Inter-Linkages Between MDG, PRSP and National Development Plans by Tarun Das

Mainstreaming MDGs Through
National Development Strategies
Prepared For
THE ECONOMIC AND SOCIAL COMMISSION

FOR ASIA AND THE PACIFIC
______________________________________________________________________
Dr. Tarun Das1
May 2007
Millennium Development Goals
1
The report was prepared when the author worked as Professor (Public Policy), Institute for
Integrated Learning in Management, New Delhi, India. Presently, the author is on sabbatical
leave and working as Glocoms Inc. (USA) Strategic Planning Expert for the Government of
Mongolia under a Capacity Building Project on Governance Reforms being funded by the
Asian Development Bank. Earlier the author worked as Economic Adviser in the Ministry of
Finance and the Planning Commission, Government of India.
The paper expresses personal views of the author and should not be attributed to the views of
the organizations he is associated with. The author would like to express his gratitude to the
UN-ESCAP, Bangkok, particularly to Dr. Ravi Ratnayake, Director and Dr. Hiren Sarkar,
Chief, Poverty and Development Division, for providing an opportunity to prepare this
report, and also making valuable and extensive comments on an earlier draft.
** For any clarification and additional information, EMAIL das.tarun@hotmal.com/

das5delhi@yahoo.co.in
1
"The Millennium Development Goals were adopted five years ago by all the
world's Governments as a blueprint for building a better world in the 21st
century." Kofi Annan
TABLE OF CONTENTS
Contents
Acronyms
1. Introduction, Scope and Objectives
1.1 Introduction and objectives

1.2 Scope of the report
1.3 Methodology
1.4 Misunderstanding and misconception of MDG targets
1.5 Growth and Pro-Poor Policies
2. Millennium Development Goals (MDG) and Poverty Reduction Strategy

Papers (PRSP)
2.1 Millennium Development Goals (MDGs)

2.2 Poverty Reduction Strategy Papers (PRSP)
2.3 Poverty Reduction and Growth Facility (PRGF)
2.4 Interlinkages between MDG Reports and PRSP
2.5 MDG Reports and PRSP Consulted in this Report
3. Economic and Social Profiles of sample countries
3.1 Economic and social indicators of sample countries

3.2 General development strategies of Asian economies
3.3 Development challenges of Asian Sub regions
3.3.1 Development challenges of South Asia and SAARC
3.3.2 Development challenges of East Asia and South East Asia
3.4 Progress of Achievement of MDG targets in Asian economies
3.4.1 Assessment by the Joint WB-IMF Monitoring Report on MDG (2006)
3.4.2 Assessment by the UN Millennium Development Goals Report (2006)
3.4.3 Performance of MDG targets in SAARC countries
2
4. Common policies and program under MDG Reports and PRSP
4.1 Stylized policies and programs under MDG reports and PRSP
4.2 Rationale for a package of policies and programs for poverty reduction
4.3 Poverty traps at individual, local, national and global levels
4.4 Poverty and the environment
4.5 Macro Adjustment Policies
4.5.1 Reorientation of public policies
4.5.2 Role of macro stabilisation policies for poverty reduction
4.5.3 Fiscal incentives
4.5.4 Role of Foreign Direct Investment (FDI)
4.5.5 Innovative financing techniques for the poor
4.6 Sectoral policies
4.6.1 Rationale for development of agriculture and agro-based SMEs for
poverty alleviation
4.7 Targeted pro-poor policies
4.8 Development of efficient infrastructure and human capital formation
4.8.1 Infrastructure development
4.8.2 Human resource development
4.8.3 Legal, institutional and regulatory system
4.8.4 Competent and committed bureaucracy
4.9 Regional economic cooperation
4.9.1 Technical assistance
4.9.2 External Aid
4.10 MDG and PRSP coordination
5 Concluding observations
5.1 Asian Economy- Performance and Challenges
5.2 Main Observations on MDG Reports and PRSP
5.2.1 Basic thrust of MDG reports
5.2.2 MDGs and budgets
5.2.3 MDGs and PRSP
5.3 MDGs and regional co-operation
5.3.1 Reinforcing a country-driven approach
5.3.2 Enhancing analytical underpinnings
5.3.3 Strengthening institutional capacity for successful implementation
5.3.4 Monitoring outputs and outcomes and improving database
5.3.5 Enhancing aid effectiveness
5.3.6 Bridging development research and policy planning
5.4 Stylized policy package for pro-poor growth
Selected References
3
Annexes
Annex-1.1: Policies and strategies for reduction of poverty and hunger under MDG
reports and PRSPs in 14 sample countries1
Annex-1.2: Policies and strategies for development of universal education and gender
equality under MDG reports and PRSPs in 14 sample countries
Annex-1.3: Policies and strategies for improvement of health conditions and

environmental sustainability under MDG reports and PRSPs in 14 sample countries
Annex-1.4: Policies and strategies to encourage globalization and development

partnership under MDG reports and PRSPs in 14 sample countries
Annex-2.1 Bangladesh MDG Targets, Performances, Challenges and Strategy
Annex-2.2 Cambodia MDG Targets, Performances, Challenges and Strategy
Annex-2.3 Maldives MDG Targets, Performances, Challenges and Strategy
Annex-2.4 Mongolia MDG Targets, Performances, Challenges and Strategy
Annex-2.5 Pakistan MDG Targets, Performances, Challenges and Strategy
1
Afghanistan, Bangladesh, Cambodia, China, Lao PDR, Maldives, Mongolia, Myanmar,
Nepal, Pakistan, Papua New Guinea, Samoa, Thailand and Timor Leste
4
ACRONYMS
ADB Asian Development Bank

AFTA ASEAN Free Trade Area
AIDS Acquired Immune Deficiency Syndrome
APCTT Asia and Pacific Centre for Transfer for Technology
APEC Asia Pacific Economic Cooperation
ASEAN Association of Southeast Asian Nations
ATC Agreement on Textiles and Clothing
CBOs Community Based Organizations
DFID Department for International development
DOTS Directly Observed Treatment Short Course
EFA Education for All
ESCAP Economic and Social Commission for Asia and the Pacific
FAO Food and Agricultural Organization
FDI Foreign Direct Investment
GATT The General Agreement on Tariffs and Trade
GDP Gross Domestic Product
GF Global Fund
GIS Geographic Information System
GNP Gross National Product
GSP Generalized System of Preferences
HDI Human Development Index
HIPC Heavily Indebted Poor Countries
HIV Human Immune Deficiency Virus
ICT Information and Communications Technology
IPRSP Interim Poverty Reduction Strategy Papers
IT Information Technology
ILO International Labour Office
IMF International Monetary Fund
LDCs Least Developed Countries
MDG Millennium Development Goal
MOF Ministry of Finance
MTEF Medium Term Expenditure Framework
MTEP Medium Term Expenditure Plan
NDP National Development Plan
NGOs Non-Governmental Organisations
ODA Overseas Development Aid
OECD Organisation for Economic Cooperation and Development
PPA Participatory Poverty Assessments
PPP Purchasing Power Parity
PRGF Poverty Reduction Guarantee Fund
PRSP Poverty Reduction Strategy Paper
QRs Quantitative restrictions
R&D Research and Development
SAARC South Asian Association for Regional Cooperation: comprises Afghanistan, Bangladesh, Bhutan,
India, Maldives, Nepal, Pakistan and Sri Lanka.
SAFTA South Asian Free Trade Organisation
SIDA Swedish International Development Agency
SMEs Small and Medium-Sized enterprises
SOEs State Owned Enterprises
STD Sexually Transmitted Disease
STI Sexually Transmitted Infections
UN United Nations
UNAIDS United Nations Program on AIDS/ HIV
5
UNCTs United Nations Country Teams
UNCTAD United Nations Conference on Trade and Development
UNDAF United Nations Development Assistance Framework
UNDG United Nations Development Group
UNDP United Nations Development Programme
UNESC United Nations Economic and Social Council
UNESCO United Nations Educational, Scientific and Cultural Organisation
UNIFEM United Nations Development Fund for Women
UNFPA United Nations Fund for Population Activities
UNHCR United Nations High Commissioner for Refugees
UNICEF United Nations Children’s Fund
UNIDO United Nations Industrial Development Organisation
UNODC United Nations Office for Drugs and Crime
UNPAF United Nations Partnership Assistance Framework
USAID United States Agency for International Development
UXO Widespread Unexploded Ordnance
WB World Bank
WFP World Food Program
WHO World Health Organisation
WTO World Trade Organisation
Notes on Units
Million = 1000 thousand

Billion = 1000 million
Trillion = 1000 billion
Dollar $ = US dollars, unless otherwise specified
6
Mainstreaming MDGs Through National Development Strategies
Dr. Tarun Das1
• This chapter discusses the basic objectives, scope and methodology for this study. It
also clarifies certain misconceptions and misunderstandings of the MDG targets for
individual countries.
• The chapter provides the evidence that higher growth is a necessary condition but
not sufficient for poverty reduction. Growth needs to be accompanied by pro-poor
policies and strategies as the “trickle down effects of growth” may be slow, delayed
and uneven.
• The chapter concludes that although there is no consensus about the concept,
definition and measurement of pro-poor growth, much more pro-poor growth,
whatever be the definition, is needed in most countries to achieve the MDG targets.
1. Introduction, Scope and Objectives
1.1 Introduction and Objectives
This report is a part of a wider study being executed by the UN-ESCAP on the
interrelationships among MDG Reports/ strategies, National Development Plans (NDPs)
and Poverty Reduction Strategy Papers (PRSPs). The basic objective of the study is to
understand, examine and establish the respective roles, linkages and consistencies of
MDG Reports, NDPs and PRSPs for achieving MDG targets. It is also desired to examine
the logical structure for analyzing these documents so as to synthesize common priority
areas on which governments are contemplating actions and need external assistance for
enhancing achievement of MDGs.
In September 2000, the Millennium Summit synthesized previously agreed global goals
and targets in a document called the ‘Millennium Declaration’ adopted by 189 nations.
Formulated as 8 goals (viz. eradicate extreme poverty and hunger, achieve universal
primary education, promote gender equality, reduce child mortality, improve maternal
1
The Report was completed when the author worked as Professor (Public Policy) in the Institute for
Integrated Learning in Management (IILM), New Delhi, India. Presently, the author is on sabbatical
leave and working as Glocoms Inc. (USA) Strategic Planning Expert for the Government of Mongolia
under a Capacity Building Project on Governance Reforms being funded by the Asian Development
Bank. Earlier the author worked as Economic Adviser in the Ministry of Finance and Planning
Commission, Government of India.
7
health, combat HIV/AIDS and other diseases, ensure environmental sustainability, and
develop global partnership for development) and 18 targets, the ‘MDGs’ were endorsed
by the UN General Assembly in late 2001. The millennium development goals recently
marked their fifth anniversary and generated tremendous support, nationally, regionally
and globally.
The present report is based on interrelationships between MDG Reports,

National Development Plans and Poverty Reduction Strategy Papers (PRSPs) of
12 selected off-track countries (viz. Afghanistan, Bangladesh, Cambodia, Lao
PDR, Maldives, Mongolia, Myanmar, Nepal, Pakistan, Papua New Guinea,
Samoa and Timor Leste) and two on-track countries (viz. China and Thailand).
This report makes a critical analysis of the most recent MDG Reports of 12 selected off-
track countries (viz. Afghanistan, Bangladesh, Cambodia, Lao PDR, Maldives, Mongolia,
Myanmar, Nepal, Pakistan, Papua New Guinea, Samoa and Timor Leste) and two on-
track countries (viz. China and Thailand) for each goal under MDG. It also lists the broad
policies being adopted by these countries to achieve MDG targets and examines inter-
relationships between MDG Reports and PRSPs.
Among the countries included in this report, Timor Leste is the newest member of the
UN, which became an independent sovereign state on 20 May 2002 and incorporated the
MDGs in the objectives of its first five-year National Development Plan. (2002/03 to
2006/07).
1.2 Scope of the report
This report consists of five chapters. Following this brief introduction, chapter-2
discusses the basic contents of MDG reports and PRSP for achieving MDGs, and the
interlinkages between MDG reports and the PRSP reports on the basis of experiences of
14 selected countries.
Chapter-3 presents brief socio-economic profiles of the selected countries and their broad
development strategies. Since five countries among 14 selected economies (viz.
Afghanistan, Bangladesh, Maldives, Nepal and Pakistan) are members of South Asia and
belong to the regional group SAARC, a separate section in chapter-3 is devoted to the
performance of MDG targets and constraints to achieve these targets in the SAARC.
Chapter 4 analyzes goal-wise policies and strategies indicated in MDG reports and
Poverty Reduction Strategy Papers of selected Asia Pacific countries in details. It
identifies general problems/ challenges in achieving MDGs and common policies and
programs adopted by different countries.
8
Chapter 5 synthesizes the main findings of the report and identifies common thrusts of
policies, which will be necessary to reduce poverty and hunger, and at the same time to
improve education, health and environmental sustainability of developing countries. The
chapter also provides future direction of research and actions on the part of international
and regional development organisations like UN-ESCAP.
1.3 Methodology
This report is mainly based on a desk study with the help of reference articles and reports
downloaded from the Internet. Basic methodology consisted of intensive studies and
analysis of MDG reports, Poverty Reduction Strategy Papers (PRSP) and the Fund-Bank
Joint Staff Advisory Notes (JSANs) on PRSP of the selected countries, and preparing
formatted tables on goal-wise targets and achievements, policies and programs, systems
for monitoring and evaluation in selected countries. The MDG reports, PRSP and JSANs
consulted to prepare this report are listed in Table-2.4 in Chapter-2.
As the study is concerned with the interlinkages between MDG reports and PRSP in the
past and future issues, the time frame of the study is confined mainly to 2000s. The
analysis in the report is supported by four Annexes (Annex 1.1 to Annex 1.4) dealing with
policies and programs initiated by 14 selected countries to achieve eight MDGs grouped
under four heads viz. (a) to reduce poverty and hunger, (b) to improve literacy and gender
equality, (c) to improve health conditions and environmental protection and (d) to foster
9liberalization and international partnership. The report ends with a list of selected
bibliography on the subject.
For analytical purpose, in this report, the eight UN-MDGs have been grouped
under four broad heads viz. (a) reduction of poverty and hunger, (b) improving
literacy and gender equality, (c) improving health conditions and environmental
protection and (d) fostering globalization and international partnership.
1.4 Misunderstandings and Misconceptions of MDG targets
One of the basic objectives of the present report is to identify common policies, needs
and constraints of the selected countries to pursue the goals under MDG Reports. As
mentioned earlier, these issues will be discussed in details in chapter-3. However, before
discussing these interrelationships, it is necessary to clarify certain misunderstandings
and misconceptions of the MDG targets for the individual countries.
In this respect, it is worth noting the following comments on MDG targets given recently
by Jan Vandemoortele, currently UN Resident Coordinator in Pakistan and who was the
Co-chair of the UN inter-agency group that put the MDGs together in 2001. In a one
pager policy brief entitled “MDGs: Misunderstood Targets?” (Number 28, January 2007)
published by the UNDP International Poverty Centre, Jan Vandemoortele has concluded:
9
(1) “The MDG targets were selected on the basis of available indicators and reliable
data for documenting progress. The MDGs aim to reduce hunger by one-half,
infant and child mortality by two-thirds, and maternal mortality by three-quarters.
The obvious question is: Why are these targets different? Why do they not call,
for example, for a reduction by three-quarters across the board? The simple
answer is that most of the global targets are based on historical trends. They were
set on the premise that progress observed at the global level over the previous 25
years would continue for the next 25 years (1990-2015). Thus, the MDGs are
essentially an extrapolation of global trends of the 1970s and 1980s and projected
forward till 2015.”
(2) Global versus local targets – It is erroneous to interpret the MDGs as a uniform
yardstick for human development, because the quantitative targets were set in line
with global trends, not on the basis of historical trends for any a specific country.
Thus, assessing whether progress is ‘on track’ for meeting the targets by 2015 can
only be done at the global level. The spirit of the Millennium Declaration was not
to impose a one-size-fits-all benchmark for all countries regardless of their varied
socio-economic-political-historical background, natural endowments and
particular challenges.
“The spirit of the UN Millennium Declaration was not to impose

a one-size-fits-all benchmark for all countries regardless of their
varied socio-economic-political-historical background, natural
endowments and particular challenges” (Jan Vandemoortele,
January 2007).
(3) It should not be surprising that many countries will miss several of the global
MDG targets because these targets were not set specifically for individual
countries. It would be a tragic misunderstanding of the MDGs if all these
countries were to be classified as ‘failures’ for the irrelevant reason that they will
not meet artificial benchmarks set on the basis of past global trends.
(4) Making sense at the country level – Before dismissing the MDGs as targets that
are ‘easily set but never met’, there are four practical steps that can be taken to
make sense of the MDGs at the country level:
(a) Global targets must be tailored to make them context-sensitive – essential for
generating a sense of national ownership.
(b) Intermediate targets are essential for sustaining political commitment and
ensuring accountability. The MDGs must be linked to the political agenda of
today’s government.
(c) Actionable reforms must be formulated to make adequate progress towards
agreed longer-term benchmarks.
(d) Costing these actions and reforms must be reflected in the national budget and
aid allocations. However, it would be ill advised to estimate the costs of the MDG
10
targets over an extended period of time. MDG costing will only yield results that
have a reasonable degree of accuracy when done within a 2-3 year timeframe.
“Successful implementation of MDGs require that these must be

tailored to make them context-sensitive, owned by the countries,
linked to the political agenda of the government; actionable reforms
must be formulated for achieving longer-term benchmarks; and
costing these actions and reforms must be reflected in the national
budget and aid allocations” (Jan Vandemoortele, January 2007).
In another one pager policy brief entitled “MDGs: Misunderstood or Misconceived?”

(Number 33, April 2007) published by the UNDP International Poverty Centre, Hamid
Tabatabai argues that if Vandemoortele were right, the MDGs are not so much
misunderstood as misconceived. Vandemoortele, being the co-chair of the UN Inter-
agency group, represents the ‘official’ view. However, his observations are at variance
with numerous documents that suggest otherwise, at both regional and national levels.
For example, the UN Millennium Project’s main report observed that “the countries of
East Asia have, as a group, moved closer toward achieving the Goals, but progress has
been uneven within the region, within countries, and across the Goals. Some countries
have already come closer to achieving most of the Goals and have even committed
themselves to more ambitious, MDG-plus targets, but others remain significantly off
track for meeting the original Goals” (UN Millennium Project. 2005, p. 161).
Secondly, the fact that quantitative targets are based on global trends is not itself a reason
for not applying them at other levels, such as regional or national. Thirdly, past trends are
averages of diverse experiences. Therefore, it is possible that some countries obviously
lie below the average.
The purpose of these rather long quotes from the internationally acknowledged
authorities on MDG is to convey the message that like MDG targets there does not exit a
set of unique policies which hold good universally for all countries and at all times for
reduction of poverty and hunger. This observation has been explained in details in
chapter-4.
As the MDG targets differ across the Goals, regions, and within
countries, there does not exit a set of unique policies, which hold
good universally for all countries and at all times for reduction of
poverty and hunger.
1.5 Growth and Pro-poor Policies
The reduction of income poverty depends on sustained high economic growth. There is a
general consensus among the poverty experts, policy makers and multilateral funding and
development agencies that a rise in per capita income is a major element in sustainable
poverty reduction. However, similar rates of growth can have very different impact on
11
poverty depending on the initial levels of income inequalities and different socio-
economic-political environment over time and space (UNDP IPC 2007).
A recent working paper from the UNDP International Poverty Centre, Brazil (H. H. Son
and N. Kakwani 2006) presents regional and global estimates of growth and their pro-
poorness on the basis of cross-country data for 237 growth spells in 80 low-and middle-
income developing countries during 1984-2001. The study indicated that there are large
variations not only in growth rates but also in the impact on poverty.
The study defined growth as pro-poor if poor households increase income proportionately
more than the non-poor (i.e. households above the poverty line). When growth is negative
i.e. in a recession, it is termed as pro-poor if the income decrease for the poor is
proportionately less than that for non-poor households. The study indicated that of all the
237 growth spells under observation, 44.7 percent witnessed negative growth rates. In the
remaining 55.3 percent growth spells with positive growth rates, growth was pro-poor
only in 23.2 percent cases. Out of all the growth spells (including negative growth rates),
majority of the cases (accounting for 55.5 percent of total) were anti-poor (Table 1.1).
The study suggests that global growth processes have generally not been pro-poor
(defined as a situation with an increasing income share of the poor in income distribution
over time).
Various studies suggest that global growth processes have generally not
been pro-poor (defined as a situation with an increasing income share of
the poor in income distribution over time).
Above observations also hold good for Asian economies. Table 1.1 shows that in East
Asia and the Pacific, growth rates were positive in 74.3 percent of the spells, but only
17.1 percent of the spells witnessed both positive and pro poor growth. About two-thirds
(65.8 percent) of all growth spells in East Asia and Pacific were anti-poor, although this
region achieved significant reduction of poverty during 1984-2001 (except for 1997-1999
in some countries affected adversely by the foreign exchange crisis leading to wider
financial, economic and social crisis). This suggests that poverty reduction in this region
was due mainly to high rates of growth rather than to growth rates being pro-poor.
Similar observations also hold good for South Asia.
Poverty reduction in East Asia and Pacific was due mainly to high rates of
growth rather than to growth rates being pro-poor. Similar observations
also hold good for South Asia.
12
Table 1.1 Country grouping by pro-poor and anti-poor growth rates
Country Groupings Positive growth Negative growth
Pro- Anti- Total Pro- Anti- Total

