Despite decades of solid economic growth leading to significant poverty reduction, income inequality has risen in many Asian and Pacific countries.

Out of the 20 countries for which trend data is available, 12 reduced the share of their population living below one dollar (PPP) per day, the international poverty line, between the early 1990s and mid-2000s.

Figure 16.1 Percentage of the population living below one dollar [1993 PPP] per day in Asia and the Pacific, 1990-2006

Among the subregions for which data is available, the largest poverty reduction occurred in Central Asia. In this subregion, Kyrgyzstan reduced the share of its population living below one dollar (PPP) per day by three quarters, dropping from 8 per cent in the early 1990s, to only 2 per cent by the mid-2000s. Armenia, Azerbaijan and the Russian Federation also experienced considerable decreases in the share of the population living in poverty. The only country in Central Asia where the share of the poor increased, from 2 to 6 per cent, was Georgia.

In East Asia, China registered an impressive reduction in poverty. About one third of China 's population lived below the one dollar (PPP) per day poverty line at the beginning of the 1990s, while according to the latest estimates, 1 in 10 Chinese lives below this line. This represents a reduction in poverty of 70 per cent, comparable to Thailand, where the share of the population living below one dollar (PPP) per day declined from 6 to 2 per cent.

India also registered a substantial decrease in poverty, although at a much lower rate compared with China and Thailand. Between 1993 and 2004, the proportion of Indians living below one dollar (PPP) per day fell from 42 to 34 per cent, a reduction of nearly 20 per cent. Similarly, Nepal experienced a sizable decrease in the share of the poor, from 34 per cent in 1996 to 24 per cent in 2004. In Bangladesh and Sri Lanka, however, the share of the population living below one dollar (PPP) per day increased during this period, rising from 36 per cent in 1992 to 41 per cent in 2000 in the former and from 4 per cent in 1990 to 6 per cent in 2002 in the latter country.

The one dollar (PPP) per day line is used to compare poverty incidence across countries on the basis of fixed purchasing power. The national poverty line, on the other hand, reflects the official minimum standard of living based on country-specific characteristics. Both level and trend assessments based on these two poverty lines for the same country do not always agree.

For instance, according to national poverty estimates, 68 per cent of the population in Azerbaijan lived in poverty in 1995, while only 50 per cent of the population was poor in 2001. This contrasts with the 11 and 4 per cent of the population of Azerbaijan living below one dollar (PPP) per day line in the same years. In other words, the national and international yard sticks give quite different pictures of poverty.

In the case of India, the poverty reduction rate is similar when international and national poverty lines are considered, respectively, between 1993 and 2004 and between 1994 and 2000. Yet, the two lines give different incidences of poverty: according to the latest national line estimates, the share of the poor is 29 per cent, but the international poverty line suggests 34 per cent.

The most significant divergence between the international and national poverty lines is registered by Thailand and Indonesia. According to the one dollar (PPP) per day line, the share of the poor decreased in both countries between the 1990s and the 2000s, but national poverty line estimates show that the share has actually risen by 40 per cent in the case of Thailand, to 14 per cent of its total population, and by 69 per cent in the case of Indonesia, to 27 per cent of the population.

In line with the reduction in the incidence of poverty, the limited data show that poverty depth also diminished in some Asian and Pacific countries. Between the early 1990s and the early to mid-2000s, the poverty gap ratio declined in three out of the nine countries for which trend data exists, meaning that, for those living below the poverty line, the average distance to it was reduced. In the case of Kyrgyzstan, for instance, the poverty gap ratio dropped considerably, from over 3 per cent in 1993 down to 0.5 per cent in 2003.

In India, as well, significant progress was made in reducing the depth of poverty; the poverty gap ratio dropped by 27 per cent, from 11 to 8 per cent in just over a decade. In the Lao People's Democratic Republic, on the other hand, the poverty gap ratio doubled, to 6 per cent, in 10 years.

Figure 16.2 Share of the poorest quintile in national income or consumption in Asia and the Pacific, 1990-2006

Although poverty incidence and depth seem to be on the decline, inequality in income distribution has been on the rise. In many countries, the poorest 20 per cent of the population has seen its share of national consumption drop steeply.

In 12 out of 20 countries of the region for which trend data is available, the share of the poorest quintile in national consumption declined; there was some progress in the eight remaining countries. In Nepal and Sri Lanka, this share fell by over 20 and 22 per cent, respectively, from 7.5 to 6 per cent and from 9 to 7 per cent. Turkey, despite ranking as a middle-income economy with steady economic growth, registered a decrease in the share of the poorest quintile in national consumption by 8.6 per cent in less than a decade.

In the case of South-East Asia, the share of national consumption of the poorest quintile in the Lao People's Democratic Republic and the Philippines fell by 15.6 and 8.5 per cent, respectively, between the early 1990s and the early 2000s. Meanwhile, Viet Nam, Thailand and Indonesia recorded an increase in the share of the poorest quintile in national consumption by 25, 12.5 and 7.7 per cent, respectively, between the early 1990s and the early to mid-2000s.

Figure 16.3 Gini index and change between earliest (1990-1997) and latest (1998-2005) periods in Asia and the Pacific

These trends are confirmed by a more comprehensive measure of inequality, the Gini index. In the past, Gini indices across the Asian and Pacific region have been considerably lower than in other parts of the world indicating lower income inequality. This, however, is no longer the case.

The bars in figure 16.3 show that, in the past decade or so, inequality rose in 11 out of 20 countries in the region. The increases were steepest in Sri Lanka and Nepal, where the Gini index increased by more than 10 points. This in line with the decrease in the share in national consumption of their poorest quintiles, as mentioned above. The Philippines and Turkey had smaller increases in their Gini indices, but the values are still over 40. Even in Thailand, where the Gini index decreased between 1992 and 2002, the value, at 42, is still high.

Among Central Asian countries, Kyrgyzstan, Armenia and the Russian Federation experienced a substantial reduction in their Ginis. In the case of Kyrgyzstan, the index dropped by over 40 per cent, making it the lowest among all Asian and Pacific countries analysed, even the Republic of Korea, which has a Gini index of 32.

The highest level of inequality among all the countries of the region is currently found in Nepal, with China not far behind. Both have Gini indices close to 50, similar to those of Latin American countries, which are usually among the world's highest.