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The pandemic and the subsequent socioeconomic crisis reversed more than a decade of gains against poverty. The World Bank estimates that the $3.65/day poverty rate rose to 25.0% in 2022 from 11.3% in 2019 and 23.8% in 2009/10 and forecasts the rate to reach 27.5% in 2024. The multidimensional vulnerability index developed by the United Nations Development Programme estimates that over half of the population faces overlapping vulnerabilities beyond income that lead them into poverty traps; 82% of such vulnerable people live in rural areas. Rural residents, in particular workers on large plantations, suffered from loss of economic opportunity, and the urban poor faced the dual vulnerability of inconsistent earnings with limited private coping mechanisms and restricted access to social protection. The impact of severe supply shortages and elevated inflation had disproportionate effects on households headed by women, the elderly, children, the disabled, and other vulnerable groups. While inflation has subsided to single digits, prices continued to be elevated, with the average index 91.8% higher in 2023 than in 2021. Wages have failed to keep up with rising prices, prolonging the squeeze on purchasing power and pushing more people into poverty. Rising maternal and child malnutrition poses a serious threat to human capital development and growth.
The near-term priority during economic recovery is to lay institutional and structural frameworks for an inclusive social protection system. In the absence of a cohesive social protection strategy and governance mechanism, programs in the past have been fragmented, with low coverage, poor targeting, high inclusion and exclusion errors, and low payments. In 2023, however, the government introduced the Aswesuma program to consolidate over 25 state-sponsored cash-transfer programs that were previously managed by several government agencies. The new social protection program covers nearly 40% of the population at various income levels and includes a self-registry database for a more objective and streamlined selection process aimed at minimizing leakage. This program can be further strengthened with increased individual support, better forward planning and an effective graduation mechanism with technical and life skills training, better financial literacy education, and enhanced social and financial inclusion. The government must establish a comprehensive long-term strategy for poverty eradication that monitors progress and incorporates regular social dialogue to ensure the representation and participation of all stakeholders.
Addressing gender inequality is a key priority. In an economically active population of 8.5 million in 2022, female labor force participation was only 32.1%, down from 33.6% in 2018 prior to the economic crisis. Key reasons for this include a lack of safe and affordable childcare facilities, inadequate provision for flexible working hours, onerous household responsibilities and care duties socially imposed on women, and public transport inadequacies for women. While the private sector has addressed these shortcomings to some extent, the government can tackle gender inequality through a more supportive framework for female labor participation by introducing flexible work hours and mandating equal pay. Reforming labor laws is also essential to formalize informal employment and protect workers from exploitation. Given the absence of an employment-linked support system, a contributory unemployment insurance scheme and related laws may be considered.
The government should enhance access to public services to mitigate inequalities and better target poverty alleviation efforts. The integration of social protection programs with other public services such as education and health care would ensure universal access to essential services, improve targeting and coverage, and expand social inclusion. In this regard, government efforts to revamp education policy with updated curricula, improved teacher training, and digitalization are welcome. While the state-sponsored universal health-care coverage and subsidized medicine provide considerable support to the poor, the government can better leverage the health-care system for more targeted measures and promote health insurance programs to protect the poor and vulnerable. The government should intensify efforts to train and retain health and care staff, particularly considering significant outmigration by professionals. Given fiscal constraints, expanding access to services could be achieved by enabling greater private sector participation in essential services. Investments in infrastructure for water supply, road connectivity, and energy are needed to address inequality in income and opportunity, and in access to resources.
Creating jobs and fostering sustainable livelihoods would go a long way toward alleviating poverty. This can begin by improving workforce productivity, particularly in agriculture, which employs 27% of the labor force but contributes little to GDP. The government must prioritize modernizing agriculture by resolving issues regarding farmland, investing to improve land productivity, and promoting greater value addition and diversification in agricultural exports. Policies targeting structural economic transformation—by promoting investment in manufacturing and technology, digital inclusion, the adoption of global best practices in industry, and skill enhancement—would ensure increased job creation outside of agriculture with high productivity and thus bolster worker earning capacity across the economy. To catalyze economic expansion, development, and job creation, the government should promote private sector participation through consistent policies and the regulatory, legal, and institutional support necessary for private sector development. Embracing pro-poor tourism policies by providing the necessary regulatory support and capacity building would ensure optimal transfers of benefits to local communities.
Source: Asian Development Bank. 2024. Asian Development Outlook (ADO) April 2024
The near-term priority during economic recovery is to lay institutional and structural frameworks for an inclusive social protection system. In the absence of a cohesive social protection strategy and governance mechanism, programs in the past have been fragmented, with low coverage, poor targeting, high inclusion and exclusion errors, and low payments. In 2023, however, the government introduced the Aswesuma program to consolidate over 25 state-sponsored cash-transfer programs that were previously managed by several government agencies. The new social protection program covers nearly 40% of the population at various income levels and includes a self-registry database for a more objective and streamlined selection process aimed at minimizing leakage. This program can be further strengthened with increased individual support, better forward planning and an effective graduation mechanism with technical and life skills training, better financial literacy education, and enhanced social and financial inclusion. The government must establish a comprehensive long-term strategy for poverty eradication that monitors progress and incorporates regular social dialogue to ensure the representation and participation of all stakeholders.
Addressing gender inequality is a key priority. In an economically active population of 8.5 million in 2022, female labor force participation was only 32.1%, down from 33.6% in 2018 prior to the economic crisis. Key reasons for this include a lack of safe and affordable childcare facilities, inadequate provision for flexible working hours, onerous household responsibilities and care duties socially imposed on women, and public transport inadequacies for women. While the private sector has addressed these shortcomings to some extent, the government can tackle gender inequality through a more supportive framework for female labor participation by introducing flexible work hours and mandating equal pay. Reforming labor laws is also essential to formalize informal employment and protect workers from exploitation. Given the absence of an employment-linked support system, a contributory unemployment insurance scheme and related laws may be considered.
The government should enhance access to public services to mitigate inequalities and better target poverty alleviation efforts. The integration of social protection programs with other public services such as education and health care would ensure universal access to essential services, improve targeting and coverage, and expand social inclusion. In this regard, government efforts to revamp education policy with updated curricula, improved teacher training, and digitalization are welcome. While the state-sponsored universal health-care coverage and subsidized medicine provide considerable support to the poor, the government can better leverage the health-care system for more targeted measures and promote health insurance programs to protect the poor and vulnerable. The government should intensify efforts to train and retain health and care staff, particularly considering significant outmigration by professionals. Given fiscal constraints, expanding access to services could be achieved by enabling greater private sector participation in essential services. Investments in infrastructure for water supply, road connectivity, and energy are needed to address inequality in income and opportunity, and in access to resources.
Creating jobs and fostering sustainable livelihoods would go a long way toward alleviating poverty. This can begin by improving workforce productivity, particularly in agriculture, which employs 27% of the labor force but contributes little to GDP. The government must prioritize modernizing agriculture by resolving issues regarding farmland, investing to improve land productivity, and promoting greater value addition and diversification in agricultural exports. Policies targeting structural economic transformation—by promoting investment in manufacturing and technology, digital inclusion, the adoption of global best practices in industry, and skill enhancement—would ensure increased job creation outside of agriculture with high productivity and thus bolster worker earning capacity across the economy. To catalyze economic expansion, development, and job creation, the government should promote private sector participation through consistent policies and the regulatory, legal, and institutional support necessary for private sector development. Embracing pro-poor tourism policies by providing the necessary regulatory support and capacity building would ensure optimal transfers of benefits to local communities.
Source: Asian Development Bank. 2024. Asian Development Outlook (ADO) April 2024
