East Asia leads successes on poverty reduction: How can business help?

The World Bank has set a goal of getting global poverty below three per cent by 2030, and the private sector has a key role to play in achieving this target, says CSR Asia chairman Richard Welford.

china lijiang railway
Passengers at Dali Railway Station in Lijiang, China Following 3 decades of exceptional economic growth, the country is now regarded as an upper middle-income country. Image: CC BY-NC-ND 2.0

According to a recent World Bank report, the number of people in extreme poverty fell by 114 million between 2012 and 2013. Even more impressive is the fact that, from 2010 to 2011, global poverty fell by 132 million people. From 2008 to 2013, the number fell by an average of 88 million people per year.

If that rate of progress keeps up, global poverty will be eliminated in less than a decade. However, the World Bank warns that the pace of progress will likely slow down.

One reason is that much of the poverty reduction in the past couple of decades has happened in rapidly growing East Asia, while progress has been much slower elsewhere. The result is that while a narrow majority of poor people in 1990 lived in East Asia, now fewer than 10 per cent do.

The decline in extreme poverty in the past couple of decades has been rapid. In 1990, more than a third of people on Earth lived on less than US$1.90 a day, adjusted for local prices. By 2013, only 10 percent of people did. That’s one of the biggest and fastest improvements in human well-being in the history of the planet.

But the benefits were not evenly shared across regions. East Asia shows the most striking trajectory, there in 1990, 60 per cent of people in the region lived in extreme poverty. In 2013, only 3.5 percent did.

But the bigger problem is inequality. If developing countries figure out how to redistribute income effectively and share the benefits of growth with poor populations, then there’s no reason progress should slow down. Eliminating poverty by 2030 should be totally doable.

But if, as in rich countries, inequality is allowed to increase, eliminating extreme poverty becomes that much more challenging.

The big challenges remain in South Asia and sub-Saharan Africa. India has experienced very rapid growth in recent years, and Pakistan and Bangladesh are also seeing a quick rise in GDP per capita. South Asia now contains about 33 per cent of the world’s remaining extreme poor.

Sub-Saharan Africa represents 50 per cent of the extreme poor. Moreover, rapid population growth means the number of poor people in sub-Saharan Africa has actually grown since the early 1990s.

There is now a new opportunity for the private sector to build on the positive development impacts that they already have through consideration of the contribution they can make to end poverty.

The World Bank has set a goal of getting global poverty below 3 per cent by 2030. The UN has an even more ambitious target of completely eliminating extreme poverty by that point. Progress is clearly being made but that can be accelerated even further if we clearly define a role for the private sector.

Many businesses are increasingly recognising the contributions they make to development and their role in moving the world to a more sustainable development path. They want to show that they are responsible and can respond to the global challenges that remain by using their assets, expertise, products, services and influence to help the world’s poor.

There is now a new opportunity for the private sector to build on the positive development impacts that they already have through consideration of the contribution they can make to end poverty. In particular, reducing inequality is, in part, about finding new productive ways to enhance economic opportunities of poor people. There is a role here for private sector based inclusive business opportunities.

An inclusive business approach it will be able to benefit commercially whilst addressing specific aspects of development. In designing its inclusive business initiatives it will consider a number of important factors:

  1. Identifying new business opportunities: The private sector can consider new business models that have greater development impacts. This can be achieved by adopting an inclusive business strategy and addressing society’s challenges through profitable commercially viable initiatives along global value chains.

    Inclusive business approaches will allow businesses to expand their markets and enhancing profitability, while simultaneously advancing the economic and social conditions in the communities in which they operate. 

  2. Stimulating innovation: Central to the inclusive business approach is the need to innovate. Businesses can apply their creativity to solving development challenges. The private sector can mobilise and share knowledge, expertise, technology and financial resources towards the achievement of the SDGs.

    The creation and diffusion of new innovation, technologies and associated know-how are powerful drivers of economic growth and sustainable development. Companies can work on bridging the digital divide, build capacity for and provide access to information and communications technology, including affordable access to the Internet.

  3. Creating new jobs: Generating employment and decent work for all is central to the inclusive business philosophy. Employment is a key contributor to development: jobs boost living standards, raise productivity, and foster social cohesion. Jobs are also the principal way out of poverty for people in developing countries.

    Private sector is a key engine of job creation. To enable all people to benefit from growth, companies can be inclusive in their employment practices encouraging the full and equal participation of women and men, including persons with disabilities, in the workforce. 

  4. Including women: There is also an opportunity for the private sector to adopt proactive gender inclusive business practices and understand the impact of business decisions on women. There is a growing consensus among leaders in business that empowering women is good for development and good for business.

    The private sector can contribute to advancing gender equality through offering women productive employment and decent work, equal pay for equal work and equal opportunities, as well as protecting them against discrimination and abuse in the workplace.

Richard Welford is the chairman of CSR Asia. This post is republished from the CSR Asia weekly digest

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