poor poor poor poor
Low income countries 20.8 33.3 54.2 27.8 18.1 45.8

Low middle income 26.7 31.4 58.1 19.0 22.9 41.9
Upper middle income 21.7 35.0 56.7 21.7 21.7 43.3
Heavily indebted poor 18.6 27.1 45.8 32.2 22.0 54.2

countries (HIPC)
East Asia and Pacific 17.1 57.1 74.3 17.1 8.6 25.7
South Asia 29.4 52.9 82.4 11.8 5.9 17.6
East Europe and Central 12.3 21.1 33.3 21.1 45.6 66.7
Asia
Latin America and 30.4 29.1 59.5 24.1 16.5 40.5
Caribbean
Middle East and North 35.7 14.3 50.0 28.6 21.4 50.0
Africa
Sub-Saharan Africa 20.0 43.3 54.3 31.4 14.3 45.7
All countries 23.2 32.1 55.3 22.4 22.4 44.7
Source: H. H. Son (2007)
A cross-country study indicates that lower inflation and price stability are
associated with pro-poor growth. Contrary to conventional wisdom, high
levels of trade openness were found to be significantly associated with
negative growth, while there was no significant relationship between trade
openness and pro-poor growth (Son 2007).
Although cross-country regression analysis is subject to serious statistical estimation

problems, this study also investigated the relationship between different policies and
growth rates. It was observed that lower inflation and price stability are associated with
pro-poor growth. Contrary to conventional wisdom, the study found that low levels of
trade openness were significantly associated with positive growth and high level of trade
openness with negative growth, and there was no significant relationship between trade
openness and pro-poor growth.
13
There is a general consensus among development economists and
policy makers that higher growth is a necessary condition but not
sufficient for poverty reduction. It needs to be accompanied by pro-
poor policies and strategies. But there is no consensus about how to
define and measure pro-poor growth. Much more pro-poor growth,
whatever is the definition, is needed in most countries if the
Millennium Development Goals (MDGs) are to be achieved.
There seems to be a broad consensus among analysts and policy makers that higher
growth is a necessary condition but not sufficient for poverty reduction. It needs to be
accompanied by pro-poor policies and strategies. But there is no consensus about how to
define and measure pro-poor growth. The International Poverty centre (IPC) at Brazil
initiated a debate on this issue among researchers in 2004-05 in a series of One-Pagers,
summarized in Number-6: Pro-poor growth; finding the Holy Grail. The March 2007
Issue of the IPC’s Journal “Poverty in Focus” carries this debate further and concludes
that “much more pro-poor growth, whatever be the definition, is needed in most countries
if the first Millennium Development Goal is to be achieved”.
14
Chapter-2
Millennium Development Goals (MDG)

And Poverty Reduction Strategy Papers (PRSP)
• This chapter describes briefly the basic concepts, scope and objectives of the
Millennium Development Goals (MDGs), Poverty Reduction Strategy Papers
(PRSPs) and the IMF Poverty Reduction and Growth Facility (PRGF).
• It specifies eight Millennium Development Goals, 18 quantifiable targets and 48

indicators to monitor these targets.
• It also discusses interrelationships between MDG Reports and PRSPs and the
sources of data and information for our discussion.
• It is observed that there is close interactions between MDG reports and Poverty
Reduction Strategy Papers for any country as both are prepared in consultation
and association with all stakeholders who happen to be almost the same groups
in MDG and PRSPs
2.1 Millennium Development Goals (MDG)
In September 2000, at the United Nations Millennium Summit in New York, 189 nations
endorsed the Millennium Declaration, setting out a global agenda for the start of the 21st
Century to promote human development and reduce global poverty, hunger and
inequalities, and to protect environment. The Millennium Development Goals (MDGs),
drawn directly from the Millennium Declaration, set eight ambitious goals be achieved
by 2015. The eight MDGs are (1) Eradicate extreme poverty and hunger; (2) Achieve
universal primary education; (3) Promote gender equality and empower women; (4)
Reduce child mortality; (5) Improve maternal health; (6) Combat HIV/AIDS, malaria and
other diseases; (7) Ensure environmental sustainability; and (8) Develop a global
partnership for development. Eight MDGs contain 18 quantifiable targets that are
monitored through 48 indicators (Table-2.1). Global targets are set to help mobilize
political commitment and to provide benchmarks in measuring progress in promoting
human development and poverty reduction.
The Millennium Development Goals (MDGs) comprise eight ambitious

goals to be achieved by 2015. The eight MDGs are (1) Eradicate
extreme poverty and hunger; (2) Achieve universal primary education;
(3) Promote gender equality and empower women; (4) Reduce child
mortality; (5) Improve maternal health; (6) Combat HIV/AIDS, malaria
and other diseases; (7) Ensure environmental sustainability; and (8)
Develop a global partnership for development. Eight MDGs contain 18
quantifiable targets that are monitored through 48 indicators.
15
16
Table-2.1: Millennium Development Goals (MDGs)
Goals, Targets and Indicators
Goals and Targets Indicators
Goal 1: Eradicate extreme poverty and

hunger
Target 1: 1.Proportion of population below $1 per day
Halve, between 1990 and 2015, the proportion 2.Poverty gap ratio [incidence x depth of
of people whose income is less than one dollar poverty]
a day 3.Share of poorest quintile in national
consumption
Target 2:
Halve, between 1990 and 2015, the proportion of 4.Prevalence of under-weight children (under-
people who suffer from hunger five years of age)
5.Proportion of population below minimum

level of dietary energy consumption
Goal 2: Achieve universal primary education

Target 3:
Ensure that, by 2015, children everywhere, 6.Net enrollment ratio in primary education
boys and girls alike, will be able to complete a 7. Proportion of pupils starting grade 1 who
full course of primary schooling reach grade 5
8.Literacy rate of 15-24 years olds
Goal 3: Promote gender equality and
empower women 9.Ratio of girls to boys in primary, secondary
Target 4: and tertiary education
Eliminate gender disparity in primary and 10. Ratio of literate females to males of 15-24
secondary education preferably by 2005, and to year olds
all levels of education no later than 2015. 11.Ratio of women to men in wage
employment in the non-agricultural sector
12. Proportion of seats held by women in
national parliament
Goal 4: Reduce child mortality

Target 5: 13.Under-five mortality rate
Reduce by two-thirds, between 1990 and 2015, 14. Infant mortality rate
the under-five mortality rate 15. Proportion of 1 year old children
immunized against measles
Goal 5: Improve maternal health

Target 6: 16.Maternal mortality ratio
Reduce by three-quarters, between 1990 and 2015, 17.Proportion of births attended by skilled
the maternal mortality ratio health personnel
17
Goal 6: Combat HIV/AIDS, malaria and
other diseases 18.HIV prevalence among 15-24 year old
Target 7: pregnant women
Have halted by 2015 and begun to reverse the 19. Contraceptive prevalence rate
spread of HIV/AIDS 19. Contraceptive 20. Number of children orphaned by
prevalence rate 20. Number of children HIV/AIDS
orphaned by HIV/AIDS
Target 8: 21. Prevalence and death rates associated with

Have halted by 2015 and begun to reverse the malaria
incidence of malaria and other major 22. Proportion of population in malaria risk
areas using effective malaria prevention and
treatment measures
23. Incidence of Tuberculosis (per 100,000
people)
24. Proportion of TB cases detected and cured
under DOTS (Directly Observed Treatment
Short Course)
Goal 7: Ensure environmental sustainability

Target 9:
Integrate the principles of sustainable 25. Proportion of land area covered by forest
development into country policies and 26. Land area protected to maintain biological
programs and reverse the loss of environ- diversity
mental resources 27. GDP per unit of energy use (as proxy for
energy efficiency)
28. Carbon dioxide emissions (per capita)
Target 10:
Halve, by 2015, the proportion of people 29. Proportion of population with sustainable
without sustainable access to safe drinking access to an improved water source
water 30. Proportion of people with access to
improved sanitation
Target 11: 31. Proportion of people with access to secure
By 2020, to have achieved a significant tenure [Urban/rural]
improvement in the lives of at least 100 million
slum dwellers
Official Development Assistance:
Goal 8: Develop a Global Partnership for 32. Net ODA as percentage of OECD/DAC
Development donors’ GNP [targets of 0.7 per cent in total
Target 12: and 0.15 per cent for LDCs] financial system
Develop further an open, rule based, 33. Proportion of ODA to basic social services
predictable, nondiscriminatory trading and (basic education, primary health care, nutrition,
financial system safe water and sanitation)
Target 13. 34. Proportion of ODA that is untied
Address the Special Needs of the Least 35. Proportion of ODA for environment in
Developed Countries small island developing states
Target 14. 36. Proportion of ODA for transport sector in
Address the Special Needs of land locked land-locked countries
countries and small island developing states
18
Market Access
37. Proportion of exports (by value and
excluding arms) admitted free of duties and
quotas.
38. Average tariffs and quotas on agricultural
products and textiles and clothing.
39. Domestic and export agricultural subsidies
in OECD countries
40. Proportion of ODA provided to help build
trade capacity
Debt Sustainability
41. Proportion of official bilateral HIPC debt
Target 15: cancelled
Deal comprehensively with the debt problems 42. Debt service as a percentage of exports of
of developing countries through national and goods and services
international measures in order to make debt 43. Proportion of ODA provided as debt relief
sustainable in the long term 44. Number of countries reaching HIPC
decision and completion points
Target 16: 45. Unemployment rate of 15-24 year olds

In co-operation with developing countries,
develop and implement strategies for decent
and productive work for youth
46. Proportion of population with access to
Target 17: affordable essential drugs on a sustainable basis
In co-operation with pharmaceutical essential drugs in developing countries
companies, provide access to affordable,
Target 18:
In co-cooperation with the private sector, make 47. Telephone lines per 1000 people
available the benefits of new technologies, 48. Personal computers per 1000 people
especially information and communications
2.2 Poverty Reduction Strategy Papers (PRSP)
Translating the global MDG targets into action requires an operational framework at the
national level for setting out a country-owned cross-cutting agenda aimed at sustained,
shared growth and public action directed towards achieving the MDGs. For this purpose,
more than 70 poorest countries are preparing the Poverty Reduction Strategy Papers
(PRSP) under the leadership of government, and with active consultation and
collaboration with the World Bank, IMF, other donors including the UN Country
Coordinator and civil society participation. PRSP describes a country’s macroeconomic,
structural and social policies to promote growth and reduce poverty. There are six core
principles underlying the development and implementation of the poverty reduction
strategies, as the following:
19
• Country-driven, involving broad-based participation by civil society and the private
sector in all operation
• Result-oriented, and focused on not only immediate results (outputs) but also medium
and long term outcomes hat will benefit the poor,
• Comprehensive in recognizing the multidimensional nature of poverty
• Prioritized so that implementation is feasible in both fiscal and institutional terms,
• Partnership oriented, involving coordinated participation of developmental partners
(bilateral, multilateral funding organizations, governments)
• Based on long-term perspective of poverty reduction.
PRSP describes a country’s macroeconomic, structural and social policies

to promote growth and reduce poverty. There are six core principles
underlying the PRSP viz.
• Country-driven, involving broad-based participation by civil society
• Result-oriented, and focused on outputs and outcomes that will benefit the
poor,
• Comprehensive in recognizing the multidimensional nature of poverty,
• Prioritized so that implementation is feasible in both fiscal and
institutional terms,
• Partnership oriented, involving participation of developmental partners
• Based on long-term perspective of poverty reduction.
As the national ownership is the key, countries are required to set their own quantitative
and qualitative targets and formulate specific policies and program to attain the MDG
targets. The MDG Country Reports and the annual PRSP progress reports inform the
wider public and policy makers of progress towards poverty reduction. Efforts are made
to ensure that MDG reports and PRSP donot lead to duplication of works rather support
good statistics and strengthen national capacities for poverty monitoring and analysis.
Poverty Reduction Strategy Papers (PRSP) are prepared by the member countries through
a participatory and wide consultancy process involving domestic stakeholders and
external development partners such as the World Bank, International Monetary Fund,
Asian Development Bank, UNDP, IFAD. Updated every three years with annual progress
reports, PRSPs describe the country’s macro 20liberalization policies, structural reforms,
sectoral and social policies and programs over a three-year or longer time horizon to
promote broad-based growth and reduce poverty. The reports also provide an estimate of
the associated external financing needs and major sources of financing. Interim PRSPs (I-
PRSPs) summarize the current knowledge and analysis of a country’s poverty situation,
describe the existing poverty reduction strategy, and lay out the process for producing a
fully developed PRSP in a participatory fashion. The country documents, along with the
accompanying IMF/ World Bank Joint Staff Assessments (JSAs), are made available on
the World Bank and IMF websites by agreement with the member country as a service to
users of the World Bank and IMF websites.
20
2.3 Poverty Reduction and Growth Facility (PRGF)
In September 1999, the IMF established the Poverty Reduction and Growth Facility
(PRGF) to make the objectives of poverty reduction and growth more central to its
lending operations in poorest member countries. Under this facility, IMF provides low-
interest lending facility to the low-income countries. PRGF supported programs are
underpinned by comprehensive country-owned poverty reduction strategies. Experience
with the PRGF highlights a number of distinctive features:
• The principle of broad public participation and greater country ownership is central to
the PRGF. Policies and programs based on PRGF are more open as they are based on
the nationally owned PRSF.
• PRGF supported programs reflect more closely each country’s poverty reduction and
growth priorities.
• PRGF supported programs focus on strengthening governance for effective
implementation and financing of targeted and well-prioritized programs and to improve
public resource management, transparency and accountability. These also give more
attention to the poverty and social impacts of key macroeconomic policy measures.
Under the Poverty Reduction and Growth Facility (PRGF) established in

September 1999, IMF provides low-interest loans to the low-income
countries. PRGF supported programs are underpinned by comprehensive
country-owned poverty reduction strategies, and focus on strengthening
governance for implementation and financing of targeted programs; and
improving public resource management, transparency and accountability.
They also give more attention to the poverty and social impacts of key
macroeconomic policies.
PRGF supported programs are designed in areas within the primary responsibility of IMF.
These areas include prudent macroeconomic policies, related structural reforms, such as
exchange rate and tax policy, fiscal management, budget execution, fiscal transparency,
and tax and customs administration. When appropriate IMF draws upon the expertise of
the World Bank, which provides advice in designing poverty reduction strategy, poverty
assessment, monitoring, structural, sectoral and social issues, and costing priority
poverty-reducing expenditure.
2.4 Interlinkages between MDG Reports and PRSP
There is close interactions between MDG reports and Poverty Reduction Strategy Papers
for any country as both are prepared in consultation and association with all stakeholders
who happen to be almost the same groups viz. the Ministries of Planning and Finance,
concerned line ministries, NGOs, donors and international organizations.
21
There is close interactions between MDG reports and Poverty Reduction
Strategy Papers for any country as both are prepared in consultation and
association with all stakeholders who happen to be almost the same groups
in preparation of MDG Reports and PRSP.
Bangladesh MDG Report
As for example, the first Bangladesh MDG progress report (February 2005) was prepared
jointly by the government of Bangladesh and the UN Country Team (UNCT) on
Bangladesh in consultation with all stakeholders. This was the first attempt at a consensus
stock-taking of the status of all the MDGs in Bangladesh.
In the preparation of the report, in order to be effective as an advocacy tool, it was

essential to arrive at a consensus on the data used to monitor the progress of the MDGs.
This was ensured through the Technical Working Groups (TWGs) whose terms of
reference included identification of MDG targets and indicators relevant for Bangladesh.
In addition, the TWGs established the benchmark year from which the MDGs would be
monitored. While a sophisticated econometric model was applied to simulate the rates of
growth required for relevant indicators to achieve the MDGs, attempts have been made to
keep the report brief and simple, highlighting the gaps and challenges that need to be
addressed to meet the MDGs.
Using this information, the simulation model was applied to provide an indication of
whether Bangladesh was on track to achieve the MDGs by 2015, and what gaps and
challenges faced development partners to meet the MDGs.
After China and India, Bangladesh has the third largest number of poor. The report brings
out the status and indicates challenges to meat UN-MDG targets by 2015. Bangladesh
achieved remarkable progress in the areas of primary schooling, girls’ education,
immunization, micro-credit, female economic participation, birth control, physical
mobility and safety nets. The most remarkable achievement was in the field of primary
education with the country well on its way to meet the MDG 2 of universal primary
education by 2015. The challenge here was to ensure adequate finances to keep up the
momentum and quality education for all.
Although all relevant indicators of MDGs moved towards their 2015 targets, their
performances were uneven. To understand this variation, factors were analyzed for the
slowing down of the child mortality rate, the apparent plateauing of total fertility rate, and
the rise in youth unemployment rate. It was also ascertained what factors work in
accelerating the pace of poverty reduction. It was important because the main underlying
factor for the slow pace of MDG achievement was prevalence of poverty. Poverty
permeates all sectors and holds back growth in every sense.
22
Bangladesh MDG Report emphasized that there is need for strong partnership at the
global and at the national level. For countries like Bangladesh to meet the MDG
commitments made at the 2000 Millennium Summit, industrialized countries must honor
their commitments to finance development in developing countries. Trade barriers must
be lifted and both the rich and the poor must be allowed to benefit from globalization so
that we can all move towards a more equal world.
Limitations of the MDG report
Bangladesh government emphasised that this report was an advocacy tool for the
development partners. But it did not specify the exact programs and measures to achieve
those objectives. Besides, while every effort was made to use the most reliable and recent
data sources, the accent on consensus influenced the selection of data sources. Wherever
possible, the data ranges were preserved and the various scenarios were indicated within
the given range. For these reasons, no attempt was made to provide in-depth
socioeconomic analysis at the national or sub-national level. In addition, the simulation
exercises could not be applied to sectors such as health and environment, as they lacked
the necessary data base.
Linkages to PRSP
To address the limitations of MDG Report as indicated above, Bangladesh also prepared
its first PRSP, which took into account all the targets for MDGs. The PRSP addressed the
issues of pro-poor growth and human development, and if implemented fully, would
accelerate the achievement of the MDGs.
The Bangladesh PRSP was prepared under the full government ownership and direction.
PRSP process created significant opportunities for building capacity through joint
learning by doing. Twelve sectors were identified for the Bangladesh PRSP and an equal
number of thematic groups were set up by the Government for coordinating the
preparation of the various thematic background papers. Although the compositions of the
working groups varied, they consisted of senior level officers from the line ministries and
ministries of Finance and Planning. They also included observers from the donor
agencies and representatives of NGOs and other civil groups. The World Bank, Asian
IMF, Asian Development Bank, UNDP, UNICEF, UNAIDS, UNFPA, the country
coordinator of the United Nations supported these working groups by sharing their
technical resources and knowledge on international best practices.
A mapping of the sectors indicates that most of the sectors address the MDGs in some
form or the other. It may also be noted that at the Bangladesh Development Forum 2003
and 2004, the Government strongly emphasized its commitments to the MDGs,
especially by focusing on poverty eradication (Goal 1), education (Goal 2) and health
(Goals 4, 5 and 6). Towards this end, the Government has reinvigorated its pro-poor bias
under the PRGF programme, allocating from FY04 an increased annual pro-poor
spending of 1% of GDP. This link between the budgeting and the MDGs was clearly
stated in the Finance Minister’s budget speeches of FY 04 and FY05.
23
Table-2.2 Linkages between PRSP and MDGs in Bangladesh
PRSP thematic sectors MDGs
1. Agriculture and Environment, including forestry, land use, safe MDGs 1 and 7
water supply, and water resources management
2. Rural Development, including food security, disaster management,
safety net programs, micro-credit and non-firm activities
3. Domestic resources mobilization
4. Macroeconomic stability and pro-poor growth MDGs 1 and 8

5. Finance sector reforms including banking, trade and globalization
6. Private sector development
7. Education including primary and mass education, female education, MDGs 2 and 3
vocational and technical education
8. Women and children advancement and rights MDG 3
9. Health including population planning, nutrition and sanitation MDGs 1,4 to 7
10.ICT and technology policy MDG 8
11.Reforms in governance including civil service reforms, judicial Cross cutting at

reforms, law and order MDGs
12.Infrastructure development and reforms, including power, energy
and communications
Linkages to UN Development Assistance Framework (UNDAF)
In addition, the Bangladesh UNDAF 2006-2010 was prepared in 2004. An UNDAF

prioritization retreat was held in August 2004. The participants included the National
Poverty Focal Point, representatives from the various line ministries of the Government
of Bangladesh, national research institutions and the UN Country Team. The exercise
resulted in the identification of five priority areas of cooperation between the GoB and
the UN agencies for the programme cycle 2006-2010. These areas were pro-poor
economic growth; health, nutrition and sustainable population; social protection; gender
equity and the advancement of women and children; and good governance. These five
areas have clear linkages to the MDGs as well as to the PRSP themes above.
24
Table-2.3 Relation between UNDAF and MDGs
GoB/ UN prioritized areas of cooperation under the MDGs

