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Countries and Regions Country Partnership Strategies Document
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Country Strategy and Program 2004-2008: Sri Lanka
IV. ADB's StrategyA. Summary of Key Development Challenges59. The principal development challenge in Sri Lanka is to reduce poverty and address the interrelated, mutually reinforcing causes of poverty17 due to (i) inadequate growth and significant inequity; (ii) the civil conflict; (iii) lack of integration and access of physical and social infrastructure; (iv) slow growth in agriculture and productivity; (v) lack of clear land tenure; (vi) environmental degradation; and (vii) social exclusion and powerlessness felt by many of the poor. Other MDGs including targets on child mortality and maternal health, combat of major diseases, and environmental sustainability are totally on track, with those for universal primary education and gender disparity in formal education fully or mostly met. 60. Reducing poverty is best served by reducing the incidence and impact of these causes for the largest number, and by spreading social opportunity more equitably. To achieve these in line with the Government’s agenda in Regaining Sri Lanka, ADB’s strategic priorities will be: (i) promoting pro-poor economic growth; (ii) advancing social development; and (iii) supporting improved governance. Addressing these entails targeting support at pro-poor economic growth, with emphasis placed wherever possible on backward regions or on those encountering particular hardship: by improving physical infrastructure, primarily road connections and energy; raising the quality and relevance of education; increasing access of the poor to social services; rebuilding the conflict areas and reintegrating them into the national economy; promoting enhanced rural livelihoods, commercialization, and diversification; removing legislative and regulatory barriers and attracting domestic investment and FDI; and improving governance. B. Main Features of the Poverty Partnership Agreement61. The poverty reduction partnership agreement was signed in March 2002. It endorsed the Government’s priorities for poverty reduction and ADB’s COS of December 1998 which, as with this CSP, defined ADB’s plans to support poverty reduction through economic growth and human resources development. It set out a long-term vision and agreed medium- and short-term targets for poverty reduction (Table 4). Its vision called for (i) a sustained reduction in the poverty disparity between Western Province and the rest of the country; (ii) progress toward the full achievement of MDGs related to human development by 2015; (iii) good governance, indicated by such measures as a reduction in the share of government in the commercial sectors of the economy, a decline in the relative size of the civil service in the labor force, the adoption of best principles for public expenditure management, and the involvement of professional groups, private sector, and the community in decision making and in the provision of public services; and (iv) progress in reducing conflict-related poverty, as measured by the Government’s continued participation to promote peace, the provision of humanitarian assistance to conflict victims, and a progressive restoration of access to social and economic infrastructure to those displaced or otherwise adversely affected by the conflict. 
C. CSP Strategic Focus62. The strategic focus flows from the need to reflect five factors: the Government’s new development strategy; the additional research undertaken on the causes and incidence of poverty; the more optimistic outlook with respect to peace; the need to rehabilitate the North and East and to revitalize the rest of the country as the basis for lasting peace; and the need to increase the impact of ADB initiatives to achieve the MDGs. A representative diagram is shown as Figure 1. The overall objective of ADB strategy is shown to derive from three pillars: supporting pro-poor growth, social development, and improved governance, with support for pro-poor growth being seen as the core pillar for reducing poverty. This will buttress government strategy—achieving high growth and reduced poverty—outlined in Regaining Sri Lanka by supporting the Government’s emphasis on economic reform, private sector development, and reducing the current geographical disparities in access to the benefits of higher growth and productivity. The main areas of support under each of the three pillars are also shown. 1. Sectors of Intervention63. The Government‘s far-reaching reform agenda, which focuses on promoting private sector development and balanced regional development, will be supported by ADB. Comprehensive structural reforms are critical to achieve strong and sustained economic growth, which is necessary to reduce poverty. In supporting poverty reduction through broad-based growth, sectors have been chosen on the basis of their potential impact on these reform measures and on the basis of ADB’s operational experience, and because they offer the best prospects for addressing the specific development challenges noted above. In order to maximize the impact of ADB assistance to reduce poverty, the geographical distribution of the poor and the specific nature of poverty will need to be analyzed before particular projects are designed, and emphasis placed where practicable on targeting the poorest regions.  