Power of the village
One of the most respected business personalities that Sri Lanka has produced to the multinational belt of companies is Lalith De Mel, better known as J.C.L. De Mel. I was blessed to have had the exposure of being trained by him during the times that he was the Global Director for the pharmaceuticals business at Reckitt and Colman, based in London.
Once he mentioned a piece of wisdom that still lingers in my mind. He commented that the global economic downturn would have lesser impact on rural Sri Lanka, given that most of the basic requirements can be sourced from the very plots of land on which their houses stand. This can include vegetables, fruit and firewood and in some homes one has a small retail outlet, which becomes a source of a second income to the household.
I guess this thought is justified by the data released last week by DNH Financial, which states that based on the latest economic data, Sri Lanka is amongst the top five fastest growing countries in the world, overtaking traditional emerging market favourites such as China and India and other BRICS economies. The report further states the 7.9% GDP growth performance is highly encouraging and indicative of the country’s economic resilience and strength in an environment of globally heightened risk
1- 2 million affected by poverty
Poverty in Sri Lanka has become a multidimensional situation where the low income people are faced with a situation where there is increasing pressure on the purse for one’s basic consumer needs to be satisfied.
If one carefully analyses the data, the poor are faced with gaps in access to quality education, healthcare, water and sanitation, which prevents an individual from moving up the socioeconomic ladder and results in lower drive for personal development, which in turn contributes to the vicious cycle of poverty in the country.
World Bank poverty and equity data released for 2012 indicated that the poverty headcount ratio, which is the percentage of the population earning below US$ 1.25 a day (PPP) in Sri Lanka, declined from 14% in 2002 to 7% in 2007. Similarly, in Sri Lanka people living below the national poverty line declined from 15% in 2007 to 9% in 2010. Elsewhere in the South Asian region, 43.3% in Bangladesh in 2010 earned below US$ 1.25 per day, while Pakistan recorded 21% in 2008. In Nepal 24.8% of the population earned less than US$ 1.25.
However, the 7% percent means that the number of people affected by poverty is 1-2 million Sri Lankans. In addition the research also reveals that the non-poor are closely clustered just above the poverty line, which means that the number of poor is subject to sharp increases when there are slight changes in economic conditions, like a natural disaster or price increases.
If we closely examine the numbers further, they reveal that in the rural and urban sectors, the headcount ratios are way above for the former, which means that poverty is essentially a rural phenomenon. This brings me to the theme of village as a development unit and the home-grown poverty alleviation model that we need to develop so that we can drive equitable economic growth in the country. ‘Divi Neguma’ is one such model that must be strongly pursued, not only focusing on supply chain development but also on driving up the demand chain.
Village as a developmental unit
I feel the ‘Divi Neguma’ programme can be an ideal platform to make a village a key unit developmental process of the country rather than a target. This involves a careful identification of the problems at ground level and thereafter with the participation of the villages, developing a solution. In this process, it is vital that one prepares the internal and external resources which can be mobilised.
The private sector has a major role to play given the new policy where two per cent of turnover has to be used for CSR purposes. The key aspect that the private sector must keep in mind is that CSR in its correct sense could be strategic in nature and indirectly benefit the company. Hence what is required is a working business model to be architectured like what Cargills has done with the farmer clusters getting linked to the Food City chain of supermarkets in Sri Lanka.
In this perspective, if each private sector company can link itself with the 40,000 villages in the country on this model of identifying problems and developing a solution in partnership with the village, within a three to five year horizon, we can drive economic growth across the country.
In this strategy of driving growth through the village, the agricultural sector will play a major role. If we analyse the numbers in the agricultural sector, GDP has fallen while the workforce employed has remained more or less the same. Hence, one can argue that a higher level of agricultural output can drive down the poverty level like what we experienced in 2006 where due to the favourable weather condition we had positive production in tea, coconut, paddy and rubber.
