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FINANCIAL CHRONICLE™ » DAILY CHRONICLE™ » Understanding realities

Understanding realities

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1Understanding realities Empty Understanding realities Sun Jul 15, 2012 1:13 am

Redbulls

Redbulls
Director - Equity Analytics
Director - Equity Analytics
Written by Nalin Abeysekera

Economic development in Sri Lanka
Sri Lanka is now experiencing the dividends of peace. This period can be considered as a transitional period for long-term economic sustainability of the country. Last three years saw the infrastructure development together with more constructions in the country, which is essential in the long run. But that is only a part of economic development. Economic development is defined as “the sustained, concerted actions of policymakers and communities, which promote the standard of living and economic health of a specific area”. Ultimately growth of the economy as well as development of human capital in terms of wealth and quality of life (education, health, etc.) is important in the given context. Sri Lanka economy grew by 8.3 percent in the year 2011, preceding an 8 percent growth in 2010. But this year it has forecast economic growth may be slow to 6.75 percent due to tighter domestic conditions as well as weaker external demand.

Anyway economic development should be reflected by the development of the people in given context. This can be discussed with their income, education as well as the quality of life. Instead of Gross Domestic Product (GDP), the Human Development Index (HDI) has been introduced to measure ‘development’ or the progress of nations on the premise that “people are the real wealth of a nation” by United Nations in 1990.What about the income equality of Sri Lanka? Although Sri Lanka has increased the per capita income to 2,836 US dollars from 2,400 US dollars, the previous year can be questioned whether this has been equally distributed in the country.

Income disparity
Sri Lanka’s inequality in 2010 is higher than the regional average with the Gini Coefficient Index (which is basically a measure of inequality in a statistical distribution, the higher the coefficient, the higher the inequality) recording 0.49 in 2010.The income of the richest 30 percent has increased rapidly to 65.6 per cent of the GDP whilst the income of the poorest 50 percent is 17.64 percent of the GDP. This is the area which policy makers should always be concerned with. Even now it can be seen the increase in series of crime which may be partly due to the fact of income disparity of the country. No country in the world can expect a 100 percent equality of income distribution. But there should be a long-term plan to minimize the discrimination of income distribution among people by narrowing the gap between rich and poor (but the program like Samurdhi will be not the solution on this milieu).

On the other hand, it is worthwhile to discuss the contribution of different provinces in Sri Lanka to economic development. As usual the Western province is contributing around 45 percent as provincial-wise contribution to GDP, which is phenomenal. On the other hand, the Northern Province is contributing only 4 per cent and the Uva province provincial-wise contribution to GDP is also very low as 5 percent followed by the North Central. However, a 22 percent increase has been observed in the Northern Province in 2010 compared to 2009 while Uva also has recorded a 14.9 percent increase in GDP.

Technology
Nevertheless, there is a need for understanding the problem of these areas. Especially that of the Northern Province can be understandable because of 30 plus-years of war which badly affected most of the people. Then what about Uva? Uva is divided into two districts and the total area of the Uva province is 8,335 km2 compared to the Northern Province which has 8,290 km2. These two districts can be ranked as third and fourth in Sri Lanka in terms of land area. It is important to understand the infrastructure facilities given for these two districts. Electricity consumption is a good proxy for industrial growth. In the Uva province around 40 per cent of the people do not have electricity whilst in Northern also 36 percent of the people suffer from the same. But in the Western province this is much lower as 7 percent. This is one indication of disparity between the Western province and the two other provinces in Sri Lanka.
The technology can also be considered important in the development process. The distribution of fixed telephones exhibits a similar trend with the Western province leading, and the North, North Central and Uva provinces recording the lowest number (Brahmanage and Weerasekera, 2011). The computer awareness is high in the western province as 51 percent and the lowest has been recorded in Uva (29 percent). The computer literacy rate can also be seen as same. A survey conducted a few years ago in Sri Lanka exposed that the Western Province has the highest computer literacy of 15.3 percent, while the lowest of five percent was reported in the Uva and Northern Provinces.

Poverty factor
In 1971, first insurgency in Sri Lanka has erupted in April 5, 1971 by the attack on the Wellawaya Police Station at dawn, 5.20 a.m. (Wellawaya is under Wellawaya Divisional Secretariat of Moneragala District of Uva Province) and coincidentally the leader of the LTTE, Prabhakaran killed the Tamil mayor of the Jaffna municipality (under the Northern province) Alfred Doreappa which some considered as a seminal event marking the beginning of Sri Lanka’s Tamil separatist Eelam War. The poverty factor and disparity of income might have been some reasons for these incidents and violence. Especially it would pave the way for youth to think in a way that they have been victimized by the society and this treasure of Sri Lankan youth could be (mis)used by interested parties for their own motives.

Hence, in sum, the present day developmental workload and the progress can be commendable but an equitable share of its return should be distributed amongst the people as well as throughout the regions of the country. There is a need for better policy making with good governance and many factors to be considered in this regard. Further, it can be noted that there is a strategic window opened for Sri Lanka and decisions which are going to be made will be critical for the attainment of sustainable development of the country.
http://www.nation.lk/edition/business/item/8221-understanding-realities.html

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