Poverty Alleviation in : with special reference to Samurdhi (Prosperity) Movement

By Sunil Jayantha Nawaratne Professor of Management & E-Commerce Sri Lanka Institute of Information Technology Chairman Centre for Strategic Management ContentsContents in the Global context Poverty in the South Asian Region Back ground of Sri Lanka Sri Lankan Economic History Poverty in Sri Lanka Poverty Alleviation Programs in Sri Lanka Samurdhi Movement of Sri Lanka Samurdhi movement today It’s Strengths and Weaknesses Future of Poverty Alleviation of Sri Lanka Future of Samurdhi Movement of Sri Lanka Some comments on our Joint Research Project Final Comments and Q&A sessions PovertyPoverty inin thethe GlobalGlobal ContextContext Definition : People living with an The commonly used income of $1 a day –Low $1 a day standard, income countries measured in 1985 $2 a day – middle income international prices National Poverty Rate and adjusted to local (NPR): – is the currency using percentage of the Purchasing Power population living below Parities (PPP). that national poverty There are many line problems related to Different countries have this poverty line different definitions of poverty. PovertyPoverty RatesRates inin thethe RegionsRegions Share of people living on less than $1 a day (%)

Sub-Saharan Africa 50% 36% China 20% East Asia and Pacific 19% Latin America and Caribbean 12% Europe and Central Asia 8% Middle East and North Africa 5% (Source: World Development Indicators, Page 1) PovertyPoverty InIn thethe GlobalGlobal ContextContext Source: 2004 World Development Indicators, Page 55-56

Country National Poverty Line International Poverty Line($1)

Algeria (1995) 22.6% 2% (1995) Bangladesh (1996) 51% 36% (2000)

India (1993-94) 36% 34.7% (2000) Kenya (1994) 40% 23%(1997) Madagascar(97) 73% 49.1% (1999)

Pakistan (1993) 28.6% 13.4% (1998)

Sri Lanka (1991) 20% 6.6% (1996) Zimbabwe (1991) 25.8% 36.0% (1991) ExtremeExtreme PovertyPoverty 19901990 vs.vs. 20012001 1990 ($1 a day) 2001($1 a day) 1,219 million people or During the next 11 years 28% of the low and GDP of those countries middle-income grew 31% countries , lived in less than $1 a day. Poverty rate has fallen to 21% or 1,100 million people in extreme poverty Population growth of those countries was 15% during the period OtherOther IndicatorsIndicators ofof PovertyPoverty

Low Income Hunger Low education Gender inequality High child mortality Poor Maternal Poor Shelter Poor BriefBrief IntroductionIntroduction toto SriSri LankaLanka

Historical Back Ground 2550 years 1505 – 1948- Portugese / Dutch / British 1948 – 1977 – Closed 1977 – To date – Open Economy Overall Evaluation of Sri Lanka

PovertyPoverty AlleviationAlleviation ofof SriSri LankaLanka

History of Poverty Alleviation Janasaviya (peoples vigor) Samrudhi (Prosperity) Movement 1994 – 2004 2004 onwards Reaching MDGs in Sri Lanka

(MDG=Millennium Development Goal) Background

In September 2000, all 189 UN member states adopted millennium declaration: There is wide spread political support in the development mainstream – internationally and nationally People Centered and clear roles for all development partners (Governments, international Organizations, Citizens, CSOs and private sector): Scope for internalization and national capacity building (CSO=Community Service Organization) Results oriented: MDGs are results based & can make international institutions and governments more accountable for results. UN & the MDGs – Core Strategy The guiding principles for the overall strategy are that: (i) all 8 MDGs & their 18 targets are equally important; (ii) national ownership and participation will be pivotal to the achievement of the MDGs; (iii) partnership, with Governments but also with CSOs and the private sector, will be essential; (iv) much of the work required to achieve the MDGs is already underway but demands greater focus & urgency; (v) focus on MDGs neither diminishes nor precludes the important work of UN system in other mandated areas 8 Goals 18 Targets and 48 Indicators 1 GOAL 1 – Eradicate extreme poverty and hunger 22 GOAL 2 – Achieve universal primary education GOAL 3 – Promote gender equality and empower 33 women

