Statistical Yearbook for Asia and the Pacific 2012
 
   
D. Poverty and insecurity
 
D.1. Income poverty and inequality

The Asian and Pacific region1 still has the largest absolute number of people living in extreme poverty of all global regions – in 2011, there were 743 million people living in extreme poverty in developing countries in Asia and the Pacific. However, there are substantial variations between subregions and countries in terms of the proportion of people living in extreme poverty. Despite a steady decline in extreme poverty over the past two decades, many countries have been experiencing a greater level of income inequality, which constrains domestic markets and threatens shared prosperity. Poverty and inequality are the primary focus for the global development agenda and will remain a focus for the development agenda beyond 2015.

The Asian and Pacific region made impressive progress towards reducing extreme poverty between 1990 and 2011, but has been much slower in reducing the number of people living in near poverty.

In 1990, more than 51 per cent of the population in the Asian and Pacific region was living in extreme poverty (living on less than $1.25 per day in 2005 PPP). However, thanks to the impressive growth performance of several emerging countries in the region, the incidence of poverty has fallen by more than half, leaving less than 20 per cent of the population in extreme poverty in 2011. The overall global population living in extreme poverty has decreased by approximately 1 billion people between 1990 and 2011. Asia and the Pacific has lead the global success in the reduction of poverty over the last two decades. In other words, the population living in extreme poverty in the region declined from about 1.6 billion in 1990 to 0.7 billion in 2011, despite an overall population growth of approximately 0.9 billion in the same period. This immense decline and the region’s lead on the global level have been mainly due to the poverty reduction in China and India, as these two countries alone have lifted 650 million people out of extreme poverty. This significant drop in numbers of people living in extreme poverty accounts for unprecedented poverty reduction on the global level.

The incidence of extreme poverty varies considerably at the subregional level. The highest incidence of extreme poverty is recorded in South and South-West Asia (28.7 per cent in 2010), whereas the lowest is in North and Central Asia (1.0 per cent in 2011). It is noteworthy that, since 1990, East and North-East Asia and South- East Asia have recorded the fastest absolute reductions in poverty rates compared with those in other subregions.

Statistics on poverty reveal that there are also large numbers of poor people living just above the extreme poverty line, in near extreme poverty, who cannot manage a decent daily livelihood. If $2 per day (2005 PPP) is used as a benchmark, the number of poor in the Asian and Pacific region decreased from 2.4 billion in 1990 to an estimated 1.6 billion in 2011. About 900 million people living between $1.25 and $2 per day remain critically vulnerable to extreme poverty. At present, estimates show that about 40 per cent of the population of the region lives on less than $2 per day. For example, in South and South- West Asia, the population living on or less than $2 per day increased from 985 million in 1990 to 1.1 billion in 2010, which accounted for about 62 per cent of the region’s poor. However, out of this number, India alone accounted for 834 million people living below $2 in 2010.

There are substantial variations across countries in terms of the proportion of the population living in extreme poverty, as well as the success of the reduction of poverty incidence.

The region is made up of countries at different stages of development. In particular, two of the world’s most populous countries, namely China and India, have been able to significantly reduce extreme poverty over the last two decades. The percentage of people living in extreme poverty in China was reduced from 60.2 per cent in 1990 to 11.8 per cent in 2009. In India, the extreme poverty rate was reduced from 49.4 per cent in 1994 to 32.7 per cent in 2010. Similarly, Indonesia experienced a very large decline in the extreme poverty rate, from 54.3 per cent in 1990 to 16.2 per cent in 2011, and Cambodia also realized a steady decline, from 44.5 per cent in 1994 to 18.6 per cent in 2009.

Figure D.1-1
Percentage of population living in poverty (below $1.25 per day, 2005 PPP), Asia and the Pacific, early 1990s and latest

Figure D.1-1 Percentage of population living in poverty (below $1.25 per day, 2005 PPP), Asia and the Pacific, early 1990s and latestSeveral other countries in the region have also significantly lowered poverty rates in recent years in comparison with the rates of the early 1990s, including Fiji, Kyrgyzstan, Tajikistan, Turkmenistan and Viet Nam. Moreover, the incidence of extreme poverty is below 5 per cent in a number of developing countries, including Armenia, Azerbaijan, Kazakhstan, Malaysia, the Russian Federation, Thailand and Turkey.

