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ARTICLE

Approach to Poverty Reduction in Developing Countries andJapan's Contribution

Toru YANAGIHARAProfessor, Faculty of International Development,

Takushoku University

Since the 1990s, the goal of international development seems to have converged on poverty reduction.There has emerged, based on the views and concerns of poor people themselves, a more comprehensiveconception of poverty encompassing not only income and consumption but also economic vulnerabilityand sociopolitical conditions of powerlessness. Accordingly, a multidimensional strategy for poverty re-duction has been proposed, which consists of three pillars: 'expanding income-earning opportunities,' 'en-hancing security,' and 'promoting empowerment.' These developments represent a significant advance inthe understanding of the totality of the lives of poor people and in the search of effective synergetic mea-sures for poverty reduction.

The World Bank, in particular, has come to play a broader leadership role both in the formulation andimplementation of policy and institutional reforms and in the coordination of actors involved, official andprivate, as well as local and international. It has instituted two schemes, "Comprehensive DevelopmentFramework (CDF)" and "Poverty Reduction Strategic Paper (PRSP)" for poverty reduction in low-incomecountries. CDF is summarized in a matrix, where development issues and goals are listed along the hori-zontal axis and contributions by various actors in each issue area are registered along the vertical axis. Thematrix is designed to provide an overall view of the ongoing and anticipated contributions by all the devel-opment actors involved, and serve as diagnostic and prognostic device for the host country in its attempt topromote and facilitate coordination and collaboration. PRSP is a three-year action plan for poverty reduc-tion to be drawn up by the government and approved by the Boards of the World Bank and the IMF. It isstipulated that the formulation and implementation of PRSP be predicated on the following requirements:a) a long-term and multidimensional approach to poverty reduction; b) determination of the priority ofpolicies and programs based on their feasibility and effectiveness in poverty reduction; c) broad participa-tion in the decision making process within the country, and promotion of the coordination and partnershipamong the various actors under the government's leadership.

This new approach raises many important issues. In many countries administrative capacities of gov-ernments may prove to be inadequate for the task and political processes, which might militate against therealization of meaningful participation. The Japanese development community should not take the CDF-PRSP regime as given, but instead, should endeavor to conceive and propose effective approaches to pov-erty reduction based on its own experiences and perspectives. It is high time that the Japanese government,private organizations, and researchers face up to the global challenge of poverty reduction.

Introduction

Since the 1990s, the goal of international developmentappears to be focused once again on poverty reduction.The World Bank has made poverty reduction its top pri-ority since the latter half of the 1990s and has directed allits activities toward this goal. The Bank has also takenthe lead in redefining poverty through publishing a WorldDevelopment Report subtitled Attacking Poverty (WDR

2000/2001), and has worked out new policies based ona broader conception of poverty.

This article will describe these new developments,identify significant departures from traditional ap-proaches and practices, examine the poverty reductionstrategies espoused by the World Bank and the Inter-national Monetary Fund (IMF), and comment on theircontributions and limitations. Lastly, the author willoffer his views on contributions that Japan could makeand the changes needed to realize those contributions.

* This article was originally published in Japanese in Kokusai Kyoryoku Kenkyu, Vol.17 (2) (October 2001).

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Approach to Poverty Reduction in Developing Countries andJapan's Contribution

and what goals they have. This survey yielded anunprecedented detailed understanding of their livesand had a great impact in expanding the definition ofpoverty, revealing as it did the vulnerability of theirlivelihoods and their powerlessness/voicelessness insociopolitical relations.

II. New Focus in Approaches toPoverty Reduction

New policy approaches to poverty reduction have beenformulated on the basis of these new developmentsin the conception of poverty. New elements in policyapproaches may be clearly identified when they arecompared to the policies proposed a decade ago inthe World Development Report 1990. In the WDR1990, poverty was defined in terms of income/con-sumption levels and the availability of social services.The basic approach to poverty reduction focused onthe supply and demand for labor, the main incomesource among the poor. The WDR 1990 advocateddealing with two issues simultaneously: achievinglabor-intensive growth patterns that would increasethe demand for labor, especially unskilled labor, andcreating human capital that could respond to the in-come-earning opportunities generated in the course ofthe growth process, by providing education, health care,and other social services. While endorsing these mea-sures, the WDR 2000/2001 defined poverty morebroadly as a complicated phenomenon and advocatedmultidimensional approaches to poverty reduction in or-der to respond to the most urgent concerns of the poor.

