Ramani Gunatilaka - Poverty and Human Development in Sri Lanka

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Poverty and Human Development in Sri Lanka

Ramani Gunatilaka, Guanghua Wan, and Shiladitya Chatterjee

Asian Development Bank

2009 Asian Development Bank

All rights reserved. Published 2009.

Printed in the Philippines.

ISBN 978-92-9092-202-5

Publication Stock No. RPT102857

Cataloging-In-Publication Data

Asian Development Bank.

Poverty and human development in Sri Lanka.

Mandaluyong City, Philippines: Asian Development Bank, 2009.

1. Poverty2. Human development3. Sri Lanka

I. Asian Development Bank.

The views expressed in this publication are those of the authors and do not necessarily reflect the views and policies of the Asian Development Bank (ADB), its Board of Governors, or the governments they represent.

This report was finalized in 2008, before the end of Sri Lankas conflict in May 2009. The final section dealing with Human Development in Conflict-Affected Areas needs to be read against this background.

ADB does not guarantee the accuracy of the data included in this publication and accepts no responsibility for any consequence of their use.

By making any designation of or reference to a particular territory or geographic area, or by using the term country in this document, ADB does not intend to make any judgments as to the legal or other status of any territory or area.

ADB encourages printing or copying information exclusively for personal and noncommercial use with proper acknowledgment of ADB. Users are restricted from reselling, redistributing, or creating derivative works for commercial purposes without the express, written consent of ADB.

Asian Development Bank

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For orders, please contact:

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Contents

Executive Summary

Introduction

Poverty and Inequality in Sri Lanka

Income Poverty and Inequality

Non-Income Millennium Development Goal Indicators

Correlates of Poverty

Location-Specific Factors

Sector-Specific Factors

Attributes of Individuals and Households

Government Policies and Initiatives

The History of Pro-Poor Policy Initiatives

Current Approach: Mahinda Chintana

Institutional Constraints

Human Development in Conflict-Affected Areas

Introduction

Human Development Issues

Food, nutrition, and social protection

Education and health

Loss of identification documentation

Prospects for Resettlement

Prospects for Regeneration of Livelihoods

Institutional Arrangements for Relief, Rehabilitation, and Development

Conclusions

References

List of Tables
Table 1:	Sri Lankas Macroeconomic Indicators
Table 2:	Poverty and Inequality in Sri Lanka
Table 3:	Poverty Indices and Access to Infrastructure, by Province
Table 4:	Progress Toward Millennium Development Goals
Table 5:	Selected Human Development Indicators, by Sector and Province
Table 6:	Poverty Rates by Industry, Education, and Occupation of Household Head, 2002

Abbreviations

ADB	Asian Development Bank
CCHA	Consultative Committee on Humanitarian Assistance
GDP	gross domestic product
IDP	internally displaced person
LTTE	Liberation Tigers of Tamil Eelam
MDG	Millennium Development Goal
PMTF	proxy means test formula
SMEs	small and medium-sized enterprises
UAS	Unified Assistance Scheme
UN	United Nations
WFP	World Food Programme

Map Showing Sri Lankas Provinces

Executive Summary

This report aims to summarize the current state of poverty in Sri Lanka by tracing its causes and recommending policies. Special attention is paid to human development issues in the conflict-affected areas. The ongoing conflict in the north and east remains both the principal cause for poverty and the most binding constraint to human development in Sri Lanka.

Poverty Profile and Millennium Development Goals in Sri Lanka

Sri Lanka is an early achiever in the Millennium Development Goals (MDGs) of universal primary school enrolment, gender parity in school enrolment, under-five mortality, universal provision of reproductive health services, tuberculosis prevalence and death rates, and sanitation. Sri Lanka is on track to halve extreme poverty between 1990 and 2015. Nevertheless, 15% of all Sri Lankans remained poor in 2006 and differences by region and sector are large.

Poverty was significantly reduced in the urban and rural sectors between 1990 and 2006. However, poverty in the estates increased by over 50%. In the estates, there is widespread child malnutrition and maternal mortality rates are exceptionally high. Western Province has performed much better than other regions. It accounts for half of national gross domestic product (GDP) while other provinces contribute 10% or less each.

Poverty reduction in recent years was entirely due to income growth as income inequality rose in all three sectors. The rise in inequality was driven by uneven access to infrastructure and education, and by occupational differences. Demographic factors such as gender composition of household labor and ethnicity contributed little to total inequality.

Sri Lanka did not achieve the kind of structural transformation that could have provided greater employment opportunities for the poor in the nonfarm sector. Since 1985, the share of manufacturing in total GDP has hardly changed. Low rates of job creation in the formal sector, plus high wages there because of collective bargaining, and periodic statutory directives lead to the rationing of formal jobs on the basis of class and connections, which the majority of the poor lack. This problem is compounded by the lack of labor mobility as labor markets are highly segmented with spatial, skills-related, and institutional barriers to the movement of labor within and between regions. Many are pushed into informal employment by greater distance from commercial centers; lack of access to roads, electricity, schooling, and health facilities; and by poverty which limits their investment opportunities.

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