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Why Asia needs aggressive fiscal policy reform to address inequality and poverty?

Despite recent strides made against poverty in Asia lifting millions out of deprivation, still large numbers of people are facing injustice of poverty, hunger and inequality. Some Asian countries have made significant structural transformation including land reforms to evenly distribute land; however others have been unsuccessful in bringing these very basic and fundamental reforms to address poverty and inequality.

In the wake of these realities, fiscal policies are crucial instrument available with the democratic governments in Asia to fulfil unrealized dream of equality and poverty free region. Fiscal policies reflect government’s social and economic priorities and direction.  It is uncontested fact that the way countries mobilize domestic revenue and take spending decision affect redistribution and poverty reduction.

DSC_3559The challenges with existing fiscal policies include low level of tax revenue collection than the potential available in economies, reliance on indirect taxation which by nature is regressive and disproportionately affect poor households and tax exemptions or undue benefit to certain sectors/corporations creating unequal tax incentives. The redistributive fiscal policies would increase domestic revenue collection through progressive taxation and have well defined equitable tax policy.

Spending priorities are another important element of redistributive fiscal policies and directly linked to the level of revenue collection. Globally proven interventions worked in arresting poverty and counteracting against inequalities-hence expediting poverty reduction rate- include universal education and health services, social protection mechanism consisting on variety of social assistance programmes, conditional cash transfers and unemployment benefits.

Asian countries have invested smaller proportion of their national income in social protection that might partly explain that despite the era of high economic growth in many countries, rate of poverty reduction has remained.

Asian development has constructed social protection index- comprising three components i.e. social insurance, social assistance and labour market programmes-Interestingly, according to this index; the level of social protection spending does not depend on size of economy. However, it is determined by the quality of democracy and political priorities of the governments in the region.  For example Kyrgyz republic falls in low income country but its social protection index is almost equal to Singapore which is high income country- and higher than china and Thailand which fall upper middle income countries.

girls fetching water_6No doubt, there are many challenges faced by the countries in Asia for introducing and implementing effective fiscal reforms especially designing and implementing social assistance programmes to precisely achieve desired objective of poverty reduction.

The emerging post 2015 development agenda and tested global solution to finance poverty reduction programmes require that Asian government need find the ways to address those challenges and redouble their efforts in mobilizing domestic resources and increasing investment in essential public services and much needed social protection programmes to eliminate poverty and inequality by 2030.

 

 

Mustafa Tulpur is Senior Manager of Policy and Advocacy Program. He is based in Pakistan.

 

  1. One Response to “Why Asia needs aggressive fiscal policy reform to address inequality and poverty?”

  2. By Mush Rajpar on May 19, 2015

    Interesting write up, agree with the key argument of fiscal reform. In countries like Pakistan, which seems in many ways so exception and different than many countries at least in South Asia, we need land reforms here, with big land holdings inequality only deepens. In Sindh, second largest province of Pakistan, alone 76% peasants are landless. When the means of production are owned by elite, landed aristocracy, and wages are hardly implemented even in well-established garment industry poverty and backwardness won’t go away.
    Oxfam need to run a campaign how land holdings are reinforcing misery and poverty in several parts of Pakistan.

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