Three tasks have been identified as the keys topoverty reduction. The first is promoting opportunityamong the poor, who lack assets, access to markets,and work opportunities, in order to increase their in-come and allow them to escape from poverty in termsof consumption and income levels. This approachroughly corresponds to that of the WDR 1990. Thesecond is enhancing security, which is reducing theirvulnerability and enabling the poor to cope with un-favorable situations because they tend to be greatlyaffected by factors out of their control such as ill-ness, poor weather, natural disasters, worsening mar-ket conditions, and public safety. The third is facili-tating empowerment, which makes formal political-administrative and informal social institutions workin favor of the poor, who have tended to be disadvan-taged and discriminated against in both domains.

The WDR 2000/2001 also emphasizes thecomplementarity among the three tasks identifiedabove, and advocates the adoption of a comprehen-sive approach encompassing all three in order to gen-erate synergy. It further maintains that poverty reduc-tion strategies based on this comprehensive approachshould involve not only governments but also broadsectors of society. These poverty reduction strategiesenvision major changes to national economic, politi-

I. New Developments in the Conception of Poverty

The World Development Report (WDR 2000/2001)set out an important new approach in defining pov-erty, which now includes the following two aspects.

First, the definition of poverty was broadened toreflect concerns in the various aspects and character-istics of the lives of the poor. Under the traditionaleconomics-based approach, poverty was usually mea-sured based solely on consumption or income level,with these variables defining the poverty line anddetermining who are the poor. Since the mid-1960s,a greater focus has been placed on the delivery ofsocial services such as education and health care tobetter reflect the quality of life which consumptionand income levels alone fail to reveal; poverty cameto be defined as taking into account the extent to whichbasic human needs fail to be met. The WDR 2000/2001 further broadened the definition of poverty toinclude two other aspects and raised new poverty re-duction issues related to those aspects. The first wasfocusing on the vulnerability of the poor, as mani-fested by the weakness of their livelihood base, andaddressing their security-related issues — how wellthey could manage the risks and uncertainties inher-ent in daily life and what is their ability to respond tounfavorable situations. The second was attempting tounderstand the lives of the poor in the context of theirsocial and political relationships, thus shedding lighton sociopolitical aspects of their lives such as theirpowerlessness and voicelessness, and pointing to theneed for empowerment to enable them to overcomesuch conditions. Broadening the definition of pov-erty has made an important contribution toward de-veloping new, multidimensional approaches to pov-erty reduction corresponding to the overall picture ofthe lives of the poor, as opposed to the single indica-tor-based poverty line approach. While the definitionof poverty per se now encompasses more facets, how-ever, the conventional consumption or income level-based indicators remain the practical yardstick for as-sessing the degree of poverty and determining the ex-tent to which poverty reduction goals have been reached.

The second aspect in the new conception of pov-erty places more importance on the perception of thepoor concerning their situations, and also on their owndesires for and priorities in improving livelihoodconditions. This reflects the desire on the part of aiddonors to avoid imposing inappropriate externaljudgments and to accord priority to the most pressingneeds of the poor. Importantly, it implies a role reversal,viewing the poor as active participants, or actors, inremedying their situations, not as passive aid recipients.In preparation for the WDR 2000/2001, a Voice ofthe Poor survey, interviewing 60,000 poor people in60 countries across the developing world, was carriedout to determine how the poor view their livingconditions, what restrictions and barriers they face,

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cal, and social systems, taking place over a long pe-riod of time. But at the same time, WRD states thatpolicies or programs should be evaluated for (short-term) results in terms of their impact on poverty, todetermine which policies or programs are effective,and that an evaluation system should be created forthis purpose. It also emphasizes the importance ofthe role of the poor as active participants in all stagesof formulating and implementing poverty reductionpolicies, and thus the importance of devising schemesand procedures for involving them in the decision-making and implementation processes.

