Winter Semester 2015

Prof. Dr. Ulf Engel

Dr. Ute Rietdorf

The Linkage between Globalization and

Poverty in Asia

Minh Thuy Nguyen

Thuynm2610@gmail.com
Basics in Social Science
Joint International Master in Sustainable Development
Matrikelnummer: 3640620
Word count: 5,021

 Table of Contents
1. Introduction ................................................................................................................... 3
2. Background concepts .................................................................................................. 4
2.1. Globalization defined ........................................................................................................... 4
2.2. Poverty defined ...................................................................................................................... 5
3. Poverty in Asia .............................................................................................................. 6
3.1. Rural Poverty ..................................................................................................................... 8
3.2. Urban Poverty .................................................................................................................. 11
4. Linking Globalization and Poverty .................................................................... 13
5. Impact of Globalization on Poverty in Asia .................................................... 15
6. Conclusion .................................................................................................................. 18
References .......................................................................................................................... 19

1. Introduction
More than two thirds of the worlds poor are living in Asia, with South Asia alone has
been resided by 625 millions - nearly half of them (IFAD, 2002). Poverty is
excessively concentrated in rural areas, massive both in absolute numbers and as
proportions of the rural populations and the gap between rural and urban poverty has
been increasingly extending over time. According to the World Bank, 758 million
people in Asia are below the standard $1.25 poverty line.
The development in Asia has achieved spectacular progress in reducing poverty; as in
the last two decades, the percentage of the developing world living in extreme poverty
has been cut in half. Between 1990 and 2010, Asia lifted 786 million people out of
poverty, bringing down the headcount ratio to 20.8% from a high of 55.2% (ADB,
2014). The global poverty rate, which stood at 25 percent in 2005, is ticking
downwards at one to two percentage points a year, lifting around 70 million people
out of destitution annually (Chandy & Gertz, 2011).
While poverty rates were falling, developing countries in Asia became increasingly
integrated into the world trading system and globalization process. Asia has been the
major beneficiary of globalization where high growth rates and its labor-intensive
pattern contributed to a spectacular reduction in poverty thanks to the affect of
globalization in accelerating global trade which possibly lead to overall economic
growth. In the publication Globalization, Growth and Poverty (2002), the World Bank
claimed that globalization generally reduces poverty because more integrated
economies tend to grow faster and this growth is usually widely diffused. However,
the impact of globalization on poverty reduction has been uneven, especially in South
Asian countries. The downside risks and costs brought by globalization can be
significant for fragile developing economies, particularly the poor, and most vividly
irradiated during periodically global financial and economic crises time. The costs of
repeated financial crises fuelled by the globalization process have been borne
overwhelmingly among developing economies and often disproportionately by the
poor who are the most vulnerable (Nissanke & Thorbecke, 2010).
The following central questions around which this research will gravitate: What are
the relationship between globalization and poverty? How does globalization impact
Asia? To what extent did the Asian globalization pathway benefit or adversely affect

poverty? This essay attempts to provide the comprehensive picture about the different
theories and concepts regarding the effect of globalization on poverty in developing
countries in Asia. I will start by defining the basic ideas and concepts of poverty and
globalization then continue by giving the picture of poverty in Asia. The relationship
between globalization, inequality and poverty will be discussed in this essay by giving
examples of both positive and negative outcomes.

