Daily News Editorial

Tackling poverty

11 March 2017

Most news items can make you either happy or sad, but there are only a few news items that can give rise to both emotions at the same time. This is one such news item, that may also surprise you.

The 2016 Wealth Report by Knight Frank, a UK-based property consultancy released recently said Colombo is likely to see a 160 per cent growth in the super rich with more than US $ 30 million (Rs.45 billion) in personal wealth to 182 individuals over the next decade.

The report noted that Sri Lanka has 3,400 dollar millionaires, 170 multi-millionaires (more than US $ 10 million) and 70 ultra high-net-worth individuals with more than US $ 30 million in assets, though no dollar billionaires were listed as being resident in Sri Lanka. The report has excluded persons of Sri Lankan origin living overseas.

Only Ho Chi Minh City in Vietnam was expected to grow faster than Colombo, at 170 percent with 30 million dollar plus individuals growing to 243 by 2026, from 90 individuals in 2016. By comparison, developed Hong Kong already had 4,080 super rich and would see them grow 40 percent to 5,712. Singapore had 2,500 super rich individuals and was expected to grow 40 percent to 3,500.

This revelation is great news in the sense that we are getting closer to the more economically advanced nations in Asia. Both Vietnam and Sri Lanka are emerging economies and their inclusion in the super rich individuals’ lists is a good sign. However, one should also look at the other, less glamorous side and that is the growing disparity between the rich and the poor, not only in Sri Lanka but around the world.

In fact, if Sri Lanka’s Western Province were a separate country, its growth rate would far exceed that of many other countries in the region. Colombo’s streets are awash with the latest luxury vehicles, many condominiums, hotels and retail complexes are coming up and the overall pace of development is dizzying. But the downside is that the Western Province’s growth rate is higher than the growth rate of all other provinces.

This is a glaring status of inequality that a developing country can ill-afford. The Government should be commended for taking this factor into consideration in its overall development plan. For example, the proposed projects in Hambantota would be an economic boost for that impoverished region.

Working towards the equitable distribution of wealth is a challenge that all countries are grappling with. To Sri Lanka’s credit, the poverty rate has come down drastically over the last few decades. The Sri Lankan government has been successful in reducing poverty from 15.2% from a decade ago to just 8 percent and the nation has made significant progress towards achieving the UN’s Sustainable Development Goals on eradicating extreme poverty.

Globally too, the proportion of the population living in poverty has declined to fewer than 10 percent today from 35 percent in 1990. Since the world population now exceeds seven billion, that still leaves more than one billion people living in extreme poverty. This is simply unacceptable, given the fact that the world spends a staggering US$ 1700 billion annually on defence. Just over one tenth of this amount given as development assistance would go a long way towards eliminating poverty. Another astonishing fact: just 62 top billionaires are wealthier than half the world population combined.

The question is, in Sri Lanka and around the world, are the rich contributing enough to uplift their poorer cousins? The answer is a resounding ‘no’. Most rich people are likely to evade taxes either by not declaring their income and assets to the relevant agencies or depositing their monies in offshore accounts which are not liable for taxation in the home countries. This was highlighted with the release of the Panama Papers, which revealed account details of thousands of rich individuals (and corrupt politicians) who had deposited funds in offshore accounts. Many Sri Lankans are known to have deposited funds abroad and the authorities have rightly granted an amnesty for investing such funds in Sri Lanka. However, it is worth investigating how some of them may have accumulated so much wealth without seemingly having any avenue to do so.

An article from the Center for Global Development calculated that about three quarters of global poverty could be eliminated if developing countries gave a helping hand to the poorest by collecting more taxes from their wealthiest citizens. This is a major problem faced by Sri Lanka – many who should be in the tax net are not in it. Efforts should be made to widen the tax net to cover more rich individuals.

It would be churlish to define wealth in monetary terms alone. Sri Lanka is richer than many other countries in terms of health and education, which are provided free by the State to all citizens, rich or poor. That is equality in action, but we need to do more to ensure that the poor can rise on their own feet.