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OCTOBER 13, 2000 VOL. 26 NO. 40 | SEARCH ASIAWEEK


Asiaweek Pictures.
Kim Hak-Su is a United Nations under-secretary-general and executive secretary of the Bangkok-based U.N. Economic and Social Commission for Asia and the Pacific (ESCAP).

Breaking the Poverty Cycle
Cut arms spending, learn from others — and use reserves

Over 37 rich and poor countries met in Jakarta in August to discuss how to finance development. They had waited seven years for this regional United Nations consultation. On the second day, a bomb exploded in a plush diplomatic enclave. The media's attention was diverted away from the pressing agenda of how to help the region's poor break the cycle of poverty. Pity, because the U.N. participants deserved a hearing. They were, after all, trying to find ways to break the shackles of poverty, to prevent those bombs that are the result of anger and frustration.

Muhammad Yunus, founder of the Grameen Bank of Bangladesh and internationally known for extending micro credit to the poor, often tells development experts: "Poverty is not created by poor people. It is produced by our failure to create institutions to support human capabilities." I could not agree more.

Poverty figures seem daunting, almost impossible to overcome. Over 1.3 billion people, about 22% of the world's population, survive on less than one dollar a day. Another 1.6 billion live on $2 a day. "The combination of extreme poverty and inequality between countries, and often also within them, is an affront to our common humanity," U.N. Secretary-General Kofi Annan's Millennium report bluntly states. Leaders have been urged to take action to at least halve the number of the world's poor by 2015. Add other challenges such as controlling population, meeting health needs, and providing safe drinking water and education, and clearly we have our work cut out.

There is no magic formula to reduce these dismal figures. We can continue to think intelligently, however, and draw inspiration from how some countries have overcome their problems while we work toward solutions that will benefit all. What else can we do? The obvious, for one thing, such as cutting military spending, which according to a recent U.S. study is at a historic high for developing countries — $232 billion in 1997 — accounting for 28% of world military expenditure.

We can also use the power of ideas by learning from each other. For instance, I was recently in Kitakyushu, a coastal city in Japan, for a U.N. conference on environment and development. The citizens of Kitakyushu — one of four industrial centers that fueled Japan's post-war reconstruction — were proud that they had turned their "sea of death" into "a sea of plenty." They cleaned up the pollution by ensuring that local government, society and industry worked together. Women had led the Blue Sky brigade, as the city's grassroots movement was dubbed.

In South Korea, another "best-practice" initiative is the saemaul undong (new village movement) development strategy. This encourages rural people to assume a pioneering attitude and leadership and responsibility for their actions. From an economic point of view, this strategy lays the foundation of agricultural production and contributes to an increase in farm income through the introduction of scientific methods.

We have a duty to strengthen the weakening positions of developing countries in the face of globalization. ESCAP was formed in 1947 to help in post-war construction and has 61 members ranging from wealthy countries to tiny Nauru in the South Pacific. All of them need to be alert to the coming changes and — not least to reap the benefits of information technology in health and education — to learn about development from their neighbors. And we need to see how well our communities are structured to detect and tackle social problems such as human trafficking, the care of the disabled and elderly, and education for girls. We must listen to local voices while maintaining our global vision.

Can wealthy nations help bridge the poverty divide? One idea is to turn the poor into a living asset — not as preposterous as it may sound. There are about $1 trillion in foreign exchange reserves in the region, invested mostly in New York and London. Could we recycle these reserves within our region so that poor countries benefit? One of the top priorities should be to bring down interest rates in developing countries. This can be done by cautiously developing capital markets and introducing risk management strategies and guarantee systems. High interest rates kill investment opportunities and lower economic growth.

Let's consider a "swap" system under which rich nations would transfer some of their foreign exchange reserves to central banks in poor nations facing capital shortages. Instead of these nations borrowing from lending institutions such as the International Monetary Fund when they are short of foreign exchange, they can undertake a kind of swap as a form of risk management. Several banks can share the risk, and consequently interest rates will drop.

With official development assistance well below the U.N. target of 0.7% of GDP — it was less than 0.3% last year — this is an urgent matter. The poorest countries depend on ODA. Setting goals to reduce poverty is an essential part of the way forward. Goals cannot be imposed but can be adopted. We may not have found a formula to prevent bombs from being thrown in desperation, but at least we can try.

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