2. Background concepts
2.1. Globalization defined

The debate about globalization began to emerge in the 1960s and early 1970s the
golden age of rapidly expanding political and economic interdependence following
the rise of capitalism throughout the world and the spread of information thanks to
technological advance and improvement (Held & McGrew , 2004). Globalization is
multifariously apprehended as a myth, a verbal scheme, a phenomenon, an ideology, a
reality, a process, and the context of current international relations (Kacowicz, 2005).
Globalization is not a single concept that can be defined and encompassed within a set
time frame, nor is it a process that can be defined clearly with a beginning and an end.
It encompasses many aspects including economic integrations, transmission of
knowledge and policies across borders, the discourses of power, environmental and
security issues, cultural stability within its global process, linking between
development and stability, integration and cooperation over years (Al-Rodhan , 2006).
This term is also used to describe the interrelationship between economic and
noneconomic variables, a process of growing interdependence in which national
boundaries, economic and cultural boundaries are becoming less important (WHO).
From the economic perspective, Globalization is a conceptualization of the
international political economy which suggests and believes essentially that all
economic activity, whether local, regional or national, must be conducted within a
perspective and attitude that constantly is global and worldwide in its scope (Spich,
1995). Stanley Fischer states that the most important characteristics of globalizations
are the increasing amount of cross-border trade in goods and services, the increasing
volume of international financial flows, and the increasing flows of labor (Fischer,
2003). Globalization suggests a growing magnitude of global flows and societies
become increasingly involved in worldwide systems and networks of interaction.

Quantifying globalization could arduous, as there are whether by the gross volume of
international capital flows, world trade, percentage improvement of World GDP, the
convergence of price or by the labor flow between countries. (Tiponut, 2007).
Nevertheless, globalization is much more than just an economic phenomenon. The
non-economic aspects for instance political changes, technologies advance are at least
as much important in shaping our modern lives as people learn from what happen in
the others countries, which impacts their observation about their countries and their
own living situation. Nations, which benefit the most from globalization, are those
poor ones that adapted the policies to exploit the benefits of it, while the nations that
gain the least did not (Lindert & Williamson, 2003)
2.2. Poverty defined

Poverty is generally defined as the scarcity, dearth, or the state of one who lacks a
certain amount of material possessions or money. Poverty is often viewed as a
multidimensional concept that involves economic, social and political elements.
Poverty can be either absolute or relative which associate with lack of income or
failure to conquer proficiencies (Sabates, 2008). Poverty is regularly interrelated with
vulnerability and social exclusion, chronic poverty lessen the opportunities for people
to escape from it. This can extricate individuals from their community, which
elucidates why the experience of poverty is thoroughly connected to social exclusion
and elimination (Walker, 1995).
One possible measurement of poverty is absolute poverty, which means that poverty
is measured by headcount of people living on less than the poverty line of $1 per day,
established by the World Bank. Poverty line is a critical threshold of income,
consumption and access to goods and services below which individuals are declared
to be poor (Ray, 1998). The headcount ratio is the most popular measure, but
according to Debraj Ray, it fails to adequately account for the intensity of poverty.
Another popular measure of poverty is the poverty gap index, which adds up the
extent to which individuals on average fall below the poverty line, and expresses it as
a percentage of the poverty line (World Bank, 2005). This is believed to be a more
sensitive measure to growth in income of those at the poverty line (Kraay, 2004).
Another crucial indicators of poverty are not just defined in terms of income, but also
include other dimensions for instance health, education, access to employment and

housing conditions (Sen, 1976). Decisively, other non-material conditions have also
been integrated into the definition of poverty like discrimination, exploitation, the
deficiency of power and embarrassment (Lok-Dessallien, 2000).

3. Poverty in Asia

Figure 1: Poverty map

(Sources: World Bank, 2009)

Almost two thirds of the world's population lives in Asia. Four billion people are
scattered throughout rural areas or crowded into towns and cities on a land area of
almost 45 million km2, roughly 17 per cent of the worlds surface.
Some 1.2 billion people in the world are estimated to consume less than a standard
dollar a day and are therefore in dollar poverty. Although the share of Asia and the
Pacific Region in the worlds total poor declined by 8.6 percentage points between
1987 and 1998, this region still accounts for roughly two thirds of the total poor,
which made poverty a massive problem in Asia (IFAD, 2002). Poverty is
disproportionately concentrated in rural areas in the region; and the gap between rural
and urban poverty has been widening over time in many Asian countries (IFAD,
2002).

