
all aspects of ADB operations are driven by
poverty considerations, ADB must translate the
framework described in the previous chapter
into a comprehensive strategy. The following
sections describe how the three pillars of this
framework (para.15) will underpin programs of
policy reform, investment projects, and capacity
building in individual countries. In keeping
with its overarching goal, the Poverty Reduction
Strategy will also be the driving force for
ADB's Long-Term Strategic Framework.
A.
Poverty Analysis
37.
Since poverty causes and characteristics differ
from country to country, the starting point must
be a comprehensive examination of the constraints
and opportunities for poverty reduction in each
country. An initial task in poverty analysis will
be a review of the sector poverty targets agreed
under the Strategy 21 (Appendix 1) and the Agenda
for Action on Social Development (para.5) and the
principal sector strategies being followed.
This will require understanding the nature, intensity,
and spread of poverty; the distributional effects
of macroeconomic policies; the focus and efficiency
of public expenditures; and the effectiveness of
government programs and institutions. ADB
will involve other stakeholders in the analysis
and build on the extensive data already developed
by the government and the donor community.
38.
In addition to such analysis
at the macro level, field studies will be undertaken
to help disaggregate the poor into those in
the mainstream and those excluded by geographic
or social factors. For each of these groups,
the factors underlying their poverty will be
identified, as will their varying needs, demands,
and likely response patterns. Assessments
of the quality of governance at the grassroots
level will also be required. Here, participatory
assessments and consultations with civil society
leaders will be used to provide a picture of
the quality and accessibility of basic services,
poverty reduction programs, and the legal system.
39.
Through this analytical process,
ADB resources will be used to support the efforts
of the government to develop policies and institutions
that will more rapidly reduce poverty.
In view of the growing importance of civil society
and the private sector, their full involvement
in this analysis is essential. ADB country teams
with cross-cutting expertise will ensure that
an integrated view is taken. Senior ADB staff
will be directly involved in the process and
will be accountable for its quality.
40.
ADB recognizes that a large
body of work is ongoing in the region and that
many borrowing countries have well-developed
strategies for poverty reduction and monitoring.
In some cases, the strategies have been developed
with support from other external agencies.10/
In most countries, civil society is also active
and has a wealth of accumulated knowledge and
understanding of poverty issues at the grassroots
level. In its analysis, ADB will use this body
of knowledge and proven approaches. ADB
will also support strengthening of data collection
and management, poverty monitoring, participatory
research, and poverty analysis. With Pacific
island members, ADB will take the lead in capacity
building for poverty analysis. Insofar as its
own store of knowledge is concerned, ADB is
accelerating its program to build a poverty
database on each of its borrowing countries.
This exercise will identify the gaps in data
currently available and steps will be taken
to fill these, to the extent possible, in cooperation
with countries concerned and other agencies.
10/
In many countries, the World Bank and UNDP have
pioneered comprehensive living standards measurement
surveys and other studies.
41.
Poverty reduction will also
increasingly be a major focus of the work program
of the ADB Institute. In particular, the
Institute will provide the analytical basis
for long-term strategies for economic and social
development and poverty reduction in the region.
B.
Country Strategies
42.
A High Level Forum
to be organized and led by the Government -
the key stakeholder - will be held to discuss
the findings of the poverty analysis.
NGOs and community-based organizations, the
private sector, ADB and other donors will also
participate. The purpose of the forum
will be to discuss the causes and effects of
poverty, and the activities that will have the
greatest impact on poverty. The outcome
will be a common understanding of what is required
to achieve poverty reduction targets.
43.
ADB's Country Operational
Strategy will then be formulated on the
basis of the priorities emerging from the poverty
analysis and the high level forum. The
Strategy will provide the analysis and set out
the areas of focus, including policy reforms
and sectoral emphases. It will also take
into account the comparative advantage of ADB
and the programs of other agencies.11/
11/
ADB's country operational strategies are prepared
every four years. Beginning 2000, all new country
strategies will be prepared in the manner indicated.
For borrowing countries for which operational
strategies have been completed recently, appropriate
adjustments will be made to reflect ADB's overarching
goal of poverty reduction. To this end, detailed
poverty profiles will be prepared and will guide
revisions to the country strategy as well as
modifications to the country assistance program.
44.
A Partnership Agreement
between the Government and ADB will be finalized
to endorse the analysis and focus of the country
operational strategy. Based on the inputs
of government, civil society and funding agencies,
the agreement will formalize a sustainable partnership
setting out a long-term vision and agreed targets
for poverty reduction. The agreement will
also incorporate mechanisms to review performance,
highlighting key indicators and institutional
milestones necessary to monitor progress.12/
The Partnership Agreement will be allied to
an arrangement for linking performance to the
allocation of ADB resources.
12/
The targets for poverty reduction will be broken
down into the specific improvements that will
be needed in the corresponding poverty indicators.
45.
ADB's Country Assistance
Plans will translate the underlying thrusts
of the partnership agreements into specific
activities. The Plans, prepared annually,
identify, on a three-year rolling basis, the
program of loans and assistance for each borrowing
country. Figure 1 shows how ADB's operational
cycle will work.
46.
ADB's Resident Missions will
play a key role in the monitoring of the indicators
and milestones set out in the partnership agreement.
The resident missions will also be responsible
for regular interaction with stakeholders and
civil society organizations on progress in meeting
the agreed poverty reduction targets.
C.
Project Typology
47.
