Regional Development Disparities in Sri Lanka

By Priyanga Dunusinghe

Article published in Ceylon Today

Regional development disparities

One of the main development challenges faced by developing countries is how to address development disparities within the economy. Sri Lanka is not an exception. A number of studies as well as the published data have shown that a sizeable level of disparities exist across provinces in Sri Lanka. Nevertheless, compared to the early years in 2000, Sri Lanka has been able to narrow down regional disparities to some extent though it is not up to the satisfactory level. Table 1 report Gross Domestic Product (GDP) related data by sector and province wise for the years of 2004, 2008, and 2012. By 2000, provinces such as Sabaragamuwa, Uva, and North-Central were predominantlyagri-based economies whereas the Western province showed all the characteristics of a modern economy (a higher services sector GDP share). Over the years, agriculture share in provincial GDP in those provinces has declined, yet, even by 2012, over one-fifth of provincial GDP is derived from the agriculture sector in Uva and Northern provinces. Higher share of agriculture output in provincial GDP suggests that over 60 to 70 per cent of the total workforce engages in agriculture related activities in provinces such as Sabaragamuwa, Uva, Eastern, Northern, and Noth-Central thereby recording relatively higher level of poverty in those regions. For instance, according to Household Income & Expenditure Survey (HIES) 2012/13, poverty in Monaragala is 20.2 per cent whereas in Batticaloa, it is 19.4 perecnt while national poverty level reaching 6.7 per cent. As officials often highlighted, the share of the Western provinces in total GDP has declined from 51 per cent in 2004 to 43 per cent in 2012 indicating that previously underdeveloped regions made some gains during 2004-2012. In many provinces, the shares of industry and services sectors output increased reflecting provinces gradually moving away from agriculture. Between the two years, 2004-2012, GDP shares of all the provinces, other than the Western and Sabaragamuwa, increased though the increase is not uniform. It is quite surprising that the share of Sabaragamuwa province in total GDP remains intact during 2004-2012 period thereby needing some attention for injecting some dynamism. Relative position in terms of GDP per capita has declined in Sabaragamuwa indicating that an average person in Sabaragamuwa is poorer, compared to national average, now compared to his position in 2004 (see Table 1).  

Sri Lanka has witnessed some progress with regard to regional convergence when looking at GDP figures; yet, there is a significant difference between the economic life in the Western province and that of the most of the other provinces. In terms of access to better education, health, transport, and access to decent jobs, there is a wide gap between the Western province and the other provinces. Similarly, level of malnutrition, share of underweighted children, school drop outs remained high in most provinces compared to the Western Provinces and Central Provinces. Share of O/L and A/L passed students and those who received university entrance remained relative low in most of the underdeveloped provinces. All in all, regional development disparities are very visible when one moves out of the Western Province regardless of it gets narrowing down in GDP numbers.

Why do regional disparities matter?

Economic theory argues that it is natural that different regions grow at a different rate due to endowment of productive resources and institutional differentials in regions. However, neoclassical economic theory assumes that such growth differentials fade away in a speedy manner because economic agents are driven by profit motives. Yet, the reality is that regional disparities do exist. What are the consequences of regional disparities?

There are a number of consequences due to high and increasing regional development disparities in a country. Most serious among them is the social unrest. People in underdeveloped regions may feel that they are deprived from the main stream development and they display their dissatisfaction in various forms. In most cases, relative deprivation in development may combine with some religious or racial grievances and culmination of anger leads to religious and/or racial tensions. Literature of economics of civil wars often highlight above factor as one of the reasons that led to some of the long-drawn civil wars.

Similarly, regional development disparities also could result in heavy flow of migrant people to urban centers which in turn getting congested excessively. Most migrants then join the urban informal sector for living, and some time ending up in carrying out illegal businesses. Similarly, there is a heavy costs due to overuse of public provisions such as roads, health facilities, schools, and other public utilities. For instance, currently the Western province rooms for nearly 35 per cent of the total population in Sri Lanka despite being the smallest province in physical size.

Further, uneven distribution of economic activities also could generates negative inter—temporal consequences such as perpetuating poverty and inequality over the years. People living in peripheries find it hard to get out of poverty given the limited economic opportunities available around them and same prospects for their kids lead to wide spread frustration in the society. On the ground of social justice, it is required that people of all social strata receive the benefits of development. Similarly there are a number of other reasons which justify the presence of relatively less development disparities within and between regions.

Causes for regional disparities?

