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Pro-poor growth and Economic growth in Sri Lanka - A critical analysis

Oct 15, 2010 1:00:49 PM- transcurrents.com

(“International Day for the Eradication of Poverty” falls on 17th October and it has been observed every year since 1993. The theme for 2010 is ‘From Poverty to Decent Work: bridging the gap. This article talks about current status of poverty reduction/eradication strategies and related development programmes/ issues in Sri Lanka)

By Vidya Abhayagunawardena

After the nearly three decade war in the North and East which ended in 2009, Tsunami in 2004, two insurgencies in the South (1971 & 1988), other internal economic disturbances and global economic recessions/turbulence, Sri Lanka is now experiencing healthy and impressive economic growth rate.

It is posed as an emerging economy in the Asian Region. The latest report of the Department of Census and Statistics (DCS) of Sri Lanka has revealed that the island nation has recorded in the second quarter of 2010 economic growth rate at 8.5 per cent, the highest ever quarterly GDP growth since 2002. This is welcome news for the post war Sri Lanka.

With the healthy economic growth rate in the country we need to focus on whether it has helped in reduction of the poverty level. In other words where do the poor figure in the impressive economic growth? Pro-Poor Growth (PPG) facilitated by economic growth always helps to reduce poverty in any economy and this is fundamental towards the goal for eradication of poverty. Economic growth helps not only in reduction/eradication of poverty but also in creating jobs, changing in consumption inequality, reducing inflation rate, increasing per income capita, reducing balance of payment, increasing foreign reserves etc.. Till recently (except for some short periods) Sri Lanka had slow economic growth rate and as a result the goal of poverty reduction was hindered.

General overview of poverty

Global wealth in the new millennium has increased the inequalities rather than helped in the reduction of poverty. According to the UNDP, in 2005 the richest 500 people in the world earned more than the poorest 416 million.
To describe poverty there are some terms. Income or consumption poverty, human (under) development, social exclusion, ill being, (lack of) capability and functioning, vulnerability, livelihood unsustainability, lack of basic needs, relative deprivation as such. In the 1990 further development of poverty concept, the idea of well being came to act as a metaphor for absence of poverty, associated emphasis on how poor people themselves view their situation. At the same time, inspired by Amartya Sen, UNDP developed the idea of Human Development; the denial of opportunities and choices, to lead a long healthy creative life and to enjoy a decent standard of living, freedom, dignity, self-esteem, and respect of others.

Without a sufficient social security net in most of the developing countries we can see many consequences of persistence poverty including children out of school, insufficient food, social exclusion, youth unrest and violence, drug abuse etc.. Studies have revealed that today’s global poverty exists mainly in war- torn and post–conflict countries. The definition of PPG focuses on accelerating the rate of income growth of the poor and thus the rate of poverty reduction (Ravallion and Chen 2003; Ravallion 2004; DFID 2004). Further, empirical evidence suggest that growth is the primary driver of the rate of PPG, but changes in inequality can either enhance or reduce the PPG.

So accelerating the rate of PPG will require not only faster growth, but also efforts to enhance the capabilities of poor house holds to take advantage of the opportunities growth generate. With its focus on accelerating the rate of poverty reduction, this definition is consistent with the international community’s commitment to the first Millennium Development Goals (MDGs) of reducing by half the proportion of people living on less than a $1 a day from 1990 to 2015. “Eradicating extreme poverty and hunger” constitutes the first MDG and to achieve the set targets in 2015.

Poverty and current poverty reduction strategies in Sri Lanka

The current population in Sri Lanka is little over twenty million and the last population survey was done in 1999 by DCS. Rural population accounts for over seventeen million and out of this over thirteen million people are approximately rural poor according to Rural poverty portal, 2008. According to DCS, in 2010 August Sri Lanka’s Official Poverty Line (OPL) is at Rs.3111 (OPL- The person living in the households whose real per capita monthly total consumption expenditure is below Rs.3111 in the year 2010 considered are poor.) and poverty incidence is strongly associated with family the household size.

Within the larger households, especially those with children are more likely to be poor. DCS survey on “Household Income & Expenditure 2006/7” revealed that poverty is highly associated with employment of household heads. Poverty incidence is largest among household headed by person with elementary occupation (unskilled workers) agricultural workers and fishermen. Since opening the economy in 1978 “Janasaviya” and “Samurdhi” were the main poverty reduction/alleviation programmes carried out by successive governments. “Samurdhi” is still continuing with the present government and “Mahinda Chinthanaya (MC) – A New Sri Lanka” has given it a prominence place. “Samurdhi” mission says “Contribute towards poverty minimize and stable national development, by identifying the potential families through people’s participation based development”.

