World Bank Sets Poverty Line At $1.25 a Day

What it means to be poor in the world has changed. New data an­alyses show the cost of living to be higher, even among the poorest countries, than was originally thought to be the case.

With this new development, the World Bank announced Thursday a new international poverty line—$1.25 a day, an amount based on 2005 prices—which is the first re­assessment of the $1-a-day poverty line since 1993.

World Bank senior poverty specialist Tim Conway said Thursday that, according to this new line, 42 percent of Cambodians (or about 6 million people) live in extreme pov­erty—up from the 19 percent (about 2.8 million people) thought to live on less than a dollar a day.

While an international poverty line is necessary in order to be able to compare Cambodia with the rest of the world, experts agree that it does not necessarily give a nuanced local picture.

The international poverty line is generally determined by pricing a set bundle of goods, and then determining how many people can afford that bundle of goods in any given country.

The last time the bundle of goods-the nature of which changes over time-was priced was in a rolling study between 1993 and 1996, and a lot has changed since then, Conway said, which is why a new index was created using 2005 prices.

The World Bank said it used 675 household surveys in 116 countries to determine the new poverty line.

What this means globally is that 1.4 billion people live under the poverty line, 400 million more than previously thought.

Somewhat counter-intuitively, however, that does not translate to an increase in global poverty. Since 1981, the rate of poverty reduction worldwide has remained steady at around 1 percentage point per annum.

So under the new international poverty line there are more people living in poverty, but what the new line means for Cambodia specifically is more elusive and, experts agree, less relevant to understanding poverty in Cambodia.

Conway said the new World Bank poverty numbers could lead to an increase in donor funding to Cambodia since the international community often uses the international index when assessing need in a country. Though poverty is not the only factor used to determine where donor funds are allocated, he said.

According to local experts, the national poverty line-which was developed with support from World Bank-paints a truer picture of Cambodia’s poverty.

“The international poverty line is a fairly crude tool to use in any national context,” Conway said, adding that the national line is more widely used by local policy makers and government leaders to measure, track and set targets for poverty.

In 2007, the national poverty line in Cambodia was between about $0.50 and $0.75 per person per day. Specifically, the poverty line in Phnom Penh was 3,092 riel per person per day; in other urban areas it was 2,677 riel; and in rural Cambodia it was 2,402 riel.

And while the World Bank’s new international line may place 42 percent of Cambodians in poverty, Conway said that national poverty line estimates place between 31 and 33 percent of Cambodians as living in poverty in 2007. He added that definitive updated figures will be available soon.

If the national figures are correct, they are down from the 35 percent of Cambodians that lived below the national poverty line in 2004, when the line ranged from 1,753 riel in rural areas to 2,351 riel in Phnom Penh. In 1994, between 45 to 50 percent of Cambodians lived below the national poverty line, which was at the time set between 1,118 riel in rural areas and 1,578 riel in Phnom Penh.

This national poverty line is figured by taking into account how much the average Cambodian needs to spend per day in order to consume 2,100 calories, as well as the amount needed for the occasional non-edible necessity like clothing, transportation and healthcare, Conway said.

Chan Sophal, president of the Cambodian Economic Association, said that he thinks the national poverty line is more appropriate.

“I think it’s better to look at the national poverty line, which is based on actual consumption,” he said.

Though, he said he thinks the World Bank’s new international poverty line “reflects the reality that many more people live around the poverty line, or are on the verge of living in poverty. This is the case in Cambodia.”

“I think the intention is to say that a lot of people have very little. That is the intention, to be cognizant of that and to show that a lot of people have very little,” he said.

Conway said that while standards are needed to determine poverty lines of any kind, it is ultimately an imperfect science-even more of an art in some respects.

“There is no perfect poverty line…. Whatever line you use, poverty has clearly come down in Cambodia since 1994,” Conway said, adding that the decrease of poverty in Cambodia is in accordance with global poverty reduction, at about one percentage point per annum.

Conway added that, despite Cambodia’s post-conflict state being particularly bad, the steady rate of poverty reduction is not surprising due to the country’s advantageous placement regionally, its high tourism potential in the Angkor temples and its deep water port.

He added that, taking into account the spectacular economic growth in Cambodia in recent years a steady reduction in poverty can be seen as a successful transfer of at least some of that wealth to those most in need.

 

Related Stories

Latest News

The Weekly DispatchA new weekly newsletter from The Cambodia Daily delivering news, analysis and opinion to your inbox. Published every Friday at 11:30am. Sign up today.