a framework for establishing priorities in a country poverty ......with mass poverty, i.e.,...

ECONOMICS AND RESEARCH DEPARTMENT

ERD WORKING PAPER SERIES NO. 15

Ron Duncan

Steve Pollard

June 2002

Asian Development Bank

A Framework

for Establishing Priorities

in a Country Poverty

Reduction Strategy

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ERD Working Paper No. 15

A FRAMEWORK FOR ESTABLISHING PRIORITIES

IN A COUNTRY POVERTY REDUCTION STRATEGY

Ron Duncan and Steve Pollard

June 2002

Ron Duncan is Director of the Asia Pacific School of Economics and Management and Executive Director,National Centre for Development Studies, The Australian National University. Steve Pollard is a SeniorEconomist for Poverty Reduction at the Strategy and Policy Department of the Asian Development Bank.This paper was presented at the 1st Asia and Pacific Forum on Poverty: Policy and Institutional Reformsfor Poverty Reduction held 5-9 February 2001 at ADB Headquarters.

ERD Working Paper No. 15A FRAMEWORK FOR ESTABLISHING PRIORITIES IN A COUNTRY POVERTY REDUCTION STRATEGY

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Asian Development BankP.O. Box 7890980 ManilaPhilippines

2002 by Asian Development BankJune 2002ISSN 1655-5252

The views expressed in this paperare those of the author(s) and do notnecessarily reflect the views or policiesof the Asian Development Bank.

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The ERD Working Paper Series is a forum for ongoing and recentlycompleted research and policy studies undertaken in the Asian Development Bankor on its behalf. The Series is a quick-disseminating, informal publication meantto stimulate discussion and elicit feedback. Papers published under this Seriescould subsequently be revised for publication as articles in professional journalsor chapters in books.


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Abstract vii

I. Introduction 1

II. Poverty Analysis before Strategy Design 1

III. Recent Changes in Thinking about Development 2

IV. Conceptual Framework 9

V. Conclusion 13

References 16

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The paper reviews the history and progress of understanding ofdevelopment theory over the past 50 years. Development thinking has evolvedfrom an early paradigm that focused on savings and capital investment tosubsequent arguments favoring the inclusion of human capital, policy, technicalchange, and finally to the inclusion of the role of institutions, and goodgovernance. Secure property rights in the broadest sense, which are applicableto all resources and not just land, are particularly important to realize investmentyield. This evolution of development thought describes a conceptual frameworkthat can guide development practitioners in prioritizing, sequencing, andcharacterizing all interventions aimed at reducing poverty.

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The Asian Development Bank’s (ADB) Poverty Reduction Strategy, approved by the Boardin November 1999, calls for the formulation of “Country Operational Strategies” on thebasis of priorities emerging from poverty analyses and high-level forums to be conducted

under the ADB Poverty Reduction Strategy. The Country Operational Strategy will provide theanalysis and establish the areas of focus, including policy reforms and sector emphases. It willalso take into account the comparative advantage of ADB and the programs of other agencies(ADB 1999).

How should ADB select priorities for assistance to its developing member countries, whilegiving priority to the poverty reduction objective? Should ADB finance airports, roads, shipping,and other means of improving market and service access for the poor? Or should ADB invest inhealth clinics, schools, and other forms of human capital development? Should ADB fund naturaland rural development activities, SME development, and microfinance schemes to raise the incomesof the poor? According to Stiglitz (1998, 8), “technical solutions (to development) were evidentlynot enough” and “an economy needs an institutional infrastructure.” What are institutions andwhich ones should have priority?

Certainly, there is need for improving project selection. After a review of projects that arefunded by international agencies and bilateral donor agencies, the Development AssistanceCommittee of the OECD (DAC 2000, 45) concluded: “There is very little evidence that the projectshave been particularly helpful, or effective, in reducing poverty. Studies of project experienceshave few successes to report. As few as only one in five projects combating poverty can becharacterized as highly targeted at the specific issues which in combination define the situationof the poor. Few project interventions are sustainable when donor funding ceases. Successful projectsare hard to replicate.” How can ADB projects be better grounded within an overall country program,policy, and institutional framework that will assist in rapidly reducing poverty?

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Governments and donors have increasingly turned their attention and activities, and insome cases declared a total commitment, to poverty reduction. Some have published manuals (Aho,Lariviere, and Martin 1998); guidelines (DAC 2000); strategies (ADB 2000); and handbooks (WorldBank 1993) in support of the provision of assistance to reducing poverty. An outcome of all ofthis activity has been a focus on what is now called poverty analysis. Such analysis is primarily


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concentrated on describing the poor within a society: estimating how many there are; and definingthem in terms of location, occupation, gender, age, health, and access to assets, markets, and publicservices. There has been much less emphasis on gaining an understanding of why they are inthis state and why they have poor access to income-earning assets such as land, and to credit,education, health, and markets.

However, the situation is changing and much more attention is being given to asking whythe poor are not participating in economic growth. In many cases, development assistance is dealingwith mass poverty, i.e., instances in which a large proportion of people is in absolute poverty orperilously close to it. In such cases it seems that describing poverty in great detail should nothave high priority; rather, the emphasis should be on understanding the constraints to the peoplecontributing to economic growth. If most people are poor, it is clear that the most important resourceof the economy, i.e., its people, is being underutilized. It also appears irrelevant in such casesto be debating whether the focus of development should be on promoting economic growth or onreducing poverty.

Approaching development in terms of asking why the poor are not being involved in thegrowth process is a clear break from the approach that dominated development assistance in thesecond half of the 20th century. To understand how thinking about development has changed, itis helpful to review briefly the recent changes that have taken place in the way that developmenttheorists and practitioners have approached development assistance.

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During most of the latter half of the 20th century, the dominant view among developmenttheorists and development assistance agencies was that people and countries were poor becausethe countries did not have sufficient capital. Therefore, it was argued, the path to economic growthand development was to transfer capital from the richer countries. It is only recently that therehas been a wider understanding that countries lack capital and are poor because they are veryunfriendly places for capital (both physical and human capital). It is interesting, therefore, to tracehow thinking about the development process has changed over the past 50 years, both in termsof economic theory and in terms of practice within development agencies. However, the changehas been a two-way process, with practical experience being reflected in the development of theory,and theoretical developments reflected in changes in the forms of development assistance.

Early mainstream Western ideas about what was important in the economic growth processwere dominated by what has become known as the Solow-Swan neoclassical model of growth (Solow1956). Briefly, this model assumes a single output, produced using labor and capital in a constant-returns-to-scale technology with diminishing, and eventually exhausted, marginal returns to eachfactor. The model predicts that long-run growth rates of per capita income will equal the (assumed)exogenous rate of technical progress. Changes in savings rates or government policies will affectthe levels of steady-state output and capital stock but will have no long-run effect on the growth

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Section IIIRecent Changes in Thinking about Development

rate. If all countries experience the same rate of exogenous technical progress, they will all convergeto a common growth rate over time. Countries with different savings behavior, institutions, culturalnorms, government policies, and so on, may be expected to have different levels of steady-stateincome and different capital–labor ratios, but their long-run growth rates would all be anchoredto the common rate of technical progress.

Thus, this model, which was developed with the industrial countries in mind, placedemphasis on physical capital, undifferentiated labor, and technical progress. In early empiricalapplications to high-income countries, accumulations of physical capital and labor accounted foronly about 25 percent of historical growth. The balance (“residual”) was attributed to technicalchange. There were arguments over whether the technical change was “embodied” in the physicalcapital or whether it was exogenous, “autonomous,” or “disembodied.”

This theory sat well with the prevailing approach to development assistance at a practicallevel, which was that countries were poor because they lacked physical capital to go with theirabundant labor. Therefore, the principal role of development assistance was to transfer financialcapital from the richer countries to the poorer countries, where it would be transformed into physicalcapital, largely in the form of public infrastructure. Technical change was to a large extent seenas being transferred as “embodied” in the physical capital. Thus there were arguments over theappropriateness of the technology transferred in this way. This approach to development probablyreceived support from the success of the Marshall Plan in the rapid recovery of western Europeafter the devastation of the Second World War. The Marshall Plan’s success was essentially seenas the result of the successful transfer of capital to those countries.

The next major change in thinking about the process of economic growth can be seen togrow out of the work of Becker (1964). Becker argued that all labor was not the same, that itwas differentiated through education, training, and improvements in health, and that householddecisions about these investments in labor could be thought of in an economic framework of humancapital. The insights from Becker’s household consumption model were soon picked up by thedevelopment assistance agencies in the form of projects on education and health. Only later(Mankiw, Romer, and Weil, 1992) were the ideas captured in the economic growth literature byshowing that the predictions of the neoclassical model attribute much less importance to the residualif the definition of capital is widened to include human capital.

