Countries and Regions

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p. 3 of 20 BACK | NEXT I. Country Performance Assessment A. Economic Performance Assessment B. Poverty Assessment C. Assessment of Socio-Environmental Performance D. Governance: Sound Development Management E. Implementation Assessment II. Country Operational Strategy III. Sector Strategies IV. Regional Cooperation V. Donor Activities and Aid Coordination VI. Cofinancing and Catalyzing External Resources VII. ADB’s Operational Program VIII. Economic and Sector Work Program IX. Local Cost Financing

Country Assistance Plans - Sri Lanka : I. Country Performance Assessment

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B. Poverty Assessment

17. Sri Lanka’s current population of about 20.0 million is growing at a rate of 1.2 percent annually. About 17.5 million of the population live in seven of the country’s nine provinces, and one-fifth to one-third of the population (3-5 million) is categorized as poor based on a lower poverty line of 860 rupees ($12) and a higher poverty line of 1,032 rupees ($15) per person per month. According to the findings in the recently completed Framework for Poverty Reduction in Sri Lanka², poverty is predominantly a rural phenomenon in Sri Lanka, with over 85 percent of the poor in rural areas, 7 percent in urban areas and 6 percent in estate sector. Consumption poverty is estimated at over 33 percent in rural and estate sectors compared to 17 percent in urban sector based on the higher poverty line, largely a result of inadequate basic social and infrastructure services. The findings in the Framework for Poverty Reduction will be reinforced by the ongoing integrated household income and expenditure survey by the Department of Census and Statistics to be completed by the end of 2000.

18. Most of the poor are concentrated in the Central, Uva, Sabaragamuwa, and Southern Provinces where agricultural growth has been sluggish and the expansion of non-farm activities has been restricted by major infrastructure deficiencies including especially roads, electricity, irrigation and communication facilities. Malnutrition among children is also prevalent in these provinces. In six of the seven surveyed provinces (excluding the North and Eastern Provinces), and with considerable variation among the province, about 60-75 percent of the population have no access to electricity, about 27-48 percent have no access to safe drinking water and over 20-34 percent lack access to safe sanitation.

19. According to the 1981 census (latest available), about 2.8 million people or 15 percent of the country’s population live in the North and Eastern Provinces. Although not included in the national statistics on poverty, a considerable portion of the population is known to be experiencing deprivation in economic welfare, especially for those in the northern area of the North Province which has been the center of the conflict. The ongoing civil conflict in the north and east of the country has had a major impact on poverty. Although difficult to accurately quantify, it has substantially disrupted economic activity and over 5 percent of GDP is being used to finance the conflict. The conflict has caused much damage to physical and social infrastructure facilities including school buildings and medical centers as well as civilian properties. In addition, it has led to the displacement of hundreds of thousands of people from their homes and source of livelihood, and thousands of children have lost one or both parents. The conflict has also led to the increase of female-headed households that are more likely experiencing economic hardship. The next population census, planned to start in early 2001, will cover the North and Eastern Provinces.

20. Development assistance focusing on poverty reduction in Sri Lanka must take the conflict into consideration. The specific role of ADB in poverty reduction in the conflict situation is seen in the following aspects: first, providing direct assistance to the conflict-affected areas through development of basic infrastructure projects and projects that target employment generation especially for the youth and poor, to bring them into the mainstream of economy; second, mainstreaming conflict concerns either by including specific components in development projects to address the needs of the conflict-affected people or by ensuring development projects does not exacerbate conflict; third, building local capacities to support the Government’s policy of decentralization and the devolution of power through both sector and integrated approach. In 2000, ADB approved two TA projects for preparation of an Emergency Assistance for Rehabilitation of North and East in 2001 and Eastern Province Coastal Community Development Project in 2002³.

21. Another significant finding in the Framework for Poverty Reduction is that education assists the poor to rise out of poverty. Education has a strong impact on earning and poverty levels decline as the schooling attainment of household heads and principal earners rises. The impact of education on the increase of earnings ranges from 14 percent for primary education to 320 percent for postgraduate for males and 1 percent for primary education to 348 percent for postgraduate for females. The poverty level is estimated at 57 percent for no-schooling illiterate, 45 percent for primary school, 13 percent for O-level qualified, 6.5 percent for A-level qualified and nil for undergraduates.

22. The Government’s Framework for Poverty Reduction advocates a three-pronged strategy for poverty reduction: (i) improving economic and social opportunities for the poor, and broad-basing the benefits of growth; (ii) providing security to people unable to participate in mainstream economic activities and protecting excluded, marginalized and vulnerable groups; and (iii) empowering people to lead decent lives, with a voice in decision making, and enjoying dignity, freedom, social esteem and self-respect. The poverty framework also aims to identify new roles for local governments, the private sector, and civil society in poverty reduction. Prevalent efforts by the Government in poverty reduction include the Samurdhi (Prosperity) Program, introduced in 1994, aiming to provide support to provide social services and a social safety net to very poor households.

23. The Framework for Poverty Reduction further concluded that a stable and competitive macro economy is a prerequisite to sustained poverty reduction. In the medium term, the main macroeconomic challenge is to reduce the size of the fiscal deficit, since the public debt is already large, and recourse to concessional sources of finance is diminishing. Downsizing the public sector, raising the efficiency of public expenditures, and increasing the direct tax base are likely to be parts of the solution to rebuilding fiscal sustainability. Other challenges include the need to complete the privatization of commercial parastatals, enhance commercial management and governance standards in government-owned banks and public enterprises, introduce more flexible labor market regulations, improve the sustainability of public pensions, and increase the scope for private sector initiatives in non-bank services. To this end, the Government’s private sector development program assisted by ADB is addressing several of these issues. These are technically complex reforms with potentially large and unpredictable adjustment costs. Progress in these areas will need sustained investment support, technical assistance and policy dialogue over a period of years.

24. Another aspect of poverty is the incidence of child labor. The International Labor Organization (ILO) estimates that there are between 250,000 and 500,000 child laborers in Sri Lanka today⁴ . The most common forms of child labor are domestic employment (i.e. as household servants), involuntary begging on the streets, child prostitution, working in the informal sector, in the gemstones industry and in sectors such as tourism and fishing. It has been estimated by the Government and by international organizations such as the ILO and United Nations Children’s Fund that there are 30,000 child prostitutes in Sri Lanka. The problem of child labor is especially prevalent in the plantation sector. In 1997, the total resident labor force of the plantation sector was estimated at 305,000 of which 33,000 (or 11 percent) were child laborers below 14 years of age. Overall, 4 percent of children between the ages of 10 and 14 are economically active. By comparison, 14 percent of children work in India, 30 percent in Bangladesh, 45 percent in Nepal and 18 percent in Pakistan.

25. Sri Lanka joined the ILO International Program for the Elimination of Child Labor (IPEC) in 1997, the 21st fully participating country to do so. ILO’s efforts to eliminate child labor were implemented mainly through the IPEC program. The Government is currently implementing a plan of action, including actions in policy, institutional strengthening and awareness raising. One activity is a survey of household child labor in Sri Lanka. The Bureau of Statistics has now completed two rounds and the results will be published in 2000. The Government has established a Child Protection Authority (1997) which is trying to increase both reporting and awareness of this issue.

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