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Rural poverty in developing countries

Rural poverty in Iran and other developing countries

By Morteza Aminmansour

The latest World Development Report says greater investment in agriculture in transforming economies, most of which are in Asia, is vital to the welfare of 600 million rural poor people living in those countries. "Rural poverty accounts for an extraordinary 82 percent of total poverty in transforming countries, said Robert B. Zoellick, World Bank Group President. "A greater focus on agriculture is essential when considering population pressures, declining farm sizes, water scarcity and environmental contamination, and the need to develop lagging high poverty areas.

Governments in a number of developing countries are devoting considerable efforts to strengthen their monitoring and evaluation (M&E) systems and capacities. They are doing this to improve their performance • by establishing evidence-based policy-making and budget decision-making, evidence-based management, and evidence-based accountability.

Iran has the second largest population, after Egypt, in the Middle East and North Africa region. Most of its 70 million people are young (under 30), with increasing hopes and expectations of a better future. Larger numbers of increasingly well-educated women seek opportunities to participate at all levels of Iran's labor market and civil society, also many of these well educated women coming from poor families. The country's health and education indicators are among the best in the region. Thanks to talented females who are dedicating their life to disadvantaged and remote villages.

The agricultural agenda in Iran is focusing mainly on reducing the disparity between rural and urban incomes and raising the incomes of the rural poor through better planning . The report of iranian ministry of jahad-sazandegy indicate that agriculture can provide pathways out of poverty for millions of rural poor who would otherwise be left behind in transforming to market economy. It says one way out is through a high-value agricultural revolution and with the help of government institution giving Incentives to diversify into high-value horticulture, poultry, fish and dairy products could be provided via pricing reforms and an overhaul of subsidy supports for farmer. According to the report of iranian government, the livelihoods of subsistence farmers can be improved by increasing the productivity of staple crops in lagging regions, a move that would require major investments in soil and water management and in agricultural research. It also calls for an improved investment climate for agribusiness.

The report also says that a major priority for transforming economies should be to reduce the environmental footprint of intensive agriculture, especially in agrochemical and animal waste production. Given concerns over water scarcity in transforming economies, the report calls for reform of institutions dealing with irrigation and the removal of water and electricity subsidies.

Iran has placed emphasis on human development, social protection, and "social justice, with good progress to-date. From the early 1970s to 2001, life expectancy rose from 56 to 69 years, primary school enrollment rates increased from 60 to 90 percent, and the number of children dying before age one fell from 122 to 35 (per 1,000 live births). The portion of the population living under the poverty line decreased significantly from 47 percent in 1978 to 16 percent in 1999(see Unicef report on Iran). Moreover, total illiteracy fell from 36 to 27 percent from 1990-2001. Of particular note is the closing of the gender gap in education, where enrollment rates for boys and girls show only small differences”in literacy and representation. During the same period, economic indicators did not fare as well and per capita income fell by about %50.

Notwithstanding some improvements in social indicators, Iran's most crucial challenge is to reduce poverty, which is still high at 16 percent, and high unemployment. A government poverty study showed a strong linkage between poverty and unemployment: 37 percent of poor households in the poorest 10 percent have no one working, and 45 percent of them have just one working person. This characteristic underscores the high positive impact that productive employment has on poverty reduction. As the country focuses more on spurring employment and empowerment”rather than the traditional approach of charitable transfers and handouts”progress should be more attainable.

Targeting the poor more accurately with its existing programs should also reduce the rural poverty. Half of the poor in Iran in small cities or remote villages”about 4.5 million people, or 1.5 million households”benefit from social coverage by government social safety net programs, charity institutions, and other nonprofit organizations. Whereas this support is partly effective because of the high inflation (between 16-24 per cent annually), it is not specifically targeted to the poor, and remains expensive. Extensive subsidies, including energy subsidies, and credit subsidies that are excessively large (the energy subsidy alone is estimated at more than 12 percent of GDP) don't reach the poor particularly well. Subsidies for bread and medicine, for example, are highly untargeted vis-Ã -vis the poor.

The short term and long term poverty in Iran has been discussed for many years and was recently intensifies at the cost of governent and other institutions .

Short-term poverty can be viewed as a welfare problem; long-term poverty is a development problem. Distinguishing short from long-term poverty is important for policy maker because different instruments are needed to deal with each problem. Policies that assist with consumption smoothing better access to credit markets whereas long term or chronic poverty may call for transfers or programs that increase the poor's earning capacity better alleviate short term or transitory poverty.