As summarized above, the new approaches topoverty reduction cover a broad range of tasks andactions. The World Bank's activities will be geared topromoting these approaches, and it will play an ac-tive leadership role.1

III. Poverty Reduction Strategies and the Role ofthe World Bank and the IMF

In January 1999, the World Bank formulated the Com-prehensive Development Framework (CDF). At a jointannual meeting of the World Bank and the IMF inSeptember 1999, they decided that drawing up andpresenting a Poverty Reduction Strategy Paper (PRSP)would be a precondition to implementing concessionallending or the Heavily Indebted Poor Countries(HIPCs) Initiative. These initiatives have determinedthe basic tenets of approaches to poverty reduction tobe collectively pursued by the international commu-nity as a whole.

The CDF includes the following important newapproaches. First, it states that an overall, long-termperspective is needed in order to understand the de-velopment process, and that economic, social, politi-cal, and administrative aspects should all be thor-oughly considered. It proposes that, to determine thesuccess or failure of development over the long term,assessment should go beyond the usual economic andsocial indicators and place importance on other fac-tors such as (broadly defined) governance issues en-compassing government, legal, and financial systems;investment climate; education and health care; andofficial and nonofficial social security. Second, it urgesthat all the actors involved in development — devel-oping countries' governments, multilateral and bilat-eral aid agencies, civil society, and private-sector en-terprises — should work cooperatively through shar-ing information and coordinating activities to promotethe development process and boost overall develop-ment impact. Related to this, the CDF lays down op-erating principles for country ownership, participa-tion, transparency, evaluation, and accountability.

The CDF is summarized in a matrix format,

where development issues are listed along the hori-zontal axis and contributions by various actors in eachissue area are registered along the vertical axis. Thematrix is designed to provide an overall view of theongoing and anticipated contributions by all the de-velopment actors involved including multilateral andbilateral aid agencies and NGOs, and to help the hostcountry government take leadership in coordinationand collaboration in aid policies and role assignmentamong all the development actors. Coordination andcollaboration among the development actors, how-ever, is actually carried out in the process of formu-lating and implementing the PRSP.

The PRSP is a three-year action plan for povertyreduction incorporating and articulating the ap-proaches and principles set out in the CDF. In its for-mulation and implementation, the PRSP thereforereiterates many of the viewpoints and principles ema-nating from the CDF. It takes a long-term and multi-dimensional approach to poverty reduction. Policiesand programs are to be prioritized based on their fea-sibility and effectiveness in poverty reduction. At theoperational level there should be broad participationin the decision-making process within the country;the host country government should take the initia-tive in promoting collaboration and partnership amongaid agencies and NGOs. The PRSP document con-sists of five parts. First, it reviews current poverty situ-ations and diagnoses the causes of poverty. Second,it indicates goals and policy measures. The goals in-clude both long-term (10-15 years) poverty reductiontargets and short-term (2-3 years) targets; the latterare readily monitorable for timely evaluation of policymeasures. The policy measures constituting the strat-egy comprise macro and sector-level economic poli-cies, social policies, and administrative and politicalreforms. Third, it establishes a system to monitor andevaluate policy effects. Fourth, it determines the ef-fectiveness of and the need for external assistance.Fifth, it reports on methods and schemes for ensur-ing broad participation in the formulation and imple-mentation process and on the degrees of participa-tion achieved.

These principles and contents were formulatedbased on critical reflection on past experiences inconditionalities and aid effectiveness on the part ofthe World Bank and the IMF. They are understand-able as idealistic wish lists, but they may prove im-possible to apply in practice. The two organizationsadmit that drawing up a PRSP in accordance with theabove-mentioned conditions is not an easy task. Onemanifestation of this recognition is found in the factthat they have allowed interim PRSPs (I-PRSP) to beprepared and submitted to enable countries to obtainneeded aid before full PRSPs are formulated. The onlyrequirement for an I-PRSP is that the government

1. The organizational goals and guiding principles of the World Bank are spelled out in the following documents: World Bank Group Strategic Framework (World Bank2001a) and Strategic Directions for FY02-FY04 (World Bank 2001b).