Region

1990

1993

1996

2002

2005 2008

2010

Asia

55.2

51.1

41.3

34.8

26.9

23.9

20.8

Developing World

43.1

41.0

34.8

30.8

25.1

22.7

20.6

855

758

Headcount ratio (%)

Numbers of the poor (million)

Asia

1543

1502

1270

1136

930

Developing World

1908

1912

1704

1639

1389 1302

1215

Table 1: Tracking Poverty: Asia and the Developing World

Source: World Banks PovcalNet Regional Aggregation using 2005 PPP and $1.25/day
poverty line.: Regional comparison of income poverty in developing

According to IFAD (2002), using the headcount ratio, roughly two fifths of the
population in South Asia was under the poverty line, and the incidence of poverty in
East Asia and the Pacific was much lower at 15.3% including China, and 11.3%
without China (data for the year of 1998). Over the last decades, Asia registered an
extraordinarily enormous decline both in the numbers of the poor and the levels of
poverty; however, the progress in poverty reduction has varied widely. The headcount
ratio dropped vividly for East Asia and the Pacific, from a high of 26.6% in 1987 to
15.3% in 1998, but the decline was less drastic in South Asia, from 44.9% to 40.0%.
According to ADB (2014), during the time 1990 to 2010, East Asia and the Pacific
reduced its poverty incidence by 43.8 percentage points, lifting 676 million people out
of povertyunprecedented by any yardstick; South Asias progress on poverty was
moderate, having reduced its poverty incidence by 22.8 percentage points and lifting
110 million people out of poverty. Poverty incidence was one of the highest in South
Asia compare to other regions throughout the world, although the poverty levels in
East Asia and the Pacific in the initial years were higher than in South Asia (IFAD,
2002; ADB, 2014).

Figure 2: Poverty headcount ratio and Percentage Point Reductions

($1.25 Per Day Poverty Line)
Source : (Wan & Sebastian , 2011)

Even with such a massive decline in the numbers and proportions of the poor, poverty
continues to be a arduous challenge for Asia. Asia accounts for 62.2% over 1.2 billion
worlds poor, which also approximately comparable with its populations share as a
whole. Within Asia, South Asia, with a population share of 45%, comprises 67% of
Asias poor whereas East Asia, powered by the PRCs astonishingly growth, had
reduced its poverty rate to 33% in combination with the population share of 55%
(ADB, 2014).

3.1. Rural Poverty

Despite improvements over the past 10 years that have lifted more than 350 million
rural people out of extreme poverty, global poverty remains a massive and

predominantly rural phenomenon with 70 per cent of the developing worlds 1.4
billion extremely poor people living in rural areas. During the past decade, the overall
rate of extreme poverty in rural areas of developing countries people living on less
than US$1.25 a day has dropped from 48 per cent to 34 per cent (IFAD, 2010).
Poverty is also fundamentally a rural problem in Asia and the Pacific Region. Levels
of poverty vary considerably however, not just across regions and countries, but also
within countries. In all countries of the region except Mongolia, poverty is
disproportionately concentrated in the rural areas, and among 80 and 90% of the poor
is rural in all the major countries of the region. The headcount ratio of rural areas is
also higher ubiquitously excluding Mongolia (IFAD, 2002). South Asia, with the
greatest number of poor rural people, and sub-Saharan Africa, with the highest
incidence of rural poverty are the regions nastiest affected by poverty (IFAD, 2010).
Rural poverty trends differ noticeably from country to country. In China, rural poverty
declined during 1978-1984 because of rising grain yields, equal redistribution of land
among households, rising producer prices, better access to free-market sales, and
phasing-in of market prices for food grains (Lipton & de Haan, 1998). Growth in
smallholder agriculture was also the foremost feature for rural poverty reduction in
Indonesia and Malaysia during 1970s, and in Japan, the Republic of Korea, and
Taiwan between the time 1950s and 1960s. The opportunities for rapid diminutions of
poverty through agricultural growth in the remote and hilly areas were much more
challenging, with most of the residual poor are now found in the secluded upland
areas (Ahmad & Yan, 1991).

