CHINA:Development bank reports that rising inequalities present a clear danger to Asian countries, writes Richard McGregorin Beijing
China, together with Nepal, has the largest gap between rich and poor in Asia, following a decade in which income distribution in the region has become increasingly skewed in favour of the rich, according to a new study by the Asian Development Bank.
The study found that China has Asia's highest Gini coefficient, a standard measure of relative income disparities, as well as the fastest increase in spending by the wealthiest 20 per cent compared with the bottom quintile of the population.
It provides stark confirmation that high-speed growth in Asia is producing different outcomes from the region's development pioneers, Japan, South Korea and Taiwan, where incomes were much more evenly spread.
Most of the 22 developing countries in the study, from central Asia to Indonesia in southeast Asia, registered increases in inequality over the past decade, as measured by the Gini coefficient.
Absolute inequalities, which reflect differences in real incomes, have risen in almost every country - including Malaysia, where the Gini coefficient fell during the period of the study.
"It is not so much a case of the rich getting richer and the poor getting poorer, but that the rich are getting richer faster than the poor," said Ifzal Ali, the ADB's chief economist at a press conference in Beijing. Dr Ali said growing inequality could in some countries lead to greater social conflict, "from street demonstrations to violent civil wars".
"There is a direct correlation between rising inequality in Nepal and conflicts in some of its provinces," he said. Using other measures besides relative income, such as education, health and land ownership, countries such as India and Pakistan fare much worse.
Neither country rates high in terms of the Gini coefficient, but they record very high inequalities when using benchmarks such as health and land use.
Dr Ali said that India's ratings for infant mortality, child nutrition and primary schooling "had deteriorated today to be worse than Bangladesh".
"Countries which don't have high income inequality can have high non-income inequality," he said.
China's exceptionally high economic growth rates mean that even though its income distribution is more unequal than India, its poorest citizens have greater spending power than its neighbour. "China's stellar growth rates have filtered down to make the bottom 20 per cent better off than in most countries," he said.
While the report does offer some policy ideas to alleviate the problems, it concedes that the forces of globalisation, which favour coastal cities hooked into world trade and educated, English-speaking people, mean that some inequality may be inevitable. The booming Indian IT and outsourcing industry, for example, provides its workers with relatively high incomes but is open to only a select group.
"Unless you have a high-quality education and can speak English, you are pretty much shut out of that sector," said Rana Hasan, an ADB senior economist.
The report stresses the need for "active and enlightened" government, with transparent institutions, that can tackle issues such as raising incomes in the countryside and improving access to capital for poorer people. "The need for redistributive policies will not go away, especially if increasing inequalities turn out to be an enduring feature of developing Asia over the next two or three decades," the report says.
"Rising inequalities present a clear and present danger to Asian countries."