[Comment] Targeted aid more effective than sanctions

from United Press International

By JEHAN PERERA

COLOMBO, Sri Lanka, The Sri Lankan government has been engaged in a battle against the human rights lobbies in the international community, and not only in battling the Liberation Tigers of Tamil Eelam, in recent months. Wide publicity has been given to the prospect of unfair aid and trade sanctions by Western countries.

Government spokespersons have been making powerful arguments against such sanctions. They have pointed out that the human rights situation in Sri Lanka is better than in comparable cases worldwide. The most serious of the potential sanctions against the country is the possible withdrawal of the European Union's GSP+ privileges -- the Generalized System of Preferences that gives duty-free access to European markets. These privileges are contingent on Sri Lanka satisfactorily implementing 27 international legal instruments it has acceded to.

At stake is the viability of the Sri Lankan apparel industry, which employs over 100,000 persons and directly and indirectly supports a multiple of that number. Leaders of some EU countries have expressed their determination to put sanctions in place. A difficult economic situation could materialize if sanctions, including travel advisories that would affect the tourism industry, came into play as global prices of fuel and food continue to escalate.

Apart from the difficulties that could befall the formal sector of the economy as a result of trade sanctions, there are also calls for sanctions in respect of development assistance or foreign aid to the country. Some Western countries that have been longstanding donors to Sri Lanka are in the process of either withdrawing or downscaling their assistance to the country.

They have given two main justifications for their disengagement. One is Sri Lanka's elevation to the rank of a middle-income country on account of its per capita income in excess of US$1,500. The other is their reluctance to have their development assistance provide space to the government to divert its own resources for the war effort.

The argument that Sri Lanka is a middle-income country and is not in dire need of international development assistance has some justification. The past decade has seen the emergence of most Asian countries from the depths of poverty, with Sri Lanka being ahead of many. But the same positive results are not to be found in most of Africa, which continues to be poverty stricken and conflict ridden on a continental scale.

It would appear only reasonable and proper that the African continent should have the first claim on the relatively scarce development aid that is available from donor countries. However, the argument that development assistance should be reduced or withheld from Sri Lanka on account of its prosecution of war as the solution to the ethnic conflict is more problematic.

Most of the assistance given by donors who are sensitive to poverty and human rights issues is targeted at the poorer sections of the population. In the absence of adequate budgetary support from the national government, many local government bodies that depend on foreign assistance for projects that benefit local people would find themselves incapacitated.

On the other hand, the threat of economic sanctions to induce the government to change its policies with respect to war and peace is unlikely to be effective in cases where national security is deemed to be paramount. A government such as the present one, which believes the LTTE is a military threat and must be militarily defeated, is unlikely to be dissuaded by threats of economic sanctions.

In these circumstances, international donors need to reconsider their approach to trade and aid sanctions against Sri Lanka. A 2007 poverty assessment study by the World Bank has shown that apart from the war-affected north and east, high levels of poverty are prevalent in the estate sector and in remote districts such as Badulla and Moneragala. This study showed that in the period 1990 to 2002 poverty halved in the urban sector, while rural poverty only declined by less than 5 percent and poverty in the estates increased by more than 50 percent, making this sector the poorest in the country. The high inflation over the last two years has made the situation even worse.

Another concern of some international donors is that their assistance to Sri Lanka would free up government resources that could be deployed for military purposes. If donors provide direct budget support to the government, the government can utilize those funds for military purposes. On the other hand, if donors target those areas of the economy that the government has already decided to neglect, such as the road system, this problem is less likely to arise. Investing in the road and transport system is probably one of the most effective poverty reduction steps that can be undertaken in the current situation.

The World Bank's poverty assessment study shows that "geographical isolation measured by the distance to the nearest market or town is highly related with district poverty headcounts." As rural roads are a devolved subject the donors could work directly with provincial councils and thereby strengthen the implementation of the 13th Amendment, which is also government policy in respect of an interim solution to the ethnic conflict.

Ultimately, this infrastructure will also serve the development of the north and east when peace dawns, as it must and will. Instead of imposing economic sanctions on Sri Lanka, the international community needs to consider the better targeting of its development assistance.

(Dr. Jehan Perera is executive director of the National Peace Council of Sri Lanka, an independent advocacy organization. He studied economics at Harvard College and holds a doctorate in law from Harvard Law School. ©Copyright Jehan Perera.)