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Approach to Poverty Reduction in Developing Countries andJapan's Contribution

concerned indicates its commitment to poverty reduc-tion and the steps it will follow in drawing up a fullPRSP. Another manifestation is the publication of aPoverty Reduction Strategy Sourcebook as an aid indrawing up PRSPs. The purported aim of thesourcebook is to shorten the time needed for formu-lating PRSPs by allowing officials and departmentsinvolved to work simultaneously on various compo-nents of the document. It also highlights the areas thatWorld Bank/IMF assessment will focus on. The con-tents of the Sourcebook itself are very broad-ranging,however, which demonstrates the substantial burdenimposed on governments in drawing up PRSPs.2

The World Bank and the IMF stress country own-ership because they have learned, based on their ex-periences with structural adjustment lending (SAL),that policy conditionality will not be adhered to inthe absence of the country's commitment. They alsostress broad participation because they understand thatwithout it, policies and programs coming out of thepolicy-making process will fail to reflect the inter-ests of the poor. These are both correct recognitionsof administrative-political reality, but that does notimply that these new emphases can actually be ap-plied. The problem with the PRSP approach is that itmakes inappropriate assumptions concerning the ad-ministrative capabilities and the domestic politicalprocess, particularly at the local level, of the poorcountries concerned. Formulating and evaluatinglong-term poverty reduction strategies, and the poli-cies and programs based on them, requires large hu-man, organizational, and financial resources for col-lecting and analyzing the relevant information. Thepoorer the country, however, the more its governmentfaces major limitations in administrative capabilityand has no choice but to depend on external assis-tance in formulating and implementing a PRSP. Inmost cases, however, it is also doubtful that broadparticipation in the decision-making process could beeffectively carried out so that deliberation and dia-logue could play a meaningful role in reflecting thevoices of the poor in policy formulation and imple-mentation. Similarly, it would be only in exceptionalcases that the country would be able to take an initia-tive in aid coordination.

There is great significance in the PRSP approachinsofar as the World Bank and the IMF, the two mostwell-funded and powerful international organizations,highlight poverty reduction as the single most impor-tant priority and make their poverty reduction strat-egy the basic framework for aid to poor countries.Their adoption of a joint policy also has a very largeimpact on aid coordination throughout the interna-tional development community. From the viewpoint

of poor countries receiving aid, they have no choicebut to accept the PRSP approach as the new aid re-gime. First they must draw up a pro forma documentmeeting the requirements for country ownership andbroad participatory process. This could have an ironiceffect of drawing up an ostensible document withoutany commitment, as seen in the case of structuraladjustment lending, which might be repeated on alarger scale. Through approval of PRSPs at theirBoards and Joint Staff Assessments preceding this,the World Bank and the IMF have a major influenceon the formulation process and the contents of PRSPs.It is the World Bank and the IMF which decide if theprinciples of country ownership and broad participa-tion have been adhered to. It is no exaggeration tosay that the PRSP regime actually operates with thesetwo organizations effectively leading the countries inquestion and participating broadly in the process ofdrawing up their PRSPs.

IV. Japan's Contribution to Poverty Reduction

The Japanese government and aid agencies must re-spond promptly to this environment where the inter-national development community has identified pov-erty reduction as the single most important goal andaid coordination will be carried out under the PRSPregime.3 The author would like to identify four im-portant issues here and suggest directions for consid-eration.

The first issue that must be considered is the ex-tent to which the orientation of development assis-tance be focused on poverty reduction. This involvesdetermining the weight placed on the approach ofdirect support to the poor and the weight on reducingpoverty through overall economic growth, or explor-ing how these two approaches may be combined. Al-though simultaneously pursuing both approaches isthe appropriate course, more emphasis should espe-cially be placed on building stronger links with do-mestic and foreign NGOs to offer direct support tothe poor. Planning and evaluation should be carriedout with various dimensions of poverty in mind suchas better income opportunities, providing social ser-vices, measures for addressing vulnerability, and pro-moting empowerment.

The second issue to be addressed relates to therelevance and significance of Japan's experiences indevelopment or assistance when it comes to develop-ing poverty reduction strategies and policies. Thiswould entail determining what significant experiencesJapan has had with respect to the two approaches de-scribed above and their combinations. In particular,

2. The Sourcebook (World Bank 2001c) is a lengthy document consisting of two parts: Part 1 - Core Techniques and Cross-Cutting Issues, and Part 2 - Macro and SectoralIssues. Part 1 consists of two chapters (in 11 sections), and Part 2 of four chapters (in 14 sections). The cross-cutting issues in Part 1 include participation, governance,community-driven development, gender, and the environment. Part 2, covering sectoral issues, deals with rural and urban poverty, human development, the privatesector, and infrastructure.