In the late 1970s there was another major change in development thinking, which seemsto have grown out of two pieces of empirical research. First, Krueger and Bhagwati’s study ofthe rapid growth of the four “East Asian Tigers” (see Krueger 1978) highlighted the importanceof policy, particularly openness to international trade and investment. The corollary to their researchwas that the import substitution policies that had been carried on by most if not all poor countrieswere not favorable to long-term economic growth.1 There can be rapid income growth in the early

1 The popularity of import substitution policies can be traced to the early success of the “heavy industry” policyof the former Soviet Union (and later the People’s Republic of China)—especially during the 1930s when therewas such a sharp contrast between the economic performance of the Soviet Union and the Great Depressionexperienced in the capitalist countries. It can be traced later to the writings of Prebisch (1950) and Singer(1950) who saw the need for import substitution strategies to counter what they saw as the exploitation bythe industrialized countries of the primary-producing poor countries.


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stages of an import substitution strategy as the protected firms expand in capturing the domesticmarket. However, being internationally uncompetitive, when they saturate the domestic market,income growth slows as the protected firms are unable to export.

The second major jolt to development thinking came from the World Bank where anevaluation of the Bank’s completed projects showed that many of them were failures, particularlyin the poorest countries in sub-Saharan Africa. The conclusion reached—most likely with theKrueger/Bhagwati research in mind—was that the projects were unsuccessful because the policyenvironment was unfavorable. Thus developed the concept of the Structural Adjustment Programand “conditionality,” with the emphasis on changing the policy regime so that countries were moreopen to trade and investment, both internally and externally. The focus on “getting the prices/policies right” was expanded to include macroeconomic policies (which were the focus of theInternational Monetary Fund) as well as microeconomic policies (more the focus of the World Bankand the regional banks). Agreement on this approach to development assistance became knownas the “Washington Consensus.”

The focus of development assistance on policies was reflected in the economic growth theorywith the development of the so-called “endogenous” growth models in the late 1980s and early1990s. In these models, technical change is endogenous, an idea that appealed because it couldhelp explain how countries could keep growing at faster rates over long periods, rather than movingtoward some static growth rate as in the neoclassical model. An alternative to expanding the capitalstock in the neoclassical model is to assume that there are externalities to capital that can spillover to the whole economy, and increasing returns to scale such as through “learning by doing”(Romer 1986, Lucas 1988) or research and development (Romer 1990). For example, in thedifferentiated-inputs model of Romer (1990) and Grossman and Helpman (1991), growth is fasterthe larger the scale of the research and development sector. Another implication of external effectsand increasing-returns models is that these effects justify government intervention, and suchpermanent changes in government policy can have permanent effects on the growth rate.

While the focus on the policy environment dominated development assistance efforts inthe 1980s and 1990s, changes in the paradigm were under way, stemming from North’s (1990)and North and Thomas’s (1973) early focus on the important institutions of an economy. North’swork has been given a more practical flavor with the writings of Olson (1996, 2000) and de Soto(2000). The key idea of this work is that of the overriding importance for economic growth of thebasic institutions—public and private; formal and informal; and economic, social, and political—that determine how an economy functions. In this literature, “institutions” have a particulardefinition, distinct from the common use that is indistinguishable from “organizations.” Haggard(1999, 30) describes the difference as follows:

Institutions refer to the formal and informal rules and enforcement mechanismsthat influence the behavior of organizations and individuals in society. They includeconstitutions, laws and regulations, and contracts, as well as trust, informal rulesand social norms. Organizations are collective social actors, usually characterized

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by hierarchical patterns of internal authority, that pursue common interests.Organizations operating in the public sphere include government bureaucracies,legislatures, political parties, unions, interest groups, NGOs, and even firms in theirpolitical capacities.

In particular, de Soto (2000, 210-1) has shown that “getting the policies right” (the focusof the Structural Adjustment Programs) will be ineffective unless the institutions essential to theparticipation of all of an economy’s income-earning assets (land, labor, capital, and natural resources)are in place. Referring mainly to land and other forms of fixed capital, he says:

... Most people cannot participate in an expanded market because they do not haveaccess to a legal property rights system that represents their assets in a mannerthat makes them widely transferable and fungible, that allows them to beencumbered and permits their owners to be held accountable. So long as the assetsof the majority are not properly documented and tracked by a property bureaucracy,they are invisible and sterile in the marketplace.

Institutions are essentially the sets of rules that govern how a society behaves in particularareas of activity. As North (1990) describes them, they range from taboos, customs, and traditionsin what are called traditional societies, to formal, written constitutions and laws governing economic,political, and social behavior in a more modern society. Institutions may be formal—such as aconstitution or traffic laws—or they may be informal, such as voluntary codes of conduct of businessor social groups. The set of rules making up an institution defines the incentives to which peoplewill respond. According to North (1990) and Hayami and Ruttan (1971), institutions change asthe transaction costs of behaving in certain ways change. Transaction costs can be seen to changeas economies develop and technologies improve, and as political and social forces within a societychange. So, for example, reductions in transport costs—of information or goods—can make certainbehaviors more or less costly, and therefore lead to a new form of institution. Or increased trustbetween individuals and groups not only can improve social cohesion but also lower the costs oftransacting contracts.

North emphasized the cost of information in the development of institutions. The provisionand communication of information is required to measure the attributes of a good or service ineconomic exchange and to define and protect the rights that are exchanged. The more costly arethe exchange and its enforcement, the higher are the transaction costs, and the less likely is theinstitution to exist or to be effective.

North (1990), Olson (1996), and de Soto (2000) have stressed the overriding importanceof property rights and contract enforcement in economic growth. Well-defined and secure propertyrights and impartial enforcement of contracts between parties are the basis for a market economy.If individual rights to factors (land, labor, or capital) are ill-defined in legislation and all contractsmade between parties to an economic exchange are not impartially enforced by the judicial system—



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and therefore both property rights and contracts are free from discretionary intervention bypoliticians and bureaucrats—then the costs of transactions and the costs of transformation inproduction will make economic activity infeasible or highly sub-optimal. In such circumstances,people will be reluctant to invest in fixed assets. The only businesses that will exist will be thosethat are “footloose,” i.e., easily shifted to another location. Or private economic activity will onlybe undertaken with some kind of government guarantee (such as joint ventures with government,where the government will likely bear the business risks involved; or where higher profits to coverthe high transaction and transformation costs are assured, such as through some form of importprotection). In such circumstances the economic activity may be largely illegal and small-scale,and bribery of government officials frequent, as de Soto (1989) has shown. People will also beunwilling to invest in education, or will only do so if they have prospects of moving to anothercountry where they will be able to earn and retain an income that justifies their investment.

Olson (1996) and de Soto (2000) explain the large and growing gap in incomes betweenthe rich countries and those poor countries where incomes have grown very slowly, if at all, aslargely due to the absence of these basic institutions, not to the lack of capital, some inherentdeficiency in work ethic, or some culturally determined behavior. Prior to its break-up the formerSoviet Union had the highest per capita level of education in the world, as measured in termsof the level of schooling reached, and the highest per capita level of plant and machinery. But itremained a poor country. What it lacked was the institutions that allow entrepreneurship andinnovation to flourish through effective economic transformation and exchange.

Olson (1996) demonstrates the critical importance of secure property rights and impartialenforcement of contracts. He points out that if the key missing ingredient for development wascapital, then the marginal productivity of capital would be higher in poor countries than in richcountries, and private capital would be trying to move from rich to poor countries. In fact, themovement is strongly in the other direction as we see from estimates of “capital flight.” Similarly,Olson argues that institutions in the rich countries must be the missing ingredient when anindividual can migrate from a poor country to a high-income country and soon thereafter earnan income that is many times higher than in their home country and as high as or higher thanthe average income in the host country. The plane flight does not change migrants’ skills andwillingness to work as much as it places them in a more friendly environment for their labor andcapital (no doubt what applies to labor and capital also applies to technology).

De Soto (2000) has dramatically highlighted the lack of an effective system of privateentitlement to land and other income-earning assets in poor countries and how this inhibits thedevelopment of economic activity, particularly through inhibiting the creation of capital by thepoor. He estimates that the total value of land and other assets “owned” by the poor in developingcountries is around US$9.3 trillion, many times the value of foreign aid or foreign investment.Yet, without the possibility of efficient transfer of these assets, or the ability to use these assetsas collateral in order to raise capital (securitization), the assets have little income-generating power.Only where there is an effective system of property law can the value of land or other assets beproperly established; can they be easily bought and sold; or can they become collateral so that

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the wealth can be mobilized in investment capital. Without such property rights, and the possibilityof securitization of assets, there can never be an effective capital market.

The single most important source of funds for new businesses in the United Statesis a mortgage on the entrepreneur’s house.

By contrast,

The poor inhabitants of these nations [Third World and former communistcountries]—five-sixths of humanity—do have things, but they lack the process torepresent their property and create capital. They have houses but not titles; cropsbut not deeds; businesses but not statutes of incorporation. It is the unavailabilityof these essential representations that explains why people who have adopted everyother Western invention, from the paper clip to the nuclear reactor, have not beenable to produce sufficient capital to make their domestic capitalism work (de Soto2000, 6-7).

