Inequality is on the rise in Sri Lanka despite the island making much progress in economic development, an international expert said.
Overall progress in Sri Lanka has been concentrated in the western province and hides wide regional income disparities, said Neil Buhne, UN Resident Coordinator, Sri Lanka.
There were pockets of acute poverty in the central and southern provinces, he told a news conference held Monday to present the progress report on Millennium Development Goals (MDG) in the Asia-Pacific region.
"Despite high economic growth, inequality is on the rise in Sri Lanka, like elsewhere," Buhne said.
He quoted the budget speech of President Mahinda Rajapakse which said that development so far had benefited only limited areas.
"Economic growth is a necessary, but not sufficient, condition for development," Buhne said discussing the progress of countries in the region in meeting their MDG goals.
Sri Lanka has rapidly liberalized the Western Province which has seen high growth through service sector and industrial growth as it opened to the world and became more 'globalized'.
But restrictive policies have kept the rural agriculture based economy entrenched in poverty, despite billions of subsidies being pumped into the sector.
In this year's budget the government promised 15 billion rupees in fertilizer subsidies, but no attempts are being made to wean farmers away from subsistence agriculture especially water-intensive rice cultivation.
Critics say old laws that prevent farmers from changing the use of rice lands to more productive uses have preserved virtual bonded labour conditions in the agriculture sector.
This year's budget promised new laws to prevent coconut land being put into more productive uses that will give better incomes to areas in the north western part of the island which are benefiting from the economic liberalization of the Western Province.
Sri Lanka together with 190 countries signed the United Nations Millennium Declaration at the General Assembly Millennium Summit in September, 2000 which committed them to set targets to eradicate poverty and improve human well being by 2015.
The report presented this week was a review of progress in the half-way mark towards the 2015 target date.
It shows that there is uneven progress both between and within countries, with many countries falling behind Sub-Saharan Africa or Latin America in certain areas.
The report was a joint effort by the Asian Development Bank, United Nations Economic and Social Commission for Asia and the Pacific and the United Nations Development Programme.
Trickle Up or Down?
Buhne said that economic growth may not trickle down to the poor and therefore countries cannot exclusively rely on growth but need to also focus on social transfers to spread the benefits of growth more widely.
One of the key findings of the report was that despite overall economic growth, there were significant differences in what was achieved at national and regional levels.
"The growth had not benefited everyone – the benefits have been unequal," said Buhne. "It has left poor people behind in many of the MDG goals."
In Sri Lanka critics have blamed government policies that create high inflation for creating 'trickle up' conditions.
Heavy money printing to support an unwieldy government sector and a huge subsidy bill has pushed inflation to 20 percent levels.
Tens of billions of rupees have been spent in Sri Lanka for energy subsidies, giving windfalls to vehicles owners and industries using electricity. The 20 percent most rural households do not even have electricity.
Critics say under high inflation conditions, widely seen in Africa and Latin America as well as Sri Lanka, only the real asset owning richer classes can survive as wages of workers are slashed in real terms every year by high inflation.
Money printing also causes currency collapse again hurting poor people most, and denying them the benefits of cheaper imports.
Despite Asia being the fastest growing region in the world it was still home to many of its poor people, the UNDP said.
"Growth has proceeded apace but the benefits are now being skewed towards the better off," said the report.
"Although in many counties the poor continue to see their incomes rise, the richest have seen their incomes rise even faster and as a result, there have been significant increases in inequality."
Buhne said it was important to spread the benefits of growth to reduce social inequality.
Not doing so meant there were missed opportunities for greater economic prosperity and social stability, he added.