Opening Address at the Second East Asia and Pacific Regional Conference on Poverty Reduction Strategies

By
Jemal-ud-din Kassum
Vice President, East Asia and Pacific
The World Bank
Second East Asia and Pacific Regional Conference on Poverty Reduction Strategies
Phnom Penh, Cambodia, October 16, 2003

Ensuring Pro-Poor Growth in East Asia

Good morning. It's a pleasure for me to be here in Phnom Penh today, with my colleagues from the Asian Development Bank, IMF, UNDP, and the country delegation members who have gathered here for the next few days to talk about poverty reduction strategies and their role in building a more sustainable future for the countries of East Asia. I'd like to thank you all for coming, and in particular, our hosts, the Government of Cambodia, represented by the Prime Minister, for hosting this event. The presence of all of us together here for this important meeting underscores one fundamental lesson we have all learned: the value of partnership. We are more effective as donors and agencies, more able to assist our member countries, when we work together so. I want to begin by saying that the World Bank is committed to working in partnership in every country.

It is also a pleasure to be talking about the PRSP process, and the importance of ensuring that growth fully includes and benefits the poor. I believe that the PRSP approach we have taken together has begun to fundamentally change the way we do business – bringing us together, focusing on achievable, measurable steps to reduce poverty, bringing many other voices into the consultation process, and recognizing that no strategy will work unless the Government and people own it fully. We obviously have some way to go to realize the full benefits of this process, but we have made good progress, and the feedback I get is that things are changing at a country level in many important ways.

Let me talk briefly about a centerpiece of the PRSP approach: pro-poor growth. This is an issue of fundamental importance to the sustainability of growth everywhere, within countries and between countries. Excluding sections of society, even whole countries, creates what the World
Bank President, Jim Wolfenshohn, has called "an unbalanced world." Growth alone won't correct that imbalance; pro-poor growth can, and it is there that we should devote our energy.

Background

We all know that East Asia's high rates of economic growth up to 1997 led to major reductions in poverty and helped to increase living standards. Although the financial crisis dealt a blow to these gains, living standards have bounced back and poverty reduction continues.

For ordinary citizens, this means that across East Asia, poor people are able to carve out better lives for themselves and their families. It means that countries have better educated populations and healthier workforces. That children have access to better schools, better trained teachers, than their parents did, that new roads are connecting villages to markets. The countries in which those citizens live can have a stronger, more sustainable future.

But those improvements are not enough. Glaring gaps and inequities remain.

The poverty rate for the region remains unacceptably high. Many countries – and deprived regions and disadvantaged social groups within countries – have been left behind. About 700 million people in the region are living below $2 a day. The proportion of the population living on less than $2 a day remains well above 70 percent for Laos, Cambodia, and Papua New Guinea and between 40 and 50 percent for Vietnam, Philippines, and Indonesia.

The region is lagging on many other important dimensions of poverty reflected in the Millennium Development Goals. Poverty has many dimensions beyond just lack of income, including lack of access to basic services such as education, health, water and sanitation. Indeed, the region is not on track to reduce mortality rates for infants and children under five by two thirds by 2015, given setbacks in the number of children immunized. For these dimensions, growth is not enough.

Here in Cambodia, for example, the under-5 mortality rate for the poorest quintile is triple that of the richest. Similar disparities exist in Indonesia. Most developing regions are outperforming East Asia in improving access to water and sanitation – more than half of the people in East Asia do not have access to improved sanitation facilities. As recently as the year 2000, 500 million men and women in the region still lacked access to an improved water source. Without access to adequate infrastructure, hopes for a better future for millions of poor will not be realized.

The PRS Agenda

In the face of these challenges, the countries gathered here have been developing strategies committing themselves to achieve policy and institutional reforms to generate growth and improve access to basic services.

International experience shows that the participatory process of developing these strategies results in a better understanding of the constraints to reducing poverty in the country. Further, it increases openness and debate about the range of development options. It also helps link policies to budgets, including making sure that money is specifically set aside to assist the poor. Finally, it tends to create a stronger focus on achieving real results, especially the kinds of results outlined in the Millennium Development Goals.

In exchange, donors and development agencies must work together to support countries' strategies in a coherent and consistent way. In Cambodia, for example, ADB, DFID, and the World Bank are working jointly to prepare our strategies to assist the country, which seems logical since we are all using the National Poverty Reduction Strategy as the basis for our support. This is quite a change for the three institutions – harmonizing our strategies, jointly consulting with stakeholders in the country, and sharing ideas and challenging each other in ways that we have not done before – but it is something worth doing.