Aron (2000, 105) sums up the institutional constraints in poor countries as follows:

When institutions are poorly defined or there are few formal institutions, economicactivities are restricted to interpersonal exchanges. In such cases, repeat activitiesand cultural homogeneity facilitate self-enforcement. Transaction costs may be lowin such an environment, but transformation costs are high because the economyoperates at a very low level of specialization. Economic exchange also could operateat one remove, via social networks, but contracts are still constrained by kinshipties. It is clear, however, that firms or agents in an environment of weak institutionscannot engage in complex, long-term, and multiple-contract exchanges with effectiveenforcement as they do in industrial economies. A basic structure of property rightsthat encourages long-term contracting appears essential for the creation of capitalmarkets and growth.

While there are many countries where the poor own assets but have no excisable propertyrights, there are circumstances where the poor do not have any access to potential income-earningassets such as land or even education. In these latter circumstances there has to be some formof asset redistribution or asset creation.

It is not easy for a country to make the substantial changes in institutions or assetredistribution necessary to allow the poor to participate in economic growth and development.The new institutions and land redistribution that established a basis for rapid income growthin Japan; Republic of Korea; and Taipei,China was imposed by external forces. In People’s Republicof China and Viet Nam, which experienced revolutions in agricultural productivity through the



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changeover from collectivization to individual land rights (leasehold) and the liberalization ofagricultural markets, the transformations in institutions were introduced internally but wereexceptional in their breadth and speed. As North and Olson have argued, changing the status quomay be very difficult or even impossible without such dramatic intervention, because the vested interestsbenefiting from the existing situation usually hold political power and therefore have no interestin change. The important question therefore is how to stimulate change in such circumstances.

The 1990s has seen a large degree of attention given by the development community to“governance.” This focus grew out of the concerns of the World Bank and bilateral donors withcorruption in the governments of borrowing countries and the desire by nonpolitical organizationslike the World Bank to be publicly critical about corruption. As interest in governance has grown,the scope of its definition has broadened. Early on, concerns about governance were mainly focusedon the accountability and transparency of government and the political process, and the effectivenessof the government’s fiscal and monetary policies.

Following Burki and Perry (1998), Haggard (1999) defines governance as “the design ofinstitutions and organizations for making and implementing collective decisions.” Broadening thefocus of governance from what may be thought of as “good government” to include the establishmentand operation of the basic institutions for the operation of an economy may be helpful in the sensethat it places emphasis on these basic institutions. However, if the concept of governance becomesso all embracing it may be less helpful. It may be more useful to keep “good government” issuesseparate, while recognizing that the form of institutions will have an impact on the effectivenessof government.

Economic theorists are incorporating the role of institutions within the economic theoryof growth and there is burgeoning empirical research on the relationship between institutionaldevelopment and economic growth (see Aron 2000 for a review). Development agencies are beginningto focus on institutional issues. But there is not yet a full commitment to the conclusions thatare implicit in de Soto’s work. In other words, if basic institutions for the creation of capital andfull participation of the whole society in economic activity are not in place, neither investmentsin infrastructure, education, health; nor economic reforms; nor public sector reforms will be effective,and will likely only increase income inequality—favoring those who already have access to factormarkets. Building roads and bridges or undertaking agricultural research will not increase incomesas much as they could if people do not have secure property rights to farm land. Education andhealth improvement projects will not promote income growth for the poor unless there is thegeneration of capital with which the healthier and better-educated labor force can work.Privatization of public enterprises will be less than fully effective if there are no secure propertyrights to land and enforcement of contracts. Laying off public officials with redundancy packagescould make them the new entrepreneurial class but they will not if they cannot gain secure accessto land and raise additional capital through securitization of their assets. Trade and investmentpolicy reform will see disappointing results in the form of supply responses unless there is securityof property rights and contracts and capital markets are developed so that traders can raise capitaland hedge their commodity and currency risks.

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Therefore, in going about their business, particularly to ensure economic growth in whichall will participate, development agencies have to have a fundamental re-examination of theprospects of success for their traditional forms of lending and aid. They have to examine whetherthere are appropriate institutions in place so that investments have a good chance of beingsuccessful. They also have to evaluate the possibilities for assisting the creation and redistributionof income-earning assets within a country so that the poor have the chance to participate morefully in the growth process. To carry out this evaluation, development assistance agencies haveto be able to define more clearly the constraints impeding participation by the poor and placepriorities on the removal of these constraints. We suggest below a framework within which toexamine the constraints to the success of development lending. This approach can also providea framework for the prioritization of assistance in a poverty reduction strategy.

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Generally, where mass poverty persists, countries have experienced little or no economicgrowth. This lack of growth should not be surprising since the country’s most important resource,its people, are not able to generate much income. In some cases, there may be economic growthbut it is shared among a favored few. This is often the case where mineral or oil deposits areexploited in enclave activities. In these cases, forward and backward linkages within the economyare few. In other cases, a few favored industrial activities, operating under an umbrella of tariffsor some other form of government-guaranteed income support, may be generating high incomesfor those involved in the activities. Again, the likely result is high and increasing income inequality.In all cases, the key question should be, Why are the assets of most people unable to generatethe levels of income that they generate in high-income countries?

The figure below provides a framework within which to think about the constraints onpeoples’ activities, and the effectiveness of investment and aid, and thereby helps prioritize plannedinterventions in support of poverty reduction. Going from the top of the figure to the bottom is,in a sense, like peeling away layers of covering to find out what is at the core. So the figure isdesigned to be read from the bottom up. The central goal of the strategy is poverty reduction,and the objective of the exercise is to identify where, along the path from civil and social orderto poverty reduction, the constraints to effective participation of people in the growth process lie.The assumption is that constraints have to be overcome from the bottom up.

To the immediate left of the central boxes or goals are listed the institutions that haveto be in place and working effectively for the particular goal to be achieved. To the immediateright are policies that can be carried out effectively when that central goal has been achieved orpolicies that influence how well the goal is achieved. To the far right of the figure is noted thelength of time that it is expected will be needed to achieve those goals (short term, medium term,or long term). To the far left of the figure is shown whether generally rising incomes can be expected,given institutional or other constraints. Economies not generating “quality” growth, i.e., growth

Section IVConceptual Framework


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INSTITUTIONSECONOMY GOAL POLICY TIME

NO GROWTH

GROWTH

JudiciaryAccountingStandardsCodes of Conduct

ConstitutionalElectoralMedia, NGOs,Police, Community

LandLaborCapitalTechnologyInformationPriceWageEducationHealthGender

InvestmentTradeCompetition

Civil and Social Order

Good Governance

Contractand Institutional

Rules and Regulations

Poverty Reduction

Medium Term /Long Term

Pro-poor Growth andPoverty Intervention

Pro-poor Investment

Effective Markets

Short Term

MonetaryFiscal

Figure 1: Conceptual Framework

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in which most in society participate, are likely to have constraints at the bottom of the figure.Working from the bottom of the figure to the top we see that without civil order there

can be no economic development. Where civil and social order has not been established, it is likelythat only intervention in the form of humanitarian aid can be helpful. Efforts to implementinfrastructure or other investment projects in countries where a stable environment of civil orderhas not been established—as in several sub-Saharan Africa countries over recent years—has yieldeda frustrating history of stop-start development assistance, with total failure of the assistance asthe usual outcome. Important institutions that have to be in place for the maintenance of civiland social order are the police and the judiciary. As well, self-policing by the community—in thesense that there needs to be a degree of trust and concern for others—is also important in themaintenance of civil order. A constitution and a body of common law or custom will also be necessaryto codify the rights of members of the society.

The next building block that has to be put into place comprises the institutions that formthe basis for a market economy, i.e., property rights and impartial enforcement of contracts, aswell as informal institutions such as codes of conduct. For these institutions to be effective, thejudicial system will have to be working effectively, in particular without intervention by politiciansor the bureaucracy. Trust within the society is also an important ingredient in the effective workingsof property law and contracts. If there is no substantial degree of trust between parties involvedin contracts, the load on the judiciary in resolving contract disputes will make the systemunworkable, i.e., the transaction costs will be too high for the institution to function.

The next building block is good governance. If the broader definition of governance wereadopted, i.e., to include institutions and organizations as well as “good government” matters, therewould be a single governance block. As said earlier, it is a good idea to separate institutions andgovernance as a separation forces a focus on the basic institutions necessary for a market economyto function well. To have good governance, there needs to be political stability. This stability willdepend on the effectiveness of the electoral system and the constitution, as well as checks andbalances that operate through the media and community groups, and perhaps supra-governmentor supra-parliamentary bodies that have power to monitor government behavior (such asadministrative tribunals and an ombudsman). The main policies that will be affected by the stateof governance are fiscal and monetary policy. These policies in turn will determine exchange ratepolicy and the inflation rate.

If they are not already in place, establishing civil and social order, effective marketinstitutions, and good governance will usually take a considerable length of time, and withoutthese building blocks in place there will be no, or very limited, growth in incomes. Therefore, apoverty reduction strategy will have to give prior attention to what may be done in the short tomedium term that may assist in bringing about desirable changes. To gain an understanding ofany shortcomings in these areas, it will likely be necessary to undertake detailed cultural, social,and political economy studies to gain the required information about the society beforerecommending any action. One issue that will be important in bringing about change will be tofind ways to promote widespread “ownership” of desirable reforms.

