Working paper

Poverty reduction, inclusive development, and Asia's rising powers

29 Feb 2012
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Developing countries in Asia are growing steadily--in some cases rapidly--and becoming increasingly affluent. The big challenge for Australian aid policy-makers during the Asian Century will thus be to manage these contradictions emerging from a more affluent Asia.

China, India, Indonesia, Timor Leste, Vietnam, and Lao PDR, all of which were classified by the World Bank as 'low-income' countries (LICs) at some point in the late 1990s/early 2000s, have now graduated to 'lower middle income' (LMIC) status. The international consulting firm Price Waterhouse Coopers has estimated that in 2050 China will have the largest economy in the world, India the second or third largest, Indonesia one of the 10 largest, and Vietnam one of the 20 largest. Other developing countries in Asia that have not yet graduated to LMIC status such as Cambodia and Bangladesh are also growing well, the former in particular. While the performance of the region vis-a-vis the Millennium Development Goals (MDGs) has varied considerably depending on the goal and the country, the region is nevertheless on track to meet most of the goals related to the eradication of extreme poverty and hunger.
So dramatic has been the overall change within the region that some countries--most notably, China and India--have gone from being aid recipients to donors and are widely touted as 'rising powers' . What are the implications of these developments for Australian aid policy? This Policy Brief suggests that they create three sets of contradictions with which Australian aid policy-makers will have to grapple in the future. First, they create increased tension between the geographical focus of the Australian aid program on the Asia-Pacific and its official purpose, to promote poverty reduction in developing countries.
Secondly, they call into question the ideological orientation of Australian aid policy and, specifically, its emphasis on promoting free markets and economic growth. And, finally, they create a more complex aid environment in which Australian aid will increasingly have to compete with aid from new donors such as China and India for political and ideological influence, specifically but not only in the AsiaPacific. The big challenge for Australian aid policy-makers during the Asian Century will thus be to manage these contradictions emerging from a more affluent Asia.

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2012
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