Table 2: Distribution of poor in rural and urban households in Asia (%)

Source: IFAD, 2002

In India, the differences between the incidence of rural and urban poverty have been
smaller than in most other Asian countries. The gap declined up to the late 1980s but
began increasing in the 1990s. Comparable to China, and some Southeast Asian
countries like Indonesia and Malaysia, the decline in rural poverty in India was mostly
due to the employment outcomes of the Green Revolution. In many countries
including India, China, Bangladesh, Malaysia, Pakistan and The Philippines the gap
between rural and urban poverty has been widening over time (Table 2) (Ahmad &
Yan, 1991). Indonesia and parts of China progressed better thanks to the growth in
labor-intensive for manufactures and services. Lipton and de Haan stated that an
important concern for unceasing rural poverty reduction is whether the slowdown of
growth in cereal output and employment can be compensated for by labor-intensive
expansion of services and manufactures.
The rural poor in Asia are characterized by a number of general economic,
demographic and social features, but the most collective feature is landlessness or
limited access to land. Rural poverty is the consequences of factors for instance lack
of assets, limited economic opportunities, poor education and capabilities, as well as

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disadvantages rooted in social and political inequalities. Households fall into poverty
predominantly due to different shocks such as ill health, poor harvests, social
expenses, or conflict and disasters. Poor rural households tend to have larger families
since the flow of income is from children to parents, with higher dependency ratios,
lower educational attainment, and higher underemployment (IFAD, 2002).
The poor also face a scarcity of basic facilities such as piped water supply, sanitation
and electricity as well as rigorously limited access to credit, input and technology.
Low levels of social and physical infrastructure increase their vulnerability to famine
and disease, especially in the mountainous and remote areas of the region. The other
significant limitations involve lack of information about markets, lack of business and
negotiating experience, and lack of a collective organization, which hinder the
competitiveness on equal terms with the larger, and stronger market intermediaries.
Cultural and social distance and discrimination are other factors that partly eliminate
the poor from marketplaces (IFAD, 2002).
The major groups of rural poor are the landless, along with marginal farmers and
tenants, indigenous peoples and Scheduled Castes, and internally displaced persons
and victims of landmines. Pastoralists and coastal fishermen are also important subgroups of rural poor especially in South East Asia such as Philippines and Vietnam.
Certain groups particularly rural women, youth, indigenous peoples and ethnic
minorities are often disproportionately held back by disadvantages rooted in
inequalities (IFAD, 2002). Specifically, women are generally suffering the hardest by
poverty and inequality; female-headed households are particularly prone to poverty.
Although both men and women access properties, women tend to spend their incomes
mostly on the basic needs of the family, while men spend a greater share on personal
needs (Mencher, 1989).

3.2. Urban Poverty

Unlike rural poverty, urban poverty is an intricate and multidimensional state of
deprivation that varies with countries, cities, and social conditions; extending beyond
the deficiency of income or consumption. Some common characteristics of the urban
poor relate to their vulnerability on inadequate access to land and housing, physical
infrastructure and services, economic and livelihood sources, health and education
facilities, social security networks and empowerment (ADB, 2014).

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Year

Headcount

Urban Poor

Total Poor

(%)

Rural-

Ratio (%)

(million)

(million)

1993

16.8

142.2

934.4

15.2

1:0.18

2002

13.2

150.6

775.4

19.4

1:0.24

Urban Ratio

Table 3: Share of the Urban Poor in Asia: $1.08/day Poverty Line at 1993
Purchasing Power Parity Source : Revallion et al.(2007)