Bangladesh UN Development Assistance Framework
(UNDAF) 2006-1010
1. Democratic governance and human rights Millennium Declaration
2. Health, nutrition and sustainable population MDGs 1, 4 to 7
3. Education and pro-poor growth Millennium declaration

and MDGs 1, 2 and 8
4. Social protection and disaster risk reduction Millennium Declaration
and MDG 7
5. Gender equity and advancement of women MDG 3
6. Protection and prevention against HIV/ AIDS MDG 7
In other countries also there were close linkages between MDG reports and PRSP,
as all the stakeholders were consulted by the respective governments before
finalizing the reports. The UN World Summit 2005 called on countries to implement
comprehensive development strategies to achieve internationally agreed
development goals and objectives, including the MDGs by 2006 (United Nations
2005). The UN World Summit and the Paris Declaration on Aid Effectiveness in
2005 underscored the emerging consensus for a new aid environment characterized
by national ownership, convergence around national planning focused on achieving
the MDGs, capacity building, harmonization and alignment, outcome and
accountability.
Towards these aims, the UN Country Teams (UNCTs) have been working to assist
developing countries in preparing strategies for MDG and PRSP. In many least
Developed Countries and Less Income Countries, this meant making the poverty
Reduction Strategies fully comply with the MDGs. UNCTs supported the MDGs
through advocacy and campaigning, monitoring and reporting, analysis, capacity
development, integration and implementation of the goals into national development
plans or poverty reduction strategies, operational activities, as well as common
country programming processes (UNMG 2006).
2.5 MDG Reports and PRSP consulted in this Report
The MDG reports, the Poverty Reduction Strategy Papers (PRSP) and the Joint (World
Bank and IMF) Staff Advisory Notes (JSANs) consulted to prepare this report are listed
in Table-2.4. Among the 14 countries considered in this report, 8 countries viz.
Afghanistan, Bangladesh, Cambodia, Lao PDR, Mongolia, Nepal, Pakistan and Timor
Leste have both MDG report and PRSP and also Fund-Bank Joint Staff Advisory Notes
(JSAN); 5 countries viz. China, Maldives, Myanmar, Thailand and Papua New Guinea
25
has only MDG report but no PRSP report; and Samoa has neither MDG report nor PRSP.
Samoa’s analysis on poverty reduction is based on National Development Plan
Table-2.4: PRSP and MDG Reports for Selected Countries,

Consulted for preparation of the present report
Country Reports
Afghanistan PRSP and MDG Reports
May 15, 2006 Joint Staff Advisory Note (JSAN) of PRSP
Mar 2006 Interim Poverty Reduction Strategy
Mar 2006 Interim Poverty Reduction Strategy (Summary Report)
March 2004 Afghanistan MDG Report (6,085.55 Kb)
Sept 2005 Afghanistan Second MDG Report (8,130.75 Kb)
Bangladesh PRSP and MDG Reports
Dec 30, 2005 Joint Staff Advisory Note (JSAN) of PRSP
Oct 16, 2005 Poverty Reduction Strategy Paper (PRSP)
Jun 5, 2003 Joint Staff Assessment (JSA) of I-PRSP
Mar 31, 2003 Interim Poverty Reduction Strategy Paper (I-PRSP)
February 2005 Bangladesh MDG Report (2,864.90 Kb)
Cambodia PRSP and MDG Reports
Jun 21, 2006 Joint Staff Advisory Note (JSAN) of PRSP
Dec 22, 2005 Poverty Reduction Strategy Paper (PRSP)
Aug 25, 2004 Joint Staff Assessment (JSA) of PRSP Progress Report
Aug 19, 2004 PRSP Progress Report
Jan 23, 2003 Joint Staff Assessment (JSA) of PRSP
Jan 22, 2002 Joint Staff Assessment (JSA) of PRSP Preparation Status Report
Dec 24, 2001 PRSP Preparation Status Report
Dec 26, 2000 Joint Staff Assessment (JSA) of I-PRSP
Oct 20, 2000 Interim Poverty Reduction Strategy Paper (I-PRSP)
Cambodia MDG Reports and PRSP
2001 International Development (474.39 Kb)
Nov 2003 Cambodian tailored MDG Report (2,063.42 Kb)
Lao P.D.R. MDG Reports and PRSP
Dec 2, 2004 Joint Staff Advisory Note (JSAN) for PRSP
Jun 30, 2004 Poverty Reduction Strategy Paper (PRSP)
26
Aug 15, 2003 Joint Staff Assessment (JSA) of PRSP Preparation Status Report
Jul 31, 2003 PRSP Preparation Status Report
Jul 12, 2002 Joint Staff Assessment (JSA) of PRSP Preparation Status Report
May 31, 2002 PRSP Preparation Status Report
Apr 6, 2001 Joint Staff Assessment (JSA) of I-PRSP
Mar 20, 2001 Interim Poverty Reduction Strategy Paper (I-PRSP), with
January 2004 Lao PDR MDG Report
Maldives MDG Reports (Des not have PRSP Report)
Sept 2005 Maldives MDG Report (3,434.75 Kb)
Mongolia MDG Reports and PRSP
Nov, 2005 PRSP Progress Report
Sep 19, 2005 Joint Staff Advisory Note (JSAN) of PRSP
Oct 2004 English Mongolia MDG Reports
Aug 14, 2003 Joint Staff Assessment (JSA) of PRSP
Jul 3, 2003 Poverty Reduction Strategy Paper (PRSP)
Sep 10, 2001 Joint Staff Assessment (JSA) of I-PRSP
Jun 30, 2001 Interim Poverty Reduction Strategy Paper (I-PRSP)
Myanmar MDG Report (Des not have PRSP Report)
2005 Myanmar MDG Report (14,321.93 Kb)
Nepal MDG Reports and PRSP
Nov 30, 2006 Joint Staff Advisory Note on the PRSP – Annual Progress Report
Jun, 2006 PRSP Progress Report
Jun, 2005 PRSP Progress Report
Oct 24, 2003 Joint Staff Assessment (JSA) of PRSP
May 30, 2003 Poverty Reduction Strategy Paper (PRSP)
Sept 2005 Nepal MDG Progress Report 2005 (8,711.11 Kb)
Pakistan MDG Reports and PRSP
Feb 12, 2004 Joint Staff Assessment (JSA) of PRSP
Jan 31, 2003 Joint Staff Assessment (JSA) of PRSP Preparation Status Report
Jan 30, 2003 PRSP Preparation Status Report
Nov 15, 2001 Joint Staff Assessment (JSA) of I-PRSP
Nov 1, 2001 Interim Poverty Reduction Strategy Paper (I-PRSP)
27
Feb 2005 Pakistan MDG Report (765.00 Kb)
Papua New MDG Reports (Des not have PRSP Report)
Guinea
Jan 2005 Papua New Guinea MDG Report (2,738.81 Kb)
Samoa Does not have any MDG or PRSP Reports/
Analysis in this report is based on National Development Plan
Thailand MDG Reports (Des not have PRSP Report)
June 2004 Thailand MDG Report – English (1,362.22 Kb)
Thai (1,685.32 Kb)
Press Release (155.50 Kb)
Press Release (long version) (157.50 Kb)
UNDP Thailand website
Timor-Leste MDG Reports and PRSP
Apr 29, 2005 Joint Staff Advisory Note (JSAN) of PRSP
July 26, 2005 Poverty Reduction Strategy Paper – National Development Plan,
Road Map for Implementation of National Development Plan,
Overview of Sector Investment Programs – Strategies and Priorities
for the Medium Term, July 26, 2005
May 20, 2002 Poverty Reduction Strategy Paper (PRSP)
Feb 2004 Timor-Leste MDG Report (4,427.94 Kb)
28
Chapter 3
Economic and Social Profiles of Sample Countries
• Present chapter starts with brief discussion on economic and social profiles of the
selected countries in this study, which cover 27 per cent of the world population and
11 per cent of global area, but account for only 5.6 per cent of world GNP, and
display a number of contrasts in terms of economic size, growth, per capita income
and poverty.
• Asian economies had shown remarkable economic vigor and dynamism during
1990s by outperforming by a wide margin other developing regions and industrial
countries as a group. The best performers during the first half of 2000s also existed
in Asia.
• The Asian economies are typical examples of “catch-up type” economic growth.
They achieved high growth with the help of transfer of capital and technology from
advanced countries, while enjoying the benefits of the huge markets in these
advanced economies.
• The process of rapid growth in output and intra-regional trade and investment in
Asia is sometimes referred to as a “virtuous circle” of economic development.
Foreign capital inflows were the result of high growth, favourable policy
environment, sustained industrialization and trade expansion; and at the same time
boosted economic growth and external trade.
• This section also discuses the development challenges of Asian economic regions. It
is observed that despite significant economic progress and reduction of poverty in
the recent years, sustainability of higher growth in future requires removal of
existing infrastructure bottlenecks, improving governance in both public and private
sectors, strengthening regulatory and legal institutional set-up, and improving
management skill.
• The section also discusses progress of achievement of MDG targets until now. Most
of the evaluations indicate that Asians economies have made reasonable progress in
achieving MDG targets until now. UN MDG Report (2006) observes that as regards
goal-1 Asia leads the decline in global poverty and as regards goal-2 to achieve
universal primary education South Asia has made great strides.
3.1 Economic and Social Indicators of Sample Countries
The present report is based on available MDG Reports and Poverty Reduction Strategy
Papers (PRSPs) of 12 selected MDG off-track countries (viz. Afghanistan, Bangladesh,
Cambodia, Lao PDR, Maldives, Mongolia, Myanmar, Nepal, Pakistan, Papua New
Guinea, Samoa and Timor Leste) and two MDG on-track countries (viz. China and
29
Thailand). Tables 3.1 to 3.7 present general economic profiles of the countries, while
Tables 3.8 and 3.12 indicate the current status of various MDGs related indicators.
The present report is based on available MDG Reports and Poverty

Reduction Strategy Papers (PRSPs) of 12 selected MDG off-track countries
and two MDG on-track countries in the ESCAP. Selected countries cover 27
per cent of the world population and 11 per cent of global area, but account
for only 5.6 per cent of world GNP, and display a number of contrasts in
terms of poverty and social development indicators.
Selected countries for this study cover 27 per cent of the world population and 11 per
cent of global area, but account for only 5.6 per cent of world GNP, and display a number
of contrasts. The sample includes the most populous country of the world viz. China with
population at 1296 million in 2004, which also happens to be the second largest economy
in the world in terms of the purchasing power parity (PPP) adjusted GDP, and three small
economies viz. Maldives, Samoa and Timor Leste with population less than a million.
While per capita nominal GNP in 2004 exceeded $2400 for Thailand and Maldives, the
sample includes some of the poorest countries of the world viz. Bangladesh, Cambodia,
Lao PDR and Nepal with per capita GNP of less than $500. Social development
indicators also differ widely among these countries. While, in general, East Asian
economies have higher degree of adult literacy and life expectation, South Asian
countries (except Sri Lanka, Maldives and Myanmar) lag far behind.
Despite serious foreign exchange crisis in some of the East Asian countries in 1997-1999,
Asian economies had shown remarkable economic vigor and dynamism during 1990s by
outperforming by a wide margin other developing regions and industrial countries as a
group. As regards industrial growth, performance by the Asian developing countries
continued to outpace other developing regions and even the industrialized countries by
about 5 percentage points. The continued robust growth in Asia is attributable to a
number of factors such as widespread and sustained policy reforms in industry, trade and
financial sectors and continued surge of foreign capital flows to these countries.
The best performers during 1990s and first half of 2000s existed in Asia. China’s growth
has been particularly spectacular, with real GDP growing at over 10 percent a year and
real per capita income at 9 percent during 1990-2005. Building on past investments in
human, physical and institutional capital, continual high growth was the result of an
ambitious, comprehensive and sustained reforms program encompassing all sectors.
There were continual liberalization of agriculture, redirection of savings to the provinces,
removal of price controls, gradual liberalization of external trade and foreign investment,
focus on both labor-intensive SMEs and high technology sectors, revamping of the tax
and financial systems, and conversion of economic zones into attractive manufacturing
platforms for exports.
30
Table-3.1 Basic Economic Indicators of selected Asian countries in 2004
Country Populati Area GNP GNP PPP PPP GNP GDP GR
on ‘000 US$ billion per capita GNP Per capita (US $) In %
Million sq.km. (US $) US$ bln
2004 2004 2004 Rank 20004 Rank 2004 2004 Rank 2003-04
1. Afghanistan .. 652 5.5 .. .. .. .. .. .. 7.5
2. Bangladesh 139 144 61.3 52 440 174 274 1970 164 6.3
3. Cambodia 14 181 4.8 128 350 183 32 2310 154 7.7
4. China 1296 9598 1938 5 1500 129 7634 5890 108 10.1
5. Lao, PDR 6 237 2.3 154 390 180 11 1880 171 6.3
6. Maldives 0.321 0.3 0.773 .. 2410 .. .. .. .. 10.1
7. Mongolia 3 1567 1.5 164 690 161 5 2040 162 10.7
8. Myanmar 50 677 .. .. .. .. .. .. .. ..
9. Nepal 27 147 6.6 115 250 193 39 1480 178 3.5
10.Pakistan 152 796 90.7 44 600 161 330 2170 107 6.4
11.Papua NewGuinea 6 463 3.3 142 560 164 13 2280 155 2.5
12.Samoa* 0.184 2.8 0.338 160 1840 115 1.03 5610 .. 3.1
13.Thailand 64 513 158.4 31 2490 104 505 7930 88 6.2
14.Timor Leste 0.887 14.9 0.506 .. 570 .. .. .. .. 1.8
Note: (a) Two dots (..) stand for “Data not available” * Country source for Samoa.
Source: (1) World Development Indicators 2006, World Bank.
Table-3.2 Growth of output in selected Asian countries in 1990-2000 and 2000-2004
Country GDP growth GDP growth Agriculture Industry Manufacture Services

per annum per annum Growth pa Growth pa Growth pa Growth pa
1990-2000 2000-2004 2000-2004 2000-2004 2000-2004 2000-2004
1. Afghanistan .. 16.8 .. .. .. ..
2. Bangladesh 4.8 5.2 2.4 7.1 6.4 5.5
3. Cambodia 7.1 6.3 2.8 14.2 14.6 3.9
4. China 10.6 9.4 3.4 10.6 .. 9.8
5. Lao, PDR 6.5 6.0 3.3 10.8 10.9 6.4
6. Maldives .. .. .. .. .. ..
7. Mongolia 3.5 5.2 -3.3 8.4 14.3 6.9
8. Myanmar 7.0 .. 5.7* 10.5* 7.9* 7.2*
9. Nepal 4.9 2.5 3.3 0.7 -1.4 2.3
10.Pakistan 3.8 4.1 1.3 5.3 8.0 4.8
11.Papua New Guinea 4.3 0.6 2.2 -3.6 -1.1 1.4
12.Samoa** .. 5.0 .. .. .. ..
13.Thailand 4.2 5.4 3.2 6.9 7.2 4.3
14.Timor Leste .. .. .. .. .. ..
Note: (a) Two dots (..) stand for “Data not available” (b) * during 1990-2000. (c) ** Country source for Samoa
31
Table 3.3 Structure of Demand in selected Asian economies in 2004
Country Household final General govt. Gross Domestic Exports of goods Imports of goods Gross Domestic
consumption consumption Investment and services and services Savings
expenditure expenditure % of GDP % of GDP % of GDP % of GDP
as % of GDP as % of GDP
1. Afghanistan .. .. .. .. .. ..
2. Bangladesh 76 6 24 16 21 31
3. Cambodia 80 5 26 65 76 19
4. China 49 10 39 34 31 42
5. Lao, PDR .. .. .. 29 42 ..
6. Maldives .. .. .. .. .. ..
7. Mongolia 57 19 37 75 87 41
8. Myanmar 89 .. 13 3 5 12
9. Nepal 76 11 26 18 31 27
10.Pakistan 73 8 17 16 15 23
11.Papua NewGuinea 50 19 20 71 60 9
12.Samoa .. .. .. .. .. ..
13.Thailand 57 11 27 71 66 31
14.Timor Leste .. .. .. .. .. ..
Note: (a) Two dots (..) stand for “Data not available”
Table 3.4: Structure of output in selected Asian countries in 1990 and 2004
Country GDP GDP Agriculture Industry Manufacture Services

billion US$ billion US$ % of GDP % of GDP % of GDP % of GDP
1990 2004 2004 2004 2004 2004
1. Afghanistan .. 5.8 .. .. .. ..
2. Bangladesh 30.1 56.6 21 27 16 52
3. Cambodia 1.1 4.9 33 29 22 40
4. China 354.6 1931.7 13 46 .. 41
5. Lao, PDR 0.9 2.5 47 28 20 26
6. Maldives .. .. .. .. .. ..
7. Mongolia .. 1.6 21 30 5 49
8. Myanmar .. .. 57* 11* 8* 32
9. Nepal 3.6 6.7 40 23 9 37
10.Pakistan 40 96.1 22 25 18 53
11.Papua New Guinea 3.2 3.9 29 42 9 29
12.Samoa** .. 1 14 23 15 63
13.Thailand 85.3 161.7 10 44 35 46
14.Timor Leste .. .. .. .. .. ..
Note: (a) Two dots (..) stand for “Data not available” (b) * during 1990 (c) ** Country source for Samoa.
32
Table 3.5 Structure of manufacturing in selected Asian economies in 2002
Country Manufacture Food-beverages Textiles and Machinery and Chemicals Other
Value Added and tobacco Clothing Transport manufacturing
US$ billion % share % share Equipment % share % share
% share
1. Afghanistan .. .. .. .. .. ..
2. Bangladesh 7.3 24 38 7 17 18
3. Cambodia 0.8 .. .. .. .. ..
4. China .. 15 12 32 12 28
5. Lao, PDR 0.3 .. .. .. .. ..
6. Maldives .. .. .. .. .. ..
7. Mongolia 0.07 33 37 1 1 27
8. Myanmar .. .. .. .. .. ..
9. Nepal 0.4 45 19 2 10 23
10.Pakistan 10.4 23 2 5 11 59
11.Papua New Guinea 0.2 21 0 3 4 73
12.Samoa .. .. .. .. .. ..
13.Thailand 42.7 23 14 4 25 34
14.Timor Leste .. .. .. .. .. ..
Source: (1) World Development Indicators 2006, World Bank
Table 3.6 Structure of merchandise exports in selected Asian economies in 2004
Country Merchandise Food Agrl. Raw Fruits Ores and Manufactures

exports % share materials % share minerals % share
US$ billion % share % share
1. Afghanistan 2.3 .. .. .. .. ..
2. Bangladesh 12.0 19 9 8 2 62
3. Cambodia 3.2 8 2 10 0 80
4. China 561.2 4 4 8 7 77
5. Lao, PDR 0.5 .. .. .. .. ..
6. Maldives .. .. .. .. .. ..
7. Mongolia 1.0 14 1 20 1 65
8. Myanmar 2.2 13 1 5 0 81
9. Nepal 1.9 17 5 16 4 59
10.Pakistan 13.4 10 2 3 0 85
11.Papua NewGuinea 2.5 21 3 22 49 6
12.Samoa .. .. .. .. .. ..
13.Thailand 97.4 16 5 2 1 76
14.Timor Leste .. .. .. .. .. ..
33
Table 3.7 Structure of merchandise imports in selected Asian economies in 2004
Country Merchandise Food Agrl. Raw Fruits Ores and Manufactures

imports % share materials % share minerals % share
US$ billion % share % share
1. Afghanistan 2.3 .. .. .. .. ..
2. Bangladesh 12.0 19 9 8 2 62
3. Cambodia 3.2 8 2 10 0 80
4. China 561.2 4 4 8 7 77
5. Lao, PDR 0.5 .. .. .. .. ..
6. Maldives .. .. .. .. .. ..
7. Mongolia 1.0 14 1 20 1 65
8. Myanmar 2.2 13 1 5 0 81
9. Nepal 1.9 17 5 16 4 59
10.Pakistan 17.9 11 6 22 3 58
11.Papua NewGuinea 1.7 16 1 13 0 69
12.Samoa .. .. .. .. .. ..
13.Thailand 95.4 5 3 12 3 76
14.Timor Leste .. .. .. .. .. ..
Table-3.8 MDGs- Eradicating Poverty and Ensuring Gender Equality

