Sri Lanka's Social Policy as an Emerging Middle Income Country:

Can PRC's Development Assistance Help Making Growth in Sri Lanka More Inclusive?

Centre for Poverty Analysis Sri Lanka Workshop on Social Inclusiveness in Asias Emerging Middle Income Countries 13 September 2011 Jakarta, Indonesia
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Ishara Rathnayake

Background: Sri Lanka

o Lower middle income country: GDP growth rate: 8% per capita income: USD 2,399

Double the per capita income up to USD 4,000 by 2016 Sustain the economic growth at 8% for next 6 years Increase investments up to 35% of the GDP from current 25%

o Social sector development :

Poverty HCI: 8.9% Literacy rate: 91.4%

Ageing population Reducing regional disparities of attainment of MDG indicators o Post war situation and favorable macroeconomic situation has created conducive environment to spur the inclusive development in Sri Lanka
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Background Contd
China is emerging as an economic giant:
- GDP growth rate of 9.7% - Investment rate of above 45%

Poverty reduction is impressive:

- 84% in 1981, 15.6% in 2005 and 2.8% poverty incidence in 2010.

Leading donor in Sri Lanka: - 44% of external finance disbursed to Sri Lanka in 2010

Objectives and Methodology

To explore whether the social policies in Sri Lanka are contributing to inclusive growth
4 Areas: education, health, social protection and aging Comparison: regional level and across income groups: using secondary data

What are the lessons that Sri Lanka can learn from Chinas social development experience?
Weaknesses in education, health, social protection and aging Review of related systems/policies in China: using secondary data

Has Chinas development assistance contributed to inclusive growth in Sri Lanka?

Types of projects, geographical spread, social and environmental impacts: using secondary data, Key person interview
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Findings: Education
Achievements in education are impressive compared to other developing countries Free education and incentives including free textbooks, free school uniforms, free mid day meals, subsidized transport and special education programs for disadvantaged students MDG target of universal primary education: net enrolment rate of 97.5% in 2006/07

Variations across regions and near gender parity

Education Contd
9% of the students enrolled do not complete primary education and is from poorer households: poor and conflict affected provinces Disparities among provinces in the pass rates of examinations Participating in the higher education are drawn from the higher economic classes

Economic relevance and the quality of higher education are below the level required for a middle-income country
Education expenditure as a percentage of GDP: 2.67% in 2006 to 1.86% by 2010 and is low in comparison to the South Asian expenditure of 2.81% of GDP

Findings: Health/Nutrition
Health care is provided by the government free of charge Life expectancy has risen to 77 for females and 72 for males Maternal Mortality Ratio (MMR): 39.3 per 100,000 live births in 2006 and is the lowest in South Asia Infant Mortality Ratio (IMR): 1.3 infant deaths per 1,000 live births The prevalence of moderately or severely underweight children: 38% in 1993 to 29% in 2000 and is down to 26.9% in 2006/07 Regional disparities: among poor and conflict affected regions Health expenditure as a percentage of GDP has declined from 1.97% in 2006 to 1.32% by 2010

Findings: Social protection

Social Protection Index (SPI) for Sri Lanka (0.47) is higher than that of South Asia and Asia. Worker protection and promotion: yet to achieve the right balance of policies and programs non-formal sector which accounts for two-thirds of the employed has low levels of protection excess protection can be lead to lower productivity in the formal sector and also exclusion of vulnerable segments from the labor market

Social security: Social insurance schemes offer limited coverage, provide inadequate benefits, have weak administration and regulation, financially unsustainable.
Safety Nets: Sri Lanka has an extensive safety net system Lack of targeting and coverage associated with the system.

Findings: Ageing population

Fast aging population: 25% of the population will be over 60 years of age as Sri Lanka enters the 2040s

Around 75% of Sri Lanka elders received food and in-kind transfers, 50% receive cash assistance and about a third receives household help from their children
Pension system for farmers: low levels of compliance and adequacy and transfers are also low resulting in increasing poverty levels amongst the aging Sri Lanka health system does not have Geriatric doctor in its cadre Lack of novel treatment methods and financing to manage NCDs (Non Communicable Diseases)

Lessons learned
Education: Chinas focus on the direct contribution of science and technology and the preparation of skills for industrialisation helped improve its higher education system Health: regular monitoring of progress, countrys strong research institutions that ensure data and information are effectively communicated to policymakers and used for policymaking are important Establishment of NCD prevention networks, the introduction of preventive measures to high-risk groups and the implementation of integrative communitybased prevention

Social Protection: Chinas urban and rural endowment insurance schemes Ageing Population: Allocation of substantially more public funds to cater to the needs of the elderly population Plans to initiate geriatric medical training at an undergraduate level
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Chinas development assistance

Majority of the past and ongoing projects funded by China in Sri Lanka are for cultural and infrastructure development projects and less on social sector projects - The priority investment sectors are roads, energy, ports, irrigation and water supply and aviation. Recent infrastructure development projects Implemented in lagging regions Early to figure out social and environmental impacts

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Conclusions
Social policies in Sri Lanka has contributed to inclusive growth in Sri Lanka
Regional disparities prevails in educational and health/nutritional outcomes, disparities in educational outcomes among income groups, lack of quality in higher education Lack of coverage and poor targeting of social protection programs Lack of preparedness to face the needs of the aging population

Need to improve the existing social infrastructure/ quality for further inclusive growth by drawing lessons from emerging MICs like China.
Chinas development assistance have contributed to the economic development of lagging regions. Social and environment costs yet to be identified. Chinas development assistance to Sri Lanka should consider the possibilities of transferring experience on development issues that would have a beneficial effect on inclusive growth in Sri Lanka
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Thank you!

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