Section IVConceptual Framework


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The next building block for effective development assistance is effective factor and outputmarkets. Secure property rights and contract enforcement are the basis for effective factor andoutput markets; however, for effective markets there has to be effective regulation to ensure freedomof entry and thereby avoid anticompetitive pricing, and ensure provision of quality goods and servicesand health and safety standards. The development of factor markets that are open to participationby all, and do not discriminate in terms of gender, ethnicity, religion, etc., is fundamental to theexploitation of a country’s comparative advantages and having inclusive economic growth.

Secure individual title to land (whether through long-term lease or freehold) appears tobe a prerequisite for the rapid growth of poor countries and their development into modern economicsystems. Secure title to land is necessary for people to have confidence in making the fixedinvestments that lead to increased productivity. Without such security, private investments arelikely to be confined to those having a government guarantee of some kind (such as a joint venturewith government); or to go to “foot-loose” industries that will exit when there is a contract dispute;or to be exploitative (such as “high grading” in mining or logging). As has been dramaticallydemonstrated in PRC and Viet Nam in recent years, providing farmers with secure, long-termtenure to land has led to remarkable agricultural growth. The absence of such rights in manyother countries provides clear counter examples.

Secure, individual title to land is also the basic requirement for the development of a financialsector, as without land as security for loans, creditworthiness is difficult to establish. The resultwill be the locking-up of assets and savings that de Soto (2000) highlights in poor countries.

As populations grow, secure access to land for agricultural purposes becomes a less likelyavenue through which people can participate in the growth process. Good health and education(human capital) have become the main income-generating assets for most people in today’sknowledge-driven world. Moreover, while land redistribution and secure rights to land may beable to play some role in increasing the poor’s access to income-earning assets, land redistributionis extremely difficult to achieve, while education can be a much more easily achieved and evenmore productive route to higher incomes. However, there will need to be secure title to land asthe base for all productive agricultural, industrial, and services activities.

Provision of the opportunity for all to be educated and to be free of debilitating infectionsand disease will allow all in society to participate to the full in the labor market. For the labormarket to be fully effective in mobilizing labor, there should be no discrimination on the basisof gender, ethnicity, religion, etc. Moreover, care should be taken to ensure that the public sectordoes not become a wage leader to the detriment of the private sector, which often happens whenthe economy is heavily dependent on aid and/or natural resource rents. Minimum wage legislationmay be seen as essential as a social safety net; however, if the minimum wage exceeds theproductivity level of unskilled labor, it will become an impediment to the employment of the poor.

With these building blocks in place, investment should be effective in promoting economicgrowth, and particularly growth in which all can share—provided that policies directly affectinginvestment are not restrictive. Experience has shown that policies that place few restrictions ondomestic and foreign investors and on trade within and between countries are favorable to growth.

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Moreover, openness to trade and investment will serve as an effective means of preventingmonopolistic behavior by firms. However, there may still need to be legislation outlawinganticompetitive behavior. Competition policy should also provide for competitive access to naturalmonopolies in essential services such as power, water, and transport.

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After more than four decades of development assistance and nearly 20 years of concentratedeffort by international development agencies and individual country donors in encouraging economicreforms in developing countries, the limits to development assistance have become much clearer.We now have a much better idea of what is absolutely necessary for success and what is importantbut secondary; likewise, we have a much better idea of the appropriate prioritization and sequencingof economic reforms and forms of assistance in support of poverty reduction.

It is now abundantly clear that the paradigm that dominated development assistanceactivities for most of the past 40 years—that the main constraint to economic development wasa shortage of capital—was unhelpful. Capital is scarce in developing countries, but it is scarcebecause the environment is not friendly toward capital, whether private or public capital. Thepoor investment environment led some to argue in favor of direct public sector investment. Butit has also been learned at great cost that government activity in production is seldom an adequatesubstitute for private sector activity. In order to mobilize an economy’s resources and for a flourishingprivate sector to develop—one that can be a sound basis for raising the needed governmentrevenue—the basic institutions of secure property rights, impartial enforcement of contracts, andinternationally accepted codes of commercial conduct have to be in place. In turn, these institutionsdepend upon a legal and judicial system that is allowed to function without interference, and agovernment and bureaucracy operating in a transparent, accountable, and fully accessible manner.

Secure property rights and impartial enforcement of contracts are the basis for a marketexchange economy and thus for all private sector activity, which is now recognized as the engineof growth and the main means of doing away with absolute poverty. But security of property rightsand impartial enforcement of contracts, in the broadest sense of the state providing security overthe income from one’s labor, capital, and land, has even broader implications. It provides equalityof opportunity for all and thus is protective of the rights of all individuals, regardless of gender,ethnicity, or religion.

Secure property rights for labor, ensuring freedom from discrimination, also ensuresmaximum flexibility in labor markets. On one hand, firms should not be forced to pay wages thatare not in line with the productivity of labor. On the other hand, labor should be rewarded forits productivity and provided the necessary scope to realize its potential through training. Thisapproach will ensure that real wages are based on productivity, which in turn will maintaincompetitiveness in international markets.

Section VConclusion


14

While governments may be keen to implement these kinds of measures, it is clear thatthere will often be resistance from groups or individuals benefiting from the status quo. If thesegroups or individuals are in a politically powerful position, reforms may well be stifled. The majorissue in these instances is how to bring about change from the status quo.

Demand for changes to institutions and policies can be fostered by actions that increasethe value to the community of new institutions and policies. In particular, demand for more secureand impartially enforced property rights may be fostered by freeing up trade and investment,and by appropriate investment in human and physical capital. Freeing up trade and investmentcan raise the implicit rental value of land and future income streams from labor. Investment inphysical infrastructure such as roads, ports, telecommunications, and essential services will alsoraise the implicit rental value of land and future labor incomes. Investment in a better-educatedand healthier population will do likewise. Social mobilization through political parties, labor unions,and consumer groups can also help to bring about change through countervailing power. Whilechange will usually be very difficult to achieve, it may be possible to take measures that will easethe constraints in the short run. For example, in the short run it may be possible to have regulationsrepealed that limit informal sector activity and therefore restrict income generation by the poor.

Change in the distribution of rights to land use may be even more difficult to achieve thanchange in institutions. But access to land may have become less important to improving the standardof living of people than previously. In an increasingly knowledge-driven world, education maybe a more important income-earning asset and increasing access to education may be easier toachieve than access to land.

These measures should be seen as mutually reinforcing. Trade or investment reform withoutsecure property rights and contracts will see little response in the form of outward-oriented, growthenhancing investment. Similarly, public expenditure on education and health or on physicalinfrastructure will give little return without the presence of the institutions basic to private sectordevelopment. On the other hand, public sector reform in the form of public service cutbacks orprivatization of state-owned enterprises will not promote demand for better economic institutionsbut will only be effective if they already exist. Security of contracts requires an impartial judiciary,i.e., free from political and bureaucratic intervention. However, security of contracts also requireswidespread trust to minimize contract disputes and the need for the courts to intermediate. Trustis an important outcome of the social capital of a country. Where the degree of trust is poor, contractdisputes can be expected to be widespread and the transaction costs of contracts high.

Development assistance agencies can help countries move toward commitment to thesemeasures through technical assistance that demonstrates the benefits of better institutions andpolicies and participatory discussion of the pros and cons of various measures and alternatives.Experience has also shown that high-level training of local people is very effective in leading toownership of these growth enhancing measures. For those countries where there is no or verylittle interest in undertaking these measures, such technical assistance and training may be theonly worthwhile development assistance to provide until there is a change in attitude of thosein power or of the larger community. Lack of ownership of reforms will only lead to their failure

15

and often leads to unnecessary social hardship and tension, and thereby provides arguments fornot making similar attempts in the future.

If the restrictions preventing the poor from participating fully in economic growth areremoved, monetary and fiscal policies, and other policies such as trade and investment policies,should be much less discriminatory in their impacts. This removal of restrictions does not meanthat all people will do equally well out of economic growth, as people will have different levelsof access to assets. Moreover, there will still be a need for the government through its fiscal policyto try to ensure equal access to a basic level of essential services and to have in place redistributionpolicies that provide a safety net for people. The government’s capacity to provide social securitywill ultimately depend on its taxation base. However, the government does have a degree ofdiscretion in where it locates public investment. Therefore, it is able to discriminate in favor ofareas that are disadvantaged in terms of transport or other infrastructure, education, and health.However, the extent of discretion is limited by the trade-offs that will have to be made betweenpromoting maximum use of the country’s comparative advantage and assistance to disadvantagedareas.

The ADB’s approach to designing poverty reduction strategies should bederived from the fullest understanding of the development process and the appropriate role fordevelopment assistance, realizing that understanding of the process is continually improving. Itis desirable to strive for agreement among the government, other multilateral agencies, and bilateraldonors on the best strategy for achieving inclusive economic growth. Moreover, in order for anystrategy to be effective, there will need to be broad ownership of the strategy within the country.However, it has to be recognized that it is unlikely that there will ever be full agreement withany strategy, as there will always be room for healthy debate.

