The village as a development unit

Rohantha Athukorala

POVERTY ALLEVIATION: Poverty in Sri Lanka has become a multi-dimensional situation where the low income faced with a situation where one's basic consumer needs cannot be satisfied. The poor is faced with gaps in access to education, healthcare, water and sanitation.

This tends to stifle an individual which results in the drive for personal development not taking place which in turn contributes to the vicious cycle of poverty in the country.

World Bank says its recent research indicates the overall poverty head count has dropped to 22.7 percent as against the previous number of 28.8 percent which is encouraging. However, the 22.7 percent means that the number of people affected by poverty is 3 to 5 million Sri Lankans.

In addition the research also reveals that the non-poor, are closely clustered just above the poverty line which means that the number of poor is subject to sharp increases when slight changes in economic conditions happen like a natural disaster or price increases.

If we examine closely the numbers further it reveals that in the rural and urban sectors the headcount ratios are 25 and 8 percent respectively, which means that poverty is essentially a rural phenomenon. We have to develop a home grown poverty alleviation model so that we can drive equitable economic growth in the country.

Outstanding 2006

Sri Lanka received many accolades from the world in early this year, for the 7.4 economic growth in the year 2006. Overall unemployment declined by 6 percent. Exports grew by 8 percent and little Sri Lanka attracting over a 2 billion US dollars in foreign remittances placing the country fourth in the select band of developing countries on this criteria.

The FDI's flow exceeded 500 million dollars whilst a record level 1 billion US dollars was utilised. Whilst we are experiencing a significant growth in GDP, World Bank says the income growth of the house holds in the bottom quintile has increased by around 4 percent but in the top quintile of house holds, the per capita income has increased by a whopping 25 percent.

This reinforces the ethos that the rich is getting richer, whilst the poor is getting poorer given the inflationary pressure we are experiencing in the country.

Whist the country is focused on mega infrastructural projects latest research is revealing that the country is heading towards a poverty trap especially in the geographic areas of the North, East and a few districts of Badulla, Monegargala, Ratnapura and in the South. On average the poverty level has increased from 32 percent to 36 percent in the poorest districts.

May be a way forward could be to drive a village level developmental strategy so that over a period of time, a more equitable developmental growth can take place.

Village as a developmental unit

A key strategy to follow is to make a village a partner in the developmental process than a target. This involves a careful identification of the problems at the ground level and there after with the participation of the villages develop a solution. In this process it is vital that one prepares the internal and external resources which can be mobilised.

The private sector has a major role to play given the new policy where 2 percent of the turnover has to be used to CSR purposes. The key aspect that the private sector must keep in mind is that CSR in its correct sense should be an activity where the company will not benefit directly or indirectly in the short or the long term.

In this perspective if each private sector company can link it self with the forty thousand villages in the country on this model of identifying problems and developing a solution in partnership with the village, within a 3-5 year horizon we can drive economic growth across the country.

Agriculture contribution

In this strategy of driving growth through the village the agricultural sector will play a major role. If we analyse the numbers in the agricultural sector the GDP has fallen while the workforce employed remained more or less the same.

Hence, one can say that a higher level of agricultural out will drive down the poverty level like what we experienced in 2006 where due to the favourable weather condition we had positive production out in tea, coconut, paddy and rubber.

However, poverty does not seem to be inversely related to the growth in overall GDP. This throws out some interesting implications. Merely by attempting to raise agricultural subsidies may not raise the per capita incomes of farmers unless accompanied by measures to reduce the workforce engaged in basic business practices like efficient logistics, better warehousing, value addition strategies like attractive packaging and branding.

Government role

From the above it is evident that cash grants will not help a typical villager move out of poverty. A strategic initiative can be to identify opportunities for the poor to participate in economic activity through skill enhancement at the village level.

* Focusing on livelihood opportunities to provide income avenues to the village by way of economic linkages to vegetable produce.

* Provide concessionary funding and technical know-how by mobilising resources from donor agencies.

* Invest on special poverty reduction projects like building irrigation projects, causeways and village level warehouses.

* Provide promotional support for marketing the produce to indirect exporters.

* Pradeshiya Sabha members assigned to support and monitor the performance.

* Test the participatory approach of development from a village basis, and there by share the best practice among other villages.

* Mobilise the line ministries to allocate resources to selected villages on priority basis to accelerate the developmental process.

* Drive social and ethical standards in a village with psycho social development work with the help of NGO's and INGO's.

Another approach - Chinese Strategy

China adopted a unique strategy after 1979. A so called village and town enterprise (VTEs) was launched. This was essentially a small and medium scale enterprise initiative. The learning to the world that was conceptualised was that one does not have bring the village to the town and drive manufacturing up or by handing out subsidies to drive development.

A more strategic growth was embarked by way of taking manufacturing to the villages and agricultural sectors. The phenomenal growth of the Chinese economy was based mainly on the growth of the VTE's. May be Sri Lanka can do the same. After all we have some outstanding experience on this area. Who ever thought that a villager from Pannala will be the world's best maker of lingerie?

Village level credit

A lesson in time as highlighted above is that merely by raising budgetary allocations to the agricultural sector is not going to reduce poverty levels. The village level developmental must be covered with a rural development act.

This can lead to a drive of extending rural credit to rural non agricultural occupations. The Bangladeshi Nobel award winning works of the Grameen Bank is a model that we need to examine. May be the private sector can do the same on a micro basis.

A case in point was Unilever in India that developed a programme on these lines called the Sahkthi Amma that helped the rural area become an integral part of the growth model of the company.

The recent research done by Singer Sri Lanka has revealed that the commitment to pay loans is a holy grail in rural areas that is not prevalent in the urban areas. A pattern experienced and shared by the Bangladeshi Grameen Bank champion.

Growth targets

There is many a discussion on the Millennium Development Goals (MDG's). But a key area of focus should be that if the Gini coefficient for consumption inequality remains unchanged at the level of 2002 and growth continues at the same rate it did in 2004 and 2005, poverty will fall by more than 50% to 8.2% by 2015. If however, consumption inequality increases - as it did in the last 10 years -poverty will fall only to 14.8% from the 26% in 1990/91.

Given this backdrop may be the village as a developmental strategy can be the way forward to influence the Gini coefficient in Sri Lanka. The current strategy of Gama Neguma is aligned to making the village the unit of development. However, this strategy can be successful if the private sector and the international donor groups partner the process so that we can drive poverty to single digit and increase the domestic savings to 35 percent.

This in turn can drive a 8% GDP growth in Sri Lanka. If we do not move in this direction Sri Lanka will lose the in the race for growth in the South Asian region.