44 GOAL 4 – Reduce child mortality

55 GOAL 5 – Improve maternal health 66 GOAL 6 – Combat HIV/AIDS, and other 77 diseases 88 GOAL 7 - Ensure environmental sustainability GOAL 8 – Develop global partnership for development 8 Goals & 18 targets at a glance

Goal 11 :: ExtremeExtreme PovertyPoverty && HumberHumber Half (1) extreme poverty and (2) hunger by 2015 Goal 2 : Universal Primary Education 3. Achieve Universal Primary Education by 2015 Goal 3: Gender Equity 4. Eliminate disparity in all levels of education Goal 4 : Reduce Child Mortality 5. Reduce under 5 and infant mortality rate by 2/3 Goal 5: Improve Maternal Health 6. Reduce MMR by 75% Goal 6 : Combat HIV/AIDS, Malaria … 7.Halt and reverse spread of HIV/AIDS; 8. Same for Malaria and other major diseases Goals, targets & indicators at a Glance

Goal 7 : Ensure environmental sustainability. 9. Integrate “” in national policies & progs & reverse loss of environmental resources. 10. Halve lack of access to safe drink water; 11. Improve the situation of slums Goal 8: Develop a Global Partnership for development 12. Open, rule-based trading & financial system 13. Address special needs of LDC 14. Address special needs of Land locked Cos 15. Deal with debt problems 16. Dev. & implet. strategies for youth employment 17. Affordable essential drugs in dev. Cos 18. Make available benefits of the new technologies especially infor. & comm. Goals, targets & indicators at a glance

Goals (8) & Targets (18) Indicator(48) Goal 1 : Extreme Poverty & 1. Population < $1; Hunger 2. Poverty Gap ratio; Halve (1) extreme poverty and (2) 3. share of consumption of poorest 20%; hunger by 2015 4. % of underweight >5y; 5. % below min. dietary energy consump. Goal 2 : Universal Primary 6. Net Primary Enrolment Ratio; Education 7. % children reaching Grade five; 3. Achieve Universal Primary 8. rate of 15-20 Education by 2015 Goal 3: Gender Equity 9. Female Gross Primary Enrol Ratio as a % 4. Eliminate disparity in all levels of of male ratio; education 10. 15-20 M:F Literacy Ratio. 11. Share of women in non agric. wage employment. 12. % women MPs Goal 4 : Reduce Child Mortality 13. <5 mortality rate; 5. Reduce under 5 and infant 14. IMR; mortality rate by two – thirds 15.% of <1 immunized against measles Goal 5: Improve Maternal Health 16. MMR; 6. Reduce MMR by 75% 17. %births attended by skilled health workers Introduction

Samurdhi means – Prosperity. Started in 1994 as the national program. It’s just an 11 year old movement but a strong and steady one. The original concept was designed and developed by Hon. S.B. Dissanayake, who was the Minister of Samurdhi, then. Situation Now

Today, it is a giant organization with a national network of CBOs as well as public administration network. (CBO=Community Based Organization.) At present, nearly 26,000 full-timers are engaged as “Change Agents” of the movement. 24,000 SDOs and 2,000 graduate managers. (SDO=Samurdhi Development Officer) Nearly 2,000,000 families are covered. Vision & Mission

Samurdhi movement has a very clear Vision. Mission, Goals, Objectives, and Strategies. We will highlight the Vision and Mission here. Vision

Prosperous Sri Lanka with Minimized Poverty Mission

Contributing to the national development through empowerment and graduation of the low-income people out of Poverty Line and reducing disparity in their livelihood in the manner of participatory development through the process of identification and development of innate abilities of the low income families in the form of effective, efficient, sustainable and pro-poor manner. Our Major Achievements

During the last 10 years the movements major achievements are as follows: Our Formal & Informal Organizational Structure Samurdhi Movement is a combination of both formalformal && informalinformal structures. Formal Structure Ministry, Departments, Authority, District Secretaries, Divisional Secretaries, Areas(kalapa), Village Vasama (Grama Vasama). Formal Structure

