Poverty, Inequality, Environment and Urbanization

Guanghua Wan Principal Economist

ADB

1

Asia has seen fast growth (1990-2008) …

8.6

3.6 3.1 2.8

0

2

4

6

8

10

Developing Asia Sub-Saharan Africa

Latin America and Caribbean

OECD

The growth continues despite crises…

10.1

6.7 6.0

9.1

7.2 6.9 7.3

0 1 2 3 4 5 6 7 8 9

10 11

2007 2008 2009 2010 2011 2012f 2013f

GDP growth

5-year moving average

3

f: forecast

Growth helps reduce poverty…

But growth quality? Asia remains home to the largest number of poor…

Sub Saharan Africa 33%

Developing Asia 63%

Rest of the World

4%

… little reduction in moderate poverty

903.40 753.47

899.16 880.80

0

200

400

600

800

1000

1200

1400

1600

1800

2000

2005 2008

$1.25-$2.00 $0- $1.25

Num

ber o

f poo

r (in

mill

ion)

Poverty reduction mainly from PRC and India ($1.25)

PRC 57%

India 20%

Viet Nam 5%

Bangladesh 4%

Pakistan 3%

Others 11%

… in the Pacific, the number of $1.25 poor rose

Sub-region HCR (%) No. of Poor (million)

2005 2008 % change 2005 2008 % change

Central and West Asia 21.51 16.43 -23.63 49.36 39.81 -19.36

East Asia 15.93 9.25 -41.94 208.25 122.78 -41.04

Pacific 31.63 30.65 -3.07 2.23 2.35 5.52

South Asia 42.48 38.08 -10.35 550.17 513.93 -6.59

Southeast Asia 18.81 14.37 -23.60 93.39 74.60 -20.13

Developing Asia 27.09 21.87 -19.27 903.40 753.47 -16.60

0

5

10

15

20

25

30

35

40

2002 2005 2008 2009 2010

Average annual change (percentage point) under $1.25

-2.5

-1.7

-1.6 -1.5

Hea

d co

unt r

atio

The growth impacts on poverty decline over time…

… largely due to rising inequality

-1.0

-0.9

-0.8

-0.7

-0.6

-0.5

-0.4

-0.3

-0.2

-0.1

0.0 25 30 35 40 45 50

Gro

wth

ela

stic

ity

Initial Gini

Central and West East

South Southeast

The Pacific

No. of obs 124 R-squared 0.2574

Adj R-squared 0.2513

Variable Coefficient Std. Error t stat P-value

Gini 0.0218 0.0034 6.5 0.000

Constant -1.2277 0.1247 -9.84 0.000

Inequality in Asia has risen...

0 0.05 0.1 0.15 0.2 0.25 0.3 0.35 0.4 0.45 0.5

Pakistan

Bangladesh

Tajikistan

Taipei,China

Lao PDR

India

Viet Nam

Sri Lanka

Turkmenistan

Georgia

Philippines

Cambodia

Nepal

Earliest (1990s) Latest

Gini Index

Poverty-growth-inequality triangle

0 5 10 15 20 25 30 35 40

Sri Lanka

Viet Nam

Indonesia

Philippines

Cambodia

Lao PDR

$1.25 a day

Simulated Actual

13

The inequality–growth relationship in PRC (dashed = yearly; solid = cumulative)

-12

-10

-8

-6

-4

-2

0

2

4

6

8

0 3 6 9 12 15 18 21 24 27 30

Spatial (urban-rural) gaps as main contributor to high inequality

14

13

21 22 26

32 35

38

54

0

10

20

30

40

50

60

Sri Lanka (2009)

Philippines (2009)

Pakistan (2008)

Indonesia (2009)

India (2008)

Viet Nam (2008)

Bhutan (2007)

PRC (2007)

Share of spatial inequality to total inequality (%)

0.00

0.02

0.04

0.06

0.08

0.10

0.12

0.14

0.16

0.18

Total Theil

Urban-rural gaps

Other gaps

China’s Regional Inequality

Urbanization the only solution GDP = $100, Population = 10

GDP Urbanization Average Income City $90 6 (60%) $15 Rural $10 4 (40%) $2.5 Urban – rural ratio 6! City $90 8(80%) $11 Urban – rural ratio 2.2 Plus Transfer <2.0

0

200

400

600

800

1000

1200

1980-2010 2010-2040

Incr

ease

in U

rban

Pop

ulat

ion

(mill

ion)

Increase in Urban Population in Asia and the Pacific (millions)

Bangladesh Pakistan Indonesia

India China, People's Rep. of Rest of Asia & Pacific

1.06 billion 1 billion

Asia’s urbanization is unprecedented

Source: ADB estimates using UN(2012).