 

National statistics on the incidence of poverty by using national poverty lines indicate a significant reduction in poverty over the last two decades.

Statistical information on national poverty rates is crucial to show, and to create a better understanding of, a country’s human development condition. The indicator on the population living below the national poverty line measures poverty as not having the minimum level of income/ consumption necessary to satisfy basic human requirements at a particular time in a particular place. Therefore, poverty lines are different across countries and over time, and are based on national currencies. These poverty estimates are not comparable across countries or with the previously mentioned indicators (that is, the population living below $1.25 or $2 per day, 2005 PPP), but are important for measuring and monitoring the progress of national level efforts to eradicate poverty through developmental policies.

For example, according to national poverty line estimates, the proportion of the population living in poverty was reduced in China from 6.0 per cent in 1996 to 4.6 per cent in 1998, and in India from 37.2 per cent in 2005 to 29.8 per cent in 2010. Great success was also achieved by Thailand, where poverty declined from 58.1 per cent in 1990 to 13.2 per cent in 2011. In the early 1990s, during the period of transition from centrally planned to market economies, several countries of the North and Central Asian subregion experienced a high incidence of poverty. Nevertheless, all countries with available data were subsequently able to reduce poverty rates; for example, in Azerbaijan, the poverty rate fell from 49.6 per cent in 2001 to 7.6 per cent in 2011, and in Kazakhstan the rate fell from 46.7 per cent in 2001 to 5.3 per cent in 2011.

The severity of the poverty of those living below the poverty line has abated but challenges remain in least developed countries.

Many countries in the region have undertaken massive government-led anti-poverty programmes to address the challenges of extreme poverty, including cash transfers, job guarantee programmes and financial-inclusion measures. The poverty gap indicator shows how far the extreme poor fall below the poverty line and reflects both depth and incidence of poverty (the mean shortfall of the total population from the global poverty line of $1.25 per day, expressed as a percentage of the poverty line).

According to the latest information, the poverty gap measure has narrowed during the last decade and a half. Nevertheless, the highest poverty gap ratios can be observed for least developed countries, indicating pockets of extreme poverty among the poorest and most vulnerable countries in the region. The poverty gap ratios are the highest in Bangladesh at 11.2 per cent in 2010, the Lao People’s Democratic Republic at 9 per cent in 2008 and India at 7.5 per cent in 2010, whereas for countries in North and Central Asia ratios are generally very low (except Georgia). The poverty gap ratio in China fell from 20.7 per cent in 1990 to 2.8 per cent in 2009; in India, the gap fell from 13.6 per cent in 1994 to 7.5 per cent in 2010. Overall, the ratio implies that, if the real incomes of poor households increase on average by 2.8 per cent in China or 7.5 per cent in India, they will no longer fall below the global poverty line.

In some countries, inequality is increasing and threatening shared prosperity.

The Asian and Pacific region has witnessed a steady decline in poverty rates, but at the same time, some countries have experienced greater levels of income inequality (see figure D.1-2). Inequality not only diminishes the povertyreducing impact of economic growth, but also deprives hundreds of millions of people access to the means to develop their economic potential by denying them adequate health care, education, energy, credit, land and so forth. From the early 1990s to the late 2000s, the Gini index worsened from 32.4 to 42.1 for China, from 30.8 to 33.9 for India, and from 29.2 to 38.1 for Indonesia, while it decreased for other countries such as Cambodia, Kyrgyzstan, Malaysia, Nepal, the Philippines, Thailand and Uzbekistan. It is noteworthy, however, that the Gini index for Malaysia (46.2) and the Philippines (43.0) remained among the highest in the region.

