The Sunday Times Economic Analysis

The Sunday Times Economic Analysis By the Economist

Learning from South Asia's economic experience: Why poverty persists
Despite a reasonable rate of economic growth in the 1990s, South Asia failed to reduce its poverty. In fact the number in poverty increased from 485 million to 530 million. About forty per cent of the World's poor live in South Asia. South Asia remains the poorest region in the world next to sub-Saharan Africa. Its social indicators have improved in the decade of the 'nineties, but they are deplorable.

Nearly half (46 per cent) of the population of South Asia are illiterate and 200 million people are malnourished. Two thirds of the illiterate are women. Of every one thousand children 39 die before they reach 5 years. Nearly one half of the child population is malnourished, a large proportion of children in the region is underweight, stunted and wasted.

These are some of the facts disclosed in the Human Development of South Asia 2002 Report launched in Colombo on March 5, under the auspices of the UNDP in Colombo.
Where the human development indicators are concerned Sri Lankan achievements are very different to those of most other South Asian countries except the Maldives, but Sri Lanka's poverty level at 28 per cent of the population remains unacceptable.

And poverty appears to be hopelessly intractable. The significance of the Human Development of South Asia 2002 Report is that it focuses on the reasons for the persistence of poverty, poor human development indicators and the inability to raise the poor from their misery. It exhorts that the economic development strategy adopted was unable to reduce poverty and household level food security.

Although promoting economic growth and even increases in agricultural and food production, it was incapable of promoting the welfare of a sizable proportion of the population. As much as forty per cent of people in South Asia lack adequate food and are malnourished. This despite the bigger countries in the region having 70 million tons of wheat and rice in their go downs.

The report is of the view that poverty, hunger, malnutrition and the poor human development indicators that are largely a rural phenomenon cannot be resolved by mere overall economic growth, though overall growth is indeed vital. It argues for a new thrust in agricultural development that alone can address these issues.

This thrust requires more resources into research, an effective linkage in research and extension and more effective marketing channels for agricultural produce. In other words it argues for a much stronger institutional support for agriculture.

The message of the Report is strong and clear. ".......high levels of human development cannot be achieved if development priorities do not focus on the occupation of the people-both farm and non farm-and where they live -rural areas." It urges governments to support small farm agriculture through pricing policies, infrastructure development, and increased resources for scientific research and linking such research with extension. Attempting to reduce poverty through welfare measures, it points out, is both expensive and ineffective.

What are the implications of this Report for Sri Lanka in particular? The fact is that Sri Lanka's agricultural performance, particularly in the food crops, has been very inadequate. While in South Asia agriculture grew at an average of 3 per cent, it was below 3 per cent in Sri Lanka.

The slide continued in 2000 and 2001.This is a fundamental reason for the persistence of poverty in rural areas. It must be admitted that tardy economic growth in other areas of the economy also failed to provide a beneficial impact.

The absorption of labour and new employment opportunities in industry and services were limited. In fact the situation would have been much worse if not for the release of labour into occupations in the Middle East and the remittances form there, the income from soldiers and Samurdhi. That agricultural growth was inadequate to sustain rural incomes and employment is indeed very clear. It is also clear that the institutional support for rural agriculture was woefully inadequate and perhaps deteriorated. The same requisites for agricultural development that South Asia needs are the needs for our agriculture as well.

These include improved institutional infrastructure, more resources for agricultural research and extension that should be coupled, improvements in pricing policy and marketing, reforms in land policies and a number of other areas to support small farm agriculture. The fundamental issue is this. An economic strategy that focuses on the development of industry and services may generate economic growth. Such growth can assist in increasing employment and incomes and reducing poverty, yet its impact is likely to be limited.

As in the case of South Asia in general, employment opportunities in industry would be inadequate to absorb the increases in the numbers entering the labour force annually. The country's per capita income would rise, but poverty in rural areas would remain high.

It is not a case of either industry or agriculture, but a balanced and forceful thrust in all sectors of the economy without neglecting agriculture. Sri Lanka has achieved fairly good human development indicators owing to the welfare measures in the past. Now these must be improved through sustained rapid economic growth, especially agricultural development.

Back to Columns