Effectiveness needed in fight against poverty

Siwage Dharma Negara, Indonesia Institute of Sciences (LIPI), Jakarta

UN Secretary General Kofi Annan once mentioned that poor people in poor countries were not asking for a handout; what they wanted was a handup. They possessed enormous, untapped reservoirs of initiative and entrepreneurship. Indeed, poverty had confined them to exploit their resources unsustainably and wreck their opportunity for promoting their well-being.

Many talented people live in poor countries, but whose talents are not realized or nurtured because of an absence of food security, limited access to health services, or educational and financial resources. Considering how detrimentally poverty can affect human well-being, in 1974, Robert McNamara, then president of the World Bank, stated that overcoming poverty was the key goal for the bank. After more than a quarter of a century, poverty remains plaguing every part of the world.

Some 1.2 billion people currently live in extreme poverty. In Indonesia 15 percent of the total population, or 33 million people, live below the poverty line. More than half of those can be classified as living in extreme poverty. Even more frightening is the fact that half of the total population of 220 million is very close to the poverty line. Thus they are extremely vulnerable to another economic crisis or abrupt economic fluctuations that negatively affect income distribution and resource allocation.

Poverty is a multidimensional problem. It is not just a matter of technical or economic issues but also social and political problems. For this very reason, the eradication of poverty cannot be achieved without an extensive strategy that takes into consideration economic, social, and political issues.

The recent global development trend has put poverty eradication on its top-priority agenda. This indicates the ongoing paradigm shift about how people perceive development itself. Instead of viewing development as something abstract, now people tend to adopt a new perspective as it is concerned with human well-being. Development should be followed by real change in the lives of real people. Therefore the development goals should be focused on increasing human well-being through fighting poverty.

The success of global development policies and strategies is best depicted by changes in the quality of human life in the poor countries. Although the struggle for lifting the poor out of poverty has to be carried out by themselves, often they cannot lift themselves without meaningful assistance from others. Occasionally, their efforts are hampered by a lack of basic security, a rule of law, or an honest and transparent administration, plus limited financial, technological, and human resources, all of which indeed typify developing countries. However, the struggle can be accelerated and eased through development aid from richer countries.

The recent Monterey consensus has asserted how concrete action is needed in order to free the world from poverty. To reach the Millennium goal of halving extreme poverty in the world by the year 2015, not only human and natural resources are needed but also equally crucial are financial resources.

However, it is clearly understood that providing more financial assistance will not be of much benefit in the absence of an adequate and positive environment. Therefore, developing countries must promote reform in their economies and increase spending on the needs of the poor.

The first is related to adopting the right policies to mobilize investment, embracing the market, ensuring economic stability, increasing efficiency in tax collection, fighting corruption, upholding the rule of law and protecting property rights. Meanwhile the latter, which is more important, is attributed to promoting education, health, and other public facilities both in terms of quantity and quality.

Inadequate human resource capabilities are one of the biggest challenges in the poor developing countries. As a consequence of small budget allocations for education, health and other public services and the damaging impact of poverty, the potency of human resources has been wasted. This was exacerbated by underutilization of existing qualified human resources, as well as the inappropriate placement of highly qualified people. In response to this, it can be seen how crucial is the allocation of more resources for human resource development in developing countries.

The fundamental idea of development aid is that it contributes to building up the productive potential and the institutional structure of a poor country and in turn it could promote the self-reliance of that country. Technical assistance is regarded as investment in human capital in a broader sense. It involves an increase in levels of education so that the capabilities to absorb new technologies can be increased. Investment in human capital will also smooth out the process of adopting foreign technologies to local circumstances in developing countries.

It is no use providing capital goods without training and schooling on how to use them effectively. It is also useless to increase levels of knowledge and capability when there are no physical means of production where such knowledge can be utilized. Therefore, any development project should include a combination of both financial and technical assistance.

Instead of arguing about the worthiness of development aid, more attention should be paid toward the quality and effectiveness of aid flows. Indeed, the challenge ahead is how to ensure that aid finance will be used effectively to finance the development, to mobilize resources, increase production and exports, increase technology transfer and other economic benefits in the recipient countries.

Both the donor and recipient countries have to participate in creating more transparent and effective aid distribution. The richer countries still have to increase their share of overseas development assistance (ODA), while the recipient countries have to improve their governance in a clean and transparent way so that the apparatus of government itself is not an obstacle to development. If this could be assured then aid would ideally benefit recipient economies, and the world in general would be better off.