Global financial crisis may cause major lay-offs

The number of unemployed and underemployed workers around the world has never been higher and will grow by millions more before the end of the year as a result of the financial crisis in Asia and other parts of the world, says the International Labour Office (ILO) in its latest World Employment Report issued recently in Geneva.

"The global employment situation is grim, and getting grimmer," says Michel Hansenne, Director General of the ILO.

"The world financial crisis has put immense pressure on globalisation, and we fear that many governments may begin turning their backs on much needed economic reforms. But globalisation per se is not the problem."

Noting that beyond the current financial turmoil, many countries are suffering from long-term employment problems that can be solved only through the combined action of governments, trade unions and employer organizations, Mr. Hansenne says: "Among measures to increase competitiveness, growth and employment in a globalising world economy, the critical role of a high-quality, educated and skilled workforce must gain more prominence."

Among the highlights of the World Employment Report:

* Some one billion workers - one third of the world's labour force - remain unemployed or underemployed, a figure that is largely unchanged from ILO estimates contained in its World Employment Report 1996-97;

* Of the one billion total, some 150 million workers are actually unemployed or seeking or available for work.

Of these 150 million, 10 million unemployed have been generated this year due to the financial crisis in Asia alone.

* In addition 25 to 30% of the world's workers - or between 750 million and 900 million people - are underemployed, ie., either working substantially less than full-time, but wanting to work longer or earning less than a living wage.

* The ILO estimates some 60 million young people, between the ages of 15 and 24, are in search of work but cannot find it.

* The global unemployment and underemployment picture contained in the 1998-99 report contrasts sharply with developments expected since the last World Employment Report was issued in 1996, when the ILO said that a number of encouraging signs heralded a global economic revival and would cut unemployment and underemployment worldwide.

"The first half of 1998 has actually seen economic growth in many parts of the world", Mr. Hansenne said.

"However, this revival, which we anticipated would spur higher jobs growth in all parts of the world, has only cut unemployment and underemployment in the United States, and to a lesser degree in the European Union.

"Stubbornly persisting high levels of unemployment and underemployment lead to social exclusion of the young and the old, the less skilled, the disabled and ethnic minority groups - with a strong bias against women in all categories", Mr. Hansenne added.

The ILO says that worker training provides the single best way to resolve this problem among unemployed women, youths, workers trapped in the informal sector and other "vulnerable groups" such as older workers, the long-term unemployed and workers with disabilities.

"Nations facing rapid globalisation and competitive pressure need to invest in skills development and training in their workforce," the report says.

"Training and education were at the heart of South-East Asia's economic miracle and could well provide a way out of underdevelopment and poverty for millions of workers in other parts of the world."

Here is a global overview of the World Employment Report:

Asia - The report says that the three decades of sustained growth, averaging almost 85% per year (or 5.5% per capita) in many countries of East and South-East Asia has had no parallel in recorded economic history, but the situation in the region has deteriorated dramatically in the past year.

In Indonesia, steep increase in unemployment and underemployment are being accompanied by food shortages caused by an early drought.

The ILO warns that "real wages in 1998 could well fall further than the 15% or so expected drop in per capita GDP.

Unemployment in 1998 could reach between 9 to 12% of the labour force, compared to about 4% in 1996, though much of this increase will be reflected in rising underemployment rather than open unemployment."

In Thailand, unemployment could rise to about 6% in the labour force in 1998, or almost 2 million jobless, compared to 1-2% or 400,000 to 700,000 unemployed just two years ago.

The reliance of many Thais on the traditional safety net of the extended family could trigger a four to five-fold increase in underemployment.

The ILO says that the ripple effect of such trends will impact far from the urban centres, because "many people in the rural areas, especially the elderly rely on remittances from working family members in Bangkok.

In the Republic of Korea job losses have accelerated in the past year, nearly doubling between November 1997 and February 1998 to 5% and reaching 7% in June of this year.

In Hong Kong, the unemployment rate rose sharply to 4.5 at the end of the second quarter of 1998, from 2.9% in 1997.

