Lanka's development dilemmas

SPEECH made by Dr. Sarath Amunugama, Minister of Finance and Planning at the opening of the international seminar on "Poverty and Economic Policy"

WHEN I was told by Dr. Kelegama, that the subject of today's seminar would be "Poverty and Economic Policy", I had a strange feeling that it was a job description of a Minister of Finance in a developing country.

That is because the subject is of utmost importance to developing countries and I am most grateful that you have decided to hold this conference in Sri Lanka at a time when considerable attention is being paid to our antipoverty programmes.

I will begin by adverting to a very important issue raised by Dr. Even Due. He referred to the symbiotic relationship between research and policy.

It is one of the marks of underdevelopment that in our countries there is no close fit or close relationship between research, particularly in areas of poverty and development, and the actual translation of such research and research prescriptions into policy by governments.

This is a problem not only in Sri Lanka, but throughout the developing world. I think, one of the most important aspects of promoting economic growth in our region is the need to ensure that governments listen to what is being found out, particularly at the grass roots level such as household surveys.

The accumulation of such grass roots research leads middle level and high level theory. Thus we should have a large amount of field research which feeds into constant evaluation and revaluation of theories which would become useful to policy makers.

As Minister of Finance, as Dr. Kelegama will confirm, I have done my best to keep in touch with the research community. We strongly support the IPS in Sri lanka and many other organizations, which are related to economic and social research. But I am not satisfied with that.

We have to take note of the constant additional data, which comes to us not only through local research but also the networks which you represent at this meeting.

So I look on this seminar not merely as an opportunity for us to discuss each other's work, but also to situate our research within the total framework of ongoing research in the world. We must also undertake advocacy for the conversion of that research into policies.

In no other area of policy is research more important than in the area of poverty. Here we are dealing with lives of human beings.

They have specific human needs and if there are delays in the transformation of our research to policy and action then we are not only failing in our duty but also reducing the life chances of the poorest people in this part of the world.

So I welcome very much what you have highlighted as a priority item which is translating research into policy. I would welcome any suggestions by you as to how this interfacing could take place.

Very often we make policy prescriptions but we don't work out the modalities by which such an interface can take place. I would suggest that you also look into this lacuna during your deliberations.

The second point I want to make is that Sri Lanka is a very good case study in poverty alleviation. From the time of the State Council, or I would say basically from the time of the granting of adult universal franchise which is 1933, just a few years after the suffragettes in Europe managed to gain the franchise, the British colonial government extended that facility to Sri Lanka.

We were one of the earliest countries in the developing world to have adult universal suffrage and many of the anti-poverty programmes are largely a result of this expansion of the franchise. Politicians had to be responsive to the demands of the largest voter segment of the population, who happened to be poor.

There was constant competition from that time up to today to appear to be the poor man's friend. If you were politically not identified as the poor man's friend then you have to go home.

So there is constant pressure on politicians right from the 1930s to follow policies, which were in reality policies created for poverty reduction. It is as a result of that pressure that Sri Lanka has a very high position in human development.

If you take the Physical Quality of Life Index, and all its new variations that researchers like you have been suggesting, Sri Lanka figures comparatively high on that list.

If you look at our infant mortality rate, at life expectancy, at literacy, at the spread among genders of literacy and life expectation, if you look at maternity benefits and so on, which make a whole range of items depicting the physical quality of life then I think we have done quite well.

What is not so well done is that we have not had commensurate growth. As a consequence Sri Lanka is in economic terms a schizophrenic country. On one side we have a very high human development. But it is human development with a low per capita income. This is I think is a fundamental problem in Sri Lanka.

This has been adverted to in economics literature. When we were young students in the university, Prof. Warnapala and I, Demography was a key element of our training.

Then debates were conducted in the Population Journal as to whether Sri Lanka's demographic change was a single cause affair, particularly the wiping out of Malaria.

There were some other scholars who suggested that Sri Lanka's demographic pattern, the demographic transition was a result not only of the wiping out of Malaria in the dry zone and the opening up of colonization schemes.

Rather it was a package of benefits which certainly gave pride of place to the eradication of Malaria but also included very significantly the rural hospital schemes of that time and other social welfare measures. There were rural maternal benefits, midwives and a whole series of measures which cumulatively led to a spurt in population growth.

We had this spurt from the 40s to the 70s depicting rapid population growth. There were debates as to what the reasons were but there was certainly to debate about the astronomical population growth of this period.

This emphasis on social welfare was the focus of several studies particularly by Dr. Amartya Sen, who won the Nobel Prize for Economics.

He takes Sri Lanka as a model where due to this investment in social welfare, particularly in education and gender equality, we were able to not only have a pace of growth which seemed satisfactory at that time but also have political stability.

So that over a period of about 70 years Sri Lanka is one country in the world where there has been a very regular turn over of governments. Governments have come and gone but the social stability of the country has been preserved.