Country Eradicate extreme poverty and hunger Achieve universal primary Promote gender equality
education
Share of Prevalence of child Primary completion rate Ratio of female to male
poorest malnutrition underweight as % enrolment ratio
quintile in % of children under age-5 in primary and
national secondary schools (%)
income (%)
1999-2004 1989-1994 2000-2004 1991 2004 1991 2004
1. Afghanistan .. .. 39 25 .. 54 34
2. Bangladesh 9 68 48 49 73 .. 106
3. Cambodia 6.9 .. 45 .. 82 73 85
4. China 4.7 17 8 103 99 87 98
5. Lao, PDR 8.1 40 40 43 74 75 84
6. Maldives .. 45 27 99 103 96 91
7. Mongolia 5.6 12 13 .. 95 109 108
8. Myanmar .. 31 32 .. 72 96 99
9. Nepal 6 .. 48 51 71 59 90
10.Pakistan 9.3 40 38 .. .. .. 73
11.Papua NewGuinea 4.5 .. 25 50 55 80 87
12.Samoa .. .. .. 96 48 .. 50
13.Thailand 6.3 19 .. .. .. 95 98
14.Timor Leste* 7.0 .. 45 .. .. .. 96
Note Two dots (..) stand for “Data not available” Source: World Development Indicators 2006, World Bank.
3. On the basis of the country MDG Report.
Table-3.9 MDGs- Improving health
34
Country Reduce Child Mortality Improve Maternal Health
Under-5 mortality rates Maternal mortality Births attended by

per 1000 live births ratio per skilled health staff
100000 live births as % of total births
1990 2004 2000 1989-1994 2000-2004
15.Afghanistan 260 .. 1900 .. 14

16.Bangladesh 149 77 380 10 13
17.Cambodia 115 141 450 .. 32
18.China 49 31 56 .. 96
19.Lao, PDR 163 83 650 .. 19
20.Maldives 48 18 78 .. 87
21.Mongolia 108 52 110 .. 99
22.Myanmar 130 106 360 .. 57
23.Nepal 145 76 740 7 15
24.Pakistan 130 101 500 19 23
25.Papua NewGuinea 101 93 300 .. 41
26.Samoa .. .. .. .. ..
27.Thailand 37 21 44 .. 99
28.Timor Leste* .. 144 420 .. ..
*On the basis of the country MDG Report.
Table-3.10 MDGs- protecting common environment
Country Combat HIV/ AIDS Ensuring Environmental Ensuring Environmental

And other disease sustainability sustainability
HIV prevalence Incidence of Carbon dioxide emissions Access to improved
as % of people tuberculosis per per capita water source
aged 15-49 10000 people metric tons % of population
2003 2004 1990 2002 1990 2002
1. Afghanistan .. 333 0.2 .. .. 13

2. Bangladesh .. 229 0.1 0.3 71 75
3. Cambodia 2.6 510 0 0 .. 34
4. China 0.1 101 2.1 2.7 70 77
5. Lao, PDR 0.1 156 0.1 0.2 .. 43
6. Maldives 0.1 .. .. 0.3 80 90
7. Mongolia <0.1 293 0.7 0.9 87 85
8. Myanmar 1.2 171 0.1 0.2 48 80
9. Nepal 0.5 184 0 0.2 69 84
10.Pakistan 0.1 181 0.6 0.7 83 90
11.Papua NewGuinea 0.6 233 0.6 0.4 39 39
12.Samoa 0.006 .. .. 0.1 .. 99
13.Thailand 1.5 142 1.8 3.7 81 85
14.Timor Leste ..
35
Table-3.11 MDGs- protecting common environment
Country Ensure environmental Develop global partnership Female Life expectancy at birth-
sustainability for development population years
Access to improved Youth Fixed line and % of Males Females
Sanitation facilities unemployment mobile phone total
% of population % of ages subscribers population
15-24 per 1000
population
1990 2002 1990 2002 2004 2004 2004
1. Afghanistan .. 8 .. 23 .. .. ..
2. Bangladesh 23 48 .. 37 48.9 63 64
3. Cambodia .. 16 .. 40 51.7 53 60
4. China 23 44 .. 499 48.6 70 73
5. Lao, PDR .. 24 .. 48 50 54 57
6. Maldives .. .. .. .. .. 67 69
7. Mongolia 54 73 26 446 49.9 62 68
8. Myanmar 21 73 .. 10 50.3 58 64
9. Nepal 12 27 .. 22 50.4 62 63
10.Pakistan 38 54 13 63 8.5 64 66
11.Papua NewGuinea 45 45 .. 14 48.4 55 57
12.Samoa 70 72
13.Thailand 80 99 5 537 50.8 67 74
14.Timor Leste 56 58
Table-3.12 MDGs- Women in Development
Country Pregnant Teenage Women in Unpaid family workers Women in parliaments

women mothers non-
receiving agricultural
prenatal care sector
% % of women % of total Male Female % of total seats
aged 15-19 % of male % of female
years employment employment
2000-2004 1995-2004 2003 2000-04 2000-04 1990 2006
1. Afghanistan 16 .. .. .. .. 4 ..
2. Bangladesh 49 33 24.2 10.1 73.2 10 15
3. Cambodia 38 8 52.6 31.6 53.3 .. 10
4. China 89 .. 39.5 .. .. 21 20
5. Lao, PDR 27 .. .. .. .. 6 23
6. Maldives .. .. .. .. .. .. ..
7. Mongolia 94 .. 49.4 18.4 31.7 25 7
8. Myanmar 76 .. .. .. .. .. ,,
9. Nepal 28 21 .. .. .. 6 0
10.Pakistan 43 .. 8.7 16.4 46.9 10 21
11.Papua NewGuinea 58 .. 35.4 .. .. 0 1
12.Samoa .. .. .. .. .. .. 8
13.Thailand 86 3 51.8 21.9 50.3 18 27
14.Timor Leste* .. .. .. .. .. .. 28
* On the basis of the country MDG Report.
3.2 General Development Strategies of Asian economies
36
Almost all the Asian economies are passing through a phase of economic reforms. They
have taken credible reforms in industry, trade, commerce, financial and fiscal sectors to
induce dynamism in the overall growth process. The mechanism that contributed the high
growth of the Asian economies in the recent years can be summarized as export-oriented
and foreign-investment-led growth supported by low production costs due to availability
of cheap labour and raw materials. As judged by ratios to GDP, investments and exports
together made a much higher contribution to growth in Asia than in the other regions.
Asian economies achieved high economic growth by introducing capital and technology
from advanced countries, while enjoying the benefits of the huge markets that these
advanced countries offer. In other words, the Asian economies are typical examples of
“catch-up type” economic growth.
The Asian economies are typical examples of “catch-up type” economic

growth. They achieved high growth with the help of transfer of capital and
technology from advanced countries, while enjoying the benefits of the huge
markets in these advanced economies.
There was also a rapid growth in intra-Asian trade accompanied by rising flows of
foreign investment. The traditional focus of foreign investment by Asian companies in
financial sector and real estate of industrial countries was augmented by rapid growth in
investment in manufacturing, primarily in South-East Asia. Foreign investment started
moving from Japan to the newly industrialized nations and then to the other developing
Asian economies. The changing pattern of capital flows was partly due to the changing
cost structure in the Asian economies as wages and other costs were rising rapidly in
Japan and the newly industrialized economies. It was also indicative of the movement
towards higher value added and more technologically intensive activities in these
economies.
The process of rapid growth in output and intra-regional trade and investment in Asia is
sometimes referred to as a “virtuous circle” of economic development (Das 2002).
Foreign capital inflows were the result of high economic growth, favourable policy
environment, sustained industrialization and trade expansion; and at the same time
boosted economic growth and helped expansion of trade. This process is gradually
helping to internalize Asian growth and to reduce Asia’s vulnerability to external shocks.
The process of rapid growth in output and intra-regional trade and

investment in Asia is sometimes referred to as a “virtuous circle” of
economic development. Foreign capital inflows were the result of high
growth, favourable policy environment, sustained industrialization and
trade expansion; and at the same time boosted economic growth and
external trade.
During 1990s, the “virtuous circle” evolved rapidly primarily due to the structural
adjustment process in Japan. More recently, such a process occurred in the newly
37
industrialized economies (NIEs) as well, fueling further intra-regional trade and
investment. Rapid structural adjustment and shifting comparative advantage from Japan
to the NIEs and further to the Southeast Asian countries due to rising wages and factor
prices contributed significantly to Asia’s broad-based dynamism. South Asia, which
depended more on the agriculture sector, was initially left out of this process. But the
situation changed in recent years, as these countries liberalized external trade and
investment regimes and moved towards capital account convertibility gradually and
cautiously.
Two themes have characterized the development approach of most the Asian economies:
a strong economic role for the private sector and relatively outward-looking development
policy. The broad lessons of development during the past decade are that countries with
more market-friendly policies and outward-looking strategies do better both in generating
growth and reducing poverty. While there was general focus on the need of reforms, the
pace had been uneven due to mainly political economy issues. Recent progress was most
visible in reforms in privatisation, industrial, trade, external, fiscal and financial sectors.
Two themes have characterized the development approach of most the Asian
economies in recent years: a strong economic role for the private sector and
relatively outward-looking development policy. The broad lessons of
development during the past decade are that countries with more market-
friendly policies and outward-looking strategies do better both in
generating growth and reducing poverty.
3.3 Development Challenges of Asian Sub-regions
Asian economies display a number of contrasts. Asia includes two most populous
countries of the world viz. China and India, and also small economies like Bhutan and
Maldives with population less than a million and city-states like Singapore. It includes
the world’s three largest economies after USA (viz. Japan, China and India) in terms of
PPP-adjusted GDP. It includes some of the poorest countries of the world such as
Bangladesh, Cambodia, Mongolia, Nepal and Vietnam. Social development indicators
differ widely in the region. Development challenges for Asian economies include how to
achieve sustained high growth and poverty reduction over time, how to improve physical
and human capital, institutional capacity building and public-private partnership and how
to promote integration at the regional and global levels for better economic co-operation.
3.3.1 Development Challenges of South Asia and SAARC
South Asia is a region full of contrasts. On the one hand, it has vast economic potential
due to its large market space measured by the size of its population, emerging middle
class and rising purchasing power. Its bio-diversity is an immense wealth, and mineral
and water resources are plenty. The region is endowed with a large pool of skilled and
semi-skilled manpower. It achieved an average growth rate of 5.6 per cent a year in
1990s, which was regarded as a “lost decade” for many other regions of the world.
38
On the other hand, South Asia is characterized by widespread poverty and unemployment
and low levels of living. While accounting for a fifth of the world’s population, South
Asia is also home to nearly half the world’s poor. It has lower life expectancy than in any
other region except Africa, high infant mortality rates, high rates of malnutrition and low
levels of literacy (except Maldives and Sri Lanka).
Fueling the growth in 1990s and early 2000s in South Asia were savings and investment
rates of around 20-25 percent, mainly from domestic sources building on strong legal and
political traditions and a growing pool of technical manpower. Deregulation and trade
reforms increased internal competition, reduced transactions costs, and improved product
range and quality. The increased private activity stimulated the financial sector and
attracted foreign investment, particularly in automobiles, telecom and the stock market.
As compared to the world and other developing countries, the contribution of the
industrial sector to GDP in South Asia is rather small. During 1990s, the service sector
grew at a faster rate than the industrial sector in South Asia.
The share of South Asia in world trade is negligible being less than one per cent. The
composition of South Asian trade reveals concentration of exports in labour-intensive
products like textiles, clothing, gems and jewelry, while imports consist of mostly crude
oil, petroleum products and capital goods.
The challenge facing South Asia in the new millennium is how to continue the high
economic growth of the 1990s with rapid reductions in poverty and unemployment and
improvement in social indicators. A sustainable growth path for the 2000s must be based
on continued economic reforms, lower fiscal deficits, dynamic capital market, sustainable
balance-of-payments, and improvement in environment. Economic cooperation in the
region would be an effective instrument for improving the welfare of the people.
3.3.2 Development Challenges of East Asia and Southeast Asia
Over the past three decades, the economies of East Asia made remarkable economic
progress and grew faster than all other regions of the world. Many South East Asian
economies, particularly Korea, Taiwan Province of China, China, Hong Kong, Indonesia,
Malaysia, Thailand and Singapore experienced sustained economic progress since 1980s
with some attaining an average growth rate of 8-10 percent a year, except for the crisis
period during 1997-1999. In East Asia and Pacific, GDP grew at average annual rate of
7.2 percent in 1990s, while annual population growth averaged 1.2 percent.
The rapid growth of the East Asian economies was accompanied by

impressive advances in social development indicators. Poverty ratio, infant
mortality, and adult illiteracy declined significantly, while life expectancy at
birth rose considerably.
The rapid growth of the East Asian economies was also accompanied by impressive
advances in social development indicators. Poverty ratio, infant mortality, and adult
39
illiteracy declined significantly, while life expectancy at birth rose considerably. Also,
contrary to the earlier conventional wisdom, rapid economic growth was achieved with
significant reduction in poverty ratios and without any increases or marginal increase in
income inequality (Das 2003).
Economic growth in East Asia correlates strongly not only with export growth but also
with high savings and investment rates. A trinity of openness to trade, high investment
and high savings rates co-exist the fast growing economies of East Asia and it is
important to stress the presence of three factors to achieve higher growth. The benefits of
a more liberal trading environment reached beyond the narrow efficiency gains
highlighted by the theory of comparative advantage. Other benefits include more
competitive goods and factor markets, increased investment including foreign capital, and
associated transfer of knowledge and technology.
Economic growth in East and South East Asia correlates strongly not only
with export growth but also with high savings and investment rates. A trinity
of openness to trade, high investment and high savings rates co-exist the fast
growing economies of East and South East Asia.
Savings and investment rates of the South East Asian economies were generally higher
than those in other regions. Governments boosted savings through a combination of
fundamental and interventionist policies. The former included maintaining macro-
economic stability – primarily controlling inflation, and ensuring the security of banks.
The latter included forced and contractual savings by both households and corporate
bodies through public provident, pension and insurance funds.
East and South East Asia relied heavily on export-push strategy and were generally open
to foreign investment and technology transfer. Initially endowed with abundant labour
resources, they expanded their exports of low value added and labour intensive goods.
Subsequently, as labour costs increased, they shifted the structure of manufacturing
production and exports towards more sophisticated and higher value added products.
During 1997-1999, a number of Southeast Asian economies had been in the grip of
severe financial, economic and social crises. Although the region recovered quickly
following the structural reforms and adjustment programs supported by the IMF and
other funding agencies, recent crisis had highlighted that there remain serious obstacles to
sustained development for many countries in the region. Despite recent gains, the
countries of the region had an average income of US$4120 in 2000, which was much
below that of US$27450 in the developed countries. Serious environmental damages
associated with rapid urbanization, inadequate regulation and planning, and incorrect
pricing of resources, continues to impose major costs.
Another serious problem is the historical inadequacy of infrastructure investment relative

to rapidly growing demand. As the region’s infrastructure needs are large, the private
sector themselves and foreign direct investment (FDI) will have to play an increasingly
critical role in developing and modernizing East Asia’s infrastructure base. In turn,
40
governments of the region will need to strengthen the regulatory and legal frameworks to
attract and secure such investment. The need for expanding competent management
across most areas of development is emerging as a major issue in East Asia. Effective
institutions are essential in pollution monitoring and control, design and implementation
of monetary and fiscal policies, traffic-management planning and deregulation.
3.4 Progress of Achievement of MDG targets in Asian Economies
Various studies have been done on the progress of achievement of MDG targets in
individual countries and at regional levels. Particulary two reports are important viz. Joint
World Bank-IMF Global Monitoring Report (GMR) on MDG (2006) and the UN
Millennium Goals Report (2006). A brief review of these reports is given below.
3.4.1 Joint World Bank-IMF Global Monitoring Report (GMR) on MDG (2006)
The third annual Global Monitoring Report2 (GMR) on the Millennium Development
Goals (MDGs), jointly produced by the World Bank and IMF (2006) and subtitled as
Strengthening Mutual Accountability—Aid, Trade and Governance observes that the
global efforts are working. There has been reduced child mortality, rapid gains in
primary school enrolment, lower poverty and reduced HIV/AIDS infection rates in many
countries over the last decade.
The GMR highlights evidence of reduced child deaths in nine out of 10 developing
countries surveyed, namely Madagascar, Indonesia, Philippines, Bolivia, Bangladesh,
Burkina Faso, Morocco, Mozambique & Cameroon. It notes rapid gains in primary
school enrolment, with 50 countries having achieved universal primary completion, up
from 37 in 2000, and cites signs of the first decline in HIV/AIDS infection rates in high-
prevalence countries such as Haiti, Uganda and Zimbabwe. But the advances remain
uneven. Many countries, especially in Africa and Latin America, are still not making
strong inroads into poverty reduction, while progress on human development indicators
in South Asia has been insufficient.
The Joint World Bank-IMF Global Monitoring Report on MDG (2006)

hhighlights evidence of reduced child deaths, rapid gains in primary school
enrolment, and decline in HIV/AIDS infection rates in high-prevalence
countries. But the advances remain uneven. Many countries, especially in
Africa and Latin America, are still not making strong inroads into poverty
reduction, while progress on human development indicators in South Asia
has been insufficient.
The Report further highlights that higher economic growth, more and better quality aid,
trade reforms, and good governance are essential factors to achieve the MDGs. Good
governance includes clear rules and expectations, transparent information to monitor
performance, and incentives and enforcement mechanisms to reward success and address
2
Strengthening Mutual Accountability – Aid, Trade and Governance, World Bank and IMF, 2006.
41
failures. The Report emphasizes strengthening monitoring institutions that provide
checks and balances. This monitoring not only tracks progress on indicators relevant to
achieving the MDGs, but also generates greater accountability and increased demand for
good governance.
The GMR also calls on countries and multilateral institutions providing aid to
developing countries to deliver on the commitments they made in 2005 to increase
transfers and debt relief, including an additional $25 billion per year in aid to Africa by
2010, and $50 billion more per year for all developing countries. Aid must become more
predictable, less fragmented, more closely-aligned to countries’ needs, and targeted to
where it will be productively used to advance the MDGs. This includes allowing aid
recipients to use aid to cover current expenditures, including teachers’ and health
workers’ salaries, to accelerate and sustain progress on goals of increased school
enrolment, child and maternal mortality, and HIV/AIDS.
The GMR also calls for redoubled efforts to speed up the Doha Development Round of
trade talks at the World Trade Organization.
3.4.2 UN Millennium Development Goals Report (2006)
The UN Millennium Development Goals (MDG) Report 2006 makes an appraisal of

progress of MDG targets in different regions during 1990-2005. The Report observes that
as regards goal-1 Asia leads the decline in global poverty. During 1990-2002 rates of
extreme poverty fell rapidly in much of Asia, where the number of people living on less
than $1 a day dropped by nearly a quarter of a billion people.
The UN MDG Report (2006) observes that as regards goal-1 Asia leads the
decline in global poverty, and as regards Goal-2 to achieve universal primary
education South Asia has made great strides.
Chronic hunger – measured by the proportion of people lacking the food needed to meet
their daily needs – has declined in the developing world. But progress overall is not fast
enough to reduce the number of people going hungry. An estimated 824 million people in
the developing world were affected by chronic hunger in 2003. The worst-affected
regions – sub-Saharan Africa and Southern Asia –made progress in recent years, but the
number of people going hungry is increasing. It is also a matter of concern that the
number of hungry people is also increasing in Eastern Asia.
As regards Goal-2 to achieve universal primary education, net enrolment ratios in

primary education have increased to 86 per cent in the developing world, ranging from 95
per cent in Latin America and the Caribbean to 64 per cent in sub-Saharan Africa. South
Asia has made great strides, especially during 1999-2004, when enrolment rose from 72
to 89 per cent— largely as a result of progress in India.
42
An educational gender gap persists. Globally, more than one in five girls of primary-
school age is not in school, compared to about one in six boys. Oceania, Western Asia
and Southern Asia are the regions where the gender gap is most evident. Of particular
concern is the wide gender gap in sub-Saharan Africa and Southern Asia, where almost
80 per cent of the world’s out-of-school children live.
Women represent an increasing share of the world’s labour force – over a third in all
regions except Southern and Western Asia and Northern Africa. However women face
disadvantages in securing paid jobs due to socio-cultural attitudes, employment policies,
and lack of options for balancing work and family responsibilities or for controlling the
timing and spacing of births. They are also subject to wage differentials, occupational
segregation, higher unemployment rates and disproportionate representation in the
informal and subsistence sectors.
Women’s political power increased significantly in 1990s, though men still dominate.
One in five parliamentarians elected in 2005 are women, bringing the percentage of
parliamentary seats held by women in 2006 worldwide to almost 17.
Under-5 child mortality rates have improved and more children are surviving their first
years of life due to higher household incomes and education for mother, though sub-
Saharan Africa trails far behind.
The vaccination of three quarters of the world’s children has proven to be one of the most
cost-effective public health interventions on record. Still, may children remain
unprotected. Two thirds of the world’s unprotected children live in six countries: China,
the Democratic Republic of the Congo, India, Indonesia, Nigeria and Pakistan.
As regards goal 5 to improve maternal health, the issue has been high on the international
agenda for two decades, but ratios of maternal mortality seem to have changed little in
regions where most deaths occur (sub-Saharan Africa and Southern Asia). Skilled care at
delivery is one of the key elements necessary to reduce maternal mortality. Though all
regions show improvement, only 46 per cent of deliveries in sub-Saharan Africa, where
almost half the world’s maternal deaths occur, are assisted by skilled attendants. In
Southern Asia, the proportion is even lower. Eastern and South-Eastern Asia and
Northern Africa made significant progress, with increases in attended births of between
55 and 80 per cent.
Among all child and maternal health indicators, the presence of a skilled attendant at
delivery is the most inequitably distributed within a country. Poor and rural women are
far less likely to receive skilled care during childbirth than the urban or richer women.
Inequality between urban and rural care at delivery is particularly significant in sub-
Saharan Africa.
As regards goal 6 to combat HIV/ AIDS, malaria and other diseases, prevention efforts
are proving successful in some countries, but deaths and new infections continue to
increase. Several countries report success in reducing HIV infection rates, through
43
interventions that promote behavior change. However, rates of infection overall are still
growing, and the number of people living with HIV has continued to rise, from 36.2
million in 2003 to 38.6 million in 2005 (nearly half of whom are women). The number of
AIDS-related deaths also increased that year, to 2.8 million, despite greater access to
antiretroviral treatment and improved care in some regions.
As regards goal 7 to ensure environmental sustainability, rapid deforestation continues,