In China, it is estimated that 3.5 million workers will be laid off in 1998 and unemployment will increase to 5-6%.

Hopes for increasing productive employment lie in the expanding role of private industry, especially small and medium-sized enterprises.

Furthermore, the ILO fears that labour market conditions in India, Pakistan and Bangladesh, which have so far been spared significant impact from the crisis, could worsen, if the external economic environment turns hostile.

In the Russian Federation, rising economic turmoil has been accompanied by negative growth in real wages, now at less than 60% of their 1989 level.

In a growing number of cases, enterprises cannot pay any wages at all, for months at a time, to their employees.

The report notes that although GDP in Russia grew at a rate of 0.4% in 1997 after eight years of recession and inflation fell to 15% from 48% in 1996, the current economic crisis, combined with growing political instability, is worsening the situation further.

The exchange rate has fallen considerably and accelerated inflation is occuring, nearly daily. Poverty is unfortunately likely to rise.

Poland, by contrast, has begun to see a slow upswing in real wages, to just below 80% of pre 1989 levels.

Unemployment is still high at 10.4% in 1998.

In other Esstern European countries, unemployment is 5.4% in the Czech Republic, 9.2% in Hungary, 9.2% in Romania, 13% in Bulgaria, and 17.6% in Croatia.

Latin America - In Latin America, a recent inprovement in general output indicators has not been matched by improved employment.

Argentina provides an example: a stabilization and structural adjustment programme was followed by an average annual economic growth rate of 5.8% between 1991-1997.

However, the employment situation deteriorated, and unemployment increased between those years, rising from 6.3% in 1991 to a maximum of 17.5% in 1995, before dropping to around 15% in 1997.

"Unable to work in formal markets, where productivity is high and wages relatively good, many workers have to engage in a number of activities that sometimes just allow them to survive", the report says, citing self-employment, domestic service and employment in micro-enterprises.

Africa - In sub-Saharan Africa, a prolonged period of poor growth and deteriorating labour market conditions has given way to slight improvement in the employment situation in many countries during 1998.

Rising growth rates have been spurred by improvements in the weather and declining drought, an increase in the prices of export products, devaluation of the CFA franc (Communaute financiere africaine) to increase competitiveness, and structural reform and political change that made foreign direct investment more attractive.

In the European Union, more than 18 million workers are unemployed this year, the ILO says, noting that "the picture does not take into account the considerable number of 'discouraged' workers who have given up hope of finding work, and involuntary part-time workers.

"However, output and employment showed signs of picking up in Europe by mid-1998, prompting a decline in the average unempolyment rate in the European Union to 10.2% in May 1998, compared with 10.7% a year earlier.

Although Japan still experiences unemployment rates that are low by the standards of most developed countries, joblessness has begun rising sharply as economic growth has stalled since the mid-1990s.

"The long-term unemployed have poor prospects to find a job even if the overall macroeconomic environment improves," the report says. "The social dimensions of this problem are enormous and have to be tackled with policy measures and programmes aimed at reintegrating the long term unemployed into the labour market."

Young Workers: The ILO estimates that about 60 million young people around the world between the ages of 15 and 24 are in search of work, with youth unemployment running 20% in many OECD countries.

"Low growth has worsened the situation in Western Europe, and economic contraction and restructuring has severely limited access to new jobs in Eastern Europe, " the report says.

In developing countries of Africa, Asia and Latin America "urban unemployment rates for young people often reach over 30%", the report says. The new global turmoil makes young workers even more vulnerable to layoffs - employers react to economic recession by cutting back on hiring new workers.

A key policy approach in many of the European Union countries is to provide financial incentives to firms to hire and provide some training for young workers. In the mid-1990s, these "youth contracts" accounted for almost 25% of youth employment in Italy, 20% in Greece and 12% in France and Spain.

* The long-term unemployed: "Long-term unemployment in the labour market is one of the most persistent and serious social issues," the report says. The longer the workers have been unemployed, the smaller their chances of finding a job. Their skill level runs the risk of deteriorating and employers are increasingly hesitant to employ them.