Figure D.1-2
Gini index, Asia and the Pacific, early 1990s and latest

Figure D.1-2 Gini index, Asia and the Pacific, early 1990s and latestThe difference between the proportion of national income/consumption accrued by the richest quintile of the population and that accrued by the poorest quintile of the population provides another way of assessing income equality. On the one hand, the poorest quintile (bottom 20 per cent) of the population receives a small share in such countries as Malaysia (4.5 per cent in 2009) and China (4.7 per cent in 2009), but they do relatively better in India (8.5 per cent in 2010), Bangladesh (8.9 per cent in 2010) and Pakistan (9.6 per cent in 2008). On the other hand, the richest quintile (top 20 per cent) of the population receives about a 50 per cent share of the national income/consumption in such countries as China (47.9 per cent in 2005), Fiji (49.6 per cent in 2009), the Philippines (49.7 per cent in 2009) and Malaysia (51.5 per cent in 2009).

Box D.1-1
Mixed poverty and inequality manifestations in the Pacific

For the Pacific, there is a lack of internationally comparable statistics on poverty rates. However, in 2012, the Pacific Islands Forum Secretariat produced a report on the region’s progress towards achieving Millennium Development Goal 1 to eradicate extreme poverty and hunger. In the Pacific, poverty is viewed from the perspective of hardship and a lack of opportunity, in other words, the “poverty of opportunity.”a The report states that poverty is measured by the percentage of people living below the basic needs poverty line.b It is important to note that extreme poverty is rare in most Pacific island developing economies (PIDE).

According to the basic needs poverty line for 2009, Papua New Guinea, the most populous PIDE, had about 2 million people living in poverty, which represents the vast majority of the subregion’s poor. There are a further 0.6 million poor living in the Pacific, half of which is accounted for by the poor in Fiji. Great variability exists in the incidence of basic needs poverty among PIDE; the lowest basic needs poverty rate was recorded in Vanuatu (13 per cent in 2010), followed by Kiribati (22 per cent in 2006), and the highest rates were in the Federated States of Micronesia (31 per cent in 2005) and Fiji (35 per cent in 2008). Furthermore, from the available data it can be seen that the indicated poverty rates increased compared with the last recorded data in the Federated States of Micronesia, Samoa, Tonga and Tuvalu, but decreased in Fiji and Papua New Guinea. The poverty gap ratio in PIDE ranges between 3 per cent in Vanuatu (2010) and 10 per cent in Fiji (2008), with most PIDE in the subregion showing a poverty gap ratio of either 8 per cent or 9 per cent.

Basic needs poverty (BNP), poverty gap ratio (PGR) and the share of the poorest quintile in national consumption (PQNC) for selected Pacific island developing economies, latest

Basic needs poverty (BNP), poverty gap ratio (PGR) and the share of the poorest quintile in national consumption (PQNC) for selected Pacific island developing economies, latest

Abbreviations: BNP, basic needs poverty (percentage); PGR, poverty gap ratio (percentage); PQNC, poorest quintile in national consumption (percentage).

The share of national income/consumption of the poorest quintile is at 10 per cent or lower for all PIDE. The shares are extremely low for the Marshall Islands (3 per cent in 2002), and Fiji and Papua New Guinea (5 per cent in 2008 and 2009, respectively). The Gini index increased between the previous and the most recent measurements for PIDE such as Fiji, Samoa and Tuvalu, while it fell for the Federated States of Micronesia and Vanuatu. The high Gini indices observed in most PIDE are a clear indication that the improvement in the poverty index does not necessarily translate into equitable development, which is similar to other parts of Asia.

 
Source: Pacific Islands Forum Secretariat, 2012 Pacific Regional MDGs Tracking Report (2012). Available from www.forumsec.org/ resources/uploads/attachments/documents/ MDG%20Track%20Rpt%20web%2020122.pdf (accessed 3 June 2013).
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a Pacific Islands Forum Secretariat, 2012 Pacific Regional MDGs Tracking Report (2012). Available from www.forumsec.org/resources/uploads/ attachments/documents/MDG%20Track%20Rpt%20web%2020122.pdf.
b The basic needs poverty line consists of two elements. The first element takes into consideration the minimum income needed to provide the minimum daily intake of calories for survival, and the second takes into consideration the allowance for basic, non-food expenditures. Because the calculation consists of different costs and prices for each country, the basic needs poverty line is not strictly comparable between countries.