but the net loss of forest area is slowing down. Energy use has become more efficient in
most regions, though CO2 emissions continue to rise globally. Energy use per unit of
GDP, 1990 and 2003 (Kilograms of oil equivalent With half of developing country
populations still lacking basic sanitation, the world is unlikely to reach its target. World
targets for safe drinking water are in sight, but coverage remains spotty in rural areas.
As regards Goal 8 to develop a global partnership for development, development

assistance led by debt relief increased sharply but still falls short of targets. Developing
countries have gained greater access to markets over the past decade. Three quarters of
their exports entered developed country markets duty-free in 2004, with the figure rising
to 79 per cent for the least developed countries. However, goods that are strategically
important to developing economies in ESCAP and elsewhere, such as clothing and farm
products, are still heavily taxed. A major objective of ongoing negotiations in the World
Trade Organization is to further reduce such trade barriers.
3.4.2 Performance of MDG Targets in South Asia
Since five countries (viz. Afghanistan, Bangladesh, Maldives, Nepal and Pakistan) among
14 selected economies in this Report are members of South Asia and belong to the
regional group SAARC, this separate section is devoted to the performance of MDG
targets and constraints to achieve these targets in the SAARC.
The third annual global monitoring report3 on MDGs stated the following:
“South Asia, with GNI per capita at $594 in 2004, is home to 47 per cent of the world’s
poor living on less than $1 a day. Since 1990 the region has experienced rapid GDP
growth, averaging 5.4 per cent a year, which has helped to reduce the consumption
poverty rate substantially: India has reduced its poverty rate by 5-10 per cent since 1990;
most other countries registered reduction in poverty over the period, except for Pakistan,
where poverty has stagnated at around 33 per cent…. Looking beyond consumption
poverty at other indicators of social progress, the region has had encouraging success in
some areas: for example, mortality in children under five has reduced substantially
between 1990 and 2004 (from 129 to 92, per 1,000), especially in Bangladesh (149 to 77,
per 1,000), Nepal (145 to 76, per 1,000), and Sri Lanka (32 to 14, per 1,000), and
appreciable gains have also been achieved in school enrolments at primary and secondary
levels. At the same time, challenges remain in key areas such as child malnutrition,
3
Strengthening Mutual Accountability – Aid, Trade and Governance, World Bank and IMF, 2006. This
report doesn’t cover Afghanistan.
44
primary and secondary completion rates, maternal mortality, and gender balance in
education and health outcomes; nearly half of all children under the age of five are
malnourished in Bangladesh and Nepal, and youth illiteracy in the region is high – 18 per
cent for males and 35 per cent for females. The resurgence of tuberculosis and the threat
of HIV/AIDS are also a cause for concern. In general, the quality of statistics on social
MDGs needs to be improved considerably to make cross-country comparison
meaningful. Progress in MDGs at the average national level masks considerable sub-
national variation measured at regional (state, province, district, and block) level. The
average progress in MDGs is also marked by persistent social inequalities mapped on
caste, region, tribal and ethnicity dimensions. This is true not just for large economies
such as India with wide state-level and district-level disparities but also for smaller
countries of the region such as Nepal and Bangladesh… Sustained growth will be
necessary for poverty reduction, and concomitant improvement in institutional service
delivery mechanisms will be essential for achieving progress in all other dimensions of
the MDGs.”
If one ignores goals (7) and (8) on environmental sustainability and global partnership
respectively, this quote effectively states that South Asia is behind target on goals (4) to
(6) on child mortality, maternal health and combating communicable diseases
respectively, and also on the gender disparity of goal (3), but may very well attain goals
(1) and (2) on reductions of poverty and hunger respectively, with the former largely
attained because of the growth effect.
Review of MDGs by SAARC Secretariat
Poverty reduction has also figured prominently in the SAARC agenda, ever since the 6th
Summit in Colombo in 1991.4 The Declaration at the 13th SAARC Summit held in Dhaka
in November 2005 had direct focus on poverty alleviation. First, 2006-2015 was
declared as the SAARC Decade of Poverty Alleviation. Second, the SAARC
Development Goals (SDGs), recommended by the Independent South Asian Commission
on Poverty Alleviation (ISACPA), were endorsed. Third, implementation of the Plan of
Action on Poverty Alleviation, adopted by the 12th SAARC Summit in Islamabad in 2004
was emphasized. Fourth, a decision was taken to establish a SAARC Poverty Alleviation
Fund (SPAF), to function under the SAARC Development Fund (SDF), with the SDF
possessing three windows – social window, infrastructure window and economic window.
Fifth, There are also regional poverty profiles.
It is worth reproducing the ISACPA’s assessment on attaining MDGs by the SAARC,

although it is a rather long quote:5
“The first MDG is the most fundamental: eradicating extreme poverty and hunger. Within
this goal, there are two targets: firstly, to halve, between 1990 and 2015, the proportion of
people whose income is less than one dollar a day, and secondly, to halve the proportion
4
Between 1996 and 2003, there was a UNDP-sponsored South Asia Poverty Alleviation Programme
(SAPAP).
5
An Engagement with Hope, SAARC Development Goals (SDGs), 2005-2010, ISACPA, 2004.
45
of people who suffer from hunger over the same period. The record of progress of South
Asian countries on the income poverty target has been quite striking. Poverty incidence
based on national poverty line has declined from 38 to 28 percent over the last 12-year
period. By current trends, South Asia as a whole appears to be on track to meet the MDG
target of halving income poverty by 2015 though some countries will have to make
greater efforts than others. Evidence of progress on the hunger indicator has been more
mixed; significantly greater efforts will clearly be necessary in this area.
The second MDG is to achieve universal primary education. Net primary enrolment for
the region as a whole increased from 73 to 82 per cent. While progress for some
countries was appreciable as in Bangladesh, for others assessment is difficult because of
lack of adequate data. Except for Sri Lanka and Maldives, the situation is quite
challenging on related indicators such as primary completion rate and full literacy. Of
great concern is the fact that nearly a third of South Asian youth are illiterate.
The third MDG is to promote gender equality and empower women. The target is to
achieve gender parity in primary and secondary education preferably by 2005 and to all
levels of education by 2015. There has been a steady reduction of gender disparities in
primary, secondary and tertiary education in all SAARC countries. On the empowerment
indicator, despite steady progress in the region, women’s participation in non-agricultural
employment remains modest, at around 20 per cent. Gender equality also continues to
fall short in the legislative arena with less than 10 per cent of parliamentary seats in the
region occupied by women with no clear trend of increase or decrease.
The fourth MDG is to reduce child mortality. The target is to reduce the under-five
mortality rate by two-thirds by 2015. Steep percentage declines occurred in some
countries such as Bangladesh, Bhutan and Nepal from relatively higher 1990 levels while
in Sri Lanka the absolute rate was reduced to 19 deaths per 1,000 live births, the lowest
in the region. For SAARC countries as a whole, the rate of reduction has been 27 per
cent during the last 12 years. Though Bangladesh and Bhutan are on track to meet the
MDG target, the region as a whole will have to make greater efforts in this respect.
The fifth goal is to improve maternal health. No reliable data exist to assess the critical
area of maternal health with precision. Available statistics indicate great divergence from
a mortality rate of less than 100 per 100,000 women giving birth in Sri Lanka to a
mortality rate of more than 700 in Nepal. Improving data collection on relevant
indicators on this goal will also have to be a priority.
The sixth MDG is to combat HIV/AIDS, malaria and other diseases. Statistics on the
spread of HIV/AIDS in South Asia is insufficient; available estimates show a low HIV
infection rate of 0.05 per cent but this nevertheless translates into an infected population
of nearly 5 million. If unattended, this can grow to be a much bigger problem. Other
infectious diseases such as malaria and tuberculosis have a longer presence in the region
and continue to pose major health challenges for the population.
46
The seventh goal is to ensure environmental sustainability. Five targets are identified
here: forest cover, energy intensity of the economy, sustainable access to safe drinking
water, and, sanitation. South Asia as a whole managed to retain its forest coverage in the
1990s at about 16 per cent though with differing performances among individual
countries. Energy intensity measured as output per unit of energy input increased from
3.4 to 5.1 per cent in the 1990s due to growing income and structural change. On the
target of access to safe drinking water, access for the region as a whole increased from 72
to 84 per cent in the 1990s. Available data show that Bangladesh and Maldives have
achieved near universal access. Progress on sanitation in contrast remains inadequate
with data suggesting nearly two-thirds of the region’s population not having access to
improved sanitation services.
The eighth goal is to develop a global partnership for development. External debt remains
a major impediment to development in some SAARC countries. In Pakistan, external
debt servicing consumes over 20 per cent of export earnings. However, during the 1990s,
all SAARC member countries experienced a reduction in their debt servicing ratios.
Significant declines were observed for Bangladesh, India, Nepal and Sri Lanka. The
decline in ODA has been another stumbling block, particularly for LDCs. In Bangladesh,
ODA as percentage of GDP declined from 7.0 per cent in 1990 to 2.2 percent in 2001.
The figures were 11.7 and 7.0 for Nepal, 16.5 and 11.1 for Bhutan, 1.3 and 0.7 for India,
and 9.8 and 4.3 for Maldives for same period. On the other hand, accessibility to
affordable drugs in the region has been steadily improving. Telephone and computer
usage improved sharply during the 1990s in almost all SAARC countries.”
Thus, although compared to other developing regions or its own past, South Asian
countries have made significant progress in the 1990s, progress has been mixed both in
terms of targets and in terms of individual countries. The rate of progress is also slow.
Overall, the progress on MDG attainment in South Asia falls into three boxes: SAARC
countries are on track on a third of the identified 18 targets; they are off-track on another
third; and reliable or relevant data do not exist to assess performance in the residual one-
third. Given the current trends, MDGs are most likely to be achieved for halving income
poverty and child mortality and ensuring environmental sustainability. MDG targets are
less likely to be achieved in education and health. Such outcomes, however, are not pre-
determined and can be changed in favour of attaining MDG targets by greater efforts and
more strategic engagement.
47
Chapter 4
Common Policies and Programs Under MDG Reports and PRSP
• This chapter analyses the stylized policies and programs advocated in both MDG
Reports and PRS Papers. It is observed that the attainment of stable and broad-
based economic growth, which is more inclusive and participatory, is a pre-
requisite for sustainable reduction of poverty and unemployment.
• This requires adoption of a comprehensive reforms program and policy package

encompassing stabilization policies and structural reforms, and measures for
improving both physical infrastructure and human capital, strengthening
institutional set-up, improving governance and adopting targeted poverty
alleviation programs.
• The experiences of development process in many countries indicate that a piece-

meal approach to development policy does not serve tangible results, rather delay
comprehensive reforms program which leads to enhancement of transitional costs
and lengthens the transition period to achieve desirable development goals.
• The section also analyses poverty traps at individual, regional, national and global
levels and advocates for a pro-poor and high growth strategy for achieving MDG
targets
4.1 Stylized Policies and Programs under MDG and PRSP
Both the MDG reports and the Poverty Reduction Strategy Papers (PRSP) deal with
policies, programs and strategies to achieve MDG targets. Although the PRSP has a focus
on poverty reduction, it also deals with other goals such as education, health, gender
equality, environmental sustainability and global partnership for development. The
reports emphasize that the attainment of broad-based economic growth, which is more
inclusive, participatory, and stable over time, is pre-requisite for sustainable reduction of
poverty and unemployment. The major thrusts and policies under the country MDG
reports and PRSP for the poverty reduction are listed in details in Annex-1. It is observed
from Annex-1 that all the countries have initiated a wide range of policies, reforms and
programs to enhance efficiency, productivity and international competitiveness and to
impart dynamism to the overall growth process with a focus on faster reduction of
poverty, hunger, illiteracy and ill health.
The attainment of broad-based economic growth, which is more inclusive,

participatory, and stable over time, is a pre-requisite for sustainable reduction
of poverty and unemployment. Broad-based growth and overall human
development will also lead to attainment of other millennium development
goals regarding universal education, gender equality, good health, sustained
environment and global partnership for development.
48
These policies and program can be grouped under nine broad heads as indicated below:
1. Sustaining macroeconomic stability and macro stabilization policies

2. Structural reforms in trade, industry, land, labour and capital markets
3. Sectoral priorities for poverty reduction and employment generation
4. Development of physical infrastructure and human capital
5. Conflict resolution, social development and environment protection
6. Direct poverty alleviation programs
7. Improving legal and institutional set-up
8. External Aid coordination and harmonization
9. Strengthening systems for measurement, evaluation, monitoring and review
These broad policies are specified in details in Table-4.1. It may be emphasized at this
stage that all these polices and programs are interrelated and provide a package of
reforms and policies that need to be undertaken collectively by a country, although at
varying degrees of coverage, scope and intensity depending on its size, present level of
economic development and socio-political environment, for attaining sustained growth
with poverty reduction. Broad-based growth and overall human development will lead to
attainment of other millennium development goals regarding universal education, gender
equality, good health, sustained environment and global partnership for development. It is
neither possible nor advisable to identify a single policy or program which will satisfy all
the development goals or which will hold good equally for all countries at all times. Age-
old Tinbergen (1964) theory on planning techniques also states that a planner needs at
least the same number of policies or programs as the number of objectives or goals he is
entrusted with.
The experiences of development process in many countries indicate that a piece-meal

approach to development policy does not serve tangible results, rather delay
comprehensive reforms program, which leads to enhancement of transitional costs and
lengthens the transition period to achieve desirable development goals. The basic
question is not: whether these policies or programs need to be taken or not. Rather the
question should be: how to prioritize and sequence these reforms and with what speed
and intensity? Again, a universal answer to this question is neither feasible nor desirable.
Even for a single country, an answer cannot be given without painstaking research and
modeling works which are beyond the scope of this report. However, other studies are
being conducted and various Technical Background Papers (TBPs) are under preparation
on some of these aspects under the broader study by UN-ESCAP.
The experiences of development process in many countries indicate that a

piece-meal approach to development policy does not serve tangible results,
rather delay comprehensive reforms program which leads to enhancement of
transitional costs and lengthens the transition period to achieve desirable
development goals.
49
Table-4.1: Common policies and programs under MDG Reports and PRSP
Broad Heads Detailed strategies, policies and programs

1. Sustaining macroeconomic 1.1 Fiscal and budgetary reforms and policies
stability and macro liberalization 1.2 Monetary and credit policies
policies for enhancing growth 1.3 Medium Term Fiscal Sustainability
with poverty reduction and 1.4 Public expenditure reforms
employment generation 1.5 Medium Term Expenditure Framework
(MTEF)/ Expenditure Projection (MTEP)
2. Structural reforms to enhance 2.1 Reduction and rationalisation of customs
productivity and efficiency, and to duties and exports promotion
impart dynamism to overall 2.2 Decontrol, delicensing and deregulation of
growth process industrial production and investment
2.3 Public enterprises reform and privatisation
2.4 Private sector development and Public-
Private Partnership
2.5 Labour market reforms
2.6 Financial and capital market reforms
2.7 Micro finance /micro insurance schemes
3. Sectoral priorities for poverty 3.1 Development of agriculture and irrigation
reduction and employment 3.2 Development of employment-intensive
generation and agro-based industries
3.3 Development of small and medium sized
enterprises (SMEs)
4. Development of efficient physical 4.1 Infrastructure development – Power,
infrastructure and skilled human transport, telecommunications, water and
capital sanitation
4.2 Social sectors development- education and
health
4.3 Forestry p policy
5. Conflict resolution, social 5.1 Community participation
development and environment 5.2 Control of pollution and environmental
protection hazards
5.3 Economic and social security measures
5.4 Mainstreaming women and the excluded
groups through reservation in parliament
6. Direct poverty alleviation 6.1 Targeted employment generation
programs for the target groups programs
6.2 Food for works programs, public works
programs for local communities
6.3 Housing programs for the poor
7. Improving legal and institutional 7.1 Good governance and strengthening
set up institutional set up
7.2 Civil service and administrative reforms
7.3 Decentralization and local governance
50
7.4 Devolution of resources and
implementation of programs to the
subnational levels
7.5 Strengthening Anti-Corruption Strategy,
Transparency and Accountability
7.6 Legal and Judicial Reform
8. External Aid coordination and 8.1 Need for external resources

harmonization 8.2 Aid coordination and harmonization
8.3 Enhancing absorptive capacity
8.4 Encouraging foreign direct investment
9. Strengthening systems for 9.1 Improving concepts, measurement and
measurement, evaluation, analysis of poverty
monitoring and review 9.2 Poverty monitoring and poverty mapping
9.3 Output and outcome budgeting
4.2 Rationale for a package of policies and programs for poverty reduction
The following sections explain the rationale of having a package to deal with poverty,
illiteracy and ill health. The major cause of poverty especially in income is
unemployment and underemployment. Therefore, any poverty reduction program must be
based on generating remunerative employment opportunities through sustained high
growth and focusing on employment-intensive sectors such as agriculture, small and
medium enterprises and various kinds of services in retail trade, transport and
communications. However, poor cannot participate fully in these activities and contribute
to economic development unless they are adequately skilled and healthy. Therefore,
improving education levels and health conditions of the poor and upgrading their skill
and capabilities are essential for poverty reduction. As discussed below, demographic
factors and environmental conditions also have considerable impact on poverty and
inequality. Therefore, we need a package of policies and programs to attack
simultaneously on unemployment, illiteracy, hunger and disease.
As these poverty reduction strategies require massive investment in infrastructure and

human capital formation, developing countries, particularly the least developed countries,
need technical assistance and financial aid from the developed community and
international development and financial organisations.
4.3 Poverty traps at individual, local, national and global levels
Among the world’s most populous nations, India, Bangladesh, Pakistan, Indonesia and
Japan all have relatively equitable income distributions, with the richest quintile (i.e.
twenty per cent) of households in the nation receiving between 4-5 times as much as the
poorest quintile. China and the United States of America fall in the middle range, with the
richest quintile earning 8-9 times as much as the poorest quintile. Nigeria and the Russian
Federation have the higher factor of 12-15 separating the top and the bottom quintiles,
while Brazil has the highest inequality where the richest quintile earns 32 times as much
as the poorest quintile.
51
The poor persons are caught by forces at the individual, local, national, and global levels
that combine to form a four-tiered poverty trap. At the individual level, factors include
skewed distribution of land and other assets, various demographic factors leading to
physical weakness and higher probability of disease and high fertility rate. At the local
level, poor faces greedy moneylenders and false promises by self-interested politicians,
and has relatively lower power to fight against corrupt institutions. These are reinforced
at the national level by various policies ranging from tax laws to the sanction of
commercial credits that are generally pro-rich or anti-poor. At the global level, the poor
are held down by a mix of factors such as oppressive debt burdens, high interest rates,
tied grants, falling export prices, and rising capital flight.
The poor persons are caught by forces at the individual, local, national, and
global levels that combine to form a four-tiered poverty trap. At the individual
level, factors include skewed distribution of land and other assets, various
demographic factors leading to physical weakness and higher probability of
disease and high fertility rate. At the local level, poor faces greedy
moneylenders and corrupt institutions. These are reinforced at the national
level by various policies ranging from tax laws to the sanction of credits that
are generally pro-rich or anti-poor. At the global level, the poor are held
down by a mix of factors such as oppressive debt burdens, tied grants, falling
export prices and rising capital flight.
At the individual level, there are four factors that lead to poverty trap. The first individual
factor is the lack of productive assets. The poor are poor not only because they earn less
but also because they own less.
The second individual factor leading to poverty trap relates to physical weakness and
illness due to lack of nourishment, clean water, basic medical care, and adequate housing
space and sanitary services. Physical weakness often combines with low income to form
a vicious circle of poverty and ill health.
High fertility rates form the third part of the individual poverty trap. The poor families
have larger size, larger proportion of children, irregular sources of livelihood, low
productive jobs, high risk and insecure shelter and limited accessibility to basic services.
Rapid population growth and lack of sufficient employment opportunities force wages
down to the survival level, as the poor compete with each other for limited jobs.
The fourth individual factor combines a host of other demographic factors. The culture of
poverty theorists argue that poverty breeds poverty and a poor family has a high
probability of staying poor as these families are associated with high risks of ill health,
high fertility rates, inadequate education and training and lack of dynamism and
determination. With the progress of urbanization and rapid growth of industry and
services sectors, traditional joint families, which provided limited but efficient mutual
52
support networks within a family, progressively broke down into micro families, which
are economically less viable.
Demographic factors interact with socio-economic and environmental factors. For an