Long-term unemployment has been particularly severe in the European Union member countries, where more than 60% of the 9 million long-term unemployed in 1996 had been out of work longer than two years.

Older workers and women becoming unemployed are more at risk of remaining unemployed for a long period of time. Similarly, workers displaced from declining industries and workers with disabilities are similarly more likely to be among the long-term unemployed than workers in general.

A combination of mutually supportive measures is much more effective in improving employability for the long-term unemployed that "stand-alone" programmes, the report says. Combined measures include subsidized jobs, job search assistance, remedial education, training and family or social- problem counselling.

Training or placement in actual workplaces allows workers to overcome employers' hesitance to hire the long-term unemployed.

Small-scale, community-based reintegration enterprises have been most effective in countering long-term unemployment by providing a range of services to the unemployed while contributing to wider community needs and local economic regeneration.

* Women and training in the global economy: Over the past 20 years, women have provided the bulk of new labour supply in developed and developing countries alike. In every region except Africa, the proportion of women in the labour force has grown substantially.

Women, for example, have accounted for nearly 80% of all labour force growth in the European Union since 1980. In some countries - Ireland, Italy, Sweden and the United Kingdom - the figure almost reaches 100%.

Two opposing trends have emerged in recent years: one is the expansion and feminization of lower-level jobs in the service sector; the other is the growing number of high-level jobs obtained by women as a result of educational achievement. In many advanced industrial countries, for example, women have been enrolling in large numbers "for degrees in medicine, law, accountancy and business studies, all areas which have previously been dominated by male students," the report says.

There are, by contrast, "fewer examples of women making significant inroads into traditionally male-dominated jobs at intermediate and lower skill levels by pursuing training in these areas," notes the report.

Confronted with so many barriers in the labour market, increasing numbers of women are launching their own enterprises. "National estimates indicate that 10% of the new enterprises in North Africa, 33% in North America and 40% in the former East Germany were created by women," the report says. The figure for the United States alone surpasses 60%.

* Informal sector : The ILO report says the majority of new jobs in developing countries are being created in the informal sector which according to ILO estimates employs about 500 million workers.

Lack of sufficient job growth in the formal sector of the economy as well as lack of skills of a large section of the labour force has resulted in the growth of the informal sector where most workers are in low paid employment in unregulated and poor working conditions.

* Training: The ILO report surveys different approaches to training around the world with an eye to highlighting some of the strengths nd shortcomings of each system. It also sets out an agenda for improving the efficiency and governance of training systems worldwide, to achieve the quality standards required in today's highly competitive world.

Most training systems in developing or restructuring economies are in rapid evolution.

In East Asia, governments in recent decades massively supported primary and secondary education and carefully monitored international demand in setting vocational training priorities, on the back of the success of this highly structured approch, a more decentralized system is being developed, with less government involvement and more choice from increasingly affluent populations with stronger social institutions. In Eastern Europe, the governments of centrally planned economies worked to match workforce skills to the demands of state-owned industries which provided additional training. In general, the training needs of workers in this region have suffered as a result of the economic transition.

"Demand-led orientation of training systems has various components; Firstly, government helps private agents, both employers and individuals, to sponsor training which is in their own immediate interests".

Secondly, in the training which governments sponsor in their own right, more effort is made to incorporate information about market demand for skills, and to replace government provision by private provision, using market-like mechanisms to increase efficiency," the ILO report says. Public sector training providers are forced to compete with others for training contracts.

Public policy increasingly concentrates on encouraging enterprises and individuals to shoulder the major part of training costs by demonstrating the utility of training and encouraging greater competition in the provision of training. But once again, a number of possible models can co-exist.

ILO news - Geneva

Rouble tumble drags down tea prices

Tea prices have fallen by nearly Rs. 20 in the last four weeks in the absence of the Russian buyers, chairman CTTA, Michael de Zoysa said. Most exporters are awaiting payment for their earlier shipments. Only a few exporters are still dealing with Russia on cash upfront basis. Selling pressure with the collapse of the Russian market has pushed national auction averages down.

