Each country should consider what's best for its own situation in alleviating rural poverty. But Thailand's experience suggests that both the urban and rural areas should be developed jointly in a twin-track policy approach.
One of the most worrying aspects of the current economic crisis is that it is likely to hurt the world’s poorest people which in Asia predominantly live in the rural areas.
There is a danger that in the present economic environment slower economic growth could reduce poverty alleviation efforts and push more people into poverty as government’s rein in rural development programmes and foreign aid dries up.
If this was to occur it would be a shortsighted move and rigorous efforts should be made by governments to avoid moving in this direction.
Asia has made large strides in recent decades with poverty falling in East and South-East Asia by two thirds, and in South Asia by a third. China in particular has lifted 600 million of its 1.3 billion citizens out of extreme poverty--those who earn less than $1 a day--since 1981.
Nevertheless poverty in Asia and the Pacific remains a massive problem and is basically a rural problem. More than two thirds of the world’s 1.2 billion poor live in Asia, with South Asia alone accounting for nearly half of these.
According to the Asian Development Bank about 625 million people in rural Asia are poor, based on the $1-a-day poverty yardstick. But this number goes up to about 1.6 billion poor people, based on the $2-a-day yardstick in 2002.
The question is how to solve what has been an intractable problem?
The traditional approach to managing a developing economy has been in the form of a one-track policy with an emphasis on financing urban growth and infrastructure, and promoting and facilitating exports to earn more foreign currency.
For decades, excessive investment has been poured into urban areas, especially the capital and the few big cities, which has had the effect of widening the gap between the urban rich and the rural poor. This has been the case in Thailand and in many developing countries, including those in ASEAN.
Rural areas do not lack the capacity or potential to grow faster to narrow the gap. Rural economies have fallen behind because they have not been given the proper opportunities and investment.
As someone who has grown up in the rural area and spent my childhood witnessing the absence of those opportunities, I believe that I have a good understanding of the needs and the problems of rural development.
The 1997 financial crisis was a testimony to the over-dependence of developing countries on the urban economy and at the same time, testimony to the need for greater balance between the urban and rural economies.
A balanced economy must be one that drives and stimulates growth in both the rural and urban economies so the two can supplement each other at the same time.
I have always believed that the predominance of urbanisation must be balanced by “ruralisation." if a nation is to become competitive and prosperous, if resources are to be most effectively and productively used and if the distribution of wealth is to become fairer and more beneficial to all.
So when I was in government I implemented a dual- track policy as the foundation of my economic strategy, which aimed to support the continuing growth of the urban economy while at the same time accelerating the fast-track growth of the rural areas.
In a dual track policy, equal, if not more emphasis must be given to domestic led growth, enabling the rural economy to become a driver of growth as well.
There is no one blueprint for all economies as to how ruralisation can be achieved, each country has to come up with its own approach which suits its environment.
In Thailand we introduced innovative ways of transferring capital from the central government to the provinces, and down to the village level through the setting up of village funds and microcredit schemes.
These schemes ensured access to capital for the rural people who took pride in their ownership and responsibility for managing the funds. Each village set up their own fund management committee with only one requirement, that at least half the committee must be women. They have a good track record when it comes to thinking about what’s best for the community as a whole
This approach proved successful in that most rural fund management committees made their funds available for projects that benefitted the community. Most village committees were effective in monitoring the loans, and non-performing loans were minimal.
So the village funds and microcredit schemes helped by injecting the capital that rural areas had always needed but had been deprived of. The funds were granted directly rather than through the government administration – so as to avoid any leakage. At the same time we also extended finance to the rural areas through the setting up of people’s banks.
Each village was encouraged to find its own areas of expertise either in the provision of goods or services, and the government helped with training in areas such as packaging and marketing.
This approach gave people a sense of responsibility and ownership as they felt the money was their own money. I believe this played in important role in the successful outcome of these projects.
Skills were also improved with the introduction of the one computer-one -village scheme which became a source of information for marketing their new products.
Technical help was provided by the government to improve agricultural output and in creating favorable market conditions as a result of government level discussions with other countries that produced similar goods, such as rubber.
But to in influence the quality of life and to improve human development we have to go beyond income-related factors such as prices, production, and productivity and to look at a range of non-income factors. So there also needs to be improvement in health and nutrition, education, environmentally safe living conditions, and reduction in gender and income inequalities.
A 30 baht healthcare scheme was introduced (US$0.86) to provide more accessible healthcare for rural population. A new and more accessible housing scheme for the poor provided hundreds and thousands of households the possibility of owning their own homes
So with a roof over their head, food in the stomach, clothing and greater access to healthcare and capital, more markets for local products, training to improve kills, the outcome was a sudden strengthening and improvement of the rural economy.
There was an impressive increase in rural productivity and competitiveness. We saw increasing income, reduced expenditure and expanded opportunities for the poorer rural population. Inevitably we also saw increasing national revenues and productivity as a consequence.
This enabled early repayment of the loans that the IMF had made to Thailand during the financial crisis and unemployment fell to 1.5%. At the same time these policies lead to a halving of the number of people living below the poverty line in the first few years of my administration.
Expanding the export –sector alone would never have delivered these results. It was achieved because we empowered those in the rural economy.
So rethinking ways of developing the rural economy can really pay off and is money worth spending. But its effectiveness also depends on a comprehensive and integrated programme. In implementing the dual track policy, we moved capital closer to the people, but we also had to move other empowering components closer to them such as accessible healthcare and housing.
But it needs to be remembered that success of this nature can only be achieved when the urban and the rural economies are developed joint. It seems to me that the rural economy serves as the backbone of the national economy while the urban and the export-led sectors are the brains of the economy. The two parts must develop hand in hand.