The work of Amartya Sen has added to the corpus of studies of Sri Lanka's social welfare. Subsequently there had been many other studies particularly about the Janasaviya and Samurdhi programmes which were specifically targeted anti-poverty programmes.

There is also a contemporary interest in the consequences of tsunami for the poverty reduction programmes in this country. As Minister of Finance, we have a continuous dialogue with the World Bank and IMF regarding our poverty reduction programmes.

Secondly, I would place great emphasis on the question of population growth and the population policies of a country.

In the 60s and 70s there was a lot of interest among economists and among planners in the World Bank and other financial institutions on population growth and its implications for per capita income as well as basic policy issues regarding economic growth.

There was, for example, a special fund that was set up by the United Nations, the United Nations' Fund for Population Activities. UNFPA was one of the fast growing specialised agencies of the UN system.

But I must say they had to contend with the Reagan administration in the USA and the growth of fundamentalism in the Western World. We always talk of fundamentalism in other countries but US fundamentalism which started with the anti-abortion lobby is a powerful one.

Family planning took a backseat. What was earlier called 'population control', then got a much more acceptable name of 'family planning'.

So little by little the emphasis by economists of that age who I think rightly placed considerable focus on the question of population policy has now been abandoned. I want to raise this question with the academic community.

Is this not really a fall out of the political concerns of US fundamentalists. Funds for UNFPA dried up. There were attacks on the one-child policy of the government of China. Her abortion policies were attacked. Moral imperatives were raised and economic imperatives were put in the backburner.

There was a time when there was a large funding in the area of family planning. Today that funding has been, I believe, virtually removed. Other areas have been emphasised. But I would make a plea to you to take a good look at the interface between population policies and economic growth.

I think, we are just dodging a real issue if we are emphasising other important but nevertheless peripheral issues. Take Sri Lanka for example. Thanks to the progressive population policies of that time, which were really initiated by the late S. W. R. D. Bandaranaike, as Minister of Health, by 2020 the Sri Lankan population will begin to plateau.

Many of the facilities for which every year the Ministry of Finance has to find more and more money will begin to level off and we will have those funds to invest on development.

Today we are spending a lot of money because the cohorts of the time of rapid population growth are demanding expansion of services. We have, of course, now gone beyond the hump of primary education and very soon even for university education the demand will begin to falloff. Even now you would see the phenomenon in Sri Lanka of Grade 5 schools being closed.

There is no demand for them. Lots of schools are being closed, more rationalisation is taking place. Funds for education are being now targeted on key areas like science and technology. There are greater possibilities of sophisticated policy making rather than dumping all the money on kindergarten education.

So economic and social transformation is taking place on the basis of changes in demography. I would suggest to this seminar that we should again bring back the question of population growth and its implications for economic policy making.

May I add a few words about the tsunami. In Sri Lanka a phenomenon that has been clearly identified and which I articulated in my budget is the growing disparity between the urban and rural areas.

Sri Lanka's economic growth has been largely, I would even say exclusively, centered around the Western Province. 50 per cent of Sri Lanka's wealth is concentrated in the Western Province.

In the rural areas there has not been a proportionate increase of wealth and consumption. It is the top 20 per cent of the Sri Lankan population that has enjoyed rapid economic growth.

Our annual growth rates since independent are in region of 5 per cent over a 50-year period. So one of the problems we have in Sri Lanka about poverty reduction is to see how much of emphasis we could place on the deprived areas which are contributing even less than 5 per cent to the national income.

It is ironic and tragic fact that the tsunami had affected the poorest of the poor of Sri Lanka. Long before the tsunami, I had identified precisely those districts as the poorest in Sri Lanka. We identified those districts to which we should begin a shift of resources.

If you take the North and East, that is to say the Mullaitivu district, the Trincomalee, Batticaloa, Amparai and then Hambantota district; those are the districts that were badly affected.

The most affected regions of Sri Lanka in the tsunami happens also to be the poorest of the districts in the island. If we look at tsunami relief, it has been given in ample measure by the global community.

In the recently concluded Donor Conference, we had an unprecedented commitment of over 2.2 bn US Dollars for tsunami relief and reconstruction.

We want to use that to stimulate growth in the tsunami affected areas. That is at the core of the present controversy as to what mechanism we should device to ensure that all these areas are treated equitably. So we have our problems on one side and an unprecedented global commitment on the other hand.

We have started talking to all the groups that are politically organised in those regions and now we are engaged in working out the mechanism by which we can undertake the economic development of the tsunami affected areas. The government will concentrate on the areas which are the relatively deprived districts of this country.

These matters will be discussed by you in this seminar. Your policy advise as to how we can tackle these problems will be greatly appreciated. I do appreciate also that we have probably the best brains in the field of poverty research all gathered here together.

I discussed with Dr. Kelegama how the Ministry of Finance can make best use of your contribution. We would like very much to participate in these discussions and to benefit from your experience.