Regional development literature provides several theoretical models in explaining why some regions grow faster than the others. Neoclassical schools argue that level of development in a particular region depends on the decisions made by firms with respect to locating their business activities. According to many businesses want to locate closer to their customers because it enable them to reduce transport costs. Many firms want to locate closers to the commercial and administrative centers since such presence reduce their transaction costs and other type of costs. These decisions result that firms concentrate closer to the capital city thereby witnessing a rapid growth of economic activities around it. The Western province has a number of advantages which attract both physical and human capital thereby growing faster than other regions. However, neoclassical models argue that there is an economic convergence over the time thereby witnessing the spread of economic activities to the areas which initially at a dis-advantage position in attracting both physical and human capital for growth. Firms facing higher costs in urban centers may move to areas where costs of production are relatively low. As a result, theory argues, over long-run, economic convergence would take place.

However, the convergence notion of neoclassical economists has been challenged on several grounds. It is argued that most of lagging regions do not have necessary institutions to initiate economic activities and political economy factors disturb even some of the small scale attempt to breeding economic activities in those regions. Moreover, through the process of cumulative causation, any positive convergence effect is disturbed by the outflow of both physical and human capital from those lagging regions to well-developed regions. It is rare that firms locating in rural underdeveloped areas reinvest their profits in those areas and educated young people want to stay and work in those regions. In majority of cases, we could see the flow of profits and educated youth to urban centers thereby accelerating the process of economic growth in those centers.

Conclusion

Even though Sri Lanka marginally witnessed some convergence of economic activities in recent years, it is not clear to what extent it could be sustained given a greater part of regional economic acceleration is due to public funded investment projects and other public service provisions. As pointed out in a previous article, both local and foreign investments have largely confined to the Western province. International migration and internal migration related remittances have become the bread-winner of the regional economies. Hence, it is imperative to launch a concerted effort give birth to private sector led economic activities in underdeveloped regions. Many governments, including the presence one, made several attempts at conceiving economic activities in under-developed regions, but progress has so far been limited. 

Development means, according to AmartyaSen, the expansion of real freedom. It should consist of three core values; namely (a) ability to meet basic needs, (b) self-esteem (ability to choose), (c) ability to be mobile. If we go by this definition, today only a small fraction of this society enjoys the development. A large number of people fall short of meeting the second and third dimension whereas around 10 per cent of the total population is deprived of all three core components of development. Development is not about numbers, it is about the expansion of real freedom. More specifically, it is about the status in which a person could lead a kind of a life that he or she has reasons to value. Time is right for policy makers to broaden their perspective rather than merely chasing behind GDP targets. 

Table 01: Economic Performance by Provinces
Year	Sector	Western	Southern	Sabaragamuwa	Central	Uva	Eastern	North-Western	Northern Central	Northern	All island
2004	Sectoral output share
	Agriculture	0.03	0.36	0.28	0.33	0.53	0.33	0.23	0.43	0.28	0.18
	Industry	0.32	0.20	0.30	0.17	0.09	0.28	0.31	0.08	0.07	0.27
	Services	0.65	0.44	0.42	0.50	0.38	0.39	0.47	0.49	0.65	0.55
	Provincial GDP share	0.51	0.09	0.06	0.09	0.04	0.05	0.08	0.04	0.03	1.00
	Provincial Per capita GDP Ratio	1.80	0.77	0.68	0.68	0.66	0.69	0.75	0.62	0.50	1.00
2008	Sectoral output share
	Agriculture	0.03	0.17	0.22	0.21	0.32	0.22	0.19	0.30	0.20	0.13
	Industry	0.32	0.30	0.28	0.28	0.21	0.35	0.32	0.21	0.08	0.29
	Services	0.65	0.53	0.50	0.51	0.47	0.43	0.49	0.48	0.72	0.57
	Provincial GDP share	0.45	0.11	0.06	0.10	0.05	0.05	0.10	0.05	0.03	1.00
	Provincial Per capita GDP Ratio	1.59	0.88	0.68	0.76	0.72	0.73	0.88	0.78	0.50	1.00
2012	Sectoral output share
	Agriculture	0.03	0.13	0.18	0.16	0.27	0.19	0.15	0.21	0.20	0.11
	Industry	0.35	0.34	0.27	0.29	0.23	0.29	0.30	0.25	0.24	0.32
	Services	0.62	0.53	0.55	0.55	0.49	0.52	0.55	0.54	0.57	0.57
	Provincial GDP share	0.43	0.11	0.06	0.10	0.05	0.06	0.10	0.05	0.04	1.00
	Provincial Per capita GDP Ratio	1.51	0.95	0.65	0.78	0.73	0.82	0.82	0.75	0.77	1.00

A Twist in the Labour Migration Trend in Sri Lanka: Is it a Step towards Sustainability or a leap into an Unknown Territory?

