Reducing Income Disparity -ADB
By Chrishanthi Christopher
While the European Union and the United states are experiencing a recession in their regions Asia is enjoying an economic boom. But a World financial Institution says that Asia’s rapid growth is being undermined by the widening gap between the rich and the poor in the region.
The Asian Development Bank (ADB) in its flagship annual publication the Asian Development Outlook (ADO 2012) released recently says that ‘income divisions are rising markedly in the region where the richest 1 per cent of the households account for 6 to 8 per cent of total income”. It says that close to 20 per cent of total income goes to the wealthiest 5 per cent in most countries and the balance 80 per cent of total income is shared by the rest of the people. The ADB calls on all governments in Asia to reduce inequality by sharing the benefits of development equally among its populace.
In Sri Lanka according to the Household Income & Expenditure Survey (HIES) of the Department of Census & Statistics(DC&S) the gini co-efficient, a measure of income distribution and economic inequality among its population (0 being the perfect equality) was 0.49 in 2009/10. Accordingly, Colombo records a figure of 0.45 for the same period. The inequity in Ratnapura records the highest of 0.57 and Jaffna the least being 0.37.
The disparity among the gini co-efficient of household income in the urban and the rural sector is a mere 0.01 recording 0.45 and 0.46 respectively while the estate sector records the lowest of 0.44.
According to the National Estimate & Account Survey (NE&AS) also done by the DC&S the gap between the rich and the poor remains 36 per cent for the last 25 years as per statistics available as at 2009/10.
Also it says that the richest 20 per cent receive 52 per cent of the total household income, the middle 60 per cent receive 43 per cent while the poorest 20 per cent get only 5 per cent. Interestingly it says that the poorest 10 per cent of the household receive only 2 per cent of the total household income. According to Economist, Prof. A. D. V. de S. Indraratne this gap in income disparity is because of economic growth not permeating down to the bottom and the fruits of development being enjoyed only by a small section of the people. “Although Sri Lanka opened its door to an open economy several years ago, the benefits have not seeped through to the bottom” says Indratne. Among the urban regions Ratnapura records a high co-oefficient of 0.57 while Jaffna records the least 0.37. Gampaha records a jump of 0.07 from 0.44 to 0.51 from the last census of three years ago. Indraratne attributes this jump to the increasingly inequitable distribution of income among the people of the district. “Probably the fruits of development is being enjoyed only by the affluent class,” he says.
When the provinces are compared the income inequality among the people of the Sabragamuwa and the Central region record a high, of 0.50 and 0.51 while that of Eastern province registers the least being 0.33. It is learnt that the CD&S due to constraints caused by the war was unable to cover Kilinochchi, Mullaitivu and Mannar areas of the northern region in its HIES survey. Jaffna which was under the control of the government records a gini co-efficient of 0.37.
When the income disparity among the urban, rural and estate sectors are compared there was no significant differences recording only a 0.01 gap among them. The rural sector recorded a high co-efficient recording 0.46 while the urban sector recorded 0.45. The estate sector shows the least income disparity with a gini coefficient of 0.44.
Principal Researcher, Point Pedro Institute of Development, Dr. Muthukrishana Sarvananthan commenting on the low income disparity level in the north and east attributes the figure to migration. He says that because of the war many people in the region had left the area. “Many were in the camps as internally displaced people (IDPs), others had migrated to Colombo or overseas and it was difficult to cover a proper cross section of the people,” he says. He concludes that the people who were left behind were almost of equal income level and hence the low disparity.
According to him the survey has to be done on people living in their own habitat and homes. It is learnt that a very few people had returned to their homes by the end of June 2010. “DS&S did not bother to cover these areas’ he maintains. He says that even in the east the DC&S did not attempt to go to the interior areas for the survey. And therefore the gini co-efficient figures reflected in the report are questionable he says.
The ADO 2012 reports that inequality is due to unequal access to education, health and other public services which inhibits raising the living standards of people. Also it says that uneven distribution of new technology, infrastructure and access to investment deepens the divide between the urban and rural people. The ADB report, to address these issues calls on all governments in Asia to create and provide quality jobs, increased spending on education and health and expand social protection. It also advocates more investment on infrastructure so as to reduce imbalances between developed and lagging regions.
The Central Bank Annual Report of 2011 toeing these lines says that the government believes in improving the infrastructure development in the country to increase economic efficiency. Accordingly, it has allocated LKR 98.7 billion for development of highways and expressways. The phase 2 of the southern expressway, the Colombo – Katunayake expressway and the Outer Circular Highway are some of the projects in progress. In the area of education the government while continuing to provide free education to all is also focusing on reshaping education to suit the requirement of today. In keeping with this agenda the government has taken steps to improve core areas in education including technology, mathematics and English to match emerging labour markets. The government has also allocated LKR 3,000 million in its 2011 budget to transform state universities into world class institutions. In the health sector the government has drawn up a comprehensive health plan under the ‘Health Master Plan (2016 -2016). With all the measures in the right direction it is to be seen whether Sri Lanka will emerge triumphant over the inequality that plague its people for over a quarter century.