The national auction average for August of Rs.136.52 has slumped to Rs. 126.43 in September, tea broker Asiya Siyaka says.

Russia which bought 20% of our total exports of bulk and packaged tea has a buffer stock which will take them through the bitter Russian winter, de Zoysa said. The Russian fallout is now going in increased quantities to the Middle East (another volume buyer) the Baltics and East Europe, he said.

Most Russian buyers are only willing to trade in roubles, mainly beneficial to India who has a rupee/rouble trade account.

Meanwhile government attempts to give relief to the tea trade through an Export Credit Insurance Scheme which has been hanging in the balance was finalised last Friday , according to market sources.

Meanwhile an Asia Securities report says that retailers' faith in the sector is largely misplaced as plunging tea and rubber prices will affect sector profitability in the third quarter of 1998.

This is anyway a slack period for plantation crop prices as output picks up and quality falls with the onset of monsoon, they say.

The clear difference between now and the same period in 1997 is that tea prices were gathering momentum then, while wages, which account for roughly half of production costs, were also lower by approximately 16 per cent. In the high volume tea industry, price dips can have a major impact on profitability. A one-rupee reduction in the realisation of a kilogram of tea converts to a Rs. 260mn drop in industry revenue, the report said.

With the rouble having undergone a three fold devaluation, there is little hope that retail tea prices in Russia could be raised correspondingly to maintain margins. The resultant pressure on margins along the entire chain of distribution is expected to hit Sri Lanka tea exports to Russia quite hard in the ensuing months and keep tea prices depressed at the Colombo auctions, the report said. A Reuter report says that Russia is considering import tariff cuts, to ensure key imports of food and other goods remain possible.

But Andrei Kushnerenko, deputy head of the department for external trade regulation at the Industry and Trade Ministry, has said setting an artificial rouble-dollar exchange rate to help importers was a more likely option.

"Customs tariffs are long-term instruments, and changing them because of short-term changes in circumstances is not the right way of doing things," he has said.

"There are other options, for example allowing importers to pay tariffs and VAT (value-added tax) at a favourable exchange rate. While the situation is so uncertain, for, say, the next three months, one could let (importers) pay VAT and tariffs at a rate of six or eight roubles to the dollar. Then there would be no need to cut tariffs," he added.

Earnings growth slows down

Mirroring the deceleration in GDP expansion, earnings of companies have grown by a medicore 9 per cent in the second quarter of 1998, an Asia Securities report states.

However, broader market profit growth is slightly higher at 12 per cent. Although overall market growth has been affected considerably by large incremental losses at the bomb damaged Galadari Hotel and Overseas Reality (the owner of the World Trade Centre), strong performers in the previous year, such as banking and finance and plantations, have also performed poorly in the second quarter of 1998.

With provision for equity portfolio losses denting earnings of the second and third largest profit earners in the market, NDB and DFCC, overall banking sector profit has fallen by 8 per cent year on year.

However, benefiting from relatively low deposit rates and continuing trade flows, profit growth in the commercial banks has been a healthy 31 per cent in the second quarter of 1998.

In the plantations, the 16 per cent wage hike in January and depressed rubber prices and a correction in tea prices after record highs in the first quarter 1998 has resulted in sectoral earnings falling 42 per cent year on year.

In tourism, considerable losses at the city hotels (Galadari and Taj) have raised sector losses by 115 per cent year on year. However, there has been an improvement in the resorts with losses declining by 18 per cent YOY.

Losses in the textile sector have increased four fold following a government decision to allow garments manufacturers in the Export Processing Zones to sell a part of their output locally.

The best performers in the second quarter of1998 have been the engineering, manufacturing, food and beverages and the diversified sector - areas predominantly driven by local consumption.

In the food and beverages sector, a strong turn around at Coca-Cola bottler, Pure Beverages, at Ceylon Cold Stores and Nestle has lifted sectoral earnings by 67 per cent.

Manufacturing sector earnings are up a strong 87 per cent with considerable contributions coming from Richard Peiris, Lanka Lubricants, Pelwatte Sugar and Dipped Products.