By Thilini Fernando

From 1977 with the liberalization of the economic policies in Sri Lanka migration for employment has escalated. With this development the government has managed to address an issue of tackling unemployment and usage of otherwise inactive labour (unskilled female labour) towards remittance of foreign exchange to the economy and reduce poverty through employment & improving living standards. It was indeed a successful strategy where a number of workers and their families benefited from migration and it reduced the burden on government to bring down the unemployment rate. The successful journey has resulted today the labour migration as the highest net income earner for the economy surpassing export income which is more regulated and governs by the government. This sector is estimated to have earned more than USD 6 billion to the Sri Lankan economy in 2012 and caters to more than 1.4 million workers (NLMP, 2008).

However the issues pertaining to this sector are as significant as the contribution of this sector. Given this importance of this sector the Sri Lankan government has taken several initiatives to govern and regulate the sector. Creation of the Ministry of Foreign Employment Promotion and Welfare in 2007, and in the same year bringing in the Sri Lanka Bureau of Foreign Employment under the Ministry of Foreign Employment Promotion and Welfare and establishing a National Labour Migration Policy in 2008 are some indicators towards this effort (NLMP, 2008).

Furthermore the policy emphasis on achieving a vision of catering skilled labours into foreign markets as suppose to the current trend where the labour market is dominated by the unskilled female workers who engage mostly as domestic workers in confined area of the Middle East & the Gulf.  Justifying that it could be a of step towards sustainable development as this strategy intendeds to use the skilled labour in a more systematic way by placing them in employment with better remuneration and better working conditions, this will address issues of low remuneration of the migrant workers, poor regulation, irregularities in recruitment of domestic workers in the given countries and lack of protection & security of the workers and their families that leads towards physical and mental abuse.

The effort here is to continuously convert unskilled labour into skilled labour as the past trend shows that the demand for female workers is mostly related to unskilled domestic worker category, adding to this argument statistical data proves that more than 40% of the male workers engage in skilled work whereas more than 80% female labour migrants engage in unskilled work, therefore one could see an achievement of  this effort with recent years (2000) statistics where the male migrant ratio has slightly increased the female migrant ratio breaking the traditions of three decades of migrant patters. This could a temporary measure of the recent job bank the government invested in Korea or it could be a beginning of the new trend in the market. However it is also evident that the trend in female migrants as labour has reduced to 55% over the years after 1997 where the female labour migrants were amounted to 75% of the migrant population (SLBFE, 92/93) further proving the withdrawal of the female unskilled workers participation in the sector.

The focus should be to continue to invest in enhancing skills of the migrant workers and reduction of the dependency of the current Middle East location for employment. Towards this there has to be effort in entering into new markets where more skilled labour is required.

However with current efforts to change the trend from unskilled labour to skilled labour, this effort should be accompanied by regulated and strengthened migrant labour sector. The irregularities in recruitment agents and sub agents, misuse of financial gains (motivational fees) associated with undertaking employment, grievance handling of migrant workers and their families, reintegration and building capacity of the migrants and generating a force who are better informed about the sector should be areas that government should work towards improving.  Additionally Protection of the rights of migrant workers and their families and better remuneration and better welfare are issues government will further need to look into in order strengthen this sector.

On the contrary to above arguments of how beneficial the new trends may bring in to the economy it is also important to understand the its drawbacks to the economy. Such as the accommodating of any loss of foreign remittance that was received from undertaking the unskilled domestic workers jobs, securing new markets during the transitional period as suppose to currently established markets in the Middle East where there is a considerable demand for the unskilled labour migrants. The protection of labour in the new markets and possibility of building relationships with the new markets is not yet unveil, maintaining the continuous demand for the skilled labour, planning for returnee workers, creation of jobs within the country are key areas that the government will have to invest in.

However the futuristic vision is a long term goal but the fact remains that the current labour migration sector has many issues to overcome and these issues will have to be taken into account in order for survival. While we dream as a nation to see improvement from the most controversial yet most lucrative sector of the economy one must be mindful that stepping out of the known territory may bring in new challenges that again needs to be tackled in future. 

