Tuesday, December 08, 2015 Investment Priorities for Cutting Hunger and Poverty in Asia Shenggen Fan

Page 2 Outline of the Presentation How Asian countries have been spending How spending has contributed to growth and poverty reduction Way forward Lessons

Page 3 Share of Agriculture Spending in Total Budget

Page 4 Share of Agricultural Spending in AgGDP

Page 5 Government Spending and Poverty

Page 6 Effects of Government Spending, India

Page 7 Effects of Government Spending, China

Page 8 Effects of Government Spending, Thailand

Page 9 Effects of Government Spending, Vietnam

Page 10 Investment and Poverty Reduction: Summary

Page 11 Way Forward Public investment needs better targeted for achieving maximized growth and poverty reduction. Agricultural research, rural infrastructure and education are the three most effective public spending items in promoting agricultural growth and poverty reduction. More investments in many less-developed areas not only offer the largest poverty reduction per unit of spending, but also lead to the highest economic returns.

Page 12 Way Forward It is often the low grade/low cost types of infrastructure that may have highest pay off per unit of investment in growth and poverty reduction. Increased investment on irrigation should be replaced by increasing efficiency of the current public irrigation system. More efforts are needed to improve targeting and efficiency of anti-poverty programs

Page 13 Lesson: “One-Size-Fits-All” does not work Different spending priorities are needed in different stages of development. In the first phase, strategy should focus on reducing widespread poverty through broad based economic growth which reaches agricultural sector and rural areas. In subsequent phase, more direct attention is needed to concentrate on lagging regions, as well as on poverty at the community and household levels. Social protection spending becomes important when poor is concentrated to certain populaiton groups and easy to identify.

Page 14 Many Asian countries are still in the first phase. These countries include Myanmar, Nepal, Laos, and Cambodia. Investments in support of economic growth remain central to reduction of their mass poverty. Governments have the central responsibilities of forging a well-sequenced and coherent growth strategy, and of determining which public investment priorities are required. Public investment in infrastructure and agriculture are the main areas needing attention. Lesson “One-Size-Fits-All” does not work

Page 15 China, Vietnam and Thailand have favored a sectoral and regional targeting approach to deal with rising inequalities such as with employment actions but has recently expanded to more household and community targeted programs. India, on the other hand, has concentrated on targeting specific sections of the population and has involved a large set of actors including NGOs and civil society, and recently expanded employment programs. The experience of India shows that the use of variety of targeted programs directed to specific sections of the poor can help improve targeting compared with the broader income- or area-based approaches. Lesson: “One-Size-Fits-All” does not work