At some point, however, ADB will have to decide on the country strategy that it believesshould be followed and the role that it should play in the strategy, and work with the governmenton implementing its activities. Effective implementation is often much more difficult than thedesign of programs and policies. In large part, effective implementation will depend upon theeffectiveness of the country’s governance and its capacity to undertake and sustain programs.Careful assessment will therefore have to be made of the likelihood of success of the program.In some cases the assessment may be that the likelihood of success is low and therefore ADB shouldrestrict its activities in the country to technical assistance and information dissemination aimedat improving the environment for future action.

Section VConclusion


16

��

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Asian Development Bank, 1999. Fighting Poverty in Asia and the Pacific: The Poverty ReductionStrategy of the Asian Development Bank. Manila, Philippines.

———, 2000. A Sourcebook for Poverty Reduction Strategies. Manila, Philippines.Becker, G. S., 1964. Human Capital. Chicago, Illinois: University of Chicago Press.Burki, S. J., and G. Perry, 1998. Beyond the Washington Consensus: Institutions Matter. The World

Bank, Washington, D.C.DAC Informal Network on Poverty Reduction, 2000. DAC Guidelines on Poverty Reduction, Vol. 1.

Consolidated text of the draft guidelines submitted for review to the Fourth Meeting of theImplementation Group. 2-3 March 2000, OECD, Paris.

De Soto, H., 1989. The Other Path: The Invisible Revolution in the Third World. New York: Harperand Row.

———, 2000. The Mystery of Capital: Why Capitalism Triumphs in the West and Fails EverywhereElse. New York: Basic Books.

Grossman, G. M., and E. Helpman, 1991. Innovation and Growth in the Global Economy. Cambridge,Massachusetts: MIT Press.

Haggard, S., 1999. “Governance and Growth: Lessons from the Asian Crisis.” Asian-Pacific EconomicLiterature 13(2):30-42.

Hayami, Y., and V. W. Ruttan, 1971. Agricultural Development: An International Perspective.Baltimore: Johns Hopkins University Press.

Krueger, A. O., 1978. Foreign Trade Regimes and Economic Growth: Liberalization Attempts andConsequences. National Bureau of Economic Research, New York.

Lucas, R. E., 1988. “On the Mechanics of Economic Development.” Journal of Monetary Economics22(1):3-42.

Mankiw, N. G., D. Romer, and D. N. Weil, 1992. “A Contribution to the Empirics of EconomicGrowth.” Quarterly Journal of Economic Growth 107(2):407-37.

North, D., 1990. Institutions, Institutional Change and Economic Performance. Cambridge:Cambridge University Press.

North, D., and R. Thomas, 1973. The Rise of the Western World. Cambridge: Cambridge UniversityPress

Olson, M, Jr., 1996. “Big Bills Left on the Sidewalk: Why some Nations are Rich and Others arePoor.” Journal of Economic Perspectives 10:3-24.

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Prebisch, R., 1950. The Economic Development of Latin America and its Principal Problems. UnitedNations, New York.

Romer, P.M., 1986. “Increasing Returns and Long-run Growth.” Journal of Political Economy94(5):1002-37.

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Economic Review 40:473-85.Solow, R. M., 1956. “A Contribution to the Theory of Economic Growth.” Quarterly Journal of

Economics 70:65-94.Stiglitz, J. E., 1998. “Towards a New Paradigm for Development: Strategies, Policies, and Processes.”

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References

18

PUBLICATIONS FROM THEECONOMICS AND RESEARCH DEPARTMENT

ERD WORKING PAPER SERIES (WPS)(Published in-house; Available through ADB Office of External Relations; Free of Charge)

No. 1 Capitalizing on Globalization—Barry Eichengreen, January 2002

No. 2 Policy-based Lending and Poverty Reduction:An Overview of Processes, Assessmentand Options—Richard Bolt and Manabu Fujimura

January 2002No. 3 The Automotive Supply Chain: Global Trends

and Asian Perspectives—Francisco Veloso and Rajiv Kumar

January 2002No. 4 International Competitiveness of Asian Firms:

An Analytical Framework—Rajiv Kumar and Doren Chadee

February 2002No. 5 The International Competitiveness of Asian

Economies in the Apparel Commodity Chain—Gary Gereffi

February 2002No. 6 Monetary and Financial Cooperation in East

Asia—The Chiang Mai Initiative and Beyond—Pradumna B. Rana

February 2002No. 7 Probing Beneath Cross-national Averages: Poverty,

Inequality, and Growth in the Philippines—Arsenio M. Balisacan and Ernesto M. Pernia

March 2002No. 8 Poverty, Growth, and Inequality in Thailand

—Anil B. DeolalikarApril 2002

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No. 1 Contingency Calculations for EnvironmentalImpacts with Unknown Monetary Values—David Dole February 2002

No. 9 Microfinance in Northeast Thailand: Who Benefitsand How Much?—Brett E. Coleman

April 2002No. 10 PovertyReduction and the Role of Institutions in

Developing Asia—Anil B. Deolalikar, Alex B. Brilliantes, Jr.,

Raghav Gaiha, Ernesto M. Pernia, Mary Raceliswith the assistance of Marita Concepcion Castro-Guevara, Liza L. Lim, Pilipinas F. QuisingMay 2002

No. 11 The European Social Model: Lessons forDeveloping Countries—Assar Lindbeck

May 2002No. 12 Costs and Benefits of a Common Currency for

ASEAN—Srinivasa Madhur

May 2002No. 13 Monetary Cooperation in East Asia: A Survey

—Raul FabellaMay 2002

No. 14 Toward A Political Economy Approachto Prolicy-based Lending—George Abonyi

May 2002No. 15 A Framework for Establishing Priorities in a

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June 2002

19

No. 1 ASEAN and the Asian Development Bank—Seiji Naya, April 1982

No. 2 Development Issues for the Developing Eastand Southeast Asian Countriesand International Cooperation—Seiji Naya and Graham Abbott, April 1982

No. 3 Aid, Savings, and Growth in the Asian Region—J. Malcolm Dowling and Ulrich Hiemenz,

April 1982No. 4 Development-oriented Foreign Investment

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No. 5 The Multilateral Development Banksand the International Economy’s MissingPublic Sector—John Lewis, June 1982

No. 6 Notes on External Debt of DMCs—Evelyn Go, July 1982

No. 7 Grant Element in Bank Loans—Dal Hyun Kim, July 1982

No. 8 Shadow Exchange Rates and StandardConversion Factors in Project Evaluation—Peter Warr, September 1982

No. 9 Small and Medium-Scale ManufacturingEstablishments in ASEAN Countries:Perspectives and Policy Issues—Mathias Bruch and Ulrich Hiemenz,

January 1983No. 10 A Note on the Third Ministerial Meeting of GATT

—Jungsoo Lee, January 1983No. 11 Macroeconomic Forecasts for the Republic

of China, Hong Kong, and Republic of Korea—J.M. Dowling, January 1983

No. 12 ASEAN: Economic Situation and Prospects—Seiji Naya, March 1983

No. 13 The Future Prospects for the DevelopingCountries of Asia—Seiji Naya, March 1983

No. 14 Energy and Structural Change in the Asia-Pacific Region, Summary of the ThirteenthPacific Trade and Development Conference—Seiji Naya, March 1983

No. 15 A Survey of Empirical Studies on Demandfor Electricity with Special Emphasis on PriceElasticity of Demand—Wisarn Pupphavesa, June 1983

No. 16 Determinants of Paddy Production in Indonesia:1972-1981–A Simultaneous Equation ModelApproach—T.K. Jayaraman, June 1983

No. 17 The Philippine Economy: EconomicForecasts for 1983 and 1984—J.M. Dowling, E. Go, and C.N. Castillo,

June 1983No. 18 Economic Forecast for Indonesia

—J.M. Dowling, H.Y. Kim, Y.K. Wang,and C.N. Castillo, June 1983

No. 19 Relative External Debt Situation of AsianDeveloping Countries: An Applicationof Ranking Method—Jungsoo Lee, June 1983

No. 20 New Evidence on Yields, Fertilizer Application,and Prices in Asian Rice Production—William James and Teresita Ramirez, July 1983

No. 21 Inflationary Effects of Exchange RateChanges in Nine Asian LDCs—Pradumna B. Rana and J. Malcolm Dowling,

Jr., December 1983No. 22 Effects of External Shocks on the Balance

of Payments, Policy Responses, and DebtProblems of Asian Developing Countries—Seiji Naya, December 1983

No. 23 Changing Trade Patterns and Policy Issues:The Prospects for East and Southeast AsianDeveloping Countries—Seiji Naya and Ulrich Hiemenz, February 1984

No. 24 Small-Scale Industries in Asian EconomicDevelopment: Problems and Prospects—Seiji Naya, February 1984

No. 25 A Study on the External Debt IndicatorsApplying Logit Analysis—Jungsoo Lee and Clarita Barretto, February 1984