1750 1775 1800 1825 1850 1875 1900 1925 1950 1975 2000 2025 2050

China, People's Rep. of

Bhutan

Lao PDR

Indonesia

Viet Nam

Asia and the Pacific

Europe

North America

Latin America and Caribbean

Number of Years from about 10% to 50% of Urbanization Rate

10% 49% 210 years

9% 51% 105 years

12% 51% 150 years

11% 51% 95 years

12% 50% 90 years

12% 54% 65 years

10% 52% 60 years

10% 51% 55 years

11% 51% 61 years

Unique feature 1: very fast speed

Source: ADB estimates using Bairoch (2008) and UN(2012).

Unique feature 2: highest densities in the world…

0

5000

10000

15000

20000

25000

30000

35000

Mum

bai

Kolk

ata

Kara

chi

Lago

s

Shen

zhen

Seou

l/In

cheo

n

Taip

ei,C

hina

Chen

nai

Bogo

ta

Shan

ghai

Lim

a

Beiji

ng

Delh

i

Kins

hasa

Man

ila

Tehr

an

Jaka

rta

Tian

jin

Bang

alor

e

Ho C

hi M

inh

City

Cairo

Bagh

dad

Shen

yang

Hyde

raba

d

São

Paul

o

Dens

ity (p

erso

n/m

2 )

Top 25 World's Cities Ranked by Density, 2007

Asia & the Pacific (17/25) Africa Europe Latin America & Caribbean Middle East & North Africa

Source: www.citymayors.com

Unique feature 3: many megacities Megacities, 2010

ASIA: 12/23

Note: The circles indicate population sizes ranging from (10 million) to (39 million). The circles do not reflect the physical extents of

the cities and any overlap between them merely reflects their relative population sizes and not any official acceptance or endorsement of any geographical sovereignty.

Source: UN (2012).

Unique feature 4: low starting base

0

10

20

30

40

50

60

70

80

90

100

1950 1960 1970 1980 1990 2000 2010 2020 2030 2040 2050

Leve

l of U

rban

izat

ion

(%)

Level of Urbanization by Region (%)

52%

43%

67%

63%

Source: ADB estimates using Bairoch (2008) and UN(2012).

12

21

0

5

10

15

20

25

Asia Non-Asia

Urban Primacy (%, 2009)

Ratio

of P

opul

atio

n in

Lar

gest

Citi

es

over

Urb

an P

opul

atio

n (%

)

Unique feature 5: the largest cities are likely to grow bigger

Source: ADB estimates using UN(2012).

… thus more and bigger megacities are emerging

Megacities, 2025

ASIA: 21/37

Note: The circles indicate population sizes ranging from (10 million) to (39 million). The circles do not reflect the physical extents of the cities and any overlap between them merely reflects their relative population sizes and not any official acceptance or endorsement of any geographical sovereignty.

Source: UN (2012).

Unprecedented urbanization poses enormous challenges already serious

• Rising urban crimes

• Expansion of slums

• Above all, environmental degradation

Pollution

Vulnerability to flooding

Theft rates rise with urbanization

0

500

1000

1500

2000

2500

3000

3500

4000

4500

0 10 20 30 40 50 60 70 80 90 100

Thef

t (Ra

te p

er 1

00,0

00 p

opul

atio

n)

Urbanization Level (%)

Theft Rate versus Level of Urbanization: Global Data

Over 60% of global slum dwellers in Asia

Asia, 61%

Non-Asia, 39%

Shares of Global Slum Dwellers , 2010

Source: UN-HABITAT.

… and slum dwellers rise over time Asian Slum Dwellers , 1990-2010

428.7

465.2

492.2

505.4 505.6

380

400

420

440

460

480

500

520

1990 1995 2000 2005 2010

Slum

Dw

elle

rs (i

n m

illio

n)

Source: UN-HABITAT.

67% of Asian (vs. 11% Non-Asian) cities fail to meet EU air quality standard

0

50

100

150

200

250

300

350

400

Ahw

az

Ula

anba

atar

Sa

nand

aj

Ludh

iana

Ke

rman

shah

Ya

souj

Ka

npur

De

lhi

Luck

now

U

rom

iyeh

Q

om

Indo

re

Khor

amab

ad

Agra

Al

Ain

La

nzho

u Ko

lkat

a Va

n Xi

ning

U

rum

qi

Farid

abad

G

reat

er C

airo

M

exic

ali

Jaba

lpur

M

umba

i Dh

anba

d Ila

m

Alla

haba

d Bu

sheh

r Ke

rman

Jin

an

Beiji

ng

Patn

a Sa

raje

vo

Abu

Dhab

i M

eeru

t Xi

'an

Jaip

ur

Qaz

vin

Med

an

Chen

gdu

Hefe

i Sh

enya

ng

Taiy

uan

Vara

nasi

Ch

ongq

ing

Wuh

an

Esfa

han

Shiji

azhu

ang

Kony

a Ka

rs

Ham

edan

Ar

ak

Harb

in

Tian

jin

Nan

jing

Deni

zli

PM10

Leve

l (m

icro

gram

s/cu

bic m

eter

)

Cities with PM10 above 100 ug/m3 (2008-2009)

Asia and the Pacific (34/57) Non-Asia and the Pacific

EU standard

Source: WHO (2012).

