By Ganga Tilakaratna, Deshal de Mel and Zhengian Huang
BANGKOK, Thailand, Sep 4 2019 (IPS)

On the road to sustainable development, Sri Lanka provides an interesting case study. Having overcome a three-decade domestic conflict, Sri Lanka has begun its transformation towards a sustainable and resilient society. The extreme poverty rate ($1.90 a day) dropped to 0.8 per cent in 2016. The unemployment rate is below 5 per cent since 2010.

Free education and health policies have resulted in high youth literacy rates (98.7 per cent) and high life expectancy (75 years). Measured by its index of human development, Sri Lanka is a high achiever.

However, Sri Lanka still faces major challenges. Improving the quality and relevance of education, providing medical treatment and care facilities for the ageing population, and fighting climate disasters call for further policy support, financial mobilization and partnership strengthening.

Government initiatives to mainstream Sustainable Development Goals (SDGs)

Sri Lanka has been incorporating the SDGs into its national policy framework. Since the endorsement of the 2030 Agenda for Sustainable Development, Sri Lanka has taken several momentous initiatives.

The most important one is the Sustainable Development Act in 2017, which establishes the legal framework to implement the SDGs with improved institutional and policy coherence. Under this Act, the Sustainable Development Council has been established, which formulates related national policies and guides new development projects.

From increasing investment to raising investment efficiency

Investments needed to achieve the SDGs are huge, but not beyond reach. Preliminary estimates by ESCAP suggest that Sri Lanka needs an annual additional investment of 4.4 per cent of the 2018 GDP through 2030 to provide a social protection floor (1.7 per cent), poverty gap transfers (0.2 per cent), quality education (1.6 per cent) and climate-resilient infrastructure (0.8 per cent).

Some of these investment needs have been mainstreamed into the Sri Lankan Government’s budgets. For example, the Budget 2019 focuses on:

• Quality education

• by reforming curricula to enable the combination of Science, Technology, Engineering, Math and the Arts (STEM + A), enhancing continuous professional training for teachers, and introducing more technology in education delivery;

• Healthcare

• services and facilities by enhancing investments in healthcare delivery, quality and infrastructure;

• Agriculture

• by linking smallholder farmers to value chains of larger enterprises, investing in climate-proof warehousing, and enhancing natural disaster insurance for farmers;

• Climate resilience

• by improving irrigation infrastructure quality, strengthening eco-system conservation, and expanding natural disaster insurance scheme; and

• Gender

equality by sharing costs of maternity benefits, facilitating childcare services by businesses and schools, and encouraging participation of women on corporate boards.

Despite the Government’s initiatives, financing the SDGs remains a challenge. Relatively low level of tax revenue constrains Sri Lanka’s domestic resource mobilization.

The country’s access to concessionary finance (e.g. ODA) has declined given its elevation to middle-income status. Its export earnings and foreign direct investment (FDI) inflows have remained below potential.

Various measures have been taken to attract FDI and boost export earnings including implementation of a new National Export Strategy and easing business environment by digitalizing company registration and land registry.

In addition to these measures, improving investment efficiency is critical. ESCAP estimates that the developing Asia-Pacific countries can achieve similar levels of outputs and outcomes in health and education sectors using 30 per cent fewer resources. Among its peer countries, Sri Lanka performs well in health and education sectors; however, its investment efficiency in infrastructure could be improved.

To enhance infrastructure investment efficiency for the public sector, public financial management institutions – notably project appraisal, selection and management – need to be strengthened.

Effective coordination among different government branches for construction permits, environmental clearance and land acquisition is important, as these processes often lead to project delays.

Ensuring a steady flow of resources for operations and maintenance is a necessary condition for success. Good maintenance generates substantial savings, reducing the total lifecycle costs of infrastructure projects.

Multi-stakeholder partnerships

Raising awareness among relevant stakeholders and building capacity of relevant institutions are necessary to achieve the SDGs. Developing multi-stakeholder partnerships provide much room for improvement in Sri Lanka to fully engage the general public and the private sector. An effective mechanism is needed for collaborative engagement in SDG implementation, from policy formulation to monitoring.

Furthermore, regional cooperation is an area with great potential that has not yet fully entered the SDG discourse in Sri Lanka. Regional cooperation in South Asia and the broader Indian Ocean economy can help Sri Lanka accelerate its SDG progress in several areas, including climate change, renewable energy transition and food security.

The 2030 Agenda provides a blueprint to achieve a more sustainable future for all. Sri Lanka’s efforts in mainstreaming the SDGs into its national planning and budgeting are an interesting case for the rest of the Asia-Pacific region to learn – a country does not need to wait until it achieves economic affluence before tackling social well-being and environmental health. Developing countries should incorporate social and environmental goals into their path towards prosperity.