Further, driven by a strong performance at Colombo Dockyard, engineering profits have grown over three fold. Encouragingly, earnings in the diversified sector, which comprises the conglomerates, have risen 36 per cent.

While the second quarter results for 1998 indicate pockets of healthy growth, overall earnings performance is short of our expectations - partly also due to unexpectedly large incremental losses at several companies affected by the northern war.

In fact, if these losses (attributed to Galadari Hotel and Overseas Reality) are discounted, market earnings growth is a respectable 16 per cent. While this compares favourably with the rest of the market, the adverse external environment, particularly for export oriented manufacturers and the plantations, is bound to slow growth during the remainder of the year, the report states.

Coconut-a much neglected industry fighting for survival

• The Palm in strange soil

By Feizal Samath

Sri Lanka's coconut industry is fighting with its back to the wall for government help in the face of apathy, neglect and an East Asian crisis that has broken the spine of the industry.

The coconut industry is, perhaps, the worst affected by the financial crisis sweeping across Asia - effectively stunting export growth - while the rest of Sri Lanka's economy has been relatively left unshaken, so far.

Look at these statistics:

- Production of dessicated coconut (DC) has fallen sharply to 29,940 metric tons in the period January to August 1998 against 42,855 metric tons in the same period last year.

- Exports of DC fell to 14, 646 mt in the period January to June 1998, almost half of what was achieved in the same period last year - 28,844 mt.

- In value terms, DC exports were worth Rs 961 million in January-June 1998, down 53 percent from the value of exports in the same 1997 period.

- The total value of all coconut exports including DC, coconut oil, copra, fresh nuts and coconut shell charcoal has fallen by 27 percent in the six months to June 1998.

The main reason for the negative growth picture is that Sri Lankan exports of coconut products have become uncompetitive in view of the East Asian crisis. Government neglect of the coconut industry has also been attributed to a general downturn in the industry.

According to K. Dayaparan, chairman of the Coconut Products Traders Association, the Philippines, Indonesia and Malaysia are the biggest producers and exporters of coconut products. However, Sri Lanka is the number two exporter in the world of dessicated coconut.

He said that the crisis began in July last year after financial turmoil swept East Asian economies where currency values fell overnight, causing their export prices to be much cheaper than the rest of the world.

From July to September this year, Sri Lanka's currency has depreciated by 12 percent while East Asian currencies have fallen in the range of 53 percent to 320 percent (Indonesia).

"Our prices are uncompetitive," said Dayaparan, adding that the Central Bank and government authorities have repeatedly said there was no need to depreciate the Sri Lanka currency further.

He said the East Asian crisis has also cost Sri Lankan exporters the loss of key markets and less work for DC mills among other problems and urged that the government should take remedial measures to rectify the situation. The industry has a total of over 135,000 workers employed.

DC mill workers, at the 60-odd mills located in the northwestern coconut triangle of Puttalam, Gampaha and Kurunegala, were nowadays earning one-third of their normal monthly wage of about 7,000 rupees per month.

"We have recommended a reduction in import duties of vegetable oils. We have suggested zero duty for vegetable oil and 20 percent duty on coconut oil imports. There is now a duty of five percent on vegetable oil imports and 25 percent for coconut oil," he said.

He said this recommendation would enable imported vegetable oils to be sold at Rs 57,000 rupees to Rs 58,000 rupees per tonne compared to current prices of Rs 63,000 rupees to Rs 67,000 rupees per tonne. International prices of coconut oil have been in the range of Rs 45,000 rupees to Rs 47,000 rupees per tonne.

The request for a fall in duty rates is bound to stir up protests from coconut producers but export trade sources say that the fall in local prices would be marginal. "Local farmgate prices of coconuts would fall to about Rs 6,500 per 1,000 nuts compared to Rs 6000 per 1,000 nuts making it a marginal drop," one source said.

He said that it would be more detrimental to the farmer if the trade did not buy or cut its purchases of coconut from local farms for processing purposes if prices were too high.

Presently about 70 percent of total coconut output is consumed by Sri Lankan households with the balance being utilised for making other coconut products.

