“Connecting People to Prosperity” in Sri Lanka. A reality check with “Mahinda Chinthanaya”
By Vidya Abhayagunawardena
A World Bank report titled “Sri Lanka: Reshaping Economic Geography- Connecting People to Prosperity”, released in August, provides new insights on the geographic transformations in the country and identifies public policy priorities for connecting people lagging economically.
It uses the framework of World Development Report (WDR) 2009, "Reshaping Economic Geography". According to the report, “Connecting People to Prosperity” is the principle behind the economic integration policies that can help countries to reap the benefits of both uneven growth and inclusive development.
After 1978 Sri Lankan economy opened up to the world to take advantages of competitive and comparative economies around the world. Before 1978 Sri Lankan economy mainly depended on tea, rubber and coconut and it was an agriculture based economy. With liberased economy, Sri Lanka began large scale development programs to create more employment opportunities and connect people to new towns, eradicating poverty, better living standards etc. These included projects such as Greater Colombo Development Plan which was introduced with the Free Trade Zones, Mahaveli Development Project, 200 garment factory project and privatization of public enterprises.
Parallel to those programs, there were poverty reduction/alleviation schemes like Janasaviya, Gam Udawa, Samurdhi, Gami Diriya. These projects were undertaken in pre-conflict stage of Sri Lanka and some are still continuing (Samurdhi).In this particular period Sri Lanka’s economy experienced major internal and external economic threats. Among them were shocks from JVP insurgency in 1988 and continued three decade long ethnic war in the North and East till 2009 and nature made shock in 2004 Tsunami in particular.
“Mahinda Chinthana” Targets & Policy formulations
With the end of North and East conflict, Sri Lankan economy will work towards double digit growth rate with per income capita exceeding US$4000 GDP by 2015 as mentioned in the “New Sri Lanka” “Mahinda Chinthana” ploicy. Mahinda Chinthana (MC) is the policy document for next five years on development projects and programs in the island nation. After prolonged war the country is looking for “New Sri Lanka”. Without taking a side of ethnic, political, religious or any other divisions or differences, people of Sri Lanka will support “people led development programs” to make a “New Sri Lanka”.
In the past we have had some failed development programs due to top bottom approach in development planning. To a great extent MC is a bottom up approach. In the post war reconstruction stage people freedom and space for development and it was not a reality due to the North and East conflict. As Amrtya Sen described five distinct types of freedom needed for development. These are a) Political Freedoms; b) Economic Facilities; c)Social Opportunities; d)Transparency Guarantees; e) Protective Security. All of these factors help advance the general capability of a person.
Country originated policies for economic development
In the past we have noticed international lending agencies to Sri Lanka mainly the World Bank(WB) and International Monetary Fund (IMF) were perceived as enemies by some political parties and trade unions. This was mainly due to the inability of previous regimes to communicate to the people in the country about the rationale behind the agreements or discussions they had with them (WB/IMF). In recent years we have not witnessed such scale protests or any sort of displeasure towards WB and IMF involvement in Sri Lanka from these parties. It is because the WB has consulted distinguished Sri Lankan economists, policy makers, administratives, ministries, universities and other concerned institutes. Sri Lanka now needs country originated policy formulations rather Washington-driven policy formulations. This is a very much prudent approach and move by the WB (others also better to follow in the future) in developing policies for Sri Lanka.
“Connecting People to Prosperity”
The “Connecting People to Prosperity” Report consists of three chapters. Chapter One is about unbalanced economic growth and inclusive development and it provides facts on Sri Lanka’s spatial transformation as production concentrated policies balanced basic living standards. WDR 2009 calls for a rebalancing of policy discussions to include all the instruments of integration. It shows how to use the three spatial (space + distance) dimension (3D) of Density, Distance and Division to tailor the use of these policy instruments to address integration challenges facing countries. Density indicates the size of economic out put or total purchasing power per unit of surface area –for example, square kilometer. It is highest in the large cities where economic activity is concentrated and much lower in rural neighborhoods. Distance measures the ease of reaching markets. It determines access to opportunity. Areas far from economically dense centers in a country are more likely to lag. Divisions arises from barriers to economic interactions created by differences in currencies, customs and languages, which restrict market access.
In Sri Lanka’s reshaping economic geography the Western Province accounts for 70 percent of industrial value added, up from 43 per cent in 1983, contributes more than 50 per cent of GDP and this reflects unevenly distribution of employment, income in Sri Lanka. The Western Province has improved living standards for many Sri Lankans due to rising economic densities in the province. 1.5 million people living in Western Province were born in other parts of the country. In the report “Poverty Mountains” has shown that many poor people live closer to prosperity in the Western Province but the province itself home for 16.8 per cent of Sri Lanka’s poor people. Uva Province is the poorest province with per capita expenditure of Rs. 3879 and poverty incidence of 27 per cent, but is home to 12.3 per cent of Sri Lanka’s poor.
The Report suggests that by improving the quality of basic services, such as health and education, policies can facilitate migration and bring people closer to prosperity. Improving the quality of services is important to promote labor mobility. Central, Sabaragamuwa, and Southern are home to almost 50 per cent of Sri Lanka’s poor people. Further, Sri Lanka is one of the few lower middle-income countries that has surpassed or is close to achieving many of the Millennium Development Goals (MDGs). Overall achievements in delivering health and education services, gaps in some geographical pockets and vulnerable subgroups remain. The high-risk and underserved groups include the estate population, conflict effected areas, internally displaced people, and the rural poor.