urban family a child is born by parental planning and family size is limited to the
necessary minimum. But in rural areas in a developing country, a child is regarded as an
asset and is expected simply because of normal life cycle progressions. Government is
trying to change this environment by suitable public policy on health and welfare. But the
spread of education, economic incentives and facilities for family planning have marginal
impact on the fertility, net reproduction rates and the family size as socio-cultural
environment puts a constraint on the effectiveness of family planning.
At the local level, majority of the poor people live in rural areas. A poor family is
associated with extreme vulnerability to unforeseen expenses due to natural calamities,
crop failures, fires, illness, funerals, and the costs of legal battles and bribes. To meet
these expenses a poor family very often borrows at usurious rates from greedy
moneylenders, piling debt on deprivation, or sell or mortgage at low rates whatever assets
they have such as land, livestock, family silver, house, tools, even their future labour.
Another factor leading to the local poverty trap is powerlessness of the poor. Ignorant of
the law and without adequate resources to hire legal advice, the poor household is an easy
victim of exploitation by moneylenders, merchants, landlords, petty officials and police.
Aware of the power of the richer rural and urban people and their alliances with the
bureaucrats and politicians, the poor household avoids any activity, which might
endanger their employment, tenancy, loans or protection. There is a saying by the
peasants in province of West Bengal in India that “Fishes can’t afford to live on bad
terms with the crocodiles in the pool.”
At the national level, poverty trap arises due to pro-elite or anti-poor public policies.
Public credit schemes for agriculture generally flow to the privileged rural groups or the
so-called kulaks. Education budgets are similarly tilted towards the rich. University and
higher education is an excellent investment for any nation, but the poor need primary and
secondary education first. In health care, the same pattern emerges. Subsidized urban
hospitals take the lion’s share of public health budgets, but help those who least need
public assistance. Community-based health centres and rural clinics, which form the
backbone of a health care system and cater to the poor, are generally under funded.
At the international level, international development assistance explicitly targeted to help

the “poorest of the poor” has very often tended to benefit not the poorest population of a
country, but those who are nearer to the average income and the individuals in the middle
and upper income brackets who have better knowledge of public policies and programs,
and better access to the government machinery.
53
4.4 Poverty and the Environment
Most of the world’s environmental threats, from ground-water contamination to air and
noise pollution and climate change, are byproducts of affluence. But poverty also leads to
ecological deterioration when people overexploit their resource base. The prevailing
conditions of poverty and unemployment force the poor people to live in slums and
squatter settlements without basic services and further degrade their environment. Rural
sector also faces the emerging environment problems. The pressure of land is exacerbated
by farmers’ needs to gather fuel wood and graze their livestock. Farmers burn animal
dung and agricultural waste instead of using these resources for soil enrichment. Poor
people use forest resources as fuel wood leading to deforestation, which cause droughts.
The short-term needs force landless families to put forestland and mountain slopes on
cultivation. Environmental degradation, in turn, perpetuates economic deprivation, as
degraded ecosystems result in diminishing yields to their poor inhabitants and further
impoverishment of the population. A self-enforcing downward spiral of economic
deprivation and ecological degradation takes place. Pushed to the brink of starvation,
evicted from familiar lands and ancestral homes, or deprived of alternatives by misguided
laws, they lack access to sufficient quantities of food, land, water or capital to provide
them with a sustainable livelihood.
4.5 Macro Adjustment Policies
Macro adjustment policies can be broadly divided into two groups- 54liberalization
policies and structural reforms. While 54liberalization policies aim at reducing macro
economic imbalances by attacking demand, structural adjustment policies aim at
increasing supply and improving productivity and growth by imparting competitiveness,
efficiency and dynamism to the system. These policies encompass the following specific
measures:
Macro stabilization policies:
(a) Fiscal policies

(b) Monetary and credit policies
(c) Exchange rate adjustment
(d) Tariff and price policies
Structural adjustment policies
(a) Reforms in trade and external sector

(b) Reforms in industry and infrastructure
(c) Reforms in agriculture
(d) Public sector reforms and privatisation
(e) Private participation and public-private partnership
(f) Factor market reforms- land, labour and capital markets
54
4.5.1 Reorientation of public policies
Almost all the countries of the world now are going through a phase of extensive market
reforms with an emphasis on the so-called LPG (viz. liberalization, privatisation and
globalization). There is a re-orientation of public policies and a change of the role of the
government from a controller to an enabler, from a supplier to a facilitator, from an
operator to a policy maker, and from a regulator to a trustee of social equity and
environmental sustainability. At present the basic job of the government is to create
enabling environment for public-private partnership, to link fiscal, monetary and other
incentives to productivity, to streamline public investment and social welfare programs,
to repair market failures, and to strengthen institutional structures and legal system. There
is emphasis on greater decentralization in implementation, transparency in policy making,
and consultations with stakeholders for greater public participation in development.
Two basic trends are affecting governance in most of the Asian countries. The first trend
is decentralization i.e. increased administrative, political and fiscal power is being
transferred to the sub-national governments for implementation of programs, particularly
relating to social sectors. This means that the basic job of the national government is to
formulate policies and programs, monitor performance and implementation, build
institutional capacity, facilitate change and enforce standards and quality. On the other
hand, more powers and resources are being devolved to the sub-national governments.
The other trend is an emphasis on transparency and accountability in governance and

utilizing techniques such as output-and-outcome based budgeting. Output is the
continuous or end result of a program, whereas outcome is the medium-term or long-term
impact of a program. Under results based budgeting systems, line agencies enter into
contracts or memorandum of understanding (MOUs) with the budget allocating ministry
to deliver specified outputs in return for certain inputs (personnel and financial
resources). The system requires developing output and outcome indicators and
monitoring their trends over time.
There is a distinct change in the mindset of bureaucrats and the realization of a need for
greater co-ordination, co-operation and partnership with private economic agents for
development. It is now recognized that both well-governed state and well functioning
markets are essential for high growth and sustainability, and Government and free
markets should supplement and complement each other. Government should withdraw
from sectors where private participation would be more productive and more efficient,
and still the scope of government should remain large in development of social sectors
and physical infrastructure.
It is now recognized that both well-governed state and well functioning

markets are essential for high growth and sustainability, and Government
and free markets should supplement and complement each other.
55
4.5.2 Role of Macro Stabilisation Policies for Poverty Reduction
Macro-economic stability is one of the necessary conditions for efficient development of

resource base of industries and poverty reduction. Macro-economic volatility puts a break
on economic growth. High and unpredictable inflation hurts everybody particularly the
poor as their incomes are not indexed to prices, and thus contributes directly to higher
poverty rates. However, sound macro-economic polices have only limited capacity to
alleviate poverty directly as the trickle down effects of high growth may be uneven and
time consuming. These policies should be directed at promoting growth through prudent
implementation of macro-economic goals, and eschewing direct interventions for
protecting the interests of the poor and for developing target groups of industries with
employment potential and comparative advantage.
Studies done by Dutt and Ravallion (1997), Ravallion and Dutt (1996) and the World
Bank (1998, 1999, 2000, and 2002) on the interrelations between poverty reduction and
macro stabilization policies made the following observations:
(a) An increase in per capita income is essential for reduction of poverty, as it

generates extra income that can benefit the poor.
(b) Educational achievement facilitated by public investment in health allows the

poor to participate and contribute more in the economic growth process through
higher and productive employment.
(c) Inflation had a negative effect on poverty reduction. Higher inflation in

developing countries is generally associated with monsoon failures and a
relatively higher rise in the price of food grains. The poor are doubly hit, as their
consumption basket is predominantly food, and their wages and demand for
labour in the years of poor harvests rise less than general prices.
(d) Services sectors are the fastest growing sectors in a developing economy and
account for more than sixty per cent of GDP. These sectors have in general higher
employment elasticities. Their growth, therefore, helps in poverty reduction.
(e) An increasing share of private sector in total investment leads to poverty

reduction, as private investment is more productive and more efficient than the
public investment in many sectors.
(f) A reduction of fiscal deficit helps in poverty reduction, as it does not lead to
crowing out of private investment.
56
The relations of poverty with other variables lead to the following policy prescriptions:
(1) Higher growth rate of income than that of population is essential for poverty
reduction as it provides extra income for distribution among the poor without
affecting adversely the well being and savings of the relatively richer households.
(2) While growth in per capita income is a necessary condition for poverty reduction, it
is by no means sufficient. It is important to create an enabling environment for the
poor so that they can participate in, and benefit from the growth process. The pro-
poor public policies include creation of employment opportunities and enhancing
the level of health, education and skill of the poor.
While growth in per capita income is a necessary condition for

poverty reduction, it is by no means sufficient. The pro-poor public
policies include creation of employment opportunities and
enhancing the level of health, education and skill of the poor.
(3) A stable macroeconomic environment, along with low inflation and sustainable
fiscal deficit, makes it possible for the poor to safeguard their purchasing power in
years of natural calamities or adverse business and trade cycles.
(4) The reduction of government deficit allows commercial and development banks to
provide more funds for private investment, which is more productive and more
efficient. It also allows the government to devote more scarce resources to
investment in social sectors.
4.5.3 Fiscal Incentives
In many countries, various fiscal incentives and direct subsidies are provided for
development of health, education, sanitation, water supply and other social services.
Government also provides fiscal incentives such as tax holidays, deferment of taxes and
duties, concessional supply of land, power and other basic inputs to the industry. In many
cases, the benefit has been marginal either because they are not available to small and
medium industries or they are more accessible to larger industries. Moreover, tax
holidays have been less effective in the regional dispersal of industries, as industries tend
to be located near the main demand centres or regions with better infrastructure facilities.
Instead of providing tax breaks for industries, it may be more productive to develop basic
infrastructure facilities in backward areas through increased allocation of public funds.
A reform of government policies should redirect the focus from the microeconomic level
of the firm to the macroeconomic level of business and the economic environment.
Instead of focusing on the different concessions to be provided, greater emphasis should
be placed on creating an enabling environment for long-term development of industries
and services. This may entail the dismantling of costly incentives and subsidies that
encourage inefficiency and waste in firms, increasing the availability of essential inputs
57
and bank credits for small and medium industries, and introducing a wide array of
marketing options and possibilities.
4.5.4 Role of Foreign Direct Investment (FDI)
All the developing countries are trying to attract foreign direct investment (FDI) and
portfolio investment. FDI acts an engine of growth and embodies a package of important
sources of capital, technology, and managerial, marketing and technical skills. The
presence of multinationals promotes greater efficiency and dynamism in the domestic
economy. The training gained by workers and local managers and their exposure to
modern organizational system and methods are valuable assets.
In order to improve private participation including foreign investment, developing

countries are unbundling risk in production, transmission and distribution of utilities,
improving public-private partnership through risk-sharing, rationalizing user charges, and
strengthening institutional, legal and regulatory framework. They are also separating
policymakers from service providers and regulators.
The diversity of experiences in Asian economies with respect of FDI requires different
policy approaches on the part of host countries. Those countries that have only recently
been open to FDI need to ensure that the “open door policy” is maintained and remains
stable. They should examine the possibility of a further 58liberalization of FDI regimes;
the harmonization of FDI and related policies on industry, trade and technology; and
improving the efficiency of their administrative set-up for investment approvals. In doing
so, all countries in the region should pay particular attention to the firms from
neighbouring countries, so as to capitalize the growing intra-regional investment. Special
attention needs to be given to small and medium-sized enterprises whose special needs –
dictated by their limited financial and managerial resources and insufficient information –
may call for incentives for the joint ventures. The Asian market has high potentials for
small and medium-sized TNCs.
FDI acts an engine of growth and embodies a package of important sources of

capital, technology, and managerial, marketing and technical skills. Those
countries that have only recently been open to FDI need to ensure that the “open
door policy” is maintained and remains stable.
4.5.5 Innovative Financing Techniques for the poor
There is a need for developing innovative financing measures for the poor such as setting
up of venture capital funds, leasing and hiring companies, mortgage finance companies,
factoring companies, trade credit suppliers an d micro finance.
Micro Finance
Development of micro-finance promotes economic growth, thereby contributing to

poverty alleviation. Not only financial development fosters economic growth and creates
employment opportunities for the poor, but also helps to mobilize savings.
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Micro-finance institutions (MFIs) can be defined as formal, semi-formal, or informal
providers of financial services to low-income clients, including the self-employed.
Financial services generally are restricted to lending although some MFIs also provide
savings, insurance and payments services. The Bangladesh Gramin Bank is a success
story of micro finance institution helping the poor.
There are a number of reasons why MFIs are likely to bring benefits to the poor. MFIs
enjoy better local knowledge and proximity, which is an important advantage because the
majority of poor households live in vast rural areas that are underserved by the
commercial banks. Furthermore, the semi-formal and informal MFIs complement the
formal financial system by providing financial services to those who have limited access
to the formal financial system.
However, the importance of micro-finance as an instrument of poverty alleviation should

be treated with caution. The quality of the loan portfolio of MFIs is often poor because of
inadequate management. A large number of these institutions are not efficient and survive
on subsidies from their donors. Lending rates charged by MFIs are usually very high.
The linkages between MFIs and commercial banks are often weak. Replication of
successful MFI models is often impossible due to differences in demographic or cultural
contexts. Finally, there are still no countries with a comprehensive network of micro-
finance institutions.
Micro Finance Institutions (MFIs) bring benefits to the poor in a number

of ways. MFIs enjoy better local knowledge and proximity to the poor
households. The semi-formal and informal MFIs complement the formal
financial system by providing financial services to poor who have limited
access to the formal financial system. The Bangladesh Gramin Bank is a
success story of micro finance institution helping the poor
4.6 Sectoral Policies
4.6.1 Rationale for development of agriculture

And agro-based SMEs for poverty alleviation
In many developing countries, agro-based and resource-based SMEs contribute

significantly to GDP growth, employment generation and poverty alleviation. In general,
SMEs have higher labour elasticity and have grown at a higher rate than overall industrial
sector. This proves their ability to compete globally.
But, SMEs face a number of problems and constraints, such as outdated technology and
low productivity, lack of skill of labour and management, infrastructure constraints, low
economies of scale, lack of modern marketing, high cost of domestic credit and lack of
foreign investment, and increased competition due to removal of quantitative restrictions
and reduction of customs duties. A wide range of opportunities can be seized by small-
59
scale and labour-intensive industries for additional employment and poverty alleviation if
suitable government policies are taken to remove these constraints.
The experiences of India, Bangladesh, Pakistan, China, Korea, Indonesia, Thailand,

Philippines, Japan and Singapore suggest that given appropriate program and policy
assistance, SMEs can make substantial contributions not only to output and employment
but also to exports (Das 2003a). Rather than general subsidies, selective support may be
extended to qualified firms and industries only with fixed term finance for the specific
purpose of assisting them to become competitive.
Rationale for promoting agro and resource based SMEs lies in their valuable
contributions to employment generation and poverty alleviation. These enterprises
contribute significantly to poverty alleviation and promote economic and social justice by
employing a significant portion of the poor and low skill work force, which may
otherwise remain unemployed or under employed. Higher employment in rural areas
helps in reduction of inequalities, development of backward areas and balanced regional
growth and development.
The poor persons cannot participate in the growth process for reasons of extreme
deprivation or vulnerability combined with poverty or face continuing exposure to risks
of ill health and malnutrition, which may jeopardize their ability to participate in the
opportunities offered by growth. Employment generated by the SMEs provides effective
safety nets that insure rural poor against the income fluctuations.
Development of agro-based and resource-based industries provides opportunities for the

growth of economic activities in the informal sector and micro enterprises in both rural
and urban areas. The informal sector remains an important source of income and
employment for the poor and self-employed in developing countries. This sector is very
diverse and covers multiple economic activities ranging from petty trading and personal
and domestic services to manufacturing, transport and construction. The social groups
include artisans and craftsmen, hawkers, fruits and vegetable vendors, women, and daily
laborers for construction and other services. Employment or ownership of micro
enterprise provides the poor with a source of empowerment and income security and
enables them to participate actively in rural and overall economic development.
Development of agro-based and resource-based industries provides

opportunities for the growth of economic activities in the informal
sector and micro enterprises in both rural and urban areas. The
informal sector remains an important source of income and employment
for the poor and self-employed in developing countries.
Agro-based industries open up new channels of distribution and marketing for

agricultural commodities produced by the small and marginal farmers and raise their
incomes. Development of resource-based industries, particularly SMEs, in rural areas
leads to valorization of agricultural land, agricultural commodities and other resources.
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Locations of agro-based SMEs in rural areas help to distribute the benefits of economic
growth broadly among the rural poor. They also improve value addition and productivity
of rural industries through wider distribution networks and greater access to both internal
and external markets. A dynamic SMEs sector serves not only to create employment but
also to earn foreign exchange through exports, upgrade the quality of the labour force and
diffuse technological know-how throughout the economy. These industries help to
mobilize domestic resources by utilizing the savings, labour and agricultural raw
materials that otherwise remain idle. They serve the low-income consumer markets and
produce a wide variety of goods that also include sophisticated products for export.
A dynamic small and medium industries sector not only creates employment
but also helps to earn foreign exchange through exports, upgrade the
quality of the labour force and diffuse technological know-how. These
industries help to mobilize local resources by utilizing the savings, labour
and agricultural raw materials that otherwise remain idle.
The location of small and medium industries in rural areas creates livelihood
opportunities that help to stop migration to urban centres. They provide a training ground
for the small-scale entrepreneurs and business management personnel, who may later join
larger undertakings.
The role of financial markets as an instrument to promote SMEs and to alleviate poverty
is generally focused on supplying credit facilities. However, credit is only one of the
financial services that the poor need. Access to bank accounts or savings facilities in the
rural areas is equally important. For example, people who extract their income primarily
from agriculture must build up financial assets following harvests to sustain themselves
for the rest of the year. Even the poorest households are eager to save if they can obtain
positive real interest rates and there are conveniently located deposit collecting facilities.
This point has been confirmed by the experience in Bangladesh and Indonesia.
Integration of SMEs into global market offers the potential for more rapid growth and
poverty reduction. Increased market access for agricultural products would work to
directly address poverty reduction in developing countries. While the rapid expansion of
demand for unskilled labour in manufacturing and urban services in many developing
countries has sharply reduced rural poverty, about three-quarters of the world’s poor still
live in rural areas, where agriculture is often the dominant economic activity (Das
2003a). Agriculture accounts for about 27 per cent of GDP in developing countries, a
similar share of exports and 50 per cent of employment. This dependency on agriculture
is even higher in LDCs. But agricultural markets are among the most heavily distorted
and attract tariffs several times higher than those facing manufactured imports.
Integration of SMEs into global market offers the potential for more rapid
growth and poverty reduction. Increased market access for agricultural
products would work to directly address poverty reduction in developing
countries. But agricultural markets are among the most heavily distorted and
attract tariffs several times higher than those facing manufactured imports.
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Historically, textiles and clothing (T&C) have played a unique role in economic
development and poverty reduction. Their contribution to the Industrial Revolution in
Western Europe and North America in the 18th and 19th centuries is well known, and they
continued to spearhead industrialization in many developing countries in the 20th century.
Since textile and clothing production often requires only simple technology and is
intensive in unskilled labour, many developing countries have a strong comparative
advantage in these sectors. In the mid-1960s, developing countries accounted for 15 per
cent of world textile exports and less than 25 per cent of world clothing exports. By 1998,
these shares had reached 50 per cent and 70 per cent, respectively. However, the sector
has also long been a prime target for protectionism.
Despite these positive aspects, SMEs are criticized for their inability to realize economies
of scale in procurement and production, and to have higher costs of production. In many
countries, SMEs exist on the strength of costly government support programs in terms of
several fiscal, monetary and other concessions.
4.7 Targeted Pro-poor Policies
Various empirical studies by Ahluwalia (1990), Chakravarty (1990) and the World Bank
(2000 and 2003) concluded that higher economic growth, with a focus on pro-poor
economic policies, is a key driver of poverty reduction. A research study by Ghura, Leite
and Tsangarides (2003) also observed that some public policies are “super pro poor” i.e.
they appear to directly influence the incomes of the poor. On the basis of cross-country
econometric relations, they concluded the following:
(i) Countries with higher income shares of the poor are characterized by higher
macroeconomic stability, lower income inequality, higher literacy, more
democratic institutions, better governance, better internal environment, more
open trade regimes and higher levels of financial development than those in
other countries.
(ii) Economic growth is an important factor in raising the incomes of the poor.
(iii) Certain public policies have direct impact on the incomes of the poor, even
after taking into the effect of growth. These include policies that lower inflation,
shrink the size of the government, promote financial deepening, and raise the
educational level. The policies are considered “super pro- poor” because they
raise the incomes of the poor directly, as well as indirectly through economic
growth. The direct and indirect effects are mutually reinforcing, and there is
thus no trade-off between growth promotion and poverty alleviation.
Certain public policies have direct impact on the incomes of the poor.
These include policies that lower inflation, shrink the size of the public
sector, promote financial deepening, and raise the educational level.
These policies are considered “super pro-poor” because they raise the
incomes of the poor directly, as well as indirectly through economic
growth. The direct and indirect effects are mutually reinforcing, and
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there is no trade-off between growth promotion and poverty alleviation.
(iv) The poor are significantly vulnerable to adverse movements in the terms of
trade and acceleration of inflation rates as their incomes are not indexed to
prices.
(v) A number of variables, such as trade openness, investment rate, the extent of
democracy, life expectancy, and civil wars that are generally shown to affect
economic growth do not directly influence the incomes of the poor.
Most of the Asian economies have introduced several employment generation and
poverty alleviation programs over the years. The ongoing economic reforms have also a
human face and are trying to strengthen the anti-poverty programs and to provide safety
nets to the vulnerable sections that might be adversely affected by structural changes.
In the past, public expenditures for poverty alleviation in the form of subsidies and price
controls tended to be captured mostly by the better off and funded by the fiscal deficits.
These policies may have harmed the poor through the adverse effects of inflation. More
recently, progress in poverty reduction has been attributed to policies that enabled more
rapid economic growth than in the past by shifting public expenditure away from industry
towards development of physical infrastructure and human capital and other social
concerns, and by improving targeting of poverty reduction programs through changes in
the public distribution system and involvement of civil societies and NGOs for
formulation, implementation and monitoring of poverty alleviation programs.
Any country needs to reformulate an anti-poverty strategy that is fiscally

