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June 12, 2011

Economy Experts Call on Asia to Lead the World in Reducing Poverty

Participants at a meeting of the World Economic Forum in Indonesia are calling on governments in Asia to lead the world in reducing poverty.

In the year 2000, 192 countries agreed to support the United Nations Millennium Development Goals to eradicate extreme poverty and significantly reduce child mortality rates by 2015.

In the years since, many Asian countries have experienced sustained double digit economic growth that has raised the living standards of millions of people.

But Rajat Nag, Managing Director General of the Asian Development Bank, joined a panel of economists and leaders at the World Economic Forum in Jakarta who say governments must do more to meet the Millennium Development goals.

Nag says despite the robust growth, 900 million people still live on $1.25 a day, 450 million people lack access to clean water, and more than 100 million children still die each year during childbirth.

He says governments in Asia must do more to fund basic nutrition programs, provide health care and education. Nag says paying for these programs will mean significantly raising taxes.

“In Asia the average taxes collected as a percentage of GDP is likely under 10 percent. In the developed world it is easily 20 percent. So there is a huge amount of public resource mobilization which needs to happen. Not just by raising tax rates but by increasing the tax base, improving the tax collection,” said Nag.

Indonesian Vice President Boediono says while significant progress in reducing poverty has been made in his country, he agrees that more programs and increased tax revenues are needed to address the problem.

“I belong to the school that the government should play an appropriate role and even in and especially in the social program, should intervene, proactively. And this requires financing and that I think has to be, to come from our own resources,” stated Boediono.

American economist and Director of the Earth Institute at Columbia University Jeffrey Sachs says Asian countries experiencing robust economic growth should shoulder the responsibility for poverty reduction with a mix of public and private initiatives. He says the slow economic recovery in the developed world has left Europe looking inward and the United States overly focused on cutting taxes.

“My own country the United States wants it for free. We're on a constant tax cutting binge. The rich want no taxes," said Sachs. "They say let the market do it but we end up without the social policy. We have lots of poverty. We end up without the environmental policy.”

While U.S. income tax rates are still higher than those in Asia, they remain lower than those in European countries. Opponents of higher taxes say they inhibit economic growth from private business that ultimately does more to lift people out of poverty.

Sachs says Asia's dynamic economic growth in recent years also brings an increased responsibility to meet its pledge to eradicate extreme poverty in the next four years.