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Serving Sri Lanka

This web log is a news and views blog. The primary aim is to provide an avenue for the expression and collection of ideas on sustainable, fair, and just, grassroot level development. Some of the topics that the blog will specifically address are: poverty reduction, rural development, educational issues, social empowerment, post-Tsunami relief and reconstruction, livelihood development, environmental conservation and bio-diversity. 

Friday, March 02, 2007

Economic growth sans physical planning A recipe for poverty and regional disparities

The Island: 01/03/2007" by Professor Willie MendisSenior Professor of Town & Country Planning, University of Moratuwa

"The rationality of a ‘roadblock’ in overcoming the challenges of development cannot be condoned for a variety of reasons. Consequently, it will be profitable to examine the notion of the ‘systemic defect’ in the processes which now steer development. In same, higher economic growth rates will continue to remain an intrinsic imperative. Its key issue will therefore be to focus on the places from where growth can be stimulated across the country, without reliance only on one overheated oasis..."

Sri Lanka has been a paradise for both orthodox and unorthodox analysts who have attempted to seek the pros and cons of its challenges in attaining sustainable rates of economic growth with equitable development. Economists have noted that, "the Sri Lankan economy has been going up and down, averaging at approximately 5 per cent, and never reaching the desired growth rate". The focus on same have prompted these Economists to articulate that a rate of 7 to 10 per cent was needed to resolve the country’s problems of poverty, low incomes, and unemployment, which they identified as the underlying reasons for social tensions that often ends in a disruption of economic activities. Yet, they have contended that maintaining such a growth rate for over a decade or so, "has become more a dream". Meanwhile, the Central Bank of Sri Lanka has reported that the growth of Sri Lanka’s economy had hovered at around 7.4% in 2006. It also predicts a growth rate of over 7% in 2007. It may however be too early to conclude that it is a break from the past trends. In contrast, India has been able to get over its "Hindu rate of growth", and to place its economy on a high growth path of 8 to 9 per cent.

In the meantime, it is pertinent to note that in the Budget Speech 2007, the Minister of Finance did assert that, "we have to create an economy that will sustain over 8 percent annual growth over the next 10 years".

A key reason attributed by many analysts to Sri Lanka’s struggle in achieving the desired economic growth rate, has been its missed opportunities related to the 24-year war-like internal conflict. Undoubtably, if a durable peace is attained, there will be every likelihood of achieving higher rates of growth. Nevertheless, Economists have also contended that peace alone will not drive growth. They have indicated the need for many other pre-requisites for maintaining the growth momentum, such as the rates of investment and efficiency of capital. The latter in turn will be determined by a number of associated factors including correct macro-economic policies, infrastructure, education, skills, management abilities, technology, political stability, work ethics, and law and order. Therein have been the difficulty. Some analysts have added that, "the social engineering required to enable higher sustained growth has been difficult in our cultural and political milieu".

The aforesaid has prompted an immediate enquiry on whether Sri Lanka’s development has reached a `roadblock,’ or whether the methodology adopted to date has an inherent `systemic defect’ that needs to be rectified.

The rationality of a ‘roadblock’ in overcoming the challenges of development cannot be condoned for a variety of reasons. Consequently, it will be profitable to examine the notion of the `systemic defect’ in the processes which now steer development. In same, higher economic growth rates will continue to remain an intrinsic imperative. Its key issue will therefore be to focus on the places from where growth can be stimulated across the country, without reliance only on one overheated oasis. An outcome of the latter will be the challenges of "lagging regions". Its most remarkable feature became particularly evident in the political domains of Sri Lanka & India at the last general elections held in the two countries. Each incumbent government promised mega-scale macro-perspectives of prosperity through forecasts of high levels of economic growth. In reality these had little impact on the `lagging regions’ across the country wherein a significant share of the Constituents were in poverty. The classic case of `India Shining’ did not impress the voters, resulting in the installation of a new Government under the stewardship of Manmohan Singh / Sonia Gandhi. For somewhat similar reasons `Regaining Sri Lanka’ too did not appeal to the majority of voters in the ‘lagging regions’ resulting in a change of Government in Sri Lanka, in favour of the leadership of Mahinda Rajapakse.