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By Zhengian Huang and Daniel Jeong-Dae Lee
BANGKOK, Aug 13 2019 (IPS)

The Asia-Pacific region is at a crossroads. The traditional export-oriented, manufacturing-driven growth is facing headwinds from sluggish external demand and rising protectionist trade measures. 

New technologies have increased the likelihood of labour-intensive jobs in the region becoming automated. Meanwhile, many countries have witnessed widening income and opportunity inequalities. Rising environmental risks and climatic disasters add further burdens to the future development agenda.

There is an alternative scenario in which China pursues a holistic approach to structural reforms that achieves innovative, inclusive and sustainable development growth paths simultaneously

Now the questions that most developing countries in the region face are: Can they achieve economic convergence by following the traditional growth path? How can they balance economic growth with social inclusiveness and environmental sustainability?

This article addresses these questions by using China as an example.

China’s economic development is outstanding in terms of pace and scale. Over the last four decades, China’s economy has become the largest in the region, and has transformed from a predominantly agricultural one to an industrial powerhouse, and is now increasingly service-oriented.

However, strains from rapid structural changes have become clearer. Prominent among these are the country’s slowing population growth and labour force expansion, its decelerating productivity growth as available technologies approach the technological frontier, distributional tensions resulting from rising inequality and strains on the carrying capacity of the natural environment.

Economic simulations through 2030 suggest that under the business-as-usual (BAU) scenario, GDP growth would hold up at a rate of around 6 per cent in the short-term but would experience a sharp drop by 2030 as economic efficiency declines. At the same time, urban-rural income gaps as well as inequality within urban and rural areas would remain wide, leaving pockets of poverty.

China’s energy consumption and carbon emissions would continue to rise, failing to meet its commitment to the Paris Agreement (see BAU scenario in figure A, B and C).

Figure: Alternative scenarios for China in 2030
Source: ESCAP, based on DRC-CGE model.
Note: BAU = baseline scenario; ING = innovative growth scenario; ICG = inclusive growth scenario; SSG = sustainable growth scenario; and ALL = innovative, inclusive and sustainable growth scenario.

However, there is an alternative scenario in which China pursues a holistic approach to structural reforms that achieves innovative, inclusive and sustainable development growth paths simultaneously.

Under this scenario, the country could maintain relatively high rates of economic growth, even as external demand remains sluggish, the labour force shrinks, and capital accumulation slows.

Accelerated urbanization, a rising “middle-class” population and increasing government transfers to optimize the social protection system could narrow rural and urban income disparities.

China’s total energy consumption and carbon emissions could peak in 2025, five years ahead of the timeline for the Paris Agreement, if a new carbon tax is implemented and non-fossil fuel energy assumes a greater share of the energy mix (see ALL scenario in figure A, B and C).

Recent policies and measures show that China is giving more weight to the quality of growth. First, China is pursuing supply-side reforms, focusing on technology and innovation. The country has established objectives to become an “international innovation leader” by 2030.

Second, actions are underway to improve the inclusiveness of economic growth. China has established objectives for eliminating absolute poverty by 2020.

Fiscal transfers to enhance social protection have been increased, while more funds have been deployed for rural infrastructure, agricultural subsidies and discounted loans.

Third, China has taken serious steps to curb pollution while speeding up the transition to clean energy. China aims to get 20 per cent of its energy from renewables by 2030. In late 2017, a carbon emissions trading system was launched in the country.

Such policies should be pursued in an integrated manner in order to reduce trade-offs and maximize synergies. In the Chinese example, policy priorities on technology and innovation could boost growth in GDP but might worsen income inequality, given technology’s effect of favouring capital over labour and favouring skilled over unskilled labour (BAU and ING scenarios in figure A and B).

Policies to reduce carbon emissions would be more effective if combined with new technologies and innovation which improves resource efficiency (SSG and ALL scenarios in figure C).

Scenarios on China’s potential policy paths towards a sustainable future shed some light for other developing countries. While a country’s economic growth may inevitably trend down as it matures, the quality of growth will differ significantly depending on the policy choices made.

It’s highly important and urgent for policymakers to switch their mindsets to prioritize policies that support people and the planet. This is not an easy process. Continuous policy efforts are required to balance development between the social, environmental and economic dimensions to ensure long-term prosperity.

This article is based on a recent ESCAP report China’s Economic Transformation: Impacts on Asia and the Pacific. Please click here to view it.

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