HDI and socio economic progress in Sri Lanka

The Human Development Reports initiated by UNDP since 1990 focused attention on people and their development.

Accordingly the Report strives to analyze four capabilities in each country namely a long and healthy life, to be knowledgeable, to have access to resources needed for a decent standard of living and participate in the life of the community.

The ideas behind the above development paradigm are not new and could be traced to world renowned economists of the past namely Adam Smith, Robert Malthus and John Stuart Mill to name a few.

Development policy debates in the past ignored the real end of development namely people’s well being and was primarily involved in analysis of the rise and fall of national income. Accordingly economic growth measured as GNP or GDP will indicate a false sense of development ignoring the quality of life.

The Human Development Report for 2005 has identified an extensive set of 200 indicators presented in 33 tables which outlines important human outcomes such as life expectancy at birth or under five mortality rates which reflects the capability to survive, or literacy rates which reflects the capability to learn. They also include indicators identified as means to achieve the above capabilities such as access to clean water, the gaps between men and women in schooling and political participation.

The rich array of indicators provides a measure of evaluating the human development that is multifaceted and focuses on human well being than on income.

The Human Development Index (HDI) evaluates the four basic criteria for human development namely life expectancy literacy rate, community participation and a decent standard of living as measured by gross domestic product (GDP) per capita at purchasing power parity (PPP) in US Dollars. The HDI for 177 countries have been calculated and the range is from 1 to 0.1.Accordingly in the top 10 countries the HDI range from 0.963 to 0.878 and the bottom 10 countries the HDI range from 0.281 up to 0.379.

In the Human Development Report for 2005, Norway ranks one with an index of 0.963 with Australia in third place with an index of 0.955. The United States, which has the largest economy ranks tenth with an index of 0.944. It is interesting to note that out of the top 10 countries, 7 are in Europe and only 3 - namely the US, Canada and Australia are outside.

The low Human Development with an HDI of 0.499 to 0.281 has been recorded for 32 countries. Out of this number 30 countries are in Africa. Niger ranks last with an HDI of 0.281.88 countries record medium human development with HDI varying from 0.799 to 0.505.Out of this number 24 are in the Asia Pacific region. China and India rank 85 and 127 with HDI of 0.755 and 0.602, respectively.

Let us now focus attention on South Asia. The ranking of the countries with HDI are as follows Sri Lanka 93 (0.71), Maldives 96 (0.745), India 127 (0.602), Bhutan 134 (0.565), Pakistan 135 (0.527), Nepal 136 (0.526) and Bangladesh 139 (0.520).

The HDI for this region varies from 0.71 (Sri Lanka) to 0.520 (Bangladesh). Accordingly Sri Lanka has the highest HDI, which indicate comparatively high human development and quality of life.

We shall now analyze the indicators for Sri Lanka as given in the HDR for 2005. The data reflects the year 2003 as there was no HDR in 2004. HDI rank in 2003 was 93 with a GDP per capita rank of 110. This clearly shows that in 2003 Government policies translated wealth into human development.

It is also known that GDP per capita (PPPUS$) rank minus HDI rank if higher would indicate that the country has performed better on human resources development. In the case of Sri Lanka it is 17 as compared to Bangladesh which is – 1.

Human Development Report 1997 introduces a Human Poverty Index (HPI) categorized as 1 and 2 (for developing and developed countries respectively). In 2003 Sri Lanka ranked 42 with an HPI value of 18 per cent. The best performer in South Asia was the Islamic Republic of Iran with a rank of 36 and a HPI of 16.4 per cent. The worst performer was Bangladesh with a rank of 86 and a HPI value of 44. It is interesting to note that the best performer in the world was Uruguay with an HPI value of 3.6 per cent. The worst performer in the world was Niger with a rank of 103 and an HPI value of 64.4 per cent.

Another parameter for determining HDI namely building the capabilities of women is analyzed. This measurement is GDI (Gender- related Development Index). And was introduced in 1995 as an HDI measures an average achievements in a country but does not incoporate a degree of gender imbalance.

The GDI measures achievements in the same dimensions using the same indicators as for HDI but captures inequalities in achievement between women and men. The GDI rank for Sri Lanka is 66 with a value of 0.747. In South Asia Sri Lanka is the best performer with a rank of 66 as compared to Pakistan which is 107. Best performer in the world is Norway ranking 1 with a GDI value of 0.960.The worst performer in the world is Niger with a rank of 140 and a GDI value of 0.271. The greater the gender disparity in basic human development, the lower the country’s GDI relative to HDI.

The gender empowerment measure (GEM) reveals whether women take an active part in economic and political life. It focuses on gender inequality in key areas of economic and political participation and decision –making. It reflects the share of seats in Parliament held by women, female senior officials and managers and of female professional and technical workers and the gender disparity in earned income, reflecting economic independence. Differing from GDI, the GEM exposes inequality in opportunities in selected areas.

The GEM value for Sri Lanka ranks 72 out of 154 countries. Women hold 4.9 per cent of parliamentary seats and make up 46 per cent of professional and technical workers. 21 per cent of administrators and managers are women. The estimated female earned income (PPP) US$ 2579 and the ratio of female earned income to male earned income is 0.51.This could be compared to Norway where PPPUS$ is 32, 272 and in the US PPPUS$ 29017. In Sri Lanka the earned income ratio between males and females is almost equal indicating there is no gender disparity.