In MC page 21 & 22 says, “No poor family will be left out from the Samurdhi benefit, increase the benefit to a minimum of Rs.1000 for all families, families with children under age of 3 will receive an additional allowance of Rs. 1500, Samurdhi family entitled to receive a loan of Rs. 100,000 with the interest rate of 6% with guarantee of government, a “nutrition pack” for expectant mothers of Samurdhi families, families with disabled children, those benefits will be assured without regard to the economic status of such families”. Today there are 1.6 million “Samurdhi” beneficiaries in Sri Lanka.

Uneven economic growth in the past has left many provinces (except the Western Province) lagging behind. High growth rate is only in the Western province and it accounts for 50% contribution to GDP and this reflects uneven distribution of employment and income, according to the World Bank recently published report on “Connecting people to prosperity in Sri Lanka”. According to DCS survey in 2006/7 it says, ‘Western Province the most urbanized province in Sri Lanka shows the highest average household size for poor among districts. The largest average household size for poor household is reported from Colombo district compared to other districts’.

We can argue further and look at remedial measures to reduce unequal income distribution within districts, provinces? As MC economic policies work towards development of the country through people led economic development with bottom up approach rather top bottom approach, the on going infrastructure development projects will assist in linking every province with economic activities? Increasing infrastructure investment in the country can accelerate both agricultural and non agricultural earnings for poor households? Ongoing development projects results/outcomes will trickling down throughout the economy?

As 2010 ‘International day for the Eradication of Poverty’ theme is set out as “From poverty to decent work: bridging the gap” Can Sri Lanka be able to bridge the gap? If the ongoing development projects are taking place in an unorganized, ad hoc manner and also without taken into consideration of environment, culture, peoples needs, scarcity of resources, sustainability of the project/s then the expected results will be less than expected.

Women and Children

Women and children are the most vulnerable groups in term of poverty in many country in the world today and the same scenario is true of Sri Lanka. Access to basic needs such as food, shelter, health and education are the most scarce goods and services for them in terms of their availability. In Sri Lanka women represents over 55% of the population and they contribute much to the GDP. But still the majority of women live below the poverty line. This is especially visible in the plantation sector, North and East provinces and parts of the rural sector. In the plantation sector, women and children are the most vulnerable.

Women receive low daily wages, less education and poor health facilities

There is high rate of domestic violence and alcoholism and malnutrition among children is high. The Ministry of Child Development and Women’s Affairs has revealed that, in late September 2010, there are 89,000 war widows in the North and East, aged below 40, most of them with minimum three children. But none of them have any form of income. Not only war widows, there are women, who got permanently or partially disabled, mentally traumatized due to the war. In postwar economy, a country like Sri Lanka will need to address multifaceted socioeconomic issues in respect of women effected by the war.

Sri Lanka needs a holistic approach to empower women. It needs laws for women such as equal pay in all sectors, projects specially designed for women on microfinancing and training in non-traditional employment. This will lead to women’s empowerment economically, socially and will enable them to be independent and lead their own lives. This will also discourage women seek the employment in the Middle East as house maids. With the inspection of “Samurdhi” programme it has set up its own “Samurdhi Bank” to support and uplift Samurdhi beneficiaries. To what extend do banks and the other financial establishments support rural women? In Bangladesh the “Grameen Bank” was introduced to increase microcredit programs was to reduce poverty among rural women.

Among the plantation and rural sectors undernutrition levels in children are high. The Ministry of Health and Medical Research Institute (MRI) has published a report on “Nutrition & Food Security Assessment in Sri Lanka 2009” in collaboration with UNICEF and World Food Programme (WFP) in 2010. According to report statistics are, height for age- estate sector 46.8%, rural sector 17.4; weight for age –estate sector 37.9%, rural sector 20.8%.

This is not welcome news for the economy and needs immediate action to be taken by the relevant authorities to curb the under nutrition among children. Sri Lanka is in a good position compared to other countries with regard to school education and this is because of schooling is mandatory for children, and child labour is illegal. Otherwise this scenario could have been worse. As Amartya Sen says, “Women’s literacy and employment levels are the best predictions of both child survival and fertility rate reduction”.