No. 26 Alternatives to Institutional Credit Programsin the Agricultural Sector of Low-IncomeCountries—Jennifer Sour, March 1984

No. 27 Economic Scene in Asia and Its Special Features—Kedar N. Kohli, November 1984

No. 28 The Effect of Terms of Trade Changes on theBalance of Payments and Real NationalIncome of Asian Developing Countries—Jungsoo Lee and Lutgarda Labios, January 1985

No. 29 Cause and Effect in the World Sugar Market:Some Empirical Findings 1951-1982—Yoshihiro Iwasaki, February 1985

No. 30 Sources of Balance of Payments Problemin the 1970s: The Asian Experience—Pradumna Rana, February 1985

No. 31 India’s Manufactured Exports: An Analysisof Supply Sectors—Ifzal Ali, February 1985

No. 32 Meeting Basic Human Needs in AsianDeveloping Countries—Jungsoo Lee and Emma Banaria, March 1985

No. 33 The Impact of Foreign Capital Inflowon Investment and Economic Growthin Developing Asia—Evelyn Go, May 1985

No. 34 The Climate for Energy Developmentin the Pacific and Asian Region:Priorities and Perspectives—V.V. Desai, April 1986

No. 35 Impact of Appreciation of the Yen onDeveloping Member Countries of the Bank—Jungsoo Lee, Pradumna Rana, and Ifzal Ali,

May 1986No. 36 Smuggling and Domestic Economic Policies

in Developing Countries—A.H.M.N. Chowdhury, October 1986

No. 37 Public Investment Criteria: Economic InternalRate of Return and Equalizing Discount Rate—Ifzal Ali, November 1986

No. 38 Review of the Theory of Neoclassical PoliticalEconomy: An Application to Trade Policies—M.G. Quibria, December 1986

No. 39 Factors Influencing the Choice of Location:Local and Foreign Firms in the Philippines—E.M. Pernia and A.N. Herrin, February 1987

No. 40 A Demographic Perspective on DevelopingAsia and Its Relevance to the Bank—E.M. Pernia, May 1987

No. 41 Emerging Issues in Asia and Social CostBenefit Analysis

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—I. Ali, September 1988No. 42 Shifting Revealed Comparative Advantage:

Experiences of Asian and Pacific DevelopingCountries—P.B. Rana, November 1988

No. 43 Agricultural Price Policy in Asia:Issues and Areas of Reforms—I. Ali, November 1988

No. 44 Service Trade and Asian Developing Economies—M.G. Quibria, October 1989

No. 45 A Review of the Economic Analysis of PowerProjects in Asia and Identification of Areasof Improvement—I. Ali, November 1989

No. 46 Growth Perspective and Challenges for Asia:Areas for Policy Review and Research—I. Ali, November 1989

No. 47 An Approach to Estimating the PovertyAlleviation Impact of an Agricultural Project—I. Ali, January 1990

No. 48 Economic Growth Performance of Indonesia,the Philippines, and Thailand:The Human Resource Dimension—E.M. Pernia, January 1990

No. 49 Foreign Exchange and Fiscal Impact of a Project:A Methodological Framework for Estimation—I. Ali, February 1990

No. 50 Public Investment Criteria: Financialand Economic Internal Rates of Return—I. Ali, April 1990

No. 51 Evaluation of Water Supply Projects:An Economic Framework—Arlene M. Tadle, June 1990

No. 52 Interrelationship Between Shadow Prices, ProjectInvestment, and Policy Reforms:An Analytical Framework—I. Ali, November 1990

No. 53 Issues in Assessing the Impact of Projectand Sector Adjustment Lending—I. Ali, December 1990

No. 54 Some Aspects of Urbanizationand the Environment in Southeast Asia—Ernesto M. Pernia, January 1991

No. 55 Financial Sector and Economic

Development: A Survey—Jungsoo Lee, September 1991

No. 56 A Framework for Justifying Bank-AssistedEducation Projects in Asia: A Reviewof the Socioeconomic Analysisand Identification of Areas of Improvement—Etienne Van De Walle, February 1992

No. 57 Medium-term Growth-StabilizationRelationship in Asian Developing Countriesand Some Policy Considerations—Yun-Hwan Kim, February 1993

No. 58 Urbanization, Population Distribution,and Economic Development in Asia—Ernesto M. Pernia, February 1993

No. 59 The Need for Fiscal Consolidation in Nepal:The Results of a Simulation—Filippo di Mauro and Ronald Antonio Butiong,

July 1993No. 60 A Computable General Equilibrium Model

of Nepal—Timothy Buehrer and Filippo di Mauro,

October 1993No. 61 The Role of Government in Export Expansion

in the Republic of Korea: A Revisit—Yun-Hwan Kim, February 1994

No. 62 Rural Reforms, Structural Change,and Agricultural Growth inthe People’s Republic of China—Bo Lin, August 1994

No. 63 Incentives and Regulation for Pollution Abatementwith an Application to Waste Water Treatment—Sudipto Mundle, U. Shankar,and Shekhar Mehta, October 1995

No. 64 Saving Transitions in Southeast Asia—Frank Harrigan, February 1996

No. 65 Total Factor Productivity Growth in East Asia:A Critical Survey—Jesus Felipe, September 1997

No. 66 Foreign Direct Investment in Pakistan:Policy Issues and Operational Implications—Ashfaque H. Khan and Yun-Hwan Kim,

July 1999No. 67 Fiscal Policy, Income Distribution and Growth

—Sailesh K. Jha, November 1999

No. 1 International Reserves:Factors Determining Needs and Adequacy—Evelyn Go, May 1981

No. 2 Domestic Savings in Selected DevelopingAsian Countries—Basil Moore, assisted by

A.H.M. Nuruddin Chowdhury, September 1981No. 3 Changes in Consumption, Imports and Exports

of Oil Since 1973: A Preliminary Survey ofthe Developing Member Countriesof the Asian Development Bank—Dal Hyun Kim and Graham Abbott,

September 1981No. 4 By-Passed Areas, Regional Inequalities,

and Development Policies in SelectedSoutheast Asian Countries—William James, October 1981

No. 5 Asian Agriculture and Economic Development—William James, March 1982

No. 6 Inflation in Developing Member Countries:An Analysis of Recent Trends—A.H.M. Nuruddin Chowdhury and

J. Malcolm Dowling, March 1982No. 7 Industrial Growth and Employment in

Developing Asian Countries: Issues and

ECONOMIC STAFF PAPERS (ES)

Perspectives for the Coming Decade—Ulrich Hiemenz, March 1982

No. 8 Petrodollar Recycling 1973-1980.Part 1: Regional Adjustments andthe World Economy—Burnham Campbell, April 1982

No. 9 Developing Asia: The Importanceof Domestic Policies—Economics Office Staff under the direction

of Seiji Naya, May 1982No. 10 Financial Development and Household

Savings: Issues in Domestic ResourceMobilization in Asian Developing Countries—Wan-Soon Kim, July 1982

No. 11 Industrial Development: Role of SpecializedFinancial Institutions—Kedar N. Kohli, August 1982

No. 12 Petrodollar Recycling 1973-1980.Part II: Debt Problems and an Evaluationof Suggested Remedies—Burnham Campbell, September 1982

No. 13 Credit Rationing, Rural Savings, and FinancialPolicy in Developing Countries—William James, September 1982

No. 14 Small and Medium-Scale Manufacturing

21

Establishments in ASEAN Countries:Perspectives and Policy Issues—Mathias Bruch and Ulrich Hiemenz, March 1983

No. 15 Income Distribution and EconomicGrowth in Developing Asian Countries—J. Malcolm Dowling and David Soo, March 1983

No. 16 Long-Run Debt-Servicing Capacity ofAsian Developing Countries: An Applicationof Critical Interest Rate Approach—Jungsoo Lee, June 1983

No. 17 External Shocks, Energy Policy,and Macroeconomic Performance of AsianDeveloping Countries: A Policy Analysis—William James, July 1983

No. 18 The Impact of the Current Exchange RateSystem on Trade and Inflation of SelectedDeveloping Member Countries—Pradumna Rana, September 1983

No. 19 Asian Agriculture in Transition: Key Policy Issues—William James, September 1983

No. 20 The Transition to an Industrial Economyin Monsoon Asia—Harry T. Oshima, October 1983

No. 21 The Significance of Off-Farm Employmentand Incomes in Post-War East Asian Growth—Harry T. Oshima, January 1984

No. 22 Income Distribution and Poverty in SelectedAsian Countries—John Malcolm Dowling, Jr., November 1984

No. 23 ASEAN Economies and ASEAN EconomicCooperation—Narongchai Akrasanee, November 1984

No. 24 Economic Analysis of Power Projects—Nitin Desai, January 1985

No. 25 Exports and Economic Growth in the Asian Region—Pradumna Rana, February 1985

No. 26 Patterns of External Financing of DMCs—E. Go, May 1985

No. 27 Industrial Technology Developmentthe Republic of Korea—S.Y. Lo, July 1985

No. 28 Risk Analysis and Project Selection:A Review of Practical Issues—J.K. Johnson, August 1985