All ADB loans and technical
assistance will be expected to contribute to
the reduction of poverty. Accordingly, all proposals
will contain a specific assessment of their
poverty impact, and the logical framework that
accompanies each proposal will commence with
poverty reduction as its ultimate objective.
Projects or programs may (i) be designed to
accelerate pro-poor growth, or (ii) focus on
poverty directly.
48.
Pro-Poor Growth Interventions
will seek to address impediments to broad-based
economic growth. Policy-based lending
will be used to correct policy and institutional
weaknesses. I n the case of infrastructure investments,
ADB will give priority to projects that have
greater impact on poverty. This may include
locating projects in poor areas or incorporating
specific components to ensure increased access
for the poor to project facilities or services.
49.
Poverty Interventions
will be designed to disproportionately benefit
the poor. Many will be in the social sectors
but some may also involve agriculture and infrastructure
projects in rural areas, as well as environmental
protection. These projects will address
underlying weaknesses in policy and institutions
while supporting the poor through (i) education,
health, or other essential services; (ii) creation
of income and employment opportunities in locations
or among communities where poverty is disproportionately
high; and/or (iii) mitigating risks for the
poor or vulnerable. The defining characteristic
of such projects is their concern for beneficiaries:
the proportion of poor people among project
beneficiaries will be significantly larger than
their proportion in the overall population of
the country, and in no case less than 20 percent.
For purposes of classifying poverty interventions,
national and rural poverty lines will be set
out in the Partnership Agreement.
50.
Core Poverty Interventions
will be a subcategory of poverty interventions
specifically designed to tackle extreme poverty.
These will be tightly focused to ensure that
a majority of the beneficiaries are below the
poverty line. Such projects will frequently
be smaller, slower, more expensive in preparation
and supervision, and involve greater risks than
other projects; however, the additional effort
is worthwhile, as solutions have to be found
to the more intractable poverty problems.13/
13/
Typical examples of intractable poverty are
communities suffering simultaneously from physical
and social exclusion, e.g., low caste or ethnic
minorities living in remote, resource-poor regions.
D.
Program and Lending Targets
51.
The partnership agreement
with the borrowing country will bring together
ADB's program of assistance. It will embody
lending and nonlending instruments, including
policy dialogue, technical assistance, and special
studies. These constitute the program
of activities ADB will undertake to help the
country achieve its poverty reduction targets.
Taken collectively, the partnership agreements
with individual countries will provide the total
picture of ADB's program goals and lending plans.
Within this overall program, ADB's desired lending
mix will include not less than 40 percent of
all public sector lending for poverty interventions.
This target of 40 percent is based on the assumption
that an adequate level of concessionary funds
will continue to be available to ADB.
52.
Until now, ADB has committed
itself to ensuring that at least 50 percent
of its projects and 40 percent of lending volume
are devoted to projects with goals other than
pure economic growth. To monitor implementation
of these targets, projects are classified according
to primary and secondary goals of human development,
poverty reduction, women in development, and
environment. With poverty reduction now
the overarching goal, the hierarchy of ADB's
development objectives has changed and the classification
scheme will be revised.
53.
ADB's pursuit of poverty reduction
is constrained at present because some countries
do not have access to concessional funds (Box
3). Efforts may be required to ease this constraint
and expand lending for poverty reduction in
these countries.
Box 3: Poverty Reduction
in People's Republic of China and India
Almost 80 percent of
the region's poor live in just two countries-the
People's Republic of China (PRC) and India.
Helping to reduce Asian poverty includes tackling
poverty in these two countries. But
relating the relatively small size of ADB
assistance to these countries (less than one
half of one percent of public investment in
the case of the PRC) to the enormous scale
of their poverty situations is not easy.
A further problem is their reluctance to borrow
nonconcessional funds for projects yielding
low financial rates of return (even though
social returns may be high).
Despite these challenges,
ADB's portfolio in the PRC and India does
not neglect social and poverty dimensions.
In the PRC, the location of ADB-supported
infrastructure projects is shifting increasingly
from the coastal belt to poor counties in
inland areas. As restructuring of state-owned
enterprises proceeds in the PRC, urban poverty
is expected to increase. An ADB-financed
study will evaluate urban poverty in the country,
help the government determine appropriate
responses, and suggest ways in which ADB could
assist.
In India, ADB-supported
projects that address poverty or environmental
objectives tend to be in the urban development
subsector, including housing finance.
But the trend toward lending to state governments
(e.g., Gujarat and Madhya Pradesh) may offer
the greatest potential for sharpening the
poverty focus of ADB's India portfolio.
Nevertheless, increasing
ADB's present level of contribution to poverty
reduction in the PRC and India (and in other
countries borrowing nonconcessional funds
from ADB) is a challenge and may call for
new lending instruments (para. 89).
E.
Selection of Projects
54.
In selecting projects, ADB
will favor those that promise the biggest return
in terms of poverty reduction. To this
end, all three pillars of the strategic framework
will be part of the mix of assistance offered
to each country. Figure 2 depicts the
way in which the pillars will influence the
overall program.
55.
ADB recognizes that it is
often difficult in the case of individual countries
to decide how much emphasis to place on poverty
interventions and how much on more growth-oriented
investments. Where past performance in poverty
reduction has been weak and/or inequality is
rising, the emphasis will be on governance and
social development. In countries where
essential reforms have been undertaken or are
under way, growth-oriented investments will
reduce poverty. In choosing between projects
ADB will use specific assessment techniques,14/
while giving attention to the likely impact
on poverty of investments in different sectors
(Box 4). To increase understanding in
this critical area, ADB will intensify its analytical
work so as to more confidently offer optimum
