No putting the Gini back in the bottle

With the midterm elections now behind us, let’s hope that the Philippines does not have to await the next balloting for further discussion and actions to address what some perceive as a persistent divide between the haves and the have-nots, the connected and disconnected, and the educated and uneducated across the nation.

The inconvenient truth is that despite some progress and successes—whether the conditional cash transfer program in the Philippines or China’s great success in growing its economy and lifting millions out of poverty—the vast majority of the world’s poor people live in Asia. The region remains home to two-thirds of the world’s poor, and an estimated 1.7 billion people still struggle on less than $2 a day in Asia, according to the Asian Development Bank (ADB). From urban slums to impoverished rural areas, hundreds of millions of people still live on less than $1 a day.

Too often, ethnic minorities and indigenous peoples are among those who remain marginalized and excluded from the benefits of the region’s growth. This remains the case in many parts of Southeast Asia, including the Philippines.

Indeed, by some measures, more than 40 percent of the Asia-Pacific region’s population still do not have access to improved sanitation facilities, and Asia’s cities, burdened by burgeoning populations, often are marked by deteriorating sanitation and environmental conditions and inadequate housing and infrastructure. Citizens of Metro Manila need only think back to the last rainstorm that flooded streets or the last power outage.

For three-and-a-half years, under Presidents Barack Obama and George W. Bush, I served on the ADB board of directors, representing the United States. I had the good fortune during that time to travel throughout the Philippines, building friendships with Filipinos from all walks of life and gaining a better understanding of the reality of what institutions like the World Bank or ADB can and cannot do to improve people’s lives.

At the end of the day, access to education and a strengthened business environment—including sustained steps to improve the bureaucracy, to fairly enforce regulations, to limit interventions by government, and to fight corruption and cronyism—will be critical to poverty reduction in the Philippines.

Now based at a regional institute in Thailand, I was struck by the answers from a group of young college-age students when I posed the question, “Which nation in Asia is the most ‘unequal’ when it comes to the much-discussed Gini coefficient or index—a measure of income inequality?”

India, Vietnam and Pakistan were among the responses.  How, I wonder, would Filipinos respond to that question?  Perhaps, like those Thai students, many would be surprised by who is the most “unequal.”

According to the CIA World Factbook, the widely referenced resource site, while Namibia, South Africa and Lesotho in sub-Saharan Africa top the charts as the most unequal in the world, the latest reported data have Hong Kong and Thailand as the most unequal in Asia.

Ranked as the No. 11 and No. 12 most unequal in the world, Hong Kong and Thailand are followed in Asia by Papua New Guinea, No. 18 of the 136 ranked territories and nations. The Philippines is rated as the 40th most unequal nation in the world. In marked contrast, Sweden is described as having the most equal distribution of average family income. (The United States is described as the 41st most unequal nation.)

Some of these figures are startling. Indeed, the rankings underscore one of the fundamental challenges of policy—that is, the accuracy and timeliness of data. The numbers are only as good as the source data. Gigo, as they say: garbage in, garbage out.

While Gini-index calculations are often reliant on government-provided data, some governments may well deem it too sensitive, or not in their interest, to provide accurate data. And indeed for some countries, including the Philippines, the data are several years old.

In 2012, ADB economist Juzhong Zhuang wrote that while some might argue that the 1960s and 1970s saw greater “growth with equity”—perhaps easier given relatively low bases—recent growth has been much more uneven.  Inequality, he noted, has widened in 12 of the 28 economies with comparable data, including the three most populous countries and the drivers of the region’s rapid growth, namely China, India and Indonesia.

So, does the “official” Gini index really matter in the Philippines or elsewhere? Or more importantly, as the index is really only an attempt to measure inequality, does growing inequality really matter? For all of its success in achieving a “most equal” Gini ranking, Sweden has been rocked recently by riots. Groups of what have been described as mostly young immigrants set buildings and cars ablaze—perhaps testimony to the reality that inequality exists everywhere.

Perhaps more important than official Gini coefficients are trends and attitudes as to whether or not things are unequal or getting better. Critically, the Philippines’ recently elected and reelected leaders must also focus on drivers of inequality of opportunity. These may well include unequal access to public services, such as education, electricity, water and sanitation.

Certainly, Asia broadly speaking—and the Philippines specifically—has weathered recent global economic slowdowns and the “Euro crisis” in good shape so far. Asia is rising once again, and the world should welcome this development. Clearly, though, there is much more work to be done.

With the twin genies of technological progress and globalization long out of the bottle, there is no putting them back in. It is now time for us to ask ourselves: Why does inequality matter? In answering that question, all of us in Asia will be better able to define who we are—as individuals, as a country, and as a region.

This holds especially true today for the Philippines as its leaders, and various opposition parties, chart a way forward after recent elections.

Curtis S. Chin served as US ambassador to the Asian Development Bank (2007-2010) under Presidents George W. Bush and Barack Obama. He is senior fellow and executive in residence at the Asian Institute of Technology, and a managing director with advisory firm RiverPeak Group., LLC