No. 29 Rice in Indonesia: Price Policy and ComparativeAdvantage—I. Ali, January 1986

No. 30 Effects of Foreign Capital Inflowson Developing Countries of Asia—Jungsoo Lee, Pradumna B. Rana,

and Yoshihiro Iwasaki, April 1986No. 31 Economic Analysis of the Environmental

Impacts of Development Projects—John A. Dixon et al., EAPI,

East-West Center, August 1986No. 32 Science and Technology for Development:

Role of the Bank—Kedar N. Kohli and Ifzal Ali, November 1986

No. 33 Satellite Remote Sensing in the Asianand Pacific Region—Mohan Sundara Rajan, December 1986

No. 34 Changes in the Export Patterns of Asian andPacific Developing Countries: An EmpiricalOverview—Pradumna B. Rana, January 1987

No. 35 Agricultural Price Policy in Nepal—Gerald C. Nelson, March 1987

No. 36 Implications of Falling Primary CommodityPrices for Agricultural Strategy in the Philippines—Ifzal Ali, September 1987

No. 37 Determining Irrigation Charges: A Framework—Prabhakar B. Ghate, October 1987

No. 38 The Role of Fertilizer Subsidies in AgriculturalProduction: A Review of Select Issues—M.G. Quibria, October 1987

No. 39 Domestic Adjustment to External Shocksin Developing Asia—Jungsoo Lee, October 1987

No. 40 Improving Domestic Resource Mobilizationthrough Financial Development: Indonesia—Philip Erquiaga, November 1987

No. 41 Recent Trends and Issues on Foreign DirectInvestment in Asian and Pacific DevelopingCountries—P.B. Rana, March 1988

No. 42 Manufactured Exports from the Philippines:A Sector Profile and an Agenda for Reform—I. Ali, September 1988

No. 43 A Framework for Evaluating the EconomicBenefits of Power Projects—I. Ali, August 1989

No. 44 Promotion of Manufactured Exports in Pakistan—Jungsoo Lee and Yoshihiro Iwasaki,

September 1989No. 45 Education and Labor Markets in Indonesia:

A Sector Survey—Ernesto M. Pernia and David N. Wilson,

September 1989No. 46 Industrial Technology Capabilities

and Policies in Selected ADCs—Hiroshi Kakazu, June 1990

No. 47 Designing Strategies and Policiesfor Managing Structural Change in Asia—Ifzal Ali, June 1990

No. 48 The Completion of the Single European Commu-nity Market in 1992: A Tentative Assessment ofits Impact on Asian Developing Countries—J.P. Verbiest and Min Tang, June 1991

No. 49 Economic Analysis of Investment in PowerSystems—Ifzal Ali, June 1991

No. 50 External Finance and the Role of MultilateralFinancial Institutions in South Asia:Changing Patterns, Prospects, and Challenges—Jungsoo Lee, November 1991

No. 51 The Gender and Poverty Nexus: Issues andPolicies—M.G. Quibria, November 1993

No. 52 The Role of the State in Economic Development:Theory, the East Asian Experience,and the Malaysian Case—Jason Brown, December 1993

No. 53 The Economic Benefits of Potable Water SupplyProjects to Households in Developing Countries—Dale Whittington and Venkateswarlu Swarna,

January 1994No. 54 Growth Triangles: Conceptual Issues

and Operational Problems—Min Tang and Myo Thant, February 1994

No. 55 The Emerging Global Trading Environmentand Developing Asia—Arvind Panagariya, M.G. Quibria,

and Narhari Rao, July 1996No. 56 Aspects of Urban Water and Sanitation in

the Context of Rapid Urbanization inDeveloping Asia—Ernesto M. Pernia and Stella LF. Alabastro,

September 1997No. 57 Challenges for Asia’s Trade and Environment

—Douglas H. Brooks, January 1998No. 58 Economic Analysis of Health Sector Projects-

A Review of Issues, Methods, and Approaches—Ramesh Adhikari, Paul Gertler, and

Anneli Lagman, March 1999No. 59 The Asian Crisis: An Alternate View

—Rajiv Kumar and Bibek Debroy, July 1999No. 60 Social Consequences of the Financial Crisis in

Asia—James C. Knowles, Ernesto M. Pernia, and

Mary Racelis, November 1999

22

No. 1 Poverty in the People’s Republic of China:Recent Developments and Scopefor Bank Assistance—K.H. Moinuddin, November 1992

No. 2 The Eastern Islands of Indonesia: An Overviewof Development Needs and Potential—Brien K. Parkinson, January 1993

No. 3 Rural Institutional Finance in Bangladeshand Nepal: Review and Agenda for Reforms—A.H.M.N. Chowdhury and Marcelia C. Garcia,

November 1993No. 4 Fiscal Deficits and Current Account Imbalances

of the South Pacific Countries:A Case Study of Vanuatu—T.K. Jayaraman, December 1993

No. 5 Reforms in the Transitional Economies of Asia—Pradumna B. Rana, December 1993

No. 6 Environmental Challenges in the People’s Republicof China and Scope for Bank Assistance—Elisabetta Capannelli and Omkar L. Shrestha,

December 1993No. 7 Sustainable Development Environment

and Poverty Nexus—K.F. Jalal, December 1993

No. 8 Intermediate Services and EconomicDevelopment: The Malaysian Example—Sutanu Behuria and Rahul Khullar, May 1994

No. 9 Interest Rate Deregulation: A Brief Surveyof the Policy Issues and the Asian Experience—Carlos J. Glower, July 1994

No. 10 Some Aspects of Land Administrationin Indonesia: Implications for Bank Operations—Sutanu Behuria, July 1994

No. 11 Demographic and Socioeconomic Determinantsof Contraceptive Use among Urban Women inthe Melanesian Countries in the South Pacific:A Case Study of Port Vila Town in Vanuatu—T.K. Jayaraman, February 1995

No. 12 Managing Development throughInstitution Building— Hilton L. Root, October 1995

No. 13 Growth, Structural Change, and OptimalPoverty Interventions—Shiladitya Chatterjee, November 1995

No. 14 Private Investment and MacroeconomicEnvironment in the South Pacific IslandCountries: A Cross-Country Analysis—T.K. Jayaraman, October 1996

No. 15 The Rural-Urban Transition in Viet Nam:Some Selected Issues—Sudipto Mundle and Brian Van Arkadie,

October 1997No. 16 A New Approach to Setting the Future

Transport Agenda—Roger Allport, Geoff Key, and Charles Melhuish

June 1998No. 17 Adjustment and Distribution:

The Indian Experience—Sudipto Mundle and V.B. Tulasidhar, June 1998

No. 18 Tax Reforms in Viet Nam: A Selective Analysis—Sudipto Mundle, December 1998

No. 19 Surges and Volatility of Private Capital Flows toAsian Developing Countries: Implicationsfor Multilateral Development Banks—Pradumna B. Rana, December 1998

No. 20 The Millennium Round and the Asian Economies:An Introduction—Dilip K. Das, October 1999

No. 21 Occupational Segregation and the GenderEarnings Gap—Joseph E. Zveglich, Jr. and Yana van der MeulenRodgers, December 1999

No. 22 Information Technology: Next Locomotive ofGrowth?—Dilip K. Das, June 2000

No. 1 Estimates of the Total External Debt ofthe Developing Member Countries of ADB:1981-1983—I.P. David, September 1984

No. 2 Multivariate Statistical and GraphicalClassification Techniques Appliedto the Problem of Grouping Countries—I.P. David and D.S. Maligalig, March 1985

No. 3 Gross National Product (GNP) MeasurementIssues in South Pacific Developing MemberCountries of ADB—S.G. Tiwari, September 1985

No. 4 Estimates of Comparable Savings in SelectedDMCs—Hananto Sigit, December 1985

No. 5 Keeping Sample Survey Designand Analysis Simple—I.P. David, December 1985

No. 6 External Debt Situation in AsianDeveloping Countries—I.P. David and Jungsoo Lee, March 1986

No. 7 Study of GNP Measurement Issues in theSouth Pacific Developing Member Countries.Part I: Existing National Accountsof SPDMCs–Analysis of Methodologyand Application of SNA Concepts—P. Hodgkinson, October 1986

No. 8 Study of GNP Measurement Issues in the SouthPacific Developing Member Countries.Part II: Factors Affecting IntercountryComparability of Per Capita GNP—P. Hodgkinson, October 1986

No. 9 Survey of the External Debt Situationin Asian Developing Countries, 1985—Jungsoo Lee and I.P. David, April 1987

No. 10 A Survey of the External Debt Situationin Asian Developing Countries, 1986—Jungsoo Lee and I.P. David, April 1988

No. 11 Changing Pattern of Financial Flows to Asianand Pacific Developing Countries—Jungsoo Lee and I.P. David, March 1989

No. 12 The State of Agricultural Statistics inSoutheast Asia—I.P. David, March 1989

No. 13 A Survey of the External Debt Situationin Asian and Pacific Developing Countries:1987-1988—Jungsoo Lee and I.P. David, July 1989