It must be stated that the HDI is a good starting point and it must be emphasized that human development is more complex than being captured by appropriate indices. It does not include important aspects of human development such as ability to participate in the decisions that affect one’s life and to enjoy the respect of others in the community. A person can be rich healthy and educated but without the above ability human development is impeded. The present ethnic strife and the elimination of the common man as a major stakeholder and the absence of transparency in the devolution of power between the North East and the rest of the country is a case in point.

It is best to study more closely the Annual Reports of the Central Bank which summarize the key economic and social indicators. I have taken three Reports from 2003 to 2005.In the first instance one could ask whether the population figures given are correct as it is based on the Census of Population and Housing taken 5 years back namely in 2001.The 2003 Report states that the mid –year population, population growth population density per capita GDP and per capita GNP data have been revised from 1990 on the basis of 2001 census. The 2004 Report contains the same explanation as well as the 2005 Report. In the light of the present ethnic strife there have been demographic changes since 2001 and the key socio economic data are questionable. Nevertheless some key changes are reflected in these Reports. Since there was no Human Development Report for 2004 for Sri Lanka (which I was trying to access from the Internet), the HDI for Sri Lanka covering 2002 in the 2005 Report is given as 0.740 and ranks 96 out of 177 countries. However the UNDP HDR for 2005 gives the HDI for Sri Lanka, as 0.751 and the ranking is 93 out of 177 countries. The HDI given is the 2003 performance under the UNF Government. As compared to 2002 the ranking has gone up by three places reflecting the socio economic progress that the UNF Government achieved within a short period of just over a year!

I would also like to comment on the sector classification of GDP. In 1990 agriculture contributed 8.5 per cent and this figure for 2003 was 1.5 per cent and 2004 was 0.7 per cent and 2005 was 1.5 per cent. Accordingly agriculture recorded a significant increase in its contribution to GDP .In 2003 industry contributed 5.5 per cent as compared to 1990 where it was 7.8 per cent. In 2004 the percentage contribution of industry to GDP was 5.2 and in 2005 it was 8.3 per cent of GDP. The services sector contribution to GDP was 7.7, 7.6 and 6.4 per cent during 2003, 2004 and 2005 respectively. This is a significant improvement since 1990 when it was only 4.2 per cent. The policy planners should endeavour to achieve balanced growth in these sectors specially agriculture and industry to broad base its economy for sustainable growth.

The employment figures up to the 3 rd Quarter were 6,973,000, 7,305,000 and 7,518,000 in 2003, 2004 and 2005, respectively. There were no significant increase in employment in the agriculture industry and services sectors were the variation was 35 to 34.1 per cent (agriculture) 24 to 21 per cent (industry) and 44.8 to 43.3 (services) for 2003, 2004 and 2005 respectively.

An increase is indicated in government employment that has been grouped as state sector, provincial government sector and the semi government sector. The figures are 1,043,200 (2003), 1,094,415 (2004) and 1,104,243 (2005). The increase in state sector employment between 2004 and 2005 was nearly 10,000 and this figure may have even tripled in 2006 since the present government came to power in November 2005.It is also significant to note that government employees constitute nearly 15 per cent of the total employed and the ratio of government employees to the population is 1 to 17. Therefore for 17 people there is 1 government employee the highest in Asia and probably in the world. This aberration is a major challenge for policy planners as productivity in this sector is shamefully low and there is a lot of nepotism and political interference. If Sri Lanka has to progress economically as well as provide a better quality of life for its people this large state sector should be drastically pruned. I do not have to elaborate the various ramifications that are involved specially controlling the unions that are backed by political parties.

I would also like to point out that the Central Bank Reports for 2003, 2004 and 2005 give the same figures for poverty. It states that those who earn US$ 1 per day constitute 6.6 per cent of the population and those who earn below US$ 2 per day is 45.4 percent. Accordingly 52 per cent of the population earns less than Rs 200 per day. It is not clear whether these figures are on PPP (Purchasing Power Parity). In any case these figures are suspect as it reflects the poverty in 1995. It is also interesting to learn how many people live below the poverty line in Sri Lanka and what is the definition of absolute poverty as applied to Sri Lanka

In conclusion I have attempted to highlight the fact that human development is not tied up to only increase in GDP or GNP but on the quality of life indicated by certain fundamental factors such as life expectancy, literacy, employment, gender etc. The Central Bank should attempt to analyze the issues involved in development in a more meaningful manner and compare such development during the past years. Such research will be more productive than embarking on economic development per se as the information and data will be valuable for policy planners and others in understanding development with a human touch.

I would also like to stress that the UNF government during its short period of one and half years had adopted policies that were far reaching and contributed to higher human development in Sri Lanka - 96 to 93 places out of 177 countries. The present government does not appear to have any far reaching policies for economic or human development and appear to be pre-occupied in resolving the ethnic problem.

I would also like to stress that this study has categorically proved that the Ceasefire Agreement signed by the UNF government had resulted in significant economic and human development paradigm in Sri Lanka.

(The author is a retired Economic Affairs Officer United Nations ESCAP Bangkok and can be contacted on fasttrack@eol.lk)