Further reading

Milanovic, Branco. Worlds Apart: Measuring International and Global Inequality. Princeton University Press, 2005.

United Nations. Rethinking Poverty: Report on the World Social Situation 2010. Sales No. E.09.IV.10.

World Bank. PovcalNet: an online poverty analysis tool. 2013. Available from http://iresearch.worldbank.org/Povcalnet/index.htm.

Technical notes

PPP defined An international dollar has the same purchasing power that the United States dollar has in the United States of America. Costs in local currency units are converted to international dollars using PPP exchange rates. A PPP exchange rate is the number of units of a country’s currency required to buy the same amount of goods and services in the domestic market as one United States dollar would buy in the United States. An international dollar is therefore a hypothetical currency that is used as a means of translating and comparing costs from one country to the other using a common reference point, the United States dollar.

Population living in poverty, $1.25 per day in 2005 PPP (percentage of population, millions)
The population living on less than $1.25 per day, measured in 2005 PPP. The threshold of $1.25 per day roughly indicates the global poverty line. Aggregate calculations: Millennium Development Goal aggregation and imputation methods; weighted averages using population (WPP2012) as weight (percentage of population); total population for each regional and subregional grouping (millions).

Population living below the national poverty line (percentage of population, millions)
The national poverty line is defined by each country. Therefore, the figures are not comparable across countries and may not be comparable over time within a country. Aggregate calculations: Millennium Development Goal aggregation and imputation methods; weighted averages using population (WPP2012) as weight (percentage of population); total population for each regional and subregional grouping (millions).

Poverty headcount ratio at $2 per day in 2005 PPP (percentage of population, millions)
The population living on less than $2 per day, measured in 2005 PPP. As a result of revisions in PPP exchange rates, poverty rates for individual countries cannot be compared with poverty rates reported in earlier editions. Aggregate calculations: Millennium Development Goal aggregation and imputation methods; weighted averages using population (WPP2012) as weight (percentage of population); the total population for each regional and subregional grouping (millions).

Poverty gap (percentage of poverty line)
The mean shortfall of the total population from the global poverty line ($1.25 per day, 2005 PPP) expressed as a percentage of the poverty line. This measure reflects depth of poverty as well as its incidence. Non-poor populations are defined as having zero shortfall.

Income/consumption of poorest quintile (percentage of income/consumption)
National income or consumption accrued by the poorest income quintile as a percentage of the total income or consumption.

Income/consumption of richest quintile (percentage of income/consumption)
National income or consumption accrued by the richest income quintile as a percentage of total income or consumption.

Gini index (income equality coefficient)
Measures the extent to which the income distribution (or, in some cases, consumption expenditure) within an economy deviates from a perfect income equality. A Gini index of 0 represents perfect equality and a Gini index of 100 represents absolute inequality.

Source

Source of poverty data (other than poverty gap and income/consumption of poorest quintile): World Bank, poverty and inequality database. Data are based on primary household survey data obtained from government statistical agencies and World Bank country departments. Data for high-income economies are from the Luxembourg Income Study Database. Data obtained: 14 August 2013.

Source of poverty gap and income/ consumption of poorest quintile data: Millennium Indicators Database. The indicator is calculated by the World Bank Development Research Group based on microlevel data from nationally representative household surveys that are conducted by national statistical offices or by private agencies under the supervision of government or international agencies and obtained from government statistical offices and World Bank Group country departments. Global poverty indicators are adjusted for each country using an internationally comparable poverty line, enabling comparisons across countries to be made. Data obtained: 2 August 2013.

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1 The present topic covers only developing countries in the region and therefore does not include Australia, Japan or New Zealand.
 
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