65. Agriculture and rural development. Over 90% of the poor live in the rural areas, 41% of the poor come from agricultural households, some 50% of agricultural households form the poorest rural households, and rural poverty is highest in those provinces with the highest proportions of farm households. Supporting the agriculture and rural nonfarm sector, rural employment creation and incomes, and the better targeting of rural infrastructure, will be essential to poverty-reducing growth for a very large number of people. 66. Transport (roads and ports). Road access is a basic ingredient of human progress and improvement in living standards. It reduces isolation, lessens the fragmentation of the domestic market, spreads markets, widens personal opportunities and access, expands the flow of basic services, promotes the transfer of information and technology, supports the spread of market signals, generates additional income opportunities, and moderates the vulnerability of the poor. An efficient port system is a key factor in improving the country’s competitiveness and attracting FDI. It can also be a factor in encouraging the establishment of other value-added industries as Colombo port is ideally located to be the hub port for the South Asian region and 70% of containers handled are transshipment containers. Moreover, it is necessary to maximize private sector participation in the port sector both to improve operational efficiency as well as to reduce the burden on public sector financial resources. 67. Energy (including power). Electricity is a prerequisite for enhanced GDP growth as well as for rural and urban development. An adequate power supply is essential for increased private sector investment in industry and commerce, and to promote agro-industrial activity and off-farm employment opportunities in general. Additional power supply in rural areas also reduces the use of fuel wood and kerosene for domestic heating and lighting, thus reducing the incidence of allied respiratory infections for the poor, environmental damage, and household energy costs. It also relieves part of the burden of housework for women and facilitates after-school home study for students. 68. Financial sector and SMEs. Along with private sector development, supporting the financial sector and SMEs represent the most powerful means of increasing GDP growth rates, raising productivity levels, cutting unemployment numbers, reducing poverty, stimulating domestic and international investment, and generating exports. Over time, they also help raise total factor productivity, thus boosting competitiveness, promoting higher efficiency, widening the domestic market, and supporting the structural transformation of the economy. 69. Education (especially skills training and vocational training). First, the quality of education offered to the poor—especially in rural areas—is significantly worse than that offered to more affluent or urban pupils; second, the curricula available—including those in technical and tertiary institutions—are outdated, rarely consistent with the needs of the private sector or modern technology, mostly geared to the needs of the administrative occupations, and a major contributory cause of high unemployment among Sri Lanka’s youth; third, technical and vocational courses are offered by a wide array of ministries and agencies in an uncoordinated way, while many vocational courses for women are culturally stereotyped as being feminine, routinely limited in technical content, and seldom linked to the demands of the contemporary labor market; and fourth, the high enrollments at primary and secondary levels are not translated adequately to the tertiary level due to limited access to postsecondary education. 70. Water supply and sanitation. These constitute a basic human right; represent a crucial factor in preventing illness and raising universal health status (especially among the poor in general and women and children in particular); reduce the susceptibility of the poor to illness and even greater hardship; lessen the vulnerability through illness of the near-poor to periodic poverty; and ease the burden of those who have to collect water, chiefly women and children. 2. Thematic Areas of Intervention71. The ADB’s ongoing assistance in environment and natural resources management is aimed at promoting rural development and enhancing rural incomes with an emphasis on sustainable development of resources. Future intervention will be reexamined on the basis of institutional capacity, although environmental compatibility will be addressed, as required, in other sector projects. 72. Private sector development is a central theme of Regaining Sri Lanka as a key way of accelerating GDP growth, creating jobs, and raising efficiency and productivity in all sectors. Supporting these over time, and the employment opportunities they will bring, present a real chance of reducing poverty for those with few assets other than their labor to offer. 73. In governance, the Government recognizes that the effectiveness of public sector management, the quality and efficiency of public service delivery, and the impact of external assistance and government programs must all be improved significantly. More generally and as part of a wider concept of governance, the promotion of gender and social equity, decentralization and local service delivery will be addressed. 74. Gender considerations will be addressed by projects in education and in water and sanitation, and by projects directly targeting the poor in backward regions and women in the North and East. Of particular importance will be attempts to mainstream gender concerns in all sectors, to improve access to technical and vocational education and information technology for women, and thereby to improve the position of women in the labor market. ____________________
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