MINISTRY OF SAMURDHI

POOR RELIEF DEPARTMENT SAMURDHI AUTHORITY SAMURDHI COMMISIONER'S DEPARTMENT SUBSIDY PROGRAMME EMPOWERMENT AND DEVELOPMENT PROGRAMMESOCIAL INSURANCE AND INFRASTRUCTURE DEVELOPEMNT Formal Structure

National Level Provincial Level – 9 provinces (no office) District Level – 25 Districts Divisional Level – 323 Divisions Grama Vasam – 14,100 vasam Villages – 52,000 villages Families – 4,000,000 (total number) Informal Structure

Family level – 2,000,000 5 member group – 326,000 groups Samurdhi Society – Village level Area (kalapa) Society – Area level – 1,000 General union (Maha sangam) level – 179 District level – 25 National level – 1 ( Poor Peoples Parliament) Major programs

Programs are divided into six major areas. 1. Social (safety net) 2. Social Insurance 3. Infrastructure Development 4. Micro Credit 5. Income Generation 6. Socio-cultural Development Social Welfare

Implemented by the department of poor relief. Poverty Line – Rs. 1,500 per family/per month. Subsidy scheme – Rs. 1,000, 700, 400, 350, 250, 140 Total subsidy amount Rs. 12,000,000,000. (US$120,000,000) Samurdhi Subsidy Program by year 2005 – No. of Families Dis Rs. Rs. Rs. Rs. Rs. Rs. Nu Tot Am tric 1 6 4 3 2 1 mb al ou t 0 0 0 5 5 4 er Fa nt 0 0 0 0 0 0 mil y 0 All 7, 6 4 3 2 3 2,0 4,7 9,6 8 1 6 6 4 6 65, 42, 35 4 3, 4, 7, 4, 8, 55 70 mil. 4 5 0 7 2 6 4 2 8 1 5 5 5 2 8 5 7 7 Social Insurance Program

Implemented by Samurdhi Commissioners Department Rs. 30 deducted from the subsidy and entitled for followings: Death – Rs. 5,000 Wedding – Rs. 3,000 Child birth – Rs. 2,000 Hospitalization – Rs. 1,500 (Rs.50 x 30 days) Educational Scholarship Program for AL students. 6,000 students are getting this. Infrastructure Development Program Implemented by Samurdhi Authority Participatory Development Approach Basic Material Cost from the Government and labor contribution from the beneficiaries. Up to now progress is as follows: Division

Infrastructure development through community participation – Rs. 200 million in year 2003. Bank building network development Canals, rural roads, steps, culvert, agro-wells, common amenities development One month subsidy donation program Ratnapura district – Kuruwita example Micro Credit Program

Samurdhi Bank network has been developed. At present 1010 banks are operating. (Including North-East areas) Two types of savings Compulsory savings: Rs. 100 from subsidy Voluntary savings Program progress is as follows: Samurdhi Bank Program

- Compulsory Savings - Rs. 6 Billion - Voluntary Savings – Rs. 4 Billion - Self Employment Loans - Agricultural Loans - Consumption Loans - Recovery Rate - Bad Debts Socio-cultural Development

Social Development, Human Resource Development, Youth & Cultural Development Programs are implemented. Samurdhi Housing Development Lottery Rs. 10 from subsidy Rs. 150,000 x 100 houses in a month. Up to now progress is as follows: Social Development

Anti smoking, alcohol, and drug prevention program. Reducing Illiteracy program Suicide prevention and reduction program Anti smoking flag day – housing development for acute poor ( Rs. 18 mil- 2002) – 2000 houses Child care and widow mother development Specially trained 450 SDOs are engaged Youth and Cultural Development New division of the authority Alleviate poverty through youth development (empowerment) Vocational training Talent identification and development Organizing the youth and provide knowledge, information, attitude and skills Income Generation Programs

Also Implemented by SA. Agri-, Livestock Development, Small Industry Development, Marketing Network Development Programs. Up to now progress is as follows: Agri- Development Division

Forward contracting – cutting flower & leaves, horticulture, organic rice and vegitable Export Oriented Agriculture New Technology – Drip / Sprinkler /Poli-Tunnels / Post-harvest technology 42,000 families to be empowered in 2003 Livestock Development