Dayaparan says that coconut oil and copra have been exempt from turnover tax but in April this year, both were subject to the new goods and services tax, increasing the financial headaches for the industry.

The industry has also urged the government to withdraw the cess payable on coconut shell exports, saying that this is one of the few countries where there is a cess on exports.

Dayaparan said that Haycarb, Sri Lanka's top producer of activated carbon, has ironically set up a factory in Thailand - a competing country - to make activated carbon because it is cheaper to do it abroad and there is no shortage of raw material.

Giving another example of how some East Asian countries have adjusted to the crisis, Dayaparan said that the Philippines was importing palm oil for local consumption in an attempt to use the bulk of its coconut for export purposes.

This is similar to what India has done - allowing some imports of tea for local consumption to increase its tea exports. India, until recently the world's biggest tea exporter, has had to trim exports as local consumption has risen.

The biggest problem facing Sri Lanka's coconut industry is that coconut, like rubber, is one segment of Sri Lanka's agriculture economy that has been neglected over the years by government planners - unlike tea that has got all the support.

This is despite the fact that coconut exports are the third largest export commodity in value terms.

Trade sources say that in recent years Sri Lanka's top commodities have been given the cold-shoulder by planners in the name of attracting new exports and foreign investment.

While commodities are expected to fend for themselves in a global environment that is ever changing, all the perks and benefits are given to export industries - like garments for instance - where the import content is very high and the net earnings are much lower than commodity exports.

The Palm in strange soil

A sizable coconut farm is taking shape in Sri Lanka's Mahaweli areas and coconut planners are hoping this would be the first in a series of large-scale coconut farms in lands that are normally used for other agriculture purposes.

The Mahaweli coconut farm, which has an extent of 3,000 acres with plans to extend it to 10,000 acres in the next five to eight years, is being developed and promoted by the DC Millers Association, trade sources said.

They said that this experimental farm would have large-scale intercropping and also serve as a seedling farm in addition to the normal coconut produce.

"The future lies in large scale professionally managed plantations not in smallholdings," said a spokesman for the Coconut Products Traders Association.

Unlike the traditional coconut areas in Sri Lanka's northwest region, Mahaweli areas are irrigable all year round due to the availability of water. The coconut plantations would use the drip irrigation method with water pipelines running across the area.

The promotion of coconut cultivation in the Mahaweli is also under a model plan from the Coconut Cultivation Board to grow coconut in hitherto non-coconut land, because of the gradual fragmentation of traditional coconut land for development purposes.

Brightening up a forgotten village

HANGURANKETA - M.D. Thilakawathi trudges up and down a slippery mountain slope a couple of times a day in Lanka's central hill region to feed her family and work on vegetable fields.

She lives on the top of the mountain, about three km from the bottom and the nearest road, and is compelled - like many other families living on the cold and windy mountainside - to go up and down for basic provisions or other amenities.

That's normal life for some of Lanka's poverty-stricken population and in this case, their poverty is compounded by the inaccessibility to basic human needs, like health, education and food.

Help has now come from the United Nations Development Programme (UNDP), which under its South Asian Poverty Alleviation Programme (SAPAP), is trying to ease the hardships of Thilakawathi and two or three dozen families living at Rathyaya village by mobilising their skills and energies to take them out of a never-ending poverty trap.

"Our programme is basically one of social mobilisation," Somasiri Dayaratne, national co-ordinator of SAPAP, told me after a gruelling climb through a mud-splattered narrow path and salubrious climes to the top of Rathyaya village.

He said UNDP worked with community and village-based groups to help the poor to help themselves through various self-employment avenues, rather than create a dependency syndrome.

At Rathyaya, water for irrigation is a crying need and community groups helped by UNDP funds and technical help are building a 350 by 100-foot circular reservoir to collect water from a natural hill source and direct it, through a maze of drains, to the rice and vegetable fields down the slope.

Thumpalagedera Piyasinghe, a rice farmer and village elder, said the villagers work as volunteers in groups of five to build the reservoir and the drains, which would hopefully be completed in two to three months. UNDP is providing funds for material like cement while the villagers contribute the labour.