Rural agriculture and Estate sector

Support for rural agriculture farmers and estate sector (specially tea plantation) workers to overcome poverty is very important in Sri Lanka as majority of population depend on these sectors for their livelihood. Plantation sector workers directly support to bring foreign income to the country. Unfortunately high poverty rate can be visible in rural agriculture and plantation sectors in Sri Lanka. Poverty levels tend to be very responsive to agricultural growth. Rural agriculture (mainly paddy and vegetable farmers) is faced with many challenges and obstacles with high cost of fertilizer and other inputs, unable to sell crops at profit, low cost imports of agricultural products from other countries, natural disasters. There should be a mechanism to make them economically independent and not depend on subsides for eradication of poverty in the rural agriculture.

Chinese proverb say that “Give a man fish a every day and feed him for his life time or teach him to how to catch fish and leave him with it”. This can apply for Sri Lankan farmers too. Concern parties can provide and support in them with low rate loans, markets accesses opportunities in locally and abroad, insurance protection for crops, strengthening property rights for land, expanding technology availability and with how to use mobile technology to expand businesses (local know how and with global connection), continues consultation in business development are much needed. Aiming to make the agricultural sector more productive, efforts should be made to involve them in non agricultural activities mainly through vocational training programs. This could help in uplifting farmer livelihoods and eradicating poverty in rural agriculture and estate sector.

Broader Approach

“Development as Freedoms”, 1999, as Amartya Sen writes: ‘Development can be seen as a process of expanding the real freedoms that people enjoy’. To make this a reality in Sri Lanka, political will, institutions with good governance can play a leading role in rural economic development and alleviating poverty. Transparency and accountability should always be there with those institutes. The policy and decision makers in the country need special care and attention when they develop policy framework. “Dilemmas of Development – Fifty years of Economic Change in Sri Lanka”: edited by W.D. Lakshman,1997. It says, ‘Working out of a policy framework, intelligently and selectively, combining various measures to promote economic growth and social justice simultaneously, remains the challenge before Sri Lanka’s policy makers’ (page 222).

There is the need to pay special attention when the private sector becomes an “Engine of growth in the economy”. Better results can be achieved through Private Public Partnerships (PPP). With the private sector investment and involvement projects should look at the extent to which poor will be benefited. Otherwise some of them know “how to dig the gold in the bottom of the pyramid” where poor get poor more. Increasing the participation of poor households in growth should be there in development projects and programmes.

Rural sector is faced with problems of inadequate infrastructure, skill labour, stagnant agriculture, access to credit, technology know how. Protecting and supporting small and medium enterprises (SMEs) much important to economy. Through SMEs can be create many job opportunities for rural youth and this is critical factor for faster recovery for post war Sri Lanka’s economy. Tourism sector is booming in the economy now. To what extent will the poor benefit or in other words is there a Pro-Poor Tourism? This is particular with conflict affected areas of North and East and poverty level is very high and also with high unemployment rate.

Will tourism related smaller scale business get a boost? Eco-tourism will bring economic opportunities and advantages to rural people? How many employment opportunities will be generated for rural youth? Would the infrastructure related to tourism be upgraded and managed accordingly, cleaning up the garbage? Would there be programs and mechanism for children, women and youth preventing from any social wrong doing or behavior? Overall can tourism accelerate PPG in Sri Lanka?

Not only Goals, Values and Norms too…

There are eight MDGs set out by the UN including, End poverty and hunger, Universal education, Gender equality, Child health, Maternal health, Combat HIV/AIDS, Environmental sustainability and Global partnership. Developing world is currently engaged in an economic war and a rat race to achieve the set goals by 2015. There could be unexpected social consequences on account of it. Sri Lanka in its quest to achieve these goals by 2015 should not forget cultural values and norms, multi ethnic and cultural diversities. Sri Lanka is lucky to have few indigenous communities, certain cultural activities of different ethnic groups, family values and norms. For coming generations Sri Lanka should protect and preserve those but not make any room or avenue to deplete them in the sake of economic development.

When to celebrate “Make poverty history in Sri Lanka”?

After 1978, successive Sri Lanka’s governments were carrying out various poverty reduction and alleviation programs but none of governments have managed to follow sustained national policy on poverty alleviation. According to UNDP Human Development Index, Sri Lanka is ranked in 2009 at 102. To get into first thirty country category Sri Lanka has to do a lot work and this is going to be a gigantic task.

“Mahinda Chinthana New Vision for Sri Lanka” economic policies with its continues economic growth rate, country could see its golden line saying, Sri Lanka’s poverty is coming down and sooner the economy could ensure that no one is below the poverty line. Sooner than later (MDGs targets to be achieved in 2015) Sri Lankans could celebrate economic growth as “multi faceted” just like the island nation succeeded in becoming a role model in the programme on “Make Poverty History”. Then only Sri Lanka can carry the tag line called “Emerging Wonder of Asia” or beyond that “Wonder of Asia”.