97%

18%

0 10 20 30 40 50 60 70 80 90

100

Asia Non-Asia

Growth of Per Capita CO2 Emissions over 2000-2008 (%)

CO2 emissions grow fast in Asia

Source: ADB estimates using World Bank (2012).

… and three of the top five CO2 emitting economies are in Asia.

0

1000000

2000000

3000000

4000000

5000000

6000000

7000000

8000000

China, People's Rep. of

United States India Russian Federation

Japan

CO2

emis

sion

s (kt

)

Top 5 Countries in terms of CO2 Emissions

Environment may degrade further with growth

Asia’s Environmental Kuznets Curve

05

1015

CO2 e

miss

ions (

tons/c

apita

)

0 5000 10000 15000 20000 25000 30000 35000 40000 45000 50000GDP per capita (in 2005 PPP)

2010=$6,107 Peak=$40,9712010=$6,107 Peak=$40,971

Source: ADB estimates using World Bank (2012).

CO2 emissions may triple under the business-as-usual scenario

3.4 3.5

5.6

7.6

9.3 10.2

0

2

4

6

8

10

12

2008 2010 2020 2030 2040 2050

CO2

emis

sion

s (to

ns/c

apita

)

Projected CO2 emissions based on latest EKC

Source: ADB estimates using World Bank (2012).

Asia is more vulnerable to coastal flooding

Urban population

at Risk (million)

Share of Population at

Risk (%)

Urban Area at

Risk ('000 km2)

Share of Area at Risk (%)

Africa 32 11 18 6

Asia and Pacific 251 18 129 11

Latin America 24 8 42 6

Europe 40 7 56 7

Risk of Coastal Flooding by Region, 2000

Source: ADB estimates based on McGranahan et al. 2007.

Vulnerability will rise with urbanization

154 198

63

92 83

115

3

4

0

50

100

150

200

250

300

350

400

450

2010 2025

Popu

latio

n at

Ris

k (m

illio

n)

East Asia South Asia

Coastal Flooding

410 M

303 M

141 192

63

91 33

46

8

11

0

50

100

150

200

250

300

350

400

2010 2025

Southeast Asia Central and West Asia

Inland Flooding

341 M

245 M

Source: Balk and Montgomery (2012).

Unique features of Asian urbanization make challenges more serious...

• Low level = a long way to go

• Fast speed = little time to adjust or learn

• More & bigger megacities = hard to manage

• More slums = higher vulnerability

But, urban agglomeration can help • Service sector pollutes less

• Manufacturers relocate (e.g., decline manu.)

• Efficient provision of infrastructure and services

• Innovation and higher labor productivity

• Nurture middle class and property owners

• And ...

Urbanization leads to lower fertility

48.4 42.6

39.0 39.3

0

10

20

30

40

50

60

2010-2020 2020-2030 2030-2040 2040-2050

Redu

ctio

n in

Pop

ulat

ion

(mill

ion)

Reduction in Projected Population due to Urbanization

… and more human capital

Population Subgroups Sacrifice Growth

Sacrifice Income

Pay Higher Taxes

Support Regulation

By educational attainment No formal education 32.3 49.5 43.2 42.1

Less than Secondary Education 42.4 68.7 58.3 60.4 Secondary Education 45.2 75.3 62.8 60.8 At least Some University Education 46.8 80.8 67.7 61.0

World 49.3 61.8 53.3 67.2 Asia 43.4 71.8 60.4 58.5

… better health as well

0

50

100

150

200

250

300

350

0 10 20 30 40 50 60 70 80 90 100 Infa

nt M

orta

lity

Rate

(inf

ant d

eath

s/ 1

,000

live

birt

hs)

Level of Urbanization (%)

Infant Mortality Rate and Level of Urbanization, World, 1955-2010

Source: UN (2011) and (2012).

The environmental impacts of urbanization

The growth impact may be negative

The composition effect is positive

Technical effect is also positive

Environment-Urbanization relation has improved over time

10

20

30

40

50

60

PM

10 L

evel (u

g/m

3)

0 20 40 60 80 100Level of Urbanization (%)

01

23

CO

2 e

mis

sio

ns (

mt/ca

pita

)

0 20 40 60 80 100Level of Urbanization (%)

1990s

2000s

1990s

2000s

CO2 PM10

Environment-Urbanization Curves

Source: ADB estimates.

Green urbanization can help shift the curves further • Megacities with satellite cities: ToD, BRT, green/compact/eco- cities concepts

• Exploit late comer advantage: Leapfrog technology by import or R&D;

Timely introduction of regulations: pollution/emission pricing, carbon tax or cap & trade, reduce subsidies, increasing block tariffs, …

Conclusions

• It is counter-productive to contain urbanization, even for environmental concerns

• But, urbanization must exploit Asia’s own unique features

• Asia can achieve quality growth (lower inequality, less poverty and better environment) through well-managed urbanization!

Thank You