Reduction and improve income generation Back yard poultry / Goat farming Sub-contracting with private sector Nelana Farm + Samurdhi Program - cage for 1000 birds by the people - chicks, food, drugs and extension services from the company - after 42 days guaranteed purchase - average income after 42 days per family –Rs. 25000 – 30,000. ( Nelana = a poultry company) Small Industry Development

Alleviate poverty through value addition Micro and small industry development red-clay, coconut fiber pots, garments, metal crushers, lime processing, rice milling and packing, steel furniture, decorating lights, electric and electronics, wooden furniture for some examples. Marketing Network Development

Rural fair development – 300 rural fairs Home based retail shops Wholesale suppliers Door to door distribution (milk, bread, news paper, vegetables, etc.) Samurdhi Home Services Ltd. Ice-cream distribution through three wheelers – Cargils Magic Ice Cream Ultimate Objective

Graduation of low income families from the poverty through total empowerment: Economic Empowerment Social Empowerment Cultural Empowerment Physical and Psychological Empowerment Political Empowerment (Leadership) National Targets - 2003

Contributing to the national economy more than the double the cost of the program Total Cost – Subsidy –Rs. 9 bil. Admin. - Rs. 3.5 bil. Total - Rs. 12.5 bil Estimated total contribution – Rs. 28 bil In way of Income improvement, Infrastructure development, Housing development, and improved savings. Graduation from poverty

Monthly income has to be improved more that Rs. 5000 Total families in the year 2003 – 200,000 families. District allocation and divisional allocation is given to each district and divisional heads. Various poverty reduction plans: NPRP / DPRP/ DivPRP/ KPRP / VPRP Investments in Community Projects 1995–2001 (Rs. mn)

Year No. of District No. of Investment No. of Secretariat Divisional s Projects Secretary Divisions 1995 18 235 114.06 11,306 1996 18 235 210.52 11,640 1997 18 235 562.54 11,288 1998 21 283 373.50 6,061 1999 21 283 611.90 13,206 2000 21 294 416.65 6,071 2001 21 301 169.67 2,005 Total 21 301 2458.84 61,577 Community Dev. Projects

Project Category Total Actual Value Irrigation 7,099 x Rs. 10,000 70,990,000 Canals/Dams/Anicuts Public Wells/Agri 12,428 x Rs. 50,000 621,400,000 Wells/Small Scale Water Supply Schemes Transport/ Roads/ 28,318 x Rs. 100,000 2,831,800,000 Bridge / Culverts / Climbing Steps Marketing Centers / 5,443 x Rs. 10,000 54,430,000 Collection Centers/ Public Facilities

( Anicut = a concrete dam in a canal) 3. Samurdhi Banking Program

Savings Program No. of Families Amount Rs. Million Compulsory 886,055 6,367

Voluntary 366,234 4,556 Promoted (Small Groups) by Change Agents? Quantum & Value of Loans given by SBs

Category Quantity Percentage Amount Rs. Percentage Million Agriculture 192,514 22.00 1,084 17.9 Consumer 41,074 4.70 46 .8 Fishery 12,087 1.40 14.8 .24 Distress 14,076 1.60 15.1 .26 Self- 613,595 70.30 4,869 80.80 employment Recovery % Market 104.0 4th in the

Default % Leader 3.5 Market Micro Fin. Labor Intensive People's Projects (LIPP)

Special feature of this Programme is the expenditure 65% of the allocated provision for rural labor and balance 35% as the Capital. Projects Constructed Under the Labour Intensive People's Projects (LIPP)

Particulars 1998 1999 2000 Total

Total number of projects 1,385 571 916 2,872 Small Tanks 645 183 209 1,037

Minor irrigation 587 348 595 1,530

Agro wells 116 24 101 241 Other 37 16 11 64 No. of beneficiaries 92,005 42,644 83,202 217,851

Extent of land cultivated 27,301 21,254 45,175 93,730 Number of labor units engaged - 400,154 678,826 1,078,980 Amount of expenditure Rs. million 200 100 140 440 Other Programs

Program No. of families Benefit Small Industry Dev. 5,256 Training & Employment Agriculture Dev. 4,326 Training & Financing Projects Animal Husbandry 1,022 Training & Financing Projects Marketing 8,173 Weekly fairs, Trade Development Centers, Mobile Stalls Social Security 21,142 Death/Marriage/Birth Program / Ailments Relief All Implemented By the Change Agents Budgetary Allocation and Actual Expenditure for Development Programmes – 1996 to 2002 (Rs. mn)

Year Allocation Expenditure 1996 400.0 308.5 1997 978.7 749.0 1998 930.0 991.0 1999 942.0 845.0 2000 500.0 564.0 2001 403.0 406.0 2002 50.0 32.4 Cost & Benefit of the Change Agents?