Battling Non-Communicable Diseases: The Role of Institutions and Micro Policies

By Sumudu Hewawasam

Health is a matter of our main concern regardless of socioeconomic backgrounds and ill health can keep us away or restrict full participation from our responsibilities. The right to the enjoyment of health is a part of fundamental human rights and understanding of a life in dignity.

The burden of chronic non-communicable diseases (NCDs) across the globe increased, particularly in the South East Asian Region including Sri Lanka, threatens an already over-stretched health services. Diseases and conditions such as cardiovascular diseases, high blood pressure, cancer, diabetes mellitus, mental health problems, chronic respiratory disease and injuries and disabilities challenge the health systems and absorb substantial amounts of resources. The economic impact of NCDs goes beyond the costs to health services. Indirect costs, such as lost productivity, can match or exceed the direct costs. In addition, a significant proportion of the total cost of care falls on patients and their families. People die from all chronic diseases at dramatically younger ages.

NCDs account for more than 60% of the global mortality, Sri Lanka no exception. Of the 35 million deaths attributable to NCDs annually worldwide, about 80% are in low- and middle-income countries and 26% are premature deaths. From 2006 to 2015, deaths due to NCDs are expected to increase by 17%. The major NCDs share common behavioural risk factors (tobacco, unhealthy diet, physical inactivity and harmful use of alcohol) and provide common pathways for prevention. Hence, the policies for prevention and control of NCDs need to address the unhealthy behaviours of people and health needs to be a key consideration of sector-wide public policies such as transport, agriculture, education, finance, social services trade etc in order to empower people to adopt healthy living choices.

It’s well understood that the states have the primary obligation to protect and promote the health of citizens living in their territories by strengthening the institutions and adopting legislative measures including setting structural process and outcome indicators and benchmarks in order to ensure equal access to essential safe food, to get private actors conform with human rights standards when providing services such as regulating the composition of food products to control fat, sugar, salt content & chemicals such as food preservatives and agrochemicals which are harmful for wellbeing, to prevent third parties from interfering with the right to health and privatization does not become a threat to the availability, accessibility, acceptability and quality of goods and services. There is also an increasing debate about the extent to which other actors in society - eg. Individuals, families, NGOs, professionals and especially business – who have responsibilities with regards to the promotion and protection of health. As business also can affect the right to health in many ways, high attention needs to be paid immediately to incorporate health and human rights into the business operations. Government policies need to support correct infant feeding practices, provision of healthy meals in schools, labelling of food, responsible marketing of food and beverages, consumer education, capacity building etc to control NCDs burden. Increasing attention worldwide to human rights in relation to NCDs related policy documents are encouraging, although currently remains insufficient, however this new trend offers an entry point for new understanding, analysis and action.               

            Poverty and ill health are some of the most basic forms of injustice and inequality and lagging behind other areas such as education and poverty reduction. In countries faced with a chronic disease burden like NCDs, failing to address root causes of them will hit economies considerably harder and for a longer period of time. The challenge facing national authorities is to deliver on priority, while building successful and effective systems to address multiple diseases and multiple root causes with scarce human and financial resources to fund specific programmes. Improvements and diversifications in health delivery systems giving equal emphasis on prevention sector which in turn depend on public sector management, new forms of engagement with the private sector, interventions and strong partnerships well beyond the health sector including education, economic development, social services, religious affairs etc required as health is essential if progress is to be made with the other development goals including reduction of poverty. Partnerships beyond health sector and rational cross sectional approach will be highly beneficial for control of NCDs and health development as marginalized and excluded people also can participate in decisions that impact their health. Proper communication of entitlements and minimum standards of service will help people to hold policymakers and providers to account for their action.      

            It’s true that increases in aid are necessary, however the progress will depend equally on policy and institutional change of both donors and governments, as well as management of international debt and increase access to developed country markets with innovative products also important considering the magnitude of financial needs required for health and social development and looking towards long term financial stability.

At the same time we need to realize that health spending does not automatically benefit vulnerable communities. Hence developing a consensus on what constitutes effective policy, institutional change and benchmark required for health development will also be a key component. Only the projects with clear purpose, linked to clear health impact and outcome and aligned with national strategies need to be implemented.  Reprioritizing preventive care for chronic diseases has the potential for large savings, but the governments must take the initiative eg. Massive amounts of more money are required for management and treatment of complications of diabetes mellitus and heart diseases rather than more cost effective primary prevention, early detection and secondary prevention. As the government spending on health in most developing countries is below 5% of GDP (in 2012, Sri Lanka spent 3.1% of GDP for health) people become impoverished because of out of pocket catastrophic health care costs. Vulnerability to NCDs may increase substantially unless governments protect social spending and improve social health protective measures.                           