In most of developing countries in Asia, urbanization has been equipped not only with
skyscrapers, giant shopping malls, and modern infrastructures but also accompanied
by slums and shelter deprivation. Asia has accounted for 60% of the worlds total
slum population, and many more people are suffering the slum-like living conditions.
That number could even increase due to the increasing risks of climate change and
exclusionary urban forms.
Poverty is increasingly located in cities and towns. Most Asian economies are
struggling with complex urban problems, associated with the huge gap between the
rich and the poor, different forms of poverty, deprivation, vulnerability, and risks.
With urbanization concentrated in the Global South, urban poverty is rapidly
growing and in some countries becoming more significant than rural poverty (Tacoli,
2012). The Peoples Republic of China (PRC), is currently confronted with the
emergence of a new class of urban poor linked to the decline of the state-owned
sector, to the changes in the welfare provision, and to rural to urban migration, thus
result in the appearance of a new social class including urban working poor, and a
large population living in slums and slum-like conditions and a large population
estimated at about 180 million living in slums and slum-like conditions (UNHABITAT, 2012).
Urban poverty in Asia is largely concentrated and widespread in small and medium
towns. The greater incidence and severity of consumption poverty in smaller towns
are compounded by similarly higher deprivation levels like access to basic
infrastructure services, such as electricity, heating gas, sewerage, and solid waste
disposal (Ferr et al. 2010).

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Year

Share of the Urban Poor

Rural-Urban Ratio of the Poor

1990

18.3

1:0.22

1996

16.8

1:0.20

2002

17.2

1:0.21

2008

22.9

1:0.30

Table 4: Is Asia Entering into the Urbanization of Poverty Trap?

Source: The World Bank IMF (2013) Global Monitoring Report

Urban poverty is multidimensional, dissimilar and complex with several key aspects
that could be taken into account. Firstly, urban poverty is primarily a monetary
phenomenon; hence, the poor are likely to be unprotected and vulnerable to any
changes in economic system and to internal and external shocks. For example the
2008 economic crisis was recorded to strap over 100 million people below the poverty
line (Baker, 2008). The second factor that must be considered is the extremely
inequalities in income and living conditions between the wealthy and the poor, which
make it more difficult to reduce poverty. Increasing urban inequalities have raised
tensions and led to protests and riots in the different parts of the world. Moreover,
cities have become increasingly susceptible to various kinds of disasters and climate
change risks, emissions and numerous form of pollution with the greater degree of
being exposed suffer by the poor (ADB, 2014). Low levels of assets make poor
people especially vulnerable to negative economic shocks, setting in motion a
downward spiral that worsens deprivation in the long term. All these aspects make
poverty in Asian cities far more pervasive and severe.

4. Linking Globalization and Poverty

Globalization and poverty is currently a decidedly controversial topic in literature.

Various studies prove that globalization increases poverty, whereas abundant

opponents try to claim that globalization reduces poverty. Those favor the benefit of
globalization showed that there have been significant improvement to deal with global
poverty and the incidence of inequality. In contrast there are proponents of

13

globalization who claimed that globalization has led directly to increases in poverty
and inequality. The rich are getting richer while the poor are even poorer.
On the one hand, those who support the idea of globalization such as Dollar & Collier
claimed that globalization generally reduces poverty because more integrated
economies tend to grow faster and this growth is usually widely diffused. As lowincome countries break into global markets for manufactures and services, poor
people can move from the vulnerability of grinding rural poverty to better jobs, often
in towns or cities. In addition to this structural relocation, integration raises
productivity job by job. Workers with the same skills, be they farmers, factory
workers, or pharmacists, are less productive and earn less in developing economies
than in advanced ones. Integration reduces these gaps. (Dollar & Collier, 1999).
Certainly many countries, including China and its smaller neighbor in East Asia, and
more recently - India, have been growing at a faster rate than rich countries thanks to
their intensive engagement in international trade and investment over the past one or
two decades (Birdsall, 2001). Those countries that rapidly integrate into the global
economy grow faster and manage to reduce poverty. For example, outward-oriented
(i.e., export-led) economic policies transformed East Asia into some of the worlds
most dynamic and more prosperous economies over the past forty years. But its not
just the dynamic economies of East Asia, such as China, recording great feats in
poverty reduction; South Asian giants including India and Bangladesh, and Central
Asian economies such as Uzbekistan also make great progresses (Chandy & Gertz,
2011). Rapid growth in these countries has narrowed the gap in living standards
relative to the developed world for a large fraction of the world's population, and all
of these countries have reduced poverty significantly as they have integrated with the
global economy (Dollar & Kraay, 2002).
On the other hand, the anti-globalization or the anti-neoliberal theory states that world
poverty and inequality have been rising due to the effects of globalization (Wade,
2004). In opposite with Dollars statement of the decline in global inequality from
1980s, Milanovic (2005) argues that this is only true when the average per capita
income is weighted by population. His results show that when China and India are
dropped from the illustration, inequality actually increases. Inequality in China is
increasing, but the level is below average global level. Watkins (2002) concluded that
increased trade is not necessarily associated with a systematic tendency to decrease

