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Asian Development Bank Introduces New Way to Measure Poverty in Asia

The Asian Development Bank has developed a new benchmark to measure poverty in Asia. The ADB says in a region that has seen stellar growth rates and rising income inequality, its new Asian poverty line can help policy makers measure and compare poverty levels. Claudia Blume reports from Hong Kong.

Living on one dollar or less a day - that is how poverty is commonly measured around the world. But the Asian Development Bank thinks that in Asia a new benchmark is needed that reflects the region's rapid economic growth and growing income disparities.

In Hong Kong on Wednesday, the non-profit lender introduced its new Asian Poverty Line, which defines poverty as living on $1.35 a day. The ADB arrived at that figure by taking the median of the national poverty lines of 16 developing countries in Asia in 2005.

The U.S. dollar-denominated poverty line is not based on market exchange rates, but on purchasing power parity figures, which use baskets of goods to compare purchasing power across countries. The ADB says it developed a new set of measurements for their study that only compare the prices of goods and services purchased by the poor.

ADB chief economist Ifzal Ali says the bank collected data on where the poor shop, what they buy and on the quantity and quality of their purchases.

"Both you and a poor person might consume rice every day but you would consume a much higher quality of rice than a poor person who would eat coarse rice," he said.

The ADB says different measurements effect estimates of the scope of poverty in Asia. If the traditional method is used, which measures the average purchasing power of all people in a country - including the rich - there are more than one billion poor people in the region. By using the new measurement which only focuses on the poor, the figure drops to 800 million.

Ifzal Ali says it is the first time that a cross-country comparison of poverty lines has been done in Asia. He says by looking at the report, policy makers can determine where they stand compared with other countries in the region.

Ali says the Asian Poverty Line and the new, poor-focused purchasing power measurement can also help predict how inflation will affect the poor in the region. He says the ADB analyzed the likely effect of a 10 percent increase in grains, and a 10 percent increase of general food prices on poverty figures.

"The report shows that if you have a 10 percent increase in - say - cereal prices, the number of poor would go up by 36 million almost immediately. If on the other hand food prices went up - this is going from cereals to food - it would increase by about 85 million people," he said.

The ADB urges countries in the region to achieve inclusive growth to eradicate poverty by 2020. This includes expanding employment opportunities, enhancing education and health and providing social protection.