However, poverty does not seem to be inversely related to the growth in overall GDP. This throws out some interesting implications. Merely attempting to raise agricultural subsidies may not raise the per capita incomes of farmers unless accompanied by measures to reduce the workforce engaged in basic business practices like efficient logistics, better warehousing, and value addition strategies like attractive packaging and branding.
From the above it is evident that cash grants will not help a typical villager move out poverty. A strategic initiative can be to identify opportunities for the poor to participate in economic activity through skill enhancement at the village level.
- Mobilise the line ministries to allocate resources to selected villages on priority basis to accelerate the developmental process.
- Pradeshiya Sabha members assigned to support and monitor the performance of the ‘Divi Neguma’ programme
- Invest on special poverty reduction projects like building irrigation projects, causeways and village level ware houses.
- Focusing on livelihood opportunities to provide income avenues to the village by way of economic linkages to vegetable produce.
- Provide concessionary funding and technical knowhow by mobilising resources from donor agencies.
- Provide promotional support for marketing the produce to indirect exporters.
- Test the participatory approach of development from a village basis, and there by share the best practice among other villages.
- Drive social and ethical standards in a village with psycho social development work with the help of NGOs and INGOs.
Another approach – Chinese strategy
China adopted a unique strategy in 1979. A so-called Village and Town Enterprise (VTE) programme was launched. This was essentially a small and medium scale enterprise initiative. The learning to the world that was conceptualised was that one does not have bring the village to the town and drive manufacturing up or hand out subsidies to drive development.
A more strategic growth was embarked on by way of taking manufacturing to the villages and agricultural sectors. The phenomenal growth of the Chinese economy was based mainly on the growth of the VTEs. May be Sri Lanka can do the same on the sound footing of the ‘Divi Neguma’ programme that is driven by the Ministry of Economic Development. After all, who ever thought that a villager from Pannala would become the world’s best maker of lingerie?
Village level credit
A lesson in time as highlighted above is that merely raising budgetary allocations to the agricultural sector is not going to reduce poverty levels. The village level developmental must be covered with a Rural Development Act. This can lead to a drive of extending rural credit to rural non-agricultural occupations. The Bangladeshi Nobel award winning work of the Grameen Bank is a case in point. Maybe the private sector can do the same on a micro basis.
Another best practice I can remember when I worked in India was when Hindustan Lever developed a programme on the theme ‘Shakthi Amma,’ which helped the rural area become an integral part of the growth model of the company.
The recent research done by Singer Sri Lanka has revealed that the commitment to pay loans is a holy grail in rural areas that is not prevalent in the urban areas – a pattern experienced and shared by the Bangladeshi Grameen Bank champion too.
There are many discussions on the Millennium Developmental Goals (MDGs). But a key area of focus should be that if the Gini coefficient for consumption inequality remains unchanged at the level of 2002 and growth continues at the same rate it did in 2004 and 2005, poverty will fall by more than 50% to 8.2% by 2015. If however, consumption inequality increases – as it did in the last 10 years –poverty will fall only to 14.8% from the 26% in 1990/91.
Given this backdrop, maybe the village as a developmental strategy can be the way forward to influence the Gini coefficient in Sri Lanka. The current strategy of ‘Divi Neguma’ is aligned to making the village the unit of development. However, this strategy can be successful if the private sector and the international donor groups partner the process so that we can drive poverty to below five per cent in Sri Lanka whilst increasing domestic savings to 35 per cent.
This in turn can drive 8% GDP growth in Sri Lanka. If we do not move in this direction Sri Lanka will lose in the race to become a top 30 country globally, given that we have slipped from number 52 to 66 in just one year.
(The author is attached to the United Nations – UNOPS – as the Head of National Portfolio Development – Sri Lanka and Maldives and was the ‘2012 Exemplary Leadership’ award winner from the Global Association of Business, Chief Marketing Officers’ Council and World Education Congress. He can be contacted on firstname.lastname@example.org.)