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Notwithstanding the substantial reduction in prevalence of poverty in the country, income inequality has remained the same for more than a decade. The country’s richest 20 percent of the population has been consuming 7 times more than the poorest 20 percent since 2007, according to poverty analysis reports of the past four years.

Did economic growth benefit the poor?

Notwithstanding the substantial reduction in prevalence of poverty in the country, income inequality has remained the same for more than a decade.  

The country’s richest 20 percent of the population has been consuming 7 times more than the poorest 20 percent since 2007, according to poverty analysis reports of the past four years.

In 2003, the top 20 percent consumed eight times more than the bottom 20 percent. Consequently, the gini coefficient dropped from 0.416 in 2003 to 0.35 in 2007, from where it began to increase to 0.36 in 2012 and 0.38 in 2017. There is also no specific target of gini coefficient in the 12th Plan, which has been set as less than 0.38. 

The poverty reports also indicate that economic growth has not benefitted the poor and called for pro-poor policies. 

For instance, the 2003 poverty analysis report stated that no special poverty interventions were targeted in the past and it was addressed broadly, through expansion of social services. It however stated that Nu 560M would be required annually if the poverty was to be eliminated. 

The 2007 report stated that if all the poor were to benefit from the economic growth of 8 percent (which was achieved between 2000 and 2007), it would take five years for the median poor to exit poverty and 12 and half years for subsistence poor. The report also warned that economic growth may not benefit the extreme poor and recommended pro-poor policies and targeted interventions.

The country has actually achieved an average economic growth of more than 8 percent between 2009 and 2013 and 8 percent since 2013. However, even after a decade, poverty prevails. 

“Poverty is found to be a rural phenomenon. Without proper policies, population growth will lead to increasing pressures on the environment further exacerbating poverty,” a GNHC report on population and development situation analysis states.

A joint poverty assessment conducted in 2014 by the World Bank and the government estimated that ending extreme poverty would be possible in 22 years. It warned that poor households would face new risks and vulnerabilities as the economy grows and requires new strategies.

Despite the progress, the assessment also found that some have stayed poor while some non- poor also fell into poverty. “For every two families that escaped poverty, one fell into poverty.” 

Going by several reports on poverty, income inequality is also associated with social issues. For instance, in 2014, the bottom 40 percent of the population had about 40 percent of children under five years stunted and 15 percent under- nourished.  Likewise thelitercay rate, mortality rate and other social indicators also drops in the bottom quintile of income distribution.

As the prevalence of poverty is more in eastern region, the under nutrition problem is also prevalent in the eastern part of the country. The assessment report also stated that the risk of falling back into poverty is greatest in rural areas, those holding informal jobs, with low education, and resident especially in Pema Gatshel, Trashigang, or Dagana.

The national poverty line was also determined using two factors- a food poverty line and some non-food requirements. 

For instance, in 2003, the poverty line was determined at Nu 749 per person a month, of which Nu 403 was the basic food requirement and the remaining was for non-food. The 2003 poverty analysis report stated that energy requirements, calculated based on calories, vary from country to country. Since no specific food energy requirement is available for the Bhutanese population, the norm applied in Nepal, 2,124 Kilocalories per day per person, was used.

This energy requirement is still applied although there has been some changes in the food basket and inflation is accounted for.

However, a World Bank report stated that Bhutan’s dependence on food imports has been rising over the years, making it more vulnerable to food price shocks. A 12 percent increase in food prices, for example, can increase the percentage of poor in the short-term by about two percent points. With all petroleum products imported, Bhutan’s poor also face risk from fuel price shocks. 

Poverty situation

In 2003, 38 percent of the population, which was estimated at 734,340, lived under poverty. There was also stark difference in poverty rate between urban (4.2 percent) and rural (38.3 percent) areas. Almost half of the people in the eastern region lived under poverty in 2003.. 

In 2007, the poverty rate declined to 23 percent and prevalence of rural poverty declined to 31 percent and urban poverty to 1.7 percent. About 146,100 people were identified poor and 37,000 subsistence poor.

More than half (52 percent) of people in Zhemgang and almost half of the people in Mongar, Lhuntse and Samtse lived under the poverty line in 2007. Poverty rate in all other eastern dzongkhags hovered between 26 and 38 percent. 

The poverty rate got slashed by half in 2012. More strikingly, the rural poverty rate declined to 16 percent. Prevalence of poverty in Zhemgang reduced to 26 percent in 2012, 10 percent in Mongar and 22 percent in Samtse. These are the dzongkhags where about half the people were identified poor in 2007. The poverty line was also increased to 1,704 in 2012.  However, the estimate of population also came down to 629,700.

In 2017, the poverty rate came down to 8.2 percent. Dagana, with a poverty rate at 33 percent became poorer than Zhemgang where 52 percent of people lived under poverty in 2003.

The GNHC report also stated that all poverty reports showed that rural people were poor as compared to the urban people. In 2017,  2.31 percent of rural population reported food insufficiency, inadequate agricultural land, and unproductive soils, as the main reasons for poverty. 

Way forward

In one of the meetings with the press, the Prime Minister Dr Lotay Tshering said that there was not much evidences as to what steps were taken to narrow the gap. This, he said is international finding and that it is present government’s aim to address the gap between haves and have-nots. 

After the end of round table meeting, Lyonchhen said that a paradigm shift in development planning is a passionate area for the government and thus the need to ‘rethink development.’ 

The government, he said is serious to make the education system relevant to the needs, transform subsistence farming into commercial, pursue private sector development in a different model which is bottom up approach.

In terms of poverty, he said due to the smallness of the country, the government has identified every poor household and targeted interventions would be made. However, he said, interventions would be made to make them stand on their own feet and sustain it for the rest of their lives. 

“If short terms gains are to be considered, it is very easy to eradicate poverty-by giving Nu 2,195 to those identified poor,” he said. “But this is not only unsustainable but also wrong.” 

 This was also mentioned in the 2003 report, which states that direct transfer of cash to those below the falling below the poverty line is neither sensible nor feasible. “The immediate suggestion is to work out a simple mechanism to initiate income-generating activities with access to easy market and credit facilities,” the 2003 poverty analysis report stated. 

The Rural Economy Advancement Program Phase I (REAP I) was initiated in 2009 for a period of 3 years and implemented during the 10th Plan in 17 poorest villages in Zhemgang, Mongar, Chukha, Smatse, Wandgue, Trongsa, Haa and Samdrupjongkhar. The total budget allocation was Nu.38.60M. 

After the end of the project, it was recommended that an independent, responsible unit (Program Coordination Body) should be tasked with this role to effectively monitoring and implement to document outputs, outcomes, and impacts. 

It was also recommended that REAP phase II and other programs of similar nature be given top priority by the Government, civil societies, and development partners. 

Micro-enterprise, according to the assessment of the REAP is identified as one of the tools to alleviate poverty in addition to micro-credit and saving schemes for poor.

Tshering Dorji

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