"Together, we will build this reservoir and irrigation system and improve the life of this community," said Dayaratne, noting that another important aspect of development is building a proper road to the village.

More than 30 percent of Lanka's 18 million people are poor and live below the poverty line which, according to a government yardstick, means earning or receiving less than Rs. 1,500 Sri Lanka per family a month.

The poor in Lanka, like many in the South Asian region, have received doles or cash handouts through mostly politically-motivated government schemes over the years. While on one hand there is often financial mismanagement of the project, little has been done to show them how to get out of poverty or teach them some skills.

Political analysts said that under a previous project, a trust fund set up to help poverty projects spent 80 percent of its budget on overheads like salaries and vehicles.

Dayaratne says that administrative costs of SAPAP, which covers nearly 80,000 families in Hanguranketa and Kotmale towns in the Nuwara Eliya district, 180 km off Colombo, have been cut to the bare bone and accounts for less than 18 percent of the annual budget which this year is 460,000 US dollars.

SAPAP is a direct outcome of a poverty strategy adopted six years ago by the South Asian Association for Regional Co-operation (SAARC) which groups together India, Pakistan, Sri Lanka, Bangladesh, the Maldives, Nepal and Bhutan.

SAARC leaders met in Colombo last month for their annual summit but there is growing disenchantment that little has been done to reduce poverty in the region - one of the key objectives according to the group's charter formulated 13 years ago - and that the grouping has become a mere a "talking shop".

At its 1992 summit, also in Colombo, the leaders decided to implement a poverty strategy and agreed to a regional commitment to eradicate poverty by 2002. More than half the world's poor - a staggering 400 million people - live in South Asia.

SAPAP is being implemented across the region with similar programmes in all countries except Bhutan, but its reach is limited to a small percentage of the region's poor.

UNDP officials said Nuwara Eliya had been selected for the SAPAP programme because it is one of the most impoverished regions in Lanka. Since end 1996 when it began, the programme has helped to enrich the lives of peasant farmers, unemployed youth, abject poor, rural craftsmen, women's groups and other low-income groups.

The basic objectives of the programme social mobilisation and organisation, grassroots institutional development, skills development and technology transfer for micro-enterprise development, initiate and support the development of income generating activities and linking community and village groups with government funding agencies and other private funding agencies.

UNDP and community-based groups like the Hanguranketa Rural Support Foundation (HRSF) and the Kotmale Rural Development Foundation (KRDF) have developed rural savings and credit schemes and a series of employment-generating ventures in handmade paper, broiler chicken, seed production, vegetable growing and marketing, dairy milk production among others.

HRSF president Gamagedera Bisomenike is a poor dairy farmer whose milk yield had been in the region of eight litres per day. The UNDP programme provided her with better management techniques and European cow raising her yield to 12 to 14 litres per day, and a profit of Rs. 2,000 per month. This has helped to rebuild her dilapidated mud hut and buy some furniture.

"The UNDP programme has helped many of us to rise from abject poverty levels," she said.

HRSF, which has more than 3,000 members and works in 126 villages, collects Rs.10 from each member per month under its rural savings and credit scheme and has given loans totalling Rs.288,600 so far at an interest rate of two percent.

"We were helpless, powerless people but after the UNDP came into town and showed the way in building development structures and developing our lives, things have brightened up," Bisomenike said.

At Kotmale town, Dingiri Banda, a former government worker, decided to go into the egg business and with Rs13,000 worth of financial help from UNDP, has himself set up in a profitable business.

Perhaps the most motivated of the lot is 26-year old Lohitha Darada Kumbura, a final year student in archaeology at the University of Peradeniya.

Lohita had a small chicken farm and was selling fresh farm eggs but found the cost of chicken feed astronomical. It was a struggle to pay for his university education and feed his young son and wife. With help from the programme, Lohita and four others produced their own chicken feed at less than half the cost and the group now markets their own, cheaper product to 50 other chicken farmers in the area.

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