Reforms slash poverty in Sri Lanka's western province, bad policies worsen it elsewhere
Economic reforms has slashed poverty in Sri Lanka's western province while backward policies that kept agriculture stagnant in rural areas were trapping people in poverty, researchers have found.
Poverty in the western province fell from 19 to 11 percent between 1991 and 2002, with the region growing at twice or three times the rate of other provinces, which were largely based on agriculture.
The researchers also found that growth in inequality was lowest in the Western province, calling into question a popular opinion put forward by some critics of economic growth.
"Western province also experienced the smallest increase in inequality, which is similar to the kind of lesson we have learnt elsewhere," Ambar Narayan, a World Bank economist who co-authored the report said a workshop in Colombo.
"Even within Sri Lanka the faster growing region is not the region which has the fastest increase in inequality. Growth and inequality does not go hand in hand."
The Western Province, the richest region in the country, had the lowest proportional increase measured by the Gini coefficient of 12 percent while the Uva Province, the poorest region, recorded the highest proportional increase 53 percent.
From 1990/91 to 2002, the (consumption) Gini coefficient for the Western Province increased from 0.356 to 0.4, while the Gini coefficient for the Uva Province increased from 0.257 to 0.392.
Sri Lanka's Presidential Secretary Lalith Weeratunga said the report provided a valuable basis for future policy making.
"Our planning has sometimes been on gut feeling and emotional experiences," Weeratunga said.
"But I think poverty reduction must be attempted on a more rational and scientific basis."
While the government's economic development framework Mahind Chinthana did not believe that urbanization was the answer to reducing poverty, a high priority was placed by the government on modernizing the village and pushing infrastructure into the provinces.
"It shows that the government thinking is quite in line with what is being recommended," Weeratunga said,
"Particularly I am happy that report provides adequate data, enriching the debate on understand of poverty and inequality in Sri Lanka."
The World Bank in a report released just before the development forum also called for policy reform to modernize agriculture, which has been stagnant, and a root cause of poverty in rural areas, while market reforms in the 1980 and 1990's have pushed up no-farm economic activity in the western province.
"In particular, agricultural policies have been geared toward the achievement of self-sufficiency in paddy production rather than the development of high-value agricultural markets," the report The Economy, Regional Disparities, and Global Opportunities said.
"As a result, private investment in commercial agriculture and agro-business has been limited."
Sri Lanka has many policies biased towards rice cultivation, including laws that ban farmers using land for other purposes. Between 1991 and 2000 valued added in tea grew by 3.4 percent, coconut 2.5 but, it fell by 0.7 percent in rice.
"While the immediate intention of policies in these areas has been to achieve seemingly sound social objectives, these policies have ultimately hurt the poor," the report said.