14

inequality. Another problem, Watkins states, is the problem concerning what is being
measured; the non-income dimensions of poverty such as self-respect, security, and
health have been ignored. Countries such as China, Thailand, and Vietnam may be
premier globalizers. They also have a strong record on economic growth and poverty
reduction. Yet they have liberalized imports very slowly and still have relatively
restrictive trade barriers. Conversely, countries such as Brazil, Haiti, Mexico, Peru,
and Zambia have been world-beaters when it comes to import liberalization, but have
a weak record on growth and poverty reduction. In short, many first-rate globalizers
have fifth-rate records on poverty reduction. (Watkins, 2002). The fact that
globalization is a positive force for poverty reduction has also been taking into
consideration. Robert Wade doubts that the rising quantity of trade and the
developmental benefits thereof, are the consequences of trade liberalization. (Wade,
2004).

5. Impact of Globalization on Poverty in Asia

Asia is the region widely regarded as having benefited most from the dynamic growth
effect of the recent wave of globalization, which has also resulted in a very substantial
reduction in abject poverty in many economies (Nissanke & Thorbecke, 2010).
Globalization and economic liberalization have played a fundamental role in the
economic development and poverty reduction in many East and Southeast Asia
countries over the last three decades. But it is undeniable that, besides its benefit,
globalization also entails risks. For example, the inability of domestic producers to
compete in the short term with giant foreign manufacturers which also lead to
increased exposure to price risk; and the potential of destabilizing effect of
uncontrolled capital flows and the increasing inequality among poor people,
especially in remote or inaccessible areas (IFAD, 2002).
Trade and FDI had a powerful impact over the growth of most Asian countries.
Following antagonistically an outward oriented development strategy, many East
Asian countries had not only managed the process of integration into the world
economy much earlier than the other developing countries, but also improved their
linkages with the global economy during their rapid economic growth period. Many
of the East Asian economies recorded the spectacular growth performances

15

complemented with the considerable reduction in poverty through the dynamic

changes in their socioeconomic structures due to an appropriate set of economic
policies and institutions that suitable to the conditions predominant in East Asia
during that period. The incidence of poverty (based on the US$1.25 poverty line) is
estimated to have dramatically declined from 78 percent in 1981 to 17 percent in 2005
in East Asia including China, and from 60 percent to 40 percent in South Asia during
the same period (Nissanke & Thorbecke, 2010).
It is not only China and India but also a larger group of poor, relatively closed
countries that in the last two decades opened and liberalized their markets that have
enjoyed higher growth rates. The World Bank reported that the top third of
developing countries in term of increases in trade to GDP in the last two decades grew
faster in the in the 1980s and 1990s (3.5 percent and 5 percent) than in the 1960s and
1970s, faster than those with lower increase in trade and GDP ratios and even faster
than the developed countries as a group. Beside India and China, the new globalizing
group includes Bangladesh, Malaysia, the Philippines, Thailand and Vietnam. Their
average growth brought their populations as a whole closer to the income of a higher
level of estimation, for example, China total GDP and income is close to the income
of the rich countries (Birdsall, 2001).
One movement of trade in globalization - trade liberalization, for instance, influences
the rural poor in different ways. In removing or reducing biases against farm prices, it
may help the net food sellers among the rural poor and harm net food buyers, but
access to competitive market channels also matters. Moreover, trade liberalization is
associated both with higher prices of major food crops and greater alterations of these
price, therefore, even if smallholders benefit from higher prices under certain
conditions, they are also exposed to greater variability of farm incomes. When rural
infrastructure is good, the poor are able to respond better to new incentives and
opportunities. The stark example for this is China, where competitive markets
developed rapidly thanks to their investment on infrastructure and transportation after
commerce was opened up (IFAD, 2010). In contrast, with underdeveloped
infrastructure, upland and mountainous areas of Asia suffer from social deprivation
because of political neglect and remoteness and the current process of globalization
are likely leading to the increasing in risk of further marginalization, disempowerment