Developing Mass Public Transport in a Developing Nation

By Anoka Abeyrathne

It has been said that the state of public transport is a great indicator of a country’s development. In a developed country, a car is mostly a want as opposed to being a need, thanks to well connected, clean, timely and easily navigable subways, metros, coaches, sky-rails, buses and trains. An age-old test is how easily a tourist can find his or her way to get to where he or she wants to.

But in a developing country, there is stark difference in the public transport system. Be it a bus, train or plane, the inevitable delays, the hike in prices, sexual harassment and the conditions inside a public transportation vehicle will put off any one, who has other options, from using it. For tourists, it’s almost an ordeal. For anyone with a disability, it’s a no go zone. Many tourists stick to using taxi services or even renting a vehicle if they are staying in a country for a long period of time. This may explain the 40 billion rupees¹ annually lost to Sri Lanka’s economy.

With India creating the cheapest car, and other companies jumping on the bandwagon of creating cheaper “fully loaded” compact cars, people are willing to get loans, get in debt and spend more than the retail price to get their hands on a car because of the ease of transport. It has been estimated that one in every four persons, mostly in the urban area in Sri Lanka, has a car². With more than 4.4 million vehicles registered, with almost 3 million on the streets of Sri Lanka daily and no regulations curbing the amount of vehicles that can be imported, the end game of the vehicle drama can only reach a predictable end. The end will most definitely not be positive, with traffic congestions that last for hours, traffic control police deployed to ease the traffic and the vile amount of toxic gases produced leading to hazardous air pollution. Although fuel prices have been decreased as of September 2014, the issue of transportation remains due to the influx of vehicles, mostly carrying just one passenger.

For people living in a country with a national poverty line of Rupees 3808³ a month, effectively living below a dollar per day (per February 2014), buying, maintaining and refueling a vehicle is not a tangible option. A solution in the form of office transports, mini transports and other transports has come up but affording no flexibility, taking one only from point A to B. If one wants to shop, or get down from different locations, public transportation is the one that makes more sense. However getting down and getting back in costs more due to the walking back and forth to get to the other stop as well as paying a fee based not on the stop but the town, making the passenger pay the same fee that one going to a town’s last stop would pay even if he/she is getting down at the first stop. These results in a cycle of delay and poverty that needs to be broken by clever planning and clever solutions which are small but with bigger impacts.

In a post conflict country, transportation infrastructure is important. But planned infrastructure even more so as this will ensure that getting to and fro is made simple, uncongested, fast and efficient. Good infrastructure while being the foundation for good transport would be fruitless without supplementation from better transport mediums.  Well-planned transport can save billions⁴ a year with costs related to tardiness, extreme fuel consumption, car repairs/maintenance, traffic regulatory forces deployment, health related savings and create sustainable development while contributing to the development of the economy as seen with India’s metro system⁵. Effective cycling lanes as well as bus lanes would ensure that people can travel safely and save money while getting some exercise!

Our transportation needs to be cleaner, more efficient and very importantly sustainable. If our transportation over-consumes and has an over- output of toxic gases, our air quality and health will be affected negatively with respiratory and physical diseases as seen in Beijing, China and Paris, France⁶.

Instead we should invest more in alternate energy powered vehicles as seen in Germany, Japan and the United States of America⁷, car sharing services of the genre of ZipCar; an affordable car rental system, and efficient mass transport of the like of the Singaporean mass rapid transport system which is similar to the subway of the United States. Singapore’s transport sector is generating an income unlike any other system in the world. They have linked their system to the airport, to the malls and any building of interest, creating easy transit, ease of access, and ease of maintenance while providing a world-class service.

With these options taking a considerable amount of time, investments and planning, the small things like easy of pay without fighting to get the balance fare back through Near Field Communication devices¹⁰ - a short-range, low power wireless radio-frequency identification transfers small amounts of data between two devices held a few centimeters from each other, cycling lanes, Braille/vocal instructions, real time transport mobile applications, bus stands situated on opposing sides of streets, transport time-tables, easy crossings and underground crossings for pedestrians would ensure that public transport will be used by anyone. This would not only reduce pollution but also ensure that people are healthier in the long run. It will only be a matter of time that we end up on the loosing side of the health, environmental and economical bargain. Whether we will or not, will depend on no one else, but us.