MANILA, Philippines — Developing countries in East Asia and the Pacific, including the Philippines, are advised to adopt a new policy approach that would focus on priority areas of their respective levels of poverty reduction, the World Bank said in a report.
In its Riding the Wave: An East Asian Miracle for the 21st Century report, the World Bank said inclusive growth – one that reduces poverty while providing upward mobility and economic security for all – will require countries to go beyond its successful “growth with equity” model.
“Prospects for upward mobility are seen as increasingly elusive, reflecting a sense that income and wealth are becoming more concentrated while access to basic social services remains limited and often of poor quality. Achieving economic security for all is more difficult, particularly as the region faces newer challenges: rapid aging, less certain growth prospects, and greater urbanization,” the report said.
The report used a five-part grouping of countries and recommended tailored policies for each. Among the groups are the ‘Progressive Prosperity’, which are countries that have largely eliminated extreme poverty and fostered a large middle class and the ‘out-of-poverty-into-prosperity’ or countries with large swaths of their populations now economically secure or middle class.
Malaysia, and Thailand were classified under the Progressive Prosperity category, while those under the ‘out-of-poverty-into-prosperity’ are China and Vietnam.
Meanwhile, the Philippines along with Indonesia and Vietnam are described as ‘out-of-extreme-poverty’ countries which have low levels of extreme poverty but still small middle classes.
The group of countries is being urged to prioritize improving economic mobility and create an integrated social protection policy.
In contrast, ‘Lagging progress’ countries such as Lao PDR and Papua New Guinea, with still high levels of extreme poverty, are encouraged to invest in basic education and promoting financial inclusion while also strengthening social assistance and resilience.
The East Asia region has transformed from being comprised of mostly poor countries in the 1980s to a group of middle-income countries made up of varying economic classes. By 2015, almost two-thirds of the region’s population was either economically secure or middle class – up from 20 percent in 2002.
The share of the extreme and moderate poor has fallen dramatically, from almost half the population in 2002 to less than an eighth in 2015. But the percentage of individuals vulnerable to falling back into poverty – those who live with $3.10 to $5.50 a day – has remained constant between 2002 and 2015, at about a quarter of the population, according to the World Bank.
World Bank vice president for East Asia and the Pacific Victoria Kwakwa said it’s already a historic achievement that nearly a billion people in East Asia have moved out of extreme poverty in just one generation.
“But for the region to sustain inclusive growth, countries will need to address the challenges of fully eliminating extreme poverty, enhancing the prospects for economic mobility, and assuring economic security for all,”Kwakwa stressed.
The report highlighted that policies for inclusive growth need to recognize and address the varying constraints faced by different economic classes.
“Policies for the remaining extreme poor need to ease their barriers accessing economic opportunities, as well as sustain broad-based growth, so as to help them move up the income ladder. Access to services such as healthcare and infrastructure, as well as mechanisms to manage risks, will need to be improved to help the economically vulnerable,” the World Bank said.
In addition, the economically secure and the middle class are urged to prioritize improving the provision and quality of public services, such as housing, water and sanitation.
The report moved for the use of a three-pillar approach that can underpin the policy agenda. These three pillars include fostering economic mobility; providing greater economic security; and strengthening institutions
Fostering economic mobility requires closing gaps in access to jobs and services, improving the quality of jobs, and promoting financial inclusion, while providing greater economic security targets to bolster social assistance systems, expanding social insurance, and increasing resilience to shocks.
“The policy agenda for inclusive growth can constitute a new social contract for governments across the region,” said Sudhir Shetty, World Bank Chief Economist for the East Asia and Pacific region said.
“Its elements would address the needs of each economic class while remaining fiscally responsible and raising revenues in an efficient and equitable manner,” Shetty added.