16

and desperation. Globalization encourages indiscriminate resource-use intensification

with little concern to the local environmental and socio-economic consequences,
leading to the over-explosion of resources such as timber, minerals, hydropower, etc.
(Jodha, 2001).
In oppositions to the benefit that some globalization movements might bring in
diminishing the incidence of poverty, another effect could be painful. Particularly,
financial crises are costly to the poor. In many Asian countries, capital account
liberalization has increased the vulnerability of these economies to external shocks
because private, short-term capital can rapidly flow in and out of the country. For
example, because of the Asian financial crisis in 1997, the poverty rates in Indonesia
increased by at least 50 percent, from 11.3% in February 1996 to 20.3% in December
1998 (World Bank, 2001). As the financial crisis hit the real economic sector, the
adverse effects of the economic downturn were transmitted to the poor. The sharp
economic downturn led to a drastic drop in employment and real wage decreases
(IFAD, 2002). In Thailand, although the crisis has had an adverse impact on
unemployment in the urban, semi-urban and rural areas, the greatest impact was felt
in the rural areas (Kakwani, 1998). Thus the unemployment rate was higher in the
villages (4.4%) than in semi-urban (3.0%) or municipal areas (2.7%), as also seen
from the decrease in real incomes. Even before the crisis, the incidence of poverty in
rural areas was much greater (at 21.2%), than in the semi-urban (9.6%) and urban
areas (2.4%). As a result of the crisis, rural areas are not only poorer than urban areas
but have also suffered a greater fall in their average real income and employment rates
(Kakwani, 1998).
Despite the sharp reduction in the incidence of extreme poverty (less than US$1.25 a
day), poverty remains high in many developing countries in Asia especially the South
Asia when taking the measurement on the basis of the US$2 a day poverty line into
account. It is recorded the decline from 86 percent in 1981 to 73 percent in 2005 in
South Asia and from 92 percent to 38 percent in East Asia over the same period with
the latter poverty line. The reduction in this measure is remarkable in East Asia, but
poverty is still widespread in Asia as a whole, and the challenge facing policymakers
in attacking poverty and inequality between urban and rural areas is still intimidating.

17

6. Conclusion

There exist diverse opinions on globalization and its effect. One view says that
globalization will lead to prosperity while the other think that more cautiousness
should be taken into account. The links between globalization and poverty are
complex and ambiguous; globalization might have both detrimental and positive
effects. Some studies prove that globalization help the poor whereas others claim
that globalization is hurting the poor. Globalization produces both winners and losers
among the poor. Globalization could bring dynamic growth to developing countries
economy. However, openness to trade does not guarantee a better living for the poor
and the growth in income might not alleviate the poverty level in a country as a
whole. Sustaining the shared growth process is hence critical for ensuring economic
growth to continue under this era of globalization. Alternatively, growing inequalities
can weaken social cohesion and risk reducing the momentum for economic growth
and integration in the region.
Beside, there still lay some issues to concern such as the vulnerability to global crisis
of many developing countries especially in Southeast Asia and South Asia, and many
questions that go beyond the effect of globalization not only in the economic
perspective but also on local cultures and on the sustainability of our natural
environment. Rapid economic growth and poverty reduction are not necessarily
positively correlated with decreasing inequality. The implications of such a change
will be far-reaching, touching everything from global business opportunities to
environmental and resource pressures to our institutions of global governance.

18

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