Thus, in these two neighbouring countries, high in its respective political barometers, was the challenge of overcoming `regional imbalances’. The new Governments in both countries perceived the latter in the context of the `urban – rural’ divide, on the basis that the lagging regions were pre-dominantly rural. Thus, India’s Common Minimum Programme drawn up by its United Progressive Alliance (UPA) Government, established the following key objectives in its development strategy:

i) ensure that the economy grew at least at 7 to 8 per cent in a sustained manner;
ii) provide a legal guarantee for at least 100 days of employment on asset creating public works programmes at a minimum wage for every rural household;
iii) ensure that Gram Sabhas were empowered to emerge as the foundation of the Panchyati Raj bodies to which will be directly credited all funds for poverty alleviation & rural development programmes. Also, such devolution of funds to be accompanied by similar devolution of functions & functionaries.
India’s UPA Government followed through on the above, by carrying out the following:
a) launched the National Rural Guarantee Scheme providing one member for each of India’s 60 million rural households the guarantee of 100 days of work in each year at a minimum wage of Rs.60/- (or US $ 1.35) per day, or an unemployment allowance if there is no work. They will work on building roads, constructing canals, improving rural infrastructure, or conservation work. (India’s Rural Development Minister called it the biggest social security net ever provided in India).
b) launched the project to `Provide Urban Facilities in Rural Areas (PURA)’, to establish physical, electronic, knowledge, and economic connectivity to rural areas.
c) appointed a separate Ministry of Panchyati Raj to oversee the speedy implementation of the 73rd & 74th Constitutional amendments which established the Panchyati Raj bodies.
In Sri Lanka, the new Government designed the following key objectives as per its Mahinda
Chintana policy framework for development:

i) ensure that the economy will be accelerated towards 8% over the medium term by promoting modern infrastructure at both national & rural levels;
ii) establish a Jana Sabha for decisions to be taken for the benefit of the village to realize the aspirations & objectives of the Gama Neguma concept;
iii) empower the people at the grassroots through Gama Neguma involving community participation to achieve poverty eradication by undertaking 100,000 community based infrastructure projects and other livelihood development activities in each year, by expanding the Jana Pubuduwa, Gami Pubuduwa, and Gami Diriya Programmes;
iv) appoint the Regional Development Ministry to co-ordinate with the Local Authorities & Provincial Councils for the efficient use of resources and to address local needs;
v) develop the less developed Provinces by setting up 300 Industries with at least one in each DS Division, coupling tax & other incentives to any company setting up a new industry or re-locating an existing industry in any District other than Colombo and Gampaha.

It follows from the aforesaid that in both countries its policies and strategies for economic growth have been correlated with targets of poverty reduction & in mitigating regional disparities. The overarching aim of the strategy has been to capture the synergies between urban & rural areas as the means of improving opportunities for employment generation, and in achieving higher incomes. Thus, in India, the vehicle to accomplish same has been mandated in Article 243ZD of the Constitution which requires the establishment of a District Planning Committee in each District of every State to prepare a District Plan which consolidates the plans prepared by the Panchyats and the Municipalities. Such consolidation is envisaged as a task that goes beyond compilation, and connotes a degree of value addition through the integration of urban and rural plans, which is particularly important in the light of increasing urbanization.
The Sri Lankan situation which too has focussed on the rural areas for poverty reduction & in mitigating regional disparities, has however yet omitted to capture the rural – urban integration in its planning process. The latter is at the heartland of the `systemic defect’ in planning for economic development to achieve higher growth targets.

In the above context, the emphasis exclusively on the rate of economic growth has to shift to capture its impact across the spatial fabric of the entire country. Its concentration mainly in one province out of the nine provinces, signifies a meaningless economic performance. The latter will not lead to the quality of life of the nation as a whole, but of a small segment. Thus, in 2005, the Western Province contributed almost 51% of the national GDP, while the outermost four provinces of Eastern, Uva, Northern and North-Central contributed less than 5% each to the national economy. Meanwhile, the four provinces neighbouring the Western Province produced contributions to the total GDP in the range of 6 – 9% each.