We know that developing these strategies is not a simple task.

Planners are faced with multiple and sometimes competing objectives – and need to manage these tradeoffs and compromises. Countries have to deal with budget and institutional constraints – especially in linking the strategies to the budgets and addressing weak public expenditure management systems, which often strain countries' administrative capacities.

Gender must be an integral part of the overall strategy. We're very encouraged by last month's meeting in Siem Reap of government, parliamentarian, and civil society representatives from the countries gathered here today with donor agencies for a workshop on the next steps in turning gender-responsive plans identified in the poverty reduction strategies into action on the ground – with budgets, resources, and targets against which they can be monitored. The knowledge gained from that workshop should be a key part of the discussion at today's forum and in future activities.

Strategies also need to balance ambition and realism in setting targets for reducing poverty; need to address critical knowledge gaps – as well as analyze potential sources for growth in further facilitating the fight against poverty.

Policy Recommendations to Help Poor Benefit from Growth

With this in mind, policies designed to accelerate growth must be complemented by efforts to empower and include poor people themselves in the development process, namely by ensuring that they benefit from improved education, health, and infrastructure.

Specifically, there are six key areas that need further attention in order to promote a pattern of growth supportive of high rates of poverty reduction – and maximize the benefits to the poor of that growth.

And finally the last two areas which I'd like to draw special attention to are: Governance and Service Delivery.

And corruption hurts the poor most of all. While the rich bribe for speed or favors, the poor have to bribe even for access to basic services. The poor pay a higher proportion of their income in bribes than any other income group, they find it harder to get jobs or start businesses, their property rights are more insecure, and they suffer from poor services or no services at all - such as lack of access to clean water. They pay with low life expectancy as well as with money.

What do we know about what works?

There must be a domestic constituency for reform – outsiders cannot do it. We see that many of the most promising results come from increased transparency, accountability, and external monitoring of private sector and government activities whether at the national or subnational level.

The other side of the coin is the reforms that only legislatures and governments can deliver – ore effective public accounts committees, better laws and policies, more transparent and accountable administrations and decision-making processes, fair and efficient delivery of services. Tackling high-level corruption is especially difficult. The media and the business sector have a key role and responsibility in exposing the nature and patterns of high-level corruption. Sustained political will and government ownership that translates into action and successful enforcement are essential to reducing corruption at all levels. And transparency is often the most effective window to greater accountability.

We also know that all this takes time and can be risky. But leaving corruption to fester can be even more dangerous. We have seen how prolonged systemic corruption undermines institutions, alienates investors, and ultimately erodes the legitimacy of the state. This region cannot afford that.

Too often services fail poor people. These failures may be less spectacular than financial crises, but their effects are continuing and deep nonetheless. Services do not improve through growth alone. Even when governments devote about a third of their budgets to health and education, they tend to spend very little of it helping the poorest. A more explicitly pro-poor allocation of spending is therefore critical.

Increased growth and more money are part of the answer, but, as I alluded to earlier in my remarks, we have found that services really work for poor people when:

• They are inclusive -- when girls are encouraged to go to school, when pupils and parents participate in the schooling process, and when communities take charge of their own sanitation.
• When societies curtail corruption, which hurts poor people more than it hurts the better off
• And when we take a comprehensive view of development – recognizing that a mother's education will help her baby's health, that building a road or a bridge will enable children to go to school.

As part of our East Asia half yearly economic update, we've prepared a special focus section on Service Delivery in East Asia, which we hope, along with our World Development Report this year, can contribute further to the debate on this important issue.

Conclusion

To conclude, the 1990s have brought tremendous gains to our region and the next fifteen years also hold great promise of sustained growth – but the challenge will beto maximize the poverty reduction that we can achieve from this growth. Capitalizing on this tremendous opportunity facing the region will depend to a large extent on the determination of governments and their domestic and international partners to undertake the necessary steps to ensure that the poor people of the region are active contributors to and beneficiaries of this growth.

While we at the Bank feel we have much to contribute to this debate – we recognize that there is a lot we don't know. This is why we are supporting this forum and others like it that enable us to come together with our partners in governments, civil society, and donor agencies, and foster learning by doing; sharing of knowledge, ideas, and experience; and debating and discussing the issues, options, and opportunities to work together and move forward on this agenda. We hope that we will all come away from this event not only enriched by the discussions and interactions – but with much better ideas, more creativity, and a renewed sense of direction to realize our common goal of an East Asia with more growth, more opportunities, and many, many less poor people. Thank you.