sustainable and more finely targeted to those who truly cannot benefit from
the opportunities offered by growth.
Any country needs to reformulate an anti-poverty strategy that is fiscally sustainable and
more finely targeted to those who truly cannot benefit from the opportunities offered by
growth. Safety nets should focus on those who either cannot participate in the growth
process (such as for reasons of extreme deprivation, lack of productive assets such as
land and capital or vulnerability combined with poverty) or face continuing exposure to
risks, which may well jeopardize their ability to participate in the opportunities offered by
growth. Effective safety nets that insure rural poor against the income fluctuations, such
as public works programs, are also essential in overcoming important market failures.
4.8 Development of Efficient Infrastructure and Human Capital Formation
4.8.1 Infrastructure Development
Power, water, industrial estates, roads, telecommunications and a clean environment are
some of the more critical aspects of infrastructure for doing business. Production and
commerce are heavily dependent on these inputs. Development of proper legal and
institutional set up and efficient infrastructure are, therefore, essential for inducing
industrial development, employment generation and overall economic growth.
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In open and developed economies, such as Singapore and Hong Kong, only minimal
investment laws and regulations exist and administrative costs are negligible. Most of the
developing countries face infrastructure constraints and are passing through a transition
period. The experiences of China, Indonesia, Malaysia, Taiwan and Thailand suggest that
the transition can be managed well if there be focus on development of efficient
infrastructure. The faster an economy is reformed and infrastructure is built, the greater
would be the participation of private investment including foreign investment.
Regulations need to be made simpler and more transparent, and their administration may
be made more efficient.
The World Wide Web is changing the face of the market place. Information is being
described as the fifth factor of production in addition to land, labour, capital and
entrepreneurship. Databases on market related and financing related information need to
be identified and made accessible in a user-friendly manner. Government must provide
more information related to poverty reduction, health, education and other social services
through the Net.
4.8.2 Human Resource Development
Along with efficient physical infrastructure, skill labour is a critical factor for enhancing
productivity and efficiency of the more dynamic traded goods and services sectors.
Technological and organizational innovations drive foreign investment into those
countries, which have trained and skilled workforce and fairly high educational
standards. This explains the overriding importance of developing countries to invest more
in the development of human resources, infrastructure and services. It also highlights the
risk of the least developed countries (LDCs) of being marginalized due to infrastructure
constraints and lack of skilled labour.
The existence of a dynamic local business sector creates a supportive environment

through efficient networks of local suppliers, service firms, consultants, partners or
competitors. It is, therefore, necessary to concentrate efforts on the development of local
entrepreneurship. Equally important is the availability of high quality telecom and
transport systems, energy supply and other utilities.
While improving education, special care needs to be taken to ensure gender equality as
research shows that gender inequality in education and employment has a negative
impact on economic growth and notably on poverty reduction (Stephen Klasen 2006).
Gender inequality has much more adverse impacts on growth rates than on overall
income inequality.
Another key finding is that women tend to devote a larger share of households resources
to most essential activities of a household (Janet Stotsky 2006). Women are also more
oriented toward productive savings and investments behaviour though they are less likely
to take financial risk. In general, women are less corrupt and their political empowerment
64
supports a larger role of public insurance. It is, therefore, desirable to formulate country-
specific policies for promoting pro-poor growth through reduction of gender inequality.
4.8.3 Legal, Institutional and Regulatory system
It is also necessary to strengthen the regulatory system and the legal and institutional set-
up for orderly growth of industries. As regards the limits and nature of government
intervention in private sector activities, it is necessary to devise optimal rules for
regulatory system, which while servicing its legitimate purpose will not transcend its
limits to the disadvantage of the private sector development. First, any policy affecting
allocation of resources and regulation of private sector needs to be transparent and based
on a specified set of procedures. Second, even when there is strong presumption in favor
of government intervention, it is imperative to limit it to minimum necessary scale.
Third, from amongst the available alternative regulatory sets, it is necessary to go in for
one, which provides the least scope for rent seeking.
Along with deregulation, more important measures are needed to be directed towards
creating a legal and institutional infrastructure for the smooth functioning of the private
sector. This is well illustrated by the Indonesian experience. Though Indonesia’s
industrial policy, trade and financial sector reforms were deep and sweeping, they failed
to get a full pay-off as Indonesia lagged in changing its corporate law and other laws vital
to trade and industry. Similar was the case with issues of land and property rights.
An important lesson from the East Asian development experience is that a holistic
approach to deregulation is more productive than a partial deregulation in any one sphere
say in industrial policy which is divorced from any reform in other areas. Domestic
deregulation should proceed pari pasu with 65liberalization of trade and tariffs in order to
ensure optimal allocation of resources between traded and no-traded goods.
4.8.4 Competent and Committed Bureaucracy
Another important institutional prerequisite appears to be the establishment of a

competent economic bureaucracy. The complexity and difficulty of managing targeted
poverty reduction programs places high demands on the economic administrators for
policy formulation and planning, evaluation and monitoring outputs and outcomes.
Bureaucrats must be able to balance financial support for targeted programs with
penalties for non-performance. The economies of Japan, Korea, and Taiwan, China had
economic bureaucracies capable of imposing discipline on private sector. In short,
management of a set of successful industrial policies requires a stable macroeconomic
framework and committed economic bureaucracy capable of running complex pricing
policies and objectively running public subsidy schemes.
4.9 Regional Economic Co-operation
Regional economic cooperation promotes technology and capital transfer and helps to
accelerate growth of trade and industry. The successful use of strategic trade, industrial
65
and macro-economic policies in South East Asia led to a pattern of regional division of
labour, described as the “flying geese” model. As the leading economies in the region
successfully shifted from resource-based and labour-intensive industries to sophisticated
manufacturing activities, they provided space for the less developed countries to enter
simpler manufacturing stages. Regional trade and investment flows played a central role
in this process by helping to create markets and by the transfer of skills and technology to
neighbouring countries. The challenge now lies in the extension of this regional dynamics
and the growth pattern to include newly emerging countries such as China and India, as
well as other less developed countries in South and East Asia (Das 2002).
Since regional economic arrangements imply close interdependence among a group of

economies, there is the risk of contagion effect that problems in one country may be
transmitted to its neighbors. In fact, a number of financial problems in the regional
integration at the end of 1990s contributed to volatile capital flows fuelling a boom-bust
cycle in East Asian economies. Thus, maintenance of a stable and rapid regional growth
needs not only credible economic policies for upgrading of production and exports, but
also appropriate regional arrangements to ensure the stability of financial markets,
including lending facilities and agreement on a sustainable pattern of exchange rates.
4.9.1 Technical Assistance
For stronger regional integration in South Asia as well as East and Southeast Asia, many
countries are starting to coordinate and harmonize policies for tariffs, taxation,
investment and business regulations. But the most productive impetus to regional
integration would come from removing the restrictions on movements of goods, capital,
and people and improving the transport and communications connectivity among the
countries, particularly among the neighbors. Regional integration is also likely to get a
boost from strengthening the regional growth centres in South Asia and Southeast Asia.
These could produce important pull effects on growth throughout the continent. They
would help promote FDI by enlarging markets. But regional integration should not be a
substitute for globalisation, but should be a means to strengthen it.
The international organizations like the World Bank, IFC, IMF, Asian Development
Bank, UNDP, UNICEF, UNIDO and UNCTAD are engaged in the provision of technical
assistance, consultancy and advisory services with regard to the development of the
private sector, infrastructure and human resource development, and promotion of non-
debt-creating financial flows. The regional organizations can spur institutional progress
by providing forum for high-level discussions on Asian solutions to Asian problems and
by providing a framework for collective policy actions for poverty reduction,
development of technology and higher education, environment sustainability, and control
of HIV/ AIDS and other communicable diseases.
4.9.2 Official Development Aid (ODA)
Donors of foreign aid expect it to boost investment and aggregate demand by transferring
real resources to recipient countries. Furthermore, attaining the Millennium Development
66
Goals (MDGs) calls for substantial increases in aid in order to strengthen domestic
investment and expenditures on development of infrastructure and social sectors. Yet, the
IMF has been encouraging some of the poorest countries, particularly in Sub Saharan
Africa (SSA) to adopt restrictive policies that prevent the transfer of real resources from
abroad, including capital imports. A recent report by the Independent Evaluation Office
of the IMF, entitled The IMF and Aid to Sub-Saharan Africa, 2007, found that SSA
countries with an IMF Poverty Reduction and Growth Facility (PRGF) spent an average
of only 28 per cent of aid flows during 1999-2005. This report also sates that only 63 per
cent of aid flows to Sub-Saharan Africa were ‘absorbed’ during 1999-2005. The
remaining 37 per cent were used to stockpile reserves (Lapavitsas 2007).
This implies that not only the italicization of committed ODA is low but
also the aid receiving country does not have the adequate absorptive
capacity. This is due to various restrictions on utilization of aid. There is
need to Liberalise some of these policies by the donor countries and
allowing aid to be utilized even for operational expenditure related to
the achievement of MDG targets.
The Paris Declaration on Aid Effectiveness and the UN World Summit

(2005) also underscore the emerging consensus for a new aid
environment focusing on national ownership, convergence around
national planning processes, capacity building, harmonization of
policies, results and mutual accountability, and realignment with the
Millennium Development Goals (MDGs).
4.10 MDG and PRSP Coordination
Both the MDG reports and PRSP put emphasis on the need for an
effective, efficient and coordinated policies and programs at the
country level. They fully support national priorities and development
needs as indicated in the national plans. There is also emphasis on
analysis, reporting and monitoring poverty, hunger and other
development indicators over time, integration of the goals into national
development plans or poverty reduction strategies, and
implementation and operational activities.
The UN Country Team (UNCT) also undertook a number of initiatives to

help countries meet their MDGs in areas such as poverty, hunger and
food security, governance, natural resource management, education,
land rights, water supply, micro-credit, social services, HIV/AIDS and
gender. It provided support to formulation of national development
plans, poverty reduction strategies, promotion of broad civil society
participation; costing of the MDGs; identification of opportunities for
implementation, advocacy for pro-poor policy reforms, service delivery
and national capacity building in the areas of statistics, monitoring,
reporting, planning and budgeting.
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68
Chapter-5
Major Concluding Observations
• This chapter summarizes the main observations of the report, which advocates for
adopting a stylized pro-poor policy package for faster growth and faster reduction
of poverty and hunger.
• Pro-poor growth strategies with redistributive measures focusing on the poor are
central to reducing absolute income poverty and to reach the Millennium
Development Goals.
• It is advocated that no single policy can achieve all the MDG goals, rather a
country needs a pro-poor growth strategy and a “stylized policy package”
encompassing structural reforms and stabilization policies, sectoral priorities for
poverty reduction and employment generation, development of physical
infrastructure and human capital, conflict resolution and environment protection,
direct poverty alleviation programs, strengthening legal and institutional set up,
external aid coordination and harmonization, and strengthening systems for
measurement, evaluation, monitoring and review.
• International and regional development organisations like UN-ESCAP can play an

effective role by helping the member countries in capacity building for policy
planning, development of physical infrastructure and human capital formation,
developing and strengthening efficient institutional set up and in refinement of
concepts, measurement and monitoring of MDG targets.
5.1 Asian Economy- Performance and Challenges
Asia has grown rapidly in the past decade and made significant progress towards
achieving the MDGs (John Farrington and Mark Robinson 2006). Economic growth has
been exceptionally high with many countries achieving real GDP growth rate exceeding 6
percent per annum on an average during the last two decades. Growth has been largely
export led with significant increase in both foreign and domestic investment. While East
and South East Asia encouraged trade and investment liberalisation, convertibility on
capital account, infrastructure and skill development, South Asia allocated more funds for
employment generation and poverty alleviation programs, and relied on direct attack on
poverty. The average poverty ratio declined from 32 percent in 1990 to 22 percent in
2000. Despite this progress, Asia is still home of more than two thirds of the world poor.
There is a high probability of further rapid progress in Asia, but actual achievement in
MDGs might be constrained by several factors such as environmental degradation, rapid
urban expansion and insufficient urban facilities, outmoded institutional arrangements,
outdated business laws and acts which have outlived their utilities, weak governance in
both public and private sectors, infrastructure deficiencies and social and political unrest
69
in some countries. Access to improved water and sanitation facilities is improving, but
most countries in the region face the challenges of reducing child and maternal mortality.
Although the overall HIV/ AIDS prevalence rates in the region are low, there is lack of
effective prevention program for tuberculosis, and emergence of new diseases like SARS
and avian flu present particular challenges.
Asia has grown rapidly in the past decade and made significant progress
towards achieving the MDGs. There is a high probability of further rapid
progress in Asia, but actual achievement in MDGs might be constrained by
several factors such as environmental degradation, insufficient urban
facilities, outmoded institutional arrangements, outdated commercial laws
and acts, weak governance in both public and private sectors, infrastructure
deficiencies.
There is general recognition that higher and sustained growth is necessary but not
sufficient condition for poverty reduction. Emerging challenges as mentioned above also
require new forms of partnership between governments in the region and the multilateral
development agencies outside the region.
There is general recognition that higher and sustained growth is necessary but
not sufficient condition for poverty reduction.
5.2 Main Observations on MDG Reports and PRSPs
This report studies in details the broad strategies and policies under MDG reports and
their relation with the Poverty Reduction Strategy Papers (PRSPs) for 14 selected ESCAP
countries (viz. Afghanistan, Bangladesh, Cambodia, China, Lao PDR, Maldives,
Mongolia, Myanmar, Nepal, Pakistan, Papua New Guinea, Samoa, Thailand, and Timor
Leste). The report reviews country specific MDG targets, policies, strategies, current
status, evaluations of systems for review and monitoring MDG targets over time etc.
(a) Basic thrusts of MDG Reports
All MDG Reports rely mainly on two approaches to attack poverty, hunger, disease and
environmental degradation- first, by adopting macro stabilisation policies and structural
reforms to enhance growth on the anticipation that economic growth will have a “trickle
down effect” on the levels of living of all groups; and the second that direct anti-poverty
programs are also required as trickle down effects could be slow, delayed and uneven.
Accordingly, governments are shifting public expenditure away from industry towards
social sectors, and targeting of subsidies towards the needy and vulnerable sections.
All MDG Reports rely mainly on two approaches to attack poverty, hunger,
disease and environmental degradation. First, adoption of macro
stabilization policies and structural reforms to enhance growth on the
anticipation that economic growth will have a “trickle down effect” on the
levels of living of all groups. Second, direct anti-poverty programs are also
70
required as trickle down effects could be slow, delayed and uneven.
The Reports identify a plan of actions and policies at both domestic and international
levels. Internal policies include a) good governance; b) sound macro-economic
management; c) human development; d) combating rural and urban poverty; e)
promotion of multi-cultural, plural, inclusive and mass education; f) expansion of social
safety nets; g) investment in human capital and social sectors; h) strengthening of
domestic resource mobilization and prudent allocation of public resources; i)
empowerment of local governments, civil society and non-governmental organizations
and etc. The Plan also identifies some external policies that affect poverty alleviation
efforts such as increased intra-regional trade and capital flows, increased ODA, increased
market access, reduction of debt burden etc.
(b) MDGs and Budgets
MDGs have been adapted to suit national budget constraints and priorities, and are
owned by the respective governments. MDG strategies are both ‘Needs Based’ and
‘Resource Constrained’. The UN Millennium Project argues that national poverty
reduction strategies should be ‘needs based’, setting out strategies that are consistent with
reaching the MDGs, and challenging the donors to fill the financing gap left after the
domestic resource mobilization with reasonable national efforts. Donors stress that, if the
PRSP is to be useful as a guide to MDG action, it should be linked to the national budget,
setting out clear priorities for public expenditure plans based on a realistic assessment of
the available resources. The countries should also have higher aid absorptive capacity.
MDG reports donot estimate the costs of achieving all the MDG targets. It is necessary to
be explicit about the assumptions linking public expenditure costs to expected MDG
outcomes because the argument for additional resources may otherwise be lost by default,
both with the Ministry of Finance, and with the donors. Estimates of the expected costs
and the impact of specific expenditure programs on outcomes are also helpful for
prioritization of the budget in the light of available resources. Estimates also provide a
quantified framework for monitoring, review, updating and evaluation and for setting
realistic targets for managing performance.
Therefore, MDG strategies should include explicit analysis of expected linkages between
costs-outputs-outcomes. Outputs are the end results whereas outcomes are the long-term
impacts of projects over time. Cost estimates should address institutional constraints and
be prepared in a form that can be mapped to budgets and support resource bids. Priorities
should be identified to permit adjustments in the light of resource availability.
It may be mentioned here that, under the various capacity building projects being funded
by the World Bank, Asian Development Bank (ADB), UNDP and other multilateral
agencies, government of Mongolia has done significant progress in establishing medium
term linkages between budget allocations and achieving targets for the MDGs. For this
purpose the government has developed Strategic Business Plans (SBPs) for major line
Ministries (such as Ministries of Finance, Education, Health, Social Welfare and Labor)
indicating their vision, mission, strategic objectives and plans for eradication of poverty
71
and hunger and achievement of other MDGs. Works are in progress to move towards
accrual system of budgeting and output-outcome based budgeting.
(c) MDGs and PRSP
Although there is no formal link with the MDGs, the PRSP has in practice become the
main national planning instrument for formulating the strategy and policies to achieve
MDG targets. However, it is necessary to develop more than one scenario for PRSPs.
The PRSPs do not capture all of the MDG goals to which countries are committed, with
some countries prioritizing macroeconomic stability and structural reforms or enhancing
overall economic growth with a focus on reduction of poverty and hunger. In addition to
policies for employment generation and poverty reduction, PRSPs focus on human
capital formation by improving education and health.
Most PRSP health strategies are dominated by health services, and there is a focus on
promotive and preventive interventions and on primary health care delivery. The
strategies prioritize the areas most closely linked to the MDGs, with reproductive and
child health and the control of the major communicable diseases given high priority.
PRSPs include the costs of expanding education, roads, water and sanitation, and their
contribution to achieving health targets, but are seldom quantified. State funded health
systems in many countries are grappling with similar problems: staff availability, pay and
motivation, and the difficulty of managing a complex and geographically diverse system.
Stronger inter-departmental coordination is needed to move from ‘health services