Chapter Two describes, Improving the fluidity of land, labor and product markets and examine the drivers of geography transformation –transformation of land use, mobility of people, and flow of products. In Sri Lanka, there is considerable public land ownership in rural areas in contrast with large urban areas where private ownership is much higher. Colombo metropolitan areas is estimated between 10 to 20 percent of the land own by the state overall land ownership is the government is 6.56 million hectares and about 82 percent. And also larger proportion of people depend on agriculture, land market restrictions tend to keep them poorer as they earn per in unit of labor. Connecting people through labor mobility will help to mitigate differences in welfare that often accompany economic concentration it said.
People are leaving to leading areas from lagging areas due to economic opportunities mainly 45 per cent reported moving for work or in search of land. Internal migration is very much high in Western Province due to most of industrial and commercial activities there. “Push” and “Pull” factors play a pivotal role in migrating people to Western Province in the country . And also due to North and East conflict in-migration rates were high in Polonaruwa, Monaragala, Anuradhapura and Ampara. Northern and Eastern provinces data was not available in the report. Connecting places and exchanges products is very much link with transport and its cost and regulation of the transport industry. Domestic transport cost is relatively high compared to US and over 90 percent of freight transport by road in Sri Lanka. Transport charges are high due to poor infrastructure quality and fuel costs, indirect costs (licensing, insurance and informal payments), transport competition, high traffic congestions, poor road maintenance.
Chapter Three, finds policies for connecting people to prosperity. It identifies public policy priorities for improving spatial equity in living standards. The WBR 2009’s framework for economic integration includes policies on spatially blind policies of institutions, Spatially connective policies refer to infrastructure, spatially targeted policies to stimulate economic growth in lagging areas. All these policies are linked to one driver of geographic transformation. In those places need to ensure basic services everywhere is beneficial for both spatial efficiency and equity.
Overall the report finds, Sri Lanka's public policies have been remarkably successful in leveling social welfare and preparing the ground for inclusive development. Poverty has come down in all provinces and service delivery in education, basic healthcare, and basic infrastructure including water and sanitation is dispersed throughout the country. Government further may look in to education sector. As the WB report says the current challenge is to improve the quality of education in lagging areas and develop skills that help people access opportunities in a transforming the economy. 30% of students fail courses in their first language and mathematics in grade 8, and 50 per cent fail English. Ministry of Education suggests the accessibility is best in Western Province, followed by Southern Province; it is worst in the Northern and Eastern Provinces.
The education system in the Northern and Eastern provinces needs priority support to reduce spatial in education opportunities. The Report further says on education “Sri Lanka little invest in education, by international standards, and public investment in education also needs to be raised over time. While there is no doubt that tertiary education is an important pillar for national transformation, the analysis here shows that higher education subsidies disproportionately benefit rich families in Western Province. For spatial efficiency and connecting people to prosperity, private involvement in delivery of tertiary education should be among the option.” The health sector in the country is very impressive. The Report says the current health system has many areas where efficiency can be improved and potentially reduce healthcare costs. Health services are equitable because poor people can seek care at any facility free of charge. Analysts suggests that while health service are geographically dispersed and reach the poor, there are significant inefficiencies due to underutilization of facilities.
“Mahinda Chinthna” at large
As mentioned early, “Mahinda Chinthana”(MC) is still in the implementation stage and results of it would be visible from end of 2011. Development projects such as new high ways, road development networks and transport system development, other infrastructure projects will contribute in connecting people to leading areas and make lagging areas into leading areas. Among the projects of promise include Southern High Way, Katunayaka High Way, Capacity enhancement of Colombo harbor, Construction of a new harbor in Hambantota, a new Air Port in Mattala, Coal power plant, Developing Oluvil harbor and the proposed Kandy express way. Along with these development projects, Northern Spring, Eastern Re-wakening, Gama Naguma, Samurdhi programs are continuing to uplift the regional livelihoods and accelerating and supporting regional development.
Beyond “Mahinda Chinthanaya”
The post war reconstruction of the North and East needs more co-ordinated socio economic development projects and programs. Government always can seek partnerships with private sector and international partners to widen its development capacities in these two provinces. Support in improving livelihoods, improving health and education, speeding up of de-mining especially of the agricultural lands, new and improving irrigation system, financial support for starting up businesses, training and investment in human capital are much needed in these two provinces. Government may encourage private sector to moving into these two provinces to invest and speed up local economic activities.
While MC policy acts as a driving force of economic development and growth of the country, “Connecting People to Prosperity” can be used as a MC’s policy analysis and evaluation tool. To what extend lagging areas has benefited from MC policies? To what level has the poverty level come down in lagging provinces? At what cost transport costs come down? Are North and East regions connected to the rest of the country? Have the Educational facilities and levels of education gone up? Overall are people connected to prosperity?
Beyond this Sri Lanka will need to have a long term sustainable economic policies with suitable and prudent changes and adjustment to the changing world economy. It is hoped that the government and the opposition and concerned parties will work together to lay the foundation for the gigantic task. Only such a strategy can ensure a sustained double digit economic growth rate with a low inflation rate in future Sri Lanka.