The Hindu Business Line : `Public investment holds key for poverty reduction in S. Asia'

In the seven countries constituting the South Asian Association for Regional Cooperation (SAARC), public investment is the key for fostering growth and reducing poverty.

In its 2005 Regional Poverty Profile report on Poverty Reduction in South Asia through Productive Employment, released here on Friday, by the Planning Commission Deputy Chairman, Mr Montek Singh Ahluwalia, the Kathmandu-based SAARC Secretariat called for better allocation and utilisation of public funds.

Investment

It said public investment in sectors such as energy, rural roads, irrigation and primary schools has often generated and stimulated private investment.

It said that unequal distributions of the gains of growth now constitute an emerging challenge, undermining progress in poverty reduction.

Some SAARC countries have logged relatively small gains in terms of human development indicators, despite relatively high growth rates in per capita GDP.

Others have scored distinctly superior literacy, school enrolment and health outcomes despite modest or low per capita income by global standards.

"The disconnect between performance in terms of human development indicators and economic development indicators has become increasingly conspicuous," it observed.

Agriculture

In agriculture, the policy priorities are to increase both productivity per hectare and the productivity per worker, while simultaneously seeking to foster as many non-farm jobs as possible with a view to absorbing the shift of workers form low productivity employment in agriculture to more productive employment in the non-farm sector.

It said urban poverty is a problem in Bangladesh and India, which calls for special treatment and specially- designed programmes.

Disproportionately slow employment growth in relation to income growth rates in several countries has led to the widening of agriculture-non-agriculture and formal-informal sector income disparities.

Except in Sri Lanka, the informal sector is growing faster than employment in the relatively small formal sector.

"Policy driven cutbacks in public sector employment and shift to more capital-intensive production processes in the private formal sector have tended to depress formal sector employment growth rates," it said.

Luring FDI

The report said the debate in countries such as Bangladesh, India and Pakistan has been focused heavily on attracting foreign direct investment, portfolio investment and humanitarian or other assistance, while relatively little is said about remittances and the contribution of diaspora.

These countries are among the world's largest recipients of remittances in absolute terms.

Hence, it said the SAARC might initiate a study to scan projected demand/supply of labour in various sectors in the region, find out comparative advantage in employing personnel from the region and identify where trade in services might benefit from contractual labour movement.

Another study could be made to understand the patterns of remittances transfer, through formal and informal channels and how the remittances could be better utilised.

In reply to a question on this issue, Mr Ahluwalia said the Government would consider policy changes, if they were needed, while finalising the 11th Plan. He also said that the FDI policies of the Government are now good enough and "we will look into how the FDI policies could help increase the investment'.

Pitching for some integrated initiatives for the region as a whole, the SAARC said increased intra-regional trade through the SAFTA, transport connectivity and regional and sub-regional social development and poverty alleviation projects could be a beginning in this regard.