strategy’ to ‘health strategy.’ Similar conclusions also hold for delivery of other services
like education, water and sanitation. In most countries, achieving national targets requires
strengthening institutional reforms for better supply and delivery of services.
It may be mentioned that the above observations are consistent with the main conclusions
drawn by Mick Foster (2003) from 14 country experiences in MDG-oriented sector and
poverty reduction strategies. Mick Foster (2003) prepared a comprehensive literature
review for 14 selected countries (viz. Albania, Benin, Burkina Faso, Cambodia, Ethiopia,
Ghana, Guyana, Nepal, Nicaragua, Rwanda, Tajikistan, Tanzania, Uganda, and Vietnam)
on the relation between MDG targets and policies and the PRSPs in the health sector. The
country cases were chosen to include all countries with completed PRSPs that were
supported by both an IMF PRGF and a World Bank PRSC. Foster concluded that:
Setting a single MDG target for the nation may not be very appropriate as
an average figure may conceal as much as it reveals. MDGs may require
disaggregation to address inequality by setting more challenging sub-
targets at the sub-national levels or for the targeted population groups.
• Setting a single MDG target for the nation may not be very appropriate as an average
figure may conceal as much as it reveals. MDGs may require disaggregation to address
72
inequality by setting more challenging sub-targets at the sub-national levels or for the
targeted population groups.
• If the PRSP is to be a useful guide to MDG action, it should be consistent with the
available resources and budget allocations in the national budget.
• Achievement of MDGs and PRSP cannot be solely dependent on aids. A fundamental

problem is that aid commitments are short-term and unreliable. Therefore, the
developing countries must enhance their own resources.
• PRSP priorities and proposed expenditure ceilings should influence and feed in to the
preparation of the budget and of any Medium Term Expenditure Framework (MTEF) or
Medium Term Expenditure Plan (MTEP).
• The PRSP should set out clear priorities and criteria for achieving MDG target. The
sectoral priorities of the PRSP and the allocations eventually agreed in the budget are
the outcome of an iterative process between MOF, line ministries, and donors.
• The PRSP needs to be a ‘living document’ that is elaborated as necessary and adapted in
the light of changing circumstances. A proper institutional set up may be established for
regular review and updating PRSP.
In this respect, it will also be worth mentioning the following main observations made by
the World Bank and the international monetary Fund in their joint evaluation of the
“Poverty Reduction Strategy Papers—Progress in Implementation” (World Bank and
IMF 2003):
“The main findings of this progress report are twofold. First, although the Poverty
Reduction Strategy (PRS) approach was introduced only around 2000, it is now
recognized as the country-level operational framework for progress towards the MDGs.
The PRS initiative, which is grounded on the principles of the Comprehensive
Development Framework (CDF), has led many low-income countries to focus more
squarely on poverty reduction in formulating and implementing their development
strategies; it has opened up the participatory process in many countries; and it has
focused more attention on monitoring poverty-related outcomes.”
“The countries have made good progress in addressing the more straightforward
challenges inherent in the approach. For example, poverty analysis is relatively good,
strategies recognize the importance of growth and macroeconomic stability, indicators
lists are being rationalized, and sectoral coverage is broadening”.
“Second, the challenges that remain are technically difficult and institutionally complex.
For example, the analysis of the sources of growth and its distributional impact remains
relatively weak and countries have experienced difficulties in marrying their aspirations
for the future with the resource and capacity constraints of the present in the context of
their PRSs. To better realize the potential of the PRS approach, sustained efforts on the
73
part of countries and their development partners are, therefore, needed to: (i) reinforce the
PRS as a country driven approach: (ii) enhance the analysis that underpins a PRS; (iii)
strengthen the institutional capacity for successful implementation; and (iv) enhance aid
effectiveness. Given the scope of these challenges, expectations need to be ambitious yet
realistic, while capacity building and analytical support must be appropriately prioritized
and sequenced at the country level.”
A major contribution of the PRSP initiative has been to focus attention on country
specific constraints to achieve MDG targets. Developing countries are aware of the need
for sound analysis of optimal policy options, prioritization; capacity building and
strengthening institutions for effective formulation, implementation, monitoring,
evaluation, review and updating policy choices, and to induce the donors to support a
country-driven development approach. Sustained action in all of these areas is needed to
more fully realize the potential benefits of the PRSP approach.
5.3 MDGs and Regional co-operation
Although the MDG reports and the Poverty Reduction Strategy Papers are still in infancy,
they are progressing well and at a fast speed in right directions. The individual countries
and all the development agencies like the World Bank, ADB, IMF, UN-ESCAP,
UNAIDS, UNDG, SIDA, DFID, UN Country Offices and other donors must be
completed for their poverty-reducing development and aid approach.
The ongoing MDG reports and PRSPs have helped to focus attention on country-specific
challenges to improving development outcomes and effectively reducing poverty. They
have also increased awareness of the scope of these challenges and the need for more
effective development dialogue, research, consultation and cooperation, including more
aid. However, important challenges do remain, and resolving them is more challenging
and may be put on the future research agenda of the development agencies like UN-
ESCAP. It will take considerable time and efforts by both individual countries and the
donors. In particular, efforts to strengthen capacity building at the country level, both
human and institutional, will continue to be critical in helping developing countries
address these challenges.
.
Both the MDG Reports and PRSPs suggest that a key determinant of poverty reduction
and employment generation is higher growth and its composition. Growth is a function
of efficiency which in turn is a function of competition. Structural reforms, liberalization
in industry and investment, and freer cross-border flows of goods, services, labour;
capital, technology and information create greater competition and enhance efficiency
and productivity. Regional cooperation initiatives such as regional trade and investment
agreements and technical assistance programs in science and technology also impart
dynamism to the overall growth process of individual countries.
It is, therefore, necessary to identify areas that will encourage regional co-operation.
These include: strengthening ongoing regional initiatives, such as on trade liberalization,
74
investment promotion, infrastructure development and implementation of social charter,
regional co-operation in promotion of regional indigenous medicine systems and
intellectual property rights in the health sector; prevention of human organ trade;
prevention of trafficking in women and children; prevention of dumping of hazardous,
including radio-active waste; wetland conservation in the region; harmonizing tariff rates,
taxes and duties.
In addition, in order to enhance interlinkages between MDGs and PRSP for overall
economic and human development, and to enhance the capacities of PRSP to achieve
MDGs, development organisations like UN-ESCAP can undertake extensive research in
the following areas:
(a) Reinforcing a Country-Driven Approach
The MDG Reports and PRSP approach have raised awareness of the value of civil society
contributions to policy dialogue. But, there is skill lack of a broad-based and open
discussion and research on macroeconomic policy alternatives in both MDGs and PRSPs.
The MDG Reports and PRSP approach have raised awareness of the value of
civil society contributions to policy dialogue. But, there is skill lack of a broad-
based and open discussion and research on macroeconomic policy alternatives
in both MDGs and PRSPs.
(b) Enhancing Analytical Underpinnings
Most low-income countries face constraints in terms of analytical capacity within the
agencies responsible for overall evaluation and monitoring systems, and particularly
within government agencies and nongovernmental institutions. While many countries
provide qualitative discussions of the sources of growth and its distributional
implications, MDG Reports PRSPs continue to be weak in linking macroeconomic
frameworks and financing requirements to the medium-term goals. They seldom use
alternative scenarios to map out what efforts should be made and how these efforts be
prioritized and sequenced to speed up the achievements of the MDGs over time.
Although some countries like Mongolia are engaged in preparing medium term strategic
business plans and costing outputs to achieve MDG targets and other development
parameters with the help of the World Bank and ADB capacity building projects, these
efforts are still at experimental stages and limited to selected ministries and preparing
similar plans for all departments will take considerable time.
MDG Reports PRSPs continue to be weak in linking macroeconomic

frameworks and financing requirements to the medium-term goals. They seldom
use alternative scenarios to map out what efforts should be made and how these
efforts be prioritized and sequenced to speed up the achievements of the MDG
targets over time
75
(c) Strengthening Institutional Capacity for Successful Implementation
Building the institutional arrangements for effective systems that allow the information to
flow among the various actors—data producers, analysts, and policy makers—is one of
the biggest challenges. Institutional arrangements encompass both formal arrangements
(with defined responsibilities, reporting, rules, legal framework) and informal rules and
practices (which determine the actual application of the formal arrangements). The
PRSPs have created interest in building institutional capacity for monitoring, evaluation
of feedbacks and review, but most of the countries still lack strong and formal channels
for linking data production, warehousing, data crunching and policymaking.
(d) Monitoring outputs and outcomes and improving database
One of the lessons learned from early studies is that the monitoring system should be kept
simple and flexible, and be built progressively. There has been progress in setting out
policy priorities for reducing poverty and managing public expenditure. However,
countries still face challenges for prioritizing and sequencing the policies over time, in
formulating Medium Term Expenditure Framework (MTEF) and Projections (MTEP).
Many countries donot have proper database, and even if they produce information, they
are week in making environmental cost-benefit appraisal, preparing impact analysis and
outcome budget for poverty reduction programs. Monitoring indicators are being
rationalized, however indicators still focus on inputs and direct impacts and statistical
systems remain fragile. There is a need in MDG Reports and PRSPs to track outputs and
outcomes, coordinate donor supports for strengthening statistical systems and database,
and improving institutional arrangements for monitoring.
(e) Enhancing Aid Effectiveness
Although some countries with strong ownership of the PRSP have successfully aligned
donor assistance with country priorities, more efforts are needed to realize the full
potential of the PRS as a mutual accountability framework. There is need to enhance
coordination among donors in order to accelerate progress towards the MDGs.
Fundamentally, donors need to demonstrate capacity and progress in providing more
resources and better development assistance to help countries to prepare sound Poverty
Reduction Strategy Papers and to make continual progress towards the MDGs. Low-
income countries often view PRSPs as imposing additional burdens on them, particularly
in terms of reporting requirements to donors, without providing commensurate benefits in
terms of more aid and improved donor alignment, coordination and harmonization.
(f) Bridging development research and policy planning
There is also a significant gap between development research by research institutions and
policy planning by the government departments. Most researches done by the research
institutions are not policy-oriented, and very few government policies are formulated on
the basis of research. Bridging research and policy is one of most challenges faced by the
developing countries (Das 2006). Organizing multi-stakeholders workshops and brain-
76
storming sessions with policy makers, researchers, development agencies and other
stakeholders would be an effective means for bridging research and policy.
Bridging development research and policy planning is one of most challenges

faced by the developing countries. Organizing multi-stakeholders workshops
and brain-storming sessions with policy makers, researchers, development
agencies and other stakeholders would be an effective means for bridging
research and policy.
5.4 Stylized Policy Package for Pro-poor Growth
It is now recognized by all planners, development agencies and poverty experts that
higher growth is necessary but not sufficient condition for poverty reduction as the trickle
down effects of growth may be uneven, slow and delayed. Pro-poor growth strategies
with redistributive measures focusing on the poor are central to reducing absolute income
poverty and to reach the Millennium Development Goals. A study on redistributive
impact of world growth by Woodward and Simms (2006) indicated that during 1981 to
2001, world GDP (PPP in 1993 prices) increased by $18.7 trillion. Of this only $786
billion or 4.2 percent of the increase, went to the poor (as defined by $2 poverty line),
even though the poor accounted for more than 50 percent of the world population.
Redistributing just 1 percent of the income of the richest 20 percent of the world’s
population to the poorest would have benefited the latter as much as distributionally
equal global growth of around 20 percent.
A study by Woodward and Simms (2006) on redistributive impact of world

growth indicated that only 4.2 percent of the increase of the world GDP in
1981-2001 went to the poor who accounted for more than 50 percent of the
world population. Redistributing just 1 percent of the income of the richest 20
percent of the world’s population to the poorest would have benefited the latter
as much as distributionally equal growth of around 20 percent.
Recent country studies by the World Bank confirm strong correlation between economic
growth and poverty reduction (Louise Cord 2006). The rates of pro-poor growth were
mostly positive but lower than GDP growth due to increasing inequality.
Slow employment growth has been a major factor leading to slow poverty reduction in
developing countries (A.R. Khan 2006). While East Asia is the best example of pro-poor
growth in the recent past, growth in China and India has been far less employment
friendly. For growth to reduce poverty sufficiently, the poor must be able to participate
fully in the development process through productive employment and contribute more to
economic growth (Susanna Lunstorm and Per Ronnds 2006). World Bank recommended
that poverty reduction strategies need to focus on job creation and growth in sectors and
regions where poor live and work. These sectors include agriculture and informal sectors,
and involve labor reforms and public investment on infrastructure, health and education.
77
Slow employment growth is a major factor leading to slow poverty
reduction in developing countries. While East Asia is the best example of
pro-poor growth in the recent past, growth in China and India has been
far less employment friendly. World Bank recommended that poverty
reduction strategies need to focus on job creation and growth in sectors
and regions where poor live and work. These sectors include agriculture,
and involve labour reforms and public investment on infrastructure,
health and education.
The MDG reports and PRSPs of all countries, discussed in this report, have also identified
development of agriculture, agro-based industries, rural extension and infrastructure services,
and small and medium industries as the main sectoral priorities for poverty reduction and
achieving food security. Many countries have established Road Maintenance Fund to provide
required funds for the construction and maintenance of national and local road network. Most
of the countries have also formulated policies for gender equity and environment strategy
(emphasizing the link between preservation of natural resources, and poverty).
The MDG reports and PRSPs of all countries discussed in this report, have
also identified development of agriculture, agro-based industries, rural
extension and infrastructure services, and small and medium industries as the
main sectoral priorities for poverty reduction and achieving food security.
Countries also recognize that macro-economic stability is a precondition for efficient

poverty reduction. Sustained high and broad-based economic growth enhances
employment and income generating opportunities for the poor and improves their access
to markets, credits and productive assets. Countries have initiated comprehensive
stabilisation policies, and structural and institutional reforms for creating enabling
environment for private participation and public-private partnership that will further
promote human development and overall economic progress.
As discussed in Chapter-4, both the MDG reports and PRSP emphasize that the
attainment of broad-based economic growth, which is more inclusive, participatory, and
stable over time, is pre-requisite for sustainable reduction of poverty and unemployment.
It is clear from the reports that no single policy can achieve all the goals, rather a country
needs a pro-poor growth strategy encompassing the following “stylized policy package”:
1. Sustaining macroeconomic stability and macro stabilization policies

2. Structural reforms in trade, industry, land, labour and capital markets
3. Sectoral priorities for poverty reduction and employment generation
4. Development of physical infrastructure and human capital
5. Conflict resolution, social development and environment protection
6. Direct poverty alleviation programs
7. Strengthening legal and institutional set up
8. External Aid coordination and harmonization
9. Strengthening systems for measurement, evaluation, monitoring and review
78
No single policy can achieve all the MDG goals, rather a country needs a pro-
poor growth strategy and a “stylized policy package” encompassing structural
reforms and stabilization policies, sectoral priorities for poverty reduction and
employment generation, development of physical infrastructure and human
capital, conflict resolution and environment protection, direct poverty
alleviation programs, strengthening legal and institutional set up, external aid
coordination and harmonization, and strengthening systems for measurement,
evaluation, monitoring and review.
The rationale of these policies and strategies for the reduction of poverty and hunger and
achievement of other MDGs has already been discussed in chapter-4. It may be reiterated
here that these polices and programs are interrelated and provide a package of reforms
and policies that need to be undertaken, not as piece meals, but collectively by a country,
although with varying degrees of scope and intensity depending on its size, level of
development and socio-political environment, for attaining sustained growth with poverty
reduction. Broad-based growth and overall human development will lead to attainment of
other MDGs on universal education, gender equality, good health, sustained environment
and global partnership for development. If all the people are health, educated and live
longer then contribute more to development and also can gain more from development.
So there is a win-win situation for all with a pro-poor growth and development strategy.
MDG reports, PRSP, Budgets and National Development Plans may, therefore, focus on
pro-poor growth strategy by building on what poor people actually do, where they live,
what they can contribute to the GNP, what are their demographic and social
characteristics, what sectors they can be gainfully employed in, how they can upgrade
their skill and knowledge, how they can improve their productivity etc. Although these
questions appear to be simple and easy, answers cannot be given without painstaking
research based on scientific and comprehensive surveys on socio-economic-locational-
demographic characteristic of the poor.
It may be mentioned here that recently in a study for the International Poverty Centre,
Mwangi S. Kimenyi has proposed 10 Commandments of pro-poor growth (described in
Box 5.1). The basic notion is that the policies must be designated to stimulate growth in
those sectors and areas in which the poor people earn their livelihood.
The 10 Commandments suggest that pro-poor reform policies should:

(i) Target activities, which most poor are involved in;
(ii) Improve the functioning of markets where poor people participate;
(iii) Target low-skill, labour intensive economic activities;
(iv) Seek to integrate markets for the poor by improved forward and backward
linkages;
(v) Ring-fence public expenditures for raising capabilities of the poor;
(vi) Target those groups that operate outside the markets;
(vii)Include a food security policy;
79
(viii)Include policy initiatives that protect vulnerable populations from large
swings in welfare;
(ix) Include policies that support accumulation of tradable assets by the poor; and
(x) Include institutional reform that empowers the poor through progressive
diffusion of power.
Continual research by the home countries, international developmental and funding

organizations, and the independent research institutes are necessary for identification of
pro-poor activities, sectors, policies and programs.
Box 5.1 Ten Commandments for pro-poor reform policies
A recent study by Mwangi S. Kimenyi (2007) for the International Poverty Centre, has
proposed 10 Commandments of pro-poor growth. The basic notion is that the policies
must be designated to stimulate growth in those sectors and areas in which the poor
people earn their livelihood.
The 10 Commandments suggest that pro-poor reform policies:
(1) Must target activities, which most poor are involved in, and must influence
markets of the poor directly without assuming any linkages with other sectors,
because markets of the poor are not well integrated with other formal markets.
(2) Must improve the functioning of markets where poor people participate.
(3) Should target low-skill, labour intensive economic activities.
(4) Should seek to reduce market segmentation so that markets for the poor are better
integrated in the economy with improved forward and backward linkages.
(5) Should ring-fence public expenditures for raising capabilities of the poor.
(6) Should target those groups that operate outside the markets with the aim of
creating markets.
(7) Should include a food security policy.
(8) Should include policy initiatives that protect vulnerable populations from large
swings in welfare
(9) Should include policies that support accumulation of tradable assets by the poor.
(10) Must include institutional reform that empowers the poor through progressive
diffusion of power.
80
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Mainstreaming MDGs Through

National Development Strategies

THE ECONOMIC AND SOCIAL COMMISSION

Dr. Tarun Das1

Millennium Development Goals

** For any clarification and additional information, EMAIL das.tarun@hotmal.com/

1. Introduction, Scope and Objectives

1.1 Introduction and objectives

2. Millennium Development Goals (MDG) and Poverty Reduction Strategy

2.1 Millennium Development Goals (MDGs)

3. Economic and Social Profiles of sample countries

3.1 Economic and social indicators of sample countries

Annex-1.3: Policies and strategies for improvement of health conditions and

Annex-1.4: Policies and strategies to encourage globalization and development

Annex-2.1 Bangladesh MDG Targets, Performances, Challenges and Strategy

Annex-2.2 Cambodia MDG Targets, Performances, Challenges and Strategy

Annex-2.3 Maldives MDG Targets, Performances, Challenges and Strategy

Annex-2.4 Mongolia MDG Targets, Performances, Challenges and Strategy

Annex-2.5 Pakistan MDG Targets, Performances, Challenges and Strategy

ADB Asian Development Bank

Million = 1000 thousand

Dr. Tarun Das1

1. Introduction, Scope and Objectives

1.1 Introduction and Objectives

The present report is based on interrelationships between MDG Reports,

1.2 Scope of the report

1.4 Misunderstandings and Misconceptions of MDG targets

“The spirit of the UN Millennium Declaration was not to impose

“Successful implementation of MDGs require that these must be

In another one pager policy brief entitled “MDGs: Misunderstood or Misconceived?”

1.5 Growth and Pro-poor Policies

Country Groupings Positive growth Negative growth

Pro- Anti- Total Pro- Anti- Total

Low income countries 20.8 33.3 54.2 27.8 18.1 45.8

Upper middle income 21.7 35.0 56.7 21.7 21.7 43.3

Heavily indebted poor 18.6 27.1 45.8 32.2 22.0 54.2

South Asia 29.4 52.9 82.4 11.8 5.9 17.6

All countries 23.2 32.1 55.3 22.4 22.4 44.7

Source: H. H. Son (2007)

Although cross-country regression analysis is subject to serious statistical estimation

Millennium Development Goals (MDG)

• It specifies eight Millennium Development Goals, 18 quantifiable targets and 48

2.1 Millennium Development Goals (MDG)

The Millennium Development Goals (MDGs) comprise eight ambitious

Goals, Targets and Indicators

Goals and Targets Indicators

Goal 1: Eradicate extreme poverty and

5.Proportion of population below minimum

Goal 2: Achieve universal primary education

Goal 4: Reduce child mortality

Goal 5: Improve maternal health

Target 8: 21. Prevalence and death rates associated with

Goal 7: Ensure environmental sustainability

Target 16: 45. Unemployment rate of 15-24 year olds

2.2 Poverty Reduction Strategy Papers (PRSP)

PRSP describes a country’s macroeconomic, structural and social policies

Under the Poverty Reduction and Growth Facility (PRGF) established in

2.4 Interlinkages between MDG Reports and PRSP

Bangladesh MDG Report

In the preparation of the report, in order to be effective as an advocacy tool, it was

Limitations of the MDG report

PRSP thematic sectors MDGs