Total Cost of SDOs & SMs 28,000 x Rs.10,000 = Rs. 280,000,000 If one officer can graduate 10 families out-of poverty trap by improving their income up-to Rs.3,000 a month the Total Benefit will be 26,000 x 10 x Rs. 3,000 = Rs.780,000,000 If 200,000 families income can be improved up-to Rs. 3,000 per month then = Rs.600,000,000 If 100,000 families income can be improved up-to Rs. 3,000 per month then = Rs. 300,000,000. Samurdhi Movement Has Done a Lot Through our village based Change Agents has done a lot to Empower the Poor and Graduate them out of the Poverty Trap. It has a giant network Let’s use that network more Effectively and Efficiently through Pro-poor Approaches for the benefit of Poor People themselves. Percentage of poor household by area and survey period

Survey Period Area 2002 1995/96 1990/91 Percentage of Percentage of Percentage of poor poor poor households households households Sri Lanka 23.9 26.7 30.4

Sector

Urban 7.9 13.4 18.2

Rural 26.4 28.7 34.7

Estate 22.1 26.1 20.5 Per capita income (average monthly) by area and poverty status of the household - 2002

Mean per capita income per month Area Non- poor Ppoor All households households households Rs. Rs. Rs.

Sri Lanka 3709 1341 3048

Sector

Urban 5654 1435 5243

Rural 3402 1348 2765

Estate 1928 1135 1707 Electricity, Telephone and LP Gas using; households (percentage) by area 2002

Mean per capita income per month Area Electricity Telephone LP Gas using using households % households % households % Sri Lanka 65.7 22.9 22.9 Sector Urban 86.8 47.1 57.7

Rural 64.2 19.6 18.8

Estate 37.1 14.6 2.5 WWee vs.vs. ThemThem 19501950 -- 20002000 Per Capita Income in US$

Country 1950-$

89 SRI LANKA 90 JAPAN 30 SINGAP JapanJapan vs.vs. SriSri LankaLanka

PerPer CapitaCapita incomeincome inin US $

Country 1950-$ 2000-$

89 840 SRI LANKA 90 32,000 JAPAN 30 28,000 SINGAPOR E Growth Compared Country 1950 2000 Growth % Sri Lanka 89 840 9

Japan 90 32,000 355

Singapore 30 28,000 933 Malaysia 30 3,420 114 Why did this happen to us?

1. No Long-term Vision 2. Too much freedom / No discipline 3. Giving every thing, everyday, to everybody free of charge 4. Working on wrong paradigms and conflicting policies Public Debt Central Bank Report 2002

Year Total Rs. As a As a As a Millions GDP % GDP % GDP % (‘000) Domestic Foreign Total

1950 654 13.7 3.2 16.9

2000 1,218,70 53.8 43.1 96.9 0

2002 1,669,28 59.8 45.5 105.3 4 War Expenditure

Defense Budget 1998 – 2003 – Rs.Million Year 1998 1999 2000 2001 2002 2003

Rs. 42,496 40,071 56,915 54,242 50,212 49,721 Mill. Foreign Exchange Central Bank Report: 2002

Year US$ UK Japanese Pounds Yen

1950 Rs.4.76 13.33 0.01

2000 Rs.75.78 114.78 0.70 TheThe WayWay JapaneseJapanese ThinkThink

KuniKuni CountryCountry KaishaKaisha OrganizatioOrganizatio nn KazokuKazoku FamilyFamily