Analysts have reasoned that the dominance of the Western Province in value addition has been due to its greater integration with global markets, especially after the introduction of economic reforms in the post – 1977 era. Furthermore, its concentration of economic activity can be partly attributed to the easier access to the country’s main seaport & the only international airport, both located within the province, besides convenient access to related support services.
However, other analysts have pointed out that, "the main productive sectors, such as agriculture, forestry, livestock, and fisheries, industry including mining, and tourism, etc., are not concentrated in one or two spatial bounds, but are widespread throughout the country. Therefore, its development has become vital to achieving balanced regional development necessary to eradicate poverty to improve the quality of life of the people of the nation as a whole."

Nevertheless, it is pertinent to note that the Central Bank has reported that historical data on per capita Provincial GDP demonstrates that the agro-based economies in the provinces outside the Western Province, had failed to expand through industry & services due to relatively poor infrastructure, despite the availability of human capital. It further reported that the agriculture sector on its own failed to prosper throughout, due to a host of reasons such as excess labour & low productivity, vulnerability to weather conditions, poor product diversification, and market inefficiencies for key commodities & inputs.

In these circumstances, the Central Bank contends that improvements in infrastructure, especially better roads & telecommunications, in the economically weaker regions would encourage investors to penetrate into such areas, taking advantage of lower land prices. Therefore the role of infrastructure as a key driver of economic growth, by its connectivity of rural & urban areas, can lever the presently lagging regions to significantly increase its contribution to the national economy, & also reduce its levels of poverty.

The magic in regional development is thus not only reliant on its economic wand. The spatial integration of its rural & urban areas by the infrastructure networks & judicious land-uses to ensure environmental sustainability, are complementary measures. In the latter context, the integrated planning of the economic, social, physical, and environmental aspects of land, assumes great significance. It constitutes the domain of Physical Planning which at the provincial scale, provides the spatial framework of the Regional Physical Plan. Its statutory character under the provisions of the Town & Country Planning Ordinance No:13 of 1946 as amended by Act No: 49 of 2000, permits the incorporation of the promotional as well as regulatory features of physical development. Consequently, its harmonious partnership with economic planning processes has become crucial for achieving balanced regional development in the country as a whole.

As previously mentioned, India’s District Planning Committee & its District Plan comprises the vehicle to consolidate the urban & rural area development plans. Sri Lanka’s corresponding vehicle is the aforementioned Regional Physical Plan. Its preparation by the Regional Planning Committee of the respective Provinces, includes the Chief Secretary of the Provincial Council as its Chairman, and the representatives of the Local Authorities and the District Secretaries within the Province, as its other key members. Consequently, its accountability cuts across the major stakeholders responsible for steering development at the provincial spatial scale.
The legitimacy of the Regional Physical Plan is also inherent in its mandatory consideration by an Inter-Ministerial Co-ordinating Committee comprised of Ministry Secretaries, which recommends its approval by the National Physical Planning Council chaired by the Head of Government. Accordingly, the network of the nine Regional Physical Plans offers the catalysm to complement with the economic planning processes in driving economic growth & equitable development across the nation. Its conformity with national physical planning policy will enable the steering of development to be based on a National Spatial Strategy.

Thus, the Regional Physical Plan constitutes the spatial framework composed of land, people, and resource endowments (natural & built), for promoting & regulating development and in identifying the appropriate locations for human settlements, including its economic activity. Consequently, it reflects the vision & mission for the development of the region or province.
The employment of the aforesaid mandate for achieving balanced regional development, has however eluded the economic planning process to date. On the other hand, the creation of Provincial Councils & its related Article 154R(5) of the 13th Amendment to the Constitution obligating the Finance Commission in formulating fiscal devolution principles towards balanced regional development, have breathed life into its dormant state. The statistical infrastructure has subsequently revealed the gravity of regional disparities, & the insignificance of the exclusiveness of the indicator of economic growth. The focus on poverty reduction has compounded the cause.

In this situation, the conclusion is explicit: economic growth sans physical planning will be a recipe for poverty & regional disparity. The `systemic defect’ in the segregated processes of economic & physical planning therefore needs immediate eradication, and substituted by its integration.

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