No. 14 A Survey of the External Debt Situation inAsian and Pacific Developing Countries: 1988-1989—Jungsoo Lee, May 1990

No. 15 A Survey of the External Debt Situationin Asian and Pacific Developing Countries: 1989-1992—Min Tang, June 1991

No. 16 Recent Trends and Prospects of External DebtSituation and Financial Flows to Asianand Pacific Developing Countries—Min Tang and Aludia Pardo, June 1992

No. 17 Purchasing Power Parity in Asian DevelopingCountries: A Co-Integration Test—Min Tang and Ronald Q. Butiong, April 1994

No. 18 Capital Flows to Asian and Pacific DevelopingCountries: Recent Trends and Future Prospects—Min Tang and James Villafuerte, October 1995

STATISTICAL REPORT SERIES (SR)

OCCASIONAL PAPERS (OP)

23

Edited by S.Ghon Rhee & Yutaka Shimomoto, 1999$35.00 (paperback)

9. Corporate Governance and Finance in East Asia:A Study of Indonesia, Republic of Korea, Malaysia,Philippines and ThailandJ. Zhuang, David Edwards, D. Webb,& Ma. Virginita CapulongVol. 1, 2000 $10.00 (paperback)Vol. 2, 2001 $15.00 (paperback)

10. Financial Management and Governance IssuesAsian Development Bank, 2000Cambodia $10.00 (paperback)People’s Republic of China $10.00 (paperback)Mongolia $10.00 (paperback)Pakistan $10.00 (paperback)Papua New Guinea $10.00 (paperback)Uzbekistan $10.00 (paperback)Viet Nam $10.00 (paperback)Selected Developing Member Countries $10.00 (paperback)

11. Guidelines for the Economic Analysis of ProjectsAsian Development Bank, 1997$10.00 (paperback)

12. Handbook for the Economic Analysis of Water SupplyProjectsAsian Development Bank, 1999$15.00 (hardbound)

13. Handbook for the Economic Analysis of Health SectorProjectsAsian Development Bank, 2000$10.00 (paperback)

1. Rural Poverty in Developing AsiaEdited by M.G. QuibriaVol. 1: Bangladesh, India, and Sri Lanka, 1994$35.00 (paperback)Vol. 2: Indonesia, Republic of Korea, Philippines,and Thailand, 1996$35.00 (paperback)

2. External Shocks and Policy Adjustments:Lessons from the Gulf CrisisEdited by Naved Hamid and Shahid N. Zahid, 1995$15.00 (paperback)

3. Gender Indicators of Developing Asianand Pacific CountriesAsian Development Bank, 1993$25.00 (paperback)

4. Urban Poverty in Asia: A Survey of Critical IssuesEdited by Ernesto Pernia, 1994$20.00 (paperback)

5. Indonesia-Malaysia-Thailand Growth Triangle:Theory to PracticeEdited by Myo Thant and Min Tang, 1996$15.00 (paperback)

6. Emerging Asia: Changes and ChallengesAsian Development Bank, 1997$30.00 (paperback)

7. Asian ExportsEdited by Dilip Das, 1999$35.00 (paperback)$55.00 (hardbound)

8. Mortgage-Backed Securities Markets in Asia

SPECIAL STUDIES, ADB (SS, ADB)(Published in-house; Available commercially through ADB Office of External Relations)

1. Improving Domestic Resource Mobilization ThroughFinancial Development: Overview September 1985

2. Improving Domestic Resource Mobilization ThroughFinancial Development: Bangladesh July 1986

3. Improving Domestic Resource Mobilization ThroughFinancial Development: Sri Lanka April 1987

4. Improving Domestic Resource Mobilization ThroughFinancial Development: India December 1987

5. Financing Public Sector Development Expenditurein Selected Countries: Overview January 1988

6. Study of Selected Industries: A Brief ReportApril 1988

7. Financing Public Sector Development Expenditurein Selected Countries: Bangladesh June 1988

8. Financing Public Sector Development Expenditurein Selected Countries: India June 1988

9. Financing Public Sector Development Expenditurein Selected Countries: Indonesia June 1988

10. Financing Public Sector Development Expenditurein Selected Countries: Nepal June 1988

11. Financing Public Sector Development Expenditurein Selected Countries: Pakistan June 1988

12. Financing Public Sector Development Expenditurein Selected Countries: Philippines June 1988

13. Financing Public Sector Development Expenditurein Selected Countries: Thailand June 1988

14. Towards Regional Cooperation in South Asia:ADB/EWC Symposium on Regional Cooperationin South Asia February 1988

15. Evaluating Rice Market Intervention Policies:Some Asian Examples April 1988

16. Improving Domestic Resource Mobilization ThroughFinancial Development: Nepal November 1988

17. Foreign Trade Barriers and Export Growth

September 198818. The Role of Small and Medium-Scale Industries in the

Industrial Development of the PhilippinesApril 1989

19. The Role of Small and Medium-Scale ManufacturingIndustries in Industrial Development: The Experienceof Selected Asian CountriesJanuary 1990

20. National Accounts of Vanuatu, 1983-1987January 1990

21. National Accounts of Western Samoa, 1984-1986February 1990

22. Human Resource Policy and EconomicDevelopment: Selected Country StudiesJuly 1990

23. Export Finance: Some Asian ExamplesSeptember 1990

24. National Accounts of the Cook Islands, 1982-1986September 1990

25. Framework for the Economic and Financial Appraisalof Urban Development Sector Projects January 1994

26. Framework and Criteria for the Appraisaland Socioeconomic Justification of Education ProjectsJanuary 1994

27. Guidelines for the Economic Analysis of ProjectsFebruary 1997

28. Investing in Asia1997

29. Guidelines for the Economic Analysisof Telecommunication Projects1998

30. Guidelines for the Economic Analysisof Water Supply Projects1999

SPECIAL STUDIES, COMPLIMENTARY (SSC)(Published in-house; Available through ADB Office of External Relations; Free of Charge)

24

1. Informal Finance: Some Findings from AsiaPrabhu Ghate et. al., 1992$15.00 (paperback)

2. Mongolia: A Centrally Planned Economyin TransitionAsian Development Bank, 1992$15.00 (paperback)

3. Rural Poverty in Asia, Priority Issues and PolicyOptionsEdited by M.G. Quibria, 1994$25.00 (paperback)

4. Growth Triangles in Asia: A New Approachto Regional Economic CooperationEdited by Myo Thant, Min Tang, and Hiroshi Kakazu1st ed., 1994 $36.00 (hardbound)Revised ed., 1998 $55.00 (hardbound)

5. Urban Poverty in Asia: A Survey of Critical IssuesEdited by Ernesto Pernia, 1994$18.00 (paperback)

6. Critical Issues in Asian Development:Theories, Experiences, and PoliciesEdited by M.G. Quibria, 1995$15.00 (paperback)$36.00 (hardbound)

7. From Centrally Planned to Market Economies:The Asian ApproachEdited by Pradumna B. Rana and Naved Hamid, 1995Vol. 1: Overview$36.00 (hardbound)Vol. 2: People’s Republic of China and Mongolia$50.00 (hardbound)

Vol. 3: Lao PDR, Myanmar, and Viet Nam$50.00 (hardbound)

8. Financial Sector Development in AsiaEdited by Shahid N. Zahid, 1995$50.00 (hardbound)

9. Financial Sector Development in Asia: Country StudiesEdited by Shahid N. Zahid, 1995$55.00 (hardbound)

10. Fiscal Management and Economic Reformin the People’s Republic of ChinaChristine P.W. Wong, Christopher Heady,and Wing T. Woo, 1995$15.00 (paperback)

11. Current Issues in Economic Development:An Asian PerspectiveEdited by M.G. Quibria and J. Malcolm Dowling, 1996$50.00 (hardbound)

12. The Bangladesh Economy in TransitionEdited by M.G. Quibria, 1997$20.00 (hardbound)

13. The Global Trading System and Developing AsiaEdited by Arvind Panagariya, M.G. Quibria,and Narhari Rao, 1997$55.00 (hardbound)

14. Rising to the Challenge in Asia: A Study of FinancialMarketsAsian Development Bank, 1999Vol. 1 $20.00 (paperback)Vol. 2 $15.00 (paperback)Vol. 3 $25.00 (paperback)Vols. 4-12 $20.00 (paperback)

SPECIAL STUDIES, OUP (SS,OUP)(Co-published with Oxford University Press; Available commercially through Oxford University PressOffices, Associated Companies, and Agents)

SERIALS(Co-published with Oxford University Press; Available commercially through Oxford University PressOffices, Associated Companies, and Agents)

1. Asian Development Outlook (ADO; annual)$36.00 (paperback)

2. Key Indicators of Developing Asian and Pacific Countries (KI; annual)$35.00 (paperback)

JOURNAL(Published in-house; Available commercially through ADB Office of External Relations)

1. Asian Development Review (ADR; semiannual)$5.00 per issue; $8.00 per year (2 issues)

a framework for establishing priorities in a country poverty ......with mass poverty, i.e.,...

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