3. For more details and discussion concerning PRSP and aid coordination under PRSP, see Basic Research on Poverty Reduction (JICA 2002).

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Japan's experience can make an important contribu-tion in understanding the channels through which thefruits of growth can be widely shared, and of organi-zations and agents that contribute to improving as-pects in daily life.4

Third is the issue of what position Japan shouldadopt regarding aid coordination under the PRSP re-gime. A strong appeal is now being made in favor ofa more integrated approach to external assistancethrough sector programs or common funds, or evengeneral fiscal support, and against uncoordinatedprovisions of project assistance by individual donoragencies. This appeal is based on the recognition ofthe problems inherent in the traditional practice ofindividual aid organizations promoting their ownprojects without mutual coordination or collabora-tion, thus failing to pay adequate attention to sec-tor- or economy-wide goals or performances. Thereis a major question concerning aid effectiveness thatrestricting the use of funds or improving the effi-ciency of resource use at the level of individualprojects does not guarantee that allocating funds willbe appropriate at the sector level or in the overalleconomy. Disregarding these broader issues and fo-cusing only on individual projects would inevitablyresult in criticism of not being able to see the forestfor the trees. The conception of development assis-tance needs to be shifted to the level of sector or theoverall economy.

Fourth is the question of how Japan can be in-volved in the PRSP formulation process. The para-mount concern here is whether it is possible to set upa system where officials in charge can digest docu-ments written in English or the language of the coun-try concerned, formulate views and opinions basedon their analysis of the documents, and take part inmeetings and communicate in English or the locallanguage. This issue can be approached on two lev-els. First, there is need for creating a system whereinformation about the country in question can be col-lected and analyzed locally. This would probably ne-cessitate strengthening such capabilities by employ-ing local consultants as analysts or even as negotia-tors. Second, it would be advisable to set up a groupin Tokyo in charge of all PRSP-related documents

and meetings in order to work out Japan's overallpolicies and positions on the PRSP approach. One ofthe important goals for such a group would be devel-oping perspectives and proposals based on Japan's ownexperiences in development and economic assistance.

Conclusion

The foregoing has outlined issues that should be con-sidered by the Japanese government and aid agenciesin developing contributions to poverty reduction, butthe scope of Japan's contributions should not be re-stricted to those from the government and govern-mental organizations. Civil society and the privatebusiness community could also contribute in ways thatreflect their interests and capabilities; utilizing non-governmental channels would help broaden the scopeof Japan's contributions to poverty reduction. Non-governmental actors would also be able to play animportant watchdog role in prodding the governmentto adopt more appropriate policies, thereby increas-ing public support for poverty-oriented assistance.One especially important challenge for JapaneseNGOs concerned with poverty reduction is to breakout of the sole focus on direct involvement in eachindividual project and engage in more general analy-sis and proposals for promoting workable approachesto poverty reduction.

ReferencesJICA (Japan International Cooperation Agency).

2002. Basic Research on Poverty Reduction In-stitute for International Cooperation, JICA.[www.jica.go.jp/english/publication/studyreport/topical/poverty/index.htm/]. March 2002.

World Bank. 2001a. World Bank Group StrategicFramework (January 24).

———. 2001b. Strategic Directions For FY02-FY04(March 28).

———. 2001c. Poverty Reduction StrategySourcebook. Mimeo / CD-ROM. PREM PovertyUnit. [www.worldbank.org/poverty/strategies/sourcons.htm]

4. Of particular importance in this connection is the attempt to document and draw lessons from the experiences of the Rural Life Improvement Program implementedin post-World War II Japan. This policy initiative in community development offers valuable insights into the roles of actors and factors impinging on the processes ofgroup formation, participation, and empowerment. A series of research projects on this case have been organized by JICA under the leadership of Mr. Hiroshi Sato ofthe Institute of Developing Economies (IDE-JETRO).