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Putting Asia's Gini Back in its Bottle

Activists across Asia have become increasingly vocal about what they view as a widening divide between the haves and the have-nots, using the region's high Gini coefficients to support their claims. But such measures are less important than trends and public perceptions of whether the situation is improving.

KLONG LUANG, THAILAND – Activists across Asia, inspired partly by the Occupy Wall Street movement in the United States, have been highlighting what they view as a widening divide between the haves and the have-nots, those with connections and those without. But what if inequality continued to rise in Asia, and no one noticed? Would the widening gap be as inconsequential as the proverbial tree that falls in the forest, with no one there to hear it?

The inconvenient truth is that two-thirds of the world’s poor live in Asia. According to the Asian Development Bank (ADB), the region is home to an estimated 1.7 billion people living on less than $2 per day, and roughly 700 million surviving on less than $1 per day.

Indeed, a substantial portion of the region’s population – in which ethnic minorities and indigenous peoples are often disproportionately represented – remains marginalized and excluded from the benefits of Asia’s rapid economic growth. For example, 43% of people still lack access to basic sanitation facilities, and many of Asia’s cities, burdened by burgeoning populations, suffer from poor sanitation, deteriorating environmental conditions, and inadequate housing and infrastructure.

This reality conflicts with the portrayals that dominate news reports, which depict a modern China, a dynamic Indonesia, and a tourist-friendly Thailand. And it is not only outsiders whose perceptions are flawed. Amid gleaming skyscrapers and high-end shopping malls, a growing and increasingly affluent middle class is disconnected from the unrelenting poverty that pervades many parts of Asia and the Pacific.

It is striking that, when asked which country in Asia is the most unequal according to the Gini coefficient (the most commonly used measure of income inequality), students at Chulalongkorn University’s Sasin Graduate Institute of Business Administration in Thailand identified India, Vietnam, and Pakistan. For many of them, it was a shock to learn that the CIA World Factbook ranks Thailand 12th in the world for income inequality.

Of the 136 territories and countries included in the rankings, three countries in sub-Saharan Africa – Namibia, South Africa, and Lesotho – are rated most unequal in the world. In Asia, Thailand is ranked the most unequal, followed by Hong Kong in 13th position, and Papua New Guinea, which is ranked 19th.

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Some of the results are not surprising – for example, Sweden is ranked as the world’s most equal country. But others are startling, which partly reflects skewed public perceptions of poverty’s prevalence and severity, as well as the challenge of acquiring accurate data.

In fact, some of the governments on which calculations of the Gini index depend for data may deem it too sensitive, or not in their interest, to provide accurate information, undermining the Gini coefficient’s leading role in evaluating poverty. After all, rankings are only as reliable as the data on which they are based.

Moreover, given that annual rankings fail to account for changing demographics and trends, they can misrepresent a country’s policy needs. Last year, ADB economist Juzhong Zhuang highlighted the contrast between the “growth with equity” that characterized the transformation of the newly industrialized economies in the 1960’s-1970’s and recent experience.

In the 12 countries that account for more than four-fifths of Asia’s population, Zhuang noted, income disparities deepened over the last two decades, despite rising average incomes and significant poverty reduction. In particular, China, India, and Indonesia – the region’s main drivers of economic growth – have experienced significant rises in income inequality. By contrast, inequality largely declined in sub-Saharan Africa and Latin America and the Caribbean, although these regions’ average regional Gini coefficients still exceed Asia’s.

This suggests that official, static Gini coefficients are less important than trends and public perceptions of whether the situation is improving. Rather than focusing on income inequality, therefore, Asia’s policymakers should focus on the drivers of inequality of opportunity –including unequal access to public services, such as education, electricity, water, and sanitation.

Singaporean diplomat Tommy Koh has argued that his country’s relatively high Gini coefficient – the 29th highest in the world – does not tell the full story. If one also considers Singapore’s strong rule of law, lack of political corruption, and, most important, equality of opportunity and potential for social mobility, he argues, “[i]t is probably better to be poor in Singapore than anywhere else in Asia.” Whether or not one agrees, there is far more to a country, region, or market than its Gini coefficient.

Indeed, although Asia’s unprecedented economic growth has brought with it rising inequality, it has also enabled the region to overcome the financial crisis of the late 1990’s, and to play a crucial role in leading the world out of the current global slump. At the same time, poverty has decreased substantially, with tens of millions of people now living better lives.

In a world driven by unstoppable technological progress and relentless globalization, we must consider whether income inequality really matters more than equality of opportunity. Answering that question will help Asia’s people gain a better understanding of themselves – and the development challenges that they face.

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