Inequality lurks under facade of prosperity

What if the gap between the rich and poor grew and grew in Asia, and no one noticed?

Avendor pedals past a Louis Vuitton store —an image of contrast that captures Thailand’s widening income gap between the rich and poor. NATTHITIAMPRIWAN

Amidst skyscrapers and shopping malls from Bangkok to Beijing, that's a question worth pondering given an increasingly affluent and growing middle class often far removed from the poverty that persists across the Asia-Pacific region.

Under Presidents Barack Obama and George W Bush, I served as US Ambassador to the Asian Development Bank (ADB), an institution focused on reducing poverty. Now based in Thailand, I was struck by the answers from students at Chulalongkorn University's Sasin Graduate Institute of Business Administration, when I asked: "Which nation in Asia is the most 'unequal' when it comes to the Gini coefficient, or index _ a measure of income inequality?"

Pakistan, India and Vietnam were among the responses. Imagine the surprise, when I informed them of the CIA World Factbook's rankings.

While the African nations of Namibia, South Africa and Lesotho top the charts as the most unequal in the world, Thailand is ranked as the most unequal in Asia. Coming in as the 12th most unequal worldwide, Thailand is followed in Asia by No.13 Hong Kong and No.19 Papua New Guinea. Sweden has the most equal distribution of average family income of more than 130 ranked nations and territories.

Some of these figures are startling. Indeed, the rankings also underscore one of the fundamental challenges of policy. That is, the accuracy of data. Rankings are only as good as the source data. GIGO, as they say: Garbage in, garbage out. While Gini index calculations often rely on government-provided information, some governments may deem it too sensitive to regularly provide fully accurate data.

Recent figures presenting China with a distribution of income on par with the United States were met with scepticism by critics who said the official numbers did not match what ordinary people are experiencing. With anecdotes circulating of Lamborghini-driving or Rolex-wearing bureaucrats and "princelings", the perception of a more unequal nation had become reality for many of China's netizens, despite official proclamations to the contrary.

Asia has seen efforts by activists, like the Occupy Wall Street movement in the United States, to bring attention to what they view as a widening divide between the haves and the have nots, between the connected and disconnected, and those with guanxi, or relationships, and those with none at all.

Even as a changing Asia helps drive the global economy, the region remains home to two-thirds of the world's poor, and an estimated 1.7 billion people still struggle on less than US$2 (59.7 baht) a day. Approximately 700 million live on less than $1 a day.

Ethnic minorities and indigenous peoples are often marginalised and excluded from the benefits of the region's growth. Some 43% of the Asia-Pacific population do not have access to improved sanitation facilities, and growing numbers moving to Asia's teeming cities face deteriorating sanitation and environmental conditions and inadequate housing and infrastructure, according to the ADB.

This is far from the shimmering images of a modern China, a dynamic Indonesia or a tourist-friendly Thailand.

ADB economist Juzhong Zhuang has noted that inequality widened in 12 of 28 Asian economies with comparable data, including the three most populous countries and the drivers of the region's rapid growth, namely China, India and Indonesia. As poverty has been reduced, inequality has widened.

So, does the "official" Gini index and growing inequality really matter?

In some ways, it remains a philosophical question _ about the role of government, business and civil society, and about what level of inequality a society can accept. Perhaps more important than Gini coefficients are trends and attitudes as to whether or not things are getting better and for whom.

Critically, Asia's leaders must also focus on inequality of opportunity. Unequal access to public services, such as education, water, electricity and sanitation, should be critical concerns.

Change and dynamism today are more likely to be associated with the developing world than the developed. But so too are poverty and inequality.

Respected Singapore diplomat Tommy Koh once wrote that technology, globalisation and domestic policy are the key drivers of inequality today.

In discussing Singapore's relatively high Gini coefficient (the nation recently ranked as the world's 29th most unequal when it came to distribution of family income) Mr Koh wrote the number did not capture Singapore's strengths _ strong rule of law, a non-corrupt government and most importantly, equality of opportunities and social mobility.

He concluded: "It is probably better to be poor in Singapore than anywhere else in Asia." Whether or not that is true, there is indeed more to a nation than its Gini coefficient.

Certainly, Asia broadly speaking has enjoyed a tremendous growth these past decades. The world should welcome Asia's rise. Poverty has decreased and tens of millions live better lives.

But the reality is that the private sector has done more to drive growth in this region than World Bank loans or ADB financing and technical assistance.

With the twin genies of technological progress and globalisation long out of the bottle, there is no putting them back in. It is now time for each of us to answer the question: "What if the gap between the rich and the poor grew and grew, and no one noticed?" Our responses and follow-up actions will help define us in Asia _ whether as individuals, families, businesses, a country or as a region.

Curtis S Chin served as US ambassador to the Asian Development Bank (2007-2010). He is senior fellow and executive-in-residence at the Asian Institute of Technology, and a managing director with RiverPeak Group.

About the author

Writer: Curtis S Chin