BokuBoku SelfSelf OurOur GNPGNP vs.vs. GlobalGlobal 500500

2001 Our GNP was Rs. 1,377.1 US $ Bil. 15.4 2000 GLOBAL 500-World’s Larges Corporations

RAN CORPORATION REV:$ EMPLOY K Bil EES 1 GENERAL 176 388,000 MOTORS 10 ITOCHU 109 5,306 20 NISSHO IWAI 65 18,446 30 SONY 60 189,700 34 HONDA 54 112,000 40 FIAT 51 221,043 41 NESTLE 49 230,929 292 KAJIMA 15 5 12 247 Honda’s Growth

Mr Honda also started his company in 1948 In year 2000 -34 rank /US$54 bil /112,000 employees In year 2003 -25 rank / US$72 bil/ 131,800 employees. 2000 – 2003 – 33% growth, 9 positions up. If assumed in year 2003 – our GNP is US$ 20 billion, there are 248 companies are their bigger than our GNP. 248th Company –Aventis (France) SriSri LankaLanka’’ss LargestLargest CompaniesCompanies 2001 GNP was Rs. 1,377.1 (US $ Bil. 15.4) 20002000 TOPTOP TENTEN InIn SriSri LankaLanka RANK COMPANY NAME REV:$ Bil 1 JOHN KEELS 0.105 2 HAYLEYS 0.089 3 HNB 0.078 4 CENTRAL FINANCE 0.062 5 NDB 0.046 6 COMMERCIAL BANK 0.045 7 DISTILLERIES COMPANY 0.043 8 CEYLON TOBACCO COM. 0.041 9 NESTLE 0.0395 10 AITKEN SPENCE 0.0394 2004 Top Ten Companies Overall Performance

1. Distilleries Company of Sri Lanka (5.940) 2. John Keels Holdings (5.750) 3. Sri Lanka Telecom (5.075) 4. Hatton National Bank (4.160) 5. Commercial Bank (4.065) 6. Ceylon Tobacco Company (3.800) 7. Aitken Spence & Company (3.565) 8. Hayleys (3.060) 9. DFCC (2.910) 10. Carson Cumberbatch & Co. (2.850) - Top Ten 2004 Based on Turnover (‘000)

1.Sri Lanka Telecom –Rs.25,553,000 2.John Keels Holdings – Rs.20,924,520 3. Hayleys – Rs.15,476,576 4. Hatton National Bank –Rs.15,158,444 5. Seylan Bank – Rs.11.110,059 6. Distilleries Co. SL – Rs.10,651,406 7. CIC –Rs.10,018,981 8. Commercial Bank – Rs.9,749,463 9. Aitken Spence – Rs.9,049,244 10. Central Fiance – Rs.8,408,531 StrategicStrategic ApproachApproach

1995 1990 2000 1985 2005 1980 SStrategictrategic 2010 1975

1970 EffectivenessEffectiveness && EfficiencyEfficiency

Effectiveness Do the right things 3 ¯ 3 ¯ 3 3 3

¯ 3 ¯ ¯ ¯ PovertyPoverty IndicesIndices –– DistrictDistrict wisewise (Except N/E) District Poverty District Poverty Incidence Incidence Colombo 10 K’negala 34 Gampaha 11 Puttlam 33 Kalutara 26 A’pura 33 Kandy 30 P’naruwa 27 Matale 35 Badulla 30 Nuwaraeliya 21 M’gala 49 Galle 25 R’pura 37 Matara 28 Kegalle 25 H’tota 27

Sources: Poverty estimates: Gunawardana 2000; GDP Shares and Average Growth (Province) Province 1996 2000 Average Growth % Western 43.5 49.4 3.3 North Western 11.3 10.4 -1.8 Central 10.6 9.9 -1.6 Sabaragamu 8.9 9.3 1.2 wa Southern 9.1 6.7 -7.1 Eastern 4.8 4.5 -1.2 Uva 5.0 4.0 -5.1 North Central 4.5 3.8 -3.6 North 2.4 2.1 -2.6 ““TadaTada gaga IchibanIchiban TakaiTakai””–– FREEFREE ISIS MOSTMOST EXPENSIVEEXPENSIVE DEADDEAD MONEYMONEY && LIVELIVE MONEYMONEY “Shinigane – Ikigane”