Average per capita rural incomes and expenditures in many Iranian villages were about half the amount in urban areas and as low as one-third in Tehran. Long-term poverty is more severe in Tehran, 8 percent, relative to rural and urban areas, 4 percent. More than half the population in rural areas and in Tehran is poor at least once, compared to 40 percent in urban areas. The comparison of Tehran with rural areas with Respect to long-term poverty, both of which had higher standard poverty rates, If long and short term poverty are correlated with the observed characteristics of households. Differences are noted in age and education profiles, as well as the effect of employment, place of residence, and gender of the household head. Long-term poverty is more strongly affected by the age of the household head than short-term poverty, and by his or her education at the lower end of the educational levels. Short-term poverty shows significant declines only for high School and university levels. The gender of the head reduces short-term poverty but has no effect on long-term poverty. Private sector work increases the probability of short-term poverty but has no effect on long-term poverty. For the poorest of the poor in rural areas such as remote villages in ostan hormozgan and sistan baluchestan , the report advocates improving the investment climate for rural nonfarm business and job schemes in rural areas. Iran's economy is highly dependent on oil exports, with roughly 50 percent of government revenues and 80 percent of exports coming from oil. The economy was rocked during the panel years as a result of this dependency, starting with soaring oil revenues in 1990-91 as a result of the Persian Gulf War and increase in oil exports.

Growth, during the Iranian year 2002/03, reached 6.8 percent after three consecutive years of higher than 5% growth. This performance, led by a pick up in the construction and manufacturing sectors (estimated at 11%), is attributed to the private sector's growing confidence following the progress made in trade and foreign exchange reform and the releases of external financial constraints that has plugged the economy during most of the 1990s. Despite this optimistic growth performance, unemployment rate continues to rise now reaching at least 15.7 percent. The most effected areas are small villages and small town with the high number of young people fewer than 25 or 30 years old. The percentage of unemployment in rural areas is much higher than urban areas.

To support Iran's reform efforts, the World Bank is also intensifying support for capacity building in the formulation of economic and sector policies, their sequencing, and implementation. Lending during the transition period focuses mainly on priority areas such as low-income housing, sewerage, urban upgrading, and community-based infrastructure and employment creation schemes for the poor people in Rural as well as Urban areas. Modest technical assistance lending will also be considered in support to the structural reform program.

World bank is also will recommending Iran a move away from redistribution through untargeted subsidies and towards growth with targeted poverty alleviation in Specific disadvantage Rural areas.

Iran is a country still making the transition from a village-based agricultural economy to a more industrial economy,, with both controlled by the government and the foundations. That change has created a political force of millions who have left their homes and social support networks in villages and towns in search of work in big cities, only to find themselves poor and disenfranchised.

There has been some progress in the past eight years in opening the country to foreign investment; economists say the inability and mismanagement in industrial sector to change the fundamental structure of the economy has allowed unemployment and poverty to climb.

Despite the fact that Iran consists of an agrarian economy, there is a high degree of malnutrition within the country. Approximately one fourth of all young children have stunted or wasted growth characteristics due to undernourishment . moreover, as an indicator of the poor food distribution capability, the percentage of undernourished children in villages is much higher.

Stunted growth is a reduced growth rate in human development. It is a primary manifestation of malnutrition in early childhood , including malnutrition during fetal development brought on by the malnourished mother. In developing countries including Iran , stunted growth is a common problem affecting a large percentage of children(specially in Rural areas). Once established, stunting and its effects typically become permanent. Stunted children may never regain the height lost as a result of stunting, and most children will never gain the corresponding body weight. It also leads to premature death later in life because vital organs never fully developed during childhood. Rural poverty in Iran like many other developing countries is often associated with vulnerability to environmental conditions and by relating population distribution to environmental characteristics the underlying causes of Poverty can be better understood and addressed.

"Poverty is no longer contained within national boundaries. It has become globalized. It travels across borders, without a passport, in the form of drugs, diseases, pollution, migration, terrorism, and political instability. The situation is worse still in cities of developing countries, where more than 60 per cent of the population lives in squatter settlements or inner- city slums. "In Calcutta, Dhaka and Mexico City, more than 25 per cent of the people constitute what is sometimes called a floating population. Not only is the world becoming increasingly urbanized, there is also an urbanization of poverty. According to the United Nations Secretariat, the urban population has grown from less than 30 per cent of humanity in 1950 to about 45 per cent in 1995. By the year 2010, every second human being will live in a city or town.

Despite the progress achieved as a result of 40 years of development efforts, real suffering persists as half a billion poor people do not get enough to eat each day and 15 to 20 million of them actually perish each year from starvation and disease exaggerated by malnutrition. Lured by the prospect of food, jobs, service and other opportunities, an ever-increasing share of the world's population gravitates to towns and cities. Rural poverty thus fuels urban poverty. Most of the migrants are men, leaving women behind to manage the homestead and the family.

Sources: World bank Oct, 2007 Mobility and dynamic of poverty in Iran: Djavad salehi-Isfahani The Geography of Poverty, human development report


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