Fewer Asians live on less than $1 a day

As Asia continues to grow, developing countries are making remarkable progress in cutting poverty and boosting livelihoods of vulnerable citizens.

In a new report, the Asian Development Bank (ADB) says the number of people in Asia living on less than $1 a day fell by 223 million between 1990 and 2002. China accounted for 3 out of 4 of those whose incomes rose above a level classified as "extreme poverty" by economists.

"This economic dynamism is unparalleled compared to other regions in the world," says Ifzal Ali, chief economist of the ADB. He estimates that by 2015, provided this growth is sustained, the number of Asians living extreme poverty could fall as low as 150 million, down from 690 million in 2002.

Soaring global trade and foreign investment have underpinned Asia's economic transformation in recent decades. Economic policymakers also take credit for nurturing industries that provide employment and space for local entrepreneurs to flourish.

But Mr. Ali and other economists caution that future progress could be jeopardized by a growing gap between the haves and the have-nots within Asia.

"Even in a country as successful as China there are warning signals that if you don't address [inequality], it's very difficult for governments to continue to reduce poverty," says Ali. "Growth is important. But addressing inequalities is also important."

The growing gap is particularly evident in India. A booming software industry has sprouted office towers and gated communities, while the number of people living on under $2 a day actually rose 17 percent to 840 million through 2002.

As Asia's urban middle classes have expanded, many rural poor are falling behind or forced to migrate and join a swelling urban underclass.

Economists say that giving communities better access to credit and land is one way of breaking out of the poverty trap. One method is micro loans, a strategy pioneered by Bangladesh's Grameen Bank. Proponents say this is more effective in the long run than government handouts, since it gives borrowers an incentive to use the money wisely.

Since 2001, Thailand has introduced several schemes to improve credit access for the poor, including a three-year loan facility for every village in Thailand. Researchers say that while some borrowers simply repaid old debts or shopped, other loans went into cottage industries, the intended target.

Somporn Charoennum, a Thai fish vendor, borrowed $244 from the Thai government's village fund and also turned to several moneylenders to purchase a delivery truck for her business. But the loan sharks demanded exorbitant rates and daily installments. When she stopped paying, four men came to her stall one morning and beat her to the point of severing her hand.

"I heard that this [lender] could be violent and had beaten up some debtors ... but I'd never heard of someone being killed," says Ms. Charoennum.

During a visit last week to her hospital bed, the provincial governor, Phiraphol Tritasavit, said that some of those behind the attack had been arrested, and that Charoennum's other debts would be refinanced by a state bank at a lower rate.

Experts say the case highlights the barriers faced by poor communities who need seed capital to improve their living standards. Unlike middle-class homeowners, poor people usually don't have assets to put up as collateral for loans. A common problem in Asia is land titles, as many farmers lack legal tenure that could be pledged for commercial loans.

This is where the enterprising moneylenders step in, says Robert England, resident representative to Thailand for the United Nations Development Program. "Poor people don't have collateral ... and the trade-off for not having collateral is high rates of interest," he says.

More reasonable loans wouldn't solve all problems faced by Asia's poor, though. "Credit is no silver bullet," argues Ali.

Access to land, clean water, education and healthcare are also crucial to the fight against poverty. The ADB chides South Asian governments for failing to invest in public services.

Some governments in Asia are starting to tackle the inequalities in access to credit and other services. Leaders in China have made frequent speeches that refer to the dangers of uneven growth and are seen as anxious to spread the spoils of capitalism into the countryside. India's election upset in May can also be traced to a backlash by communities bypassed by the country's growth spurt.

"People are no longer willing to be patient for trickledown growth. They want a better life and they want it now," says Ali. "Governments must be sensitive to their issues or they will be tossed out."