I like being an optimist given that most of my life has been in the world of business. But my gurus have always said it’s good to stop and take stock of the reality. Go to the details behind the numbers and understand the insights.

The Reality – Key indicators very low
Sri Lanka has been grappling with the issue of poverty for decades. Successive governments have been focusing on the top line where Sri Lanka has a pretty picture to boast.  Way back in 1996 the overall poverty indicator stood at 24.3% whilst in 2002 it moved down to a 19.2% and in 2007 it went down to magical mark of 15.2% which is commendable given that the South Asian countries are at logger heads on how to manage poverty through pro poor strategies, and in the recent past the mechanism of Inclusive growth.  How ever I am going back to what my early life business gurus told me- go behind the numbers and understand the insights. It’s only then that the reality can be seen.

As per the 2003/2004 Socio Economic indictors the access to pipe borne water in the Northern Province is only 3.1% whilst in the East it records a 17.4%. The National average stands at a high 30.8%. Even though we cannot be proud of the National Performance the fact remains that for a majority of people who live in the North and the East, life is not as comfortable as it is for the people in the neighbouring regions. The non access to toilets which is a stronger indicator of the quality of life of a household, the Northern region is registering 14.4% and the East a staggering  29.2% whilst the National average stands at a respectable 5.6% which gives us an idea of the disparity that exists at a regional level even though the top line reflects a healthy situation. Even though there has not been much studies done on the implications of the social indicators on terrorism the insight is that these factors create social tension that in turn can lead to conflicts. This can end up in aggressive behaviour that can then result in extreme behaviour like terrorism. This is my hypothesis.

If we move on to indicators which are related to income and health in the North and the East, may be one can develop inferences on the root causes of terrorism. As per the labour force survey of 2002, the labour force participation number is at 50.3% nationally whilst in the North it drops to 33.8% and a 40.3% drop in the East which can be directly attributed to the marked health gaps in these regions. 46% of the children below five years of age in the North and the East are underweight compared to the 29% in the rest of the country.  The percentage of babies born underweight in the country is 18% but the reality is that in the North and the East it is as high as 26%. These figures are worse in the districts like Batticaloa and Vavuniya, where one –half of the children are under weight. A deduction that can be made from these figures is the tension that exists within a family in comparison to ones relations in the other parts of the country. A typical family in such a state of deprivation can be easily coerced to extreme behaviour based on strong ideological principles that can finally result in making of a terrorist is my hypothesis.

Poverty Terrorism Link?
Even though there are counter arguments that countries that have an intermediate range of rights experience a greater risk of terrorism, there is no conclusive studies that have been done if its nurture of nature that fosters terrorism in a country. Michael K. Moore the former head of the World Trade Organization once said ‘Poverty in all forms is the greatest single threat to Peace, Security, Democracy, Human Rights and the Environment’ which to my mind is an indication of the possible relationships that can exits. However, Alberto Abadie, Public Policy Professor at Harvard University’s Kennedy School of Government says ‘Development aid is important, but it is not clear that it is an effective tool for reducing terrorism, at least not in the short run. He says more attention should be given to political freedom because it correlates with terrorism, but in a complicated way’ which is an interesting point of view given the developments we see in Sri Lanka on language policy and human rights.
    
Poor Connectivity - isolation
Research says that isolation is the prime cause of un-socialized behaviour. If we analyze the relevant indicators in Sri Lanka like access to Electricity and Communication, the North and East once again emerges as a deprived region. The connectivity through mobile and land phones is at a low ebb of 10% in the North and 15% in the East as per the 2003/4 census.  Even though the penetration of electricity is at a high 64% of the households in the North and the East, the insight is that in remote areas of Kilinochchi, Mannar and Mullativu the non availability of power can reach a dizzy height of 90%. Which can give us an idea of the deprivation and isolation that exists and the opportunity for idolism to be indoctrinated.

GDP focus –drives in equality
From the above data, it is very clear that policy makers have over time continuously focused on the investments which give the better return to GDP and the result is the neglect of low resource, geographical areas like Moneragala, Badulla and the Estate sector . In fact the recent household and Expenditure Survey 2007 reports that the poverty head count in the Estate sector has increased from 30 to 32 percent which to my mind is a very dangerous situation from a deprivation point of view.

Regionally, this issue is glaring into our face with a 50 percent odd contribution that is generated by the Western Province to the national GDP whilst the North and East are contributing a mere 7%.
The growth of the service sector has led to a neglect of the agricultural sector and the indications are of rural households getting into a poverty trap given that Sri Lanka is essentially an agriculture driven economy from a geographic point of view. The result of this investment strategy is what we see in Sri Lanka now where we are facing severe challenges in the Tea, Paddy and Coconut industry. In fact the overall productivity in the agricultural sector has declined due to the age old agricultural practices yet being followed. There are studies done globally that geography and climate tend to have a strong relationship with terrorism by way of providing a safe haven for training and hideouts for terrorism. The geographic terrain in Mullativu is a classic example in Sri Lanka.

Rest of the Country –  poverty drops to 15.2%
On the other hand if we take the rest of the country research indicates the overall poverty head count has dropped to 22.7 percent as against the previous number of 28.8 percent which is encouraging. However, the 22.7 percent means that the number of people affected by poverty is 3-5 million Sri Lankans. In addition the research also reveals that the non-poor, are closely clustered just above the poverty line which means that the number of poor is subject to sharp increases when slight changes in economic conditions happen like a natural disaster or price increases. If we examine closely the numbers further it reveals that in the rural and urban sectors the headcount ratios are 25 and 8 percent respectively, which means that poverty is essentially a rural phenomenon. If the line coefficient for consumption inequality remains unchanged at the level of 2002 and growth continuous at the same rate as it did in 2004 and 2005, poverty will fall by more than 50% to 8.2% by 2015. If however, consumption inequality increases – as it did in the last 10 years – poverty will fall to 14.8% from 26% in 1990/91 (World Bank, 2006) Further, urban poverty halved between 1990-91 and 2000, while rural poverty declined by less than 5 percentage points, and poverty in the Estates increased by about 50 per cent making this sector the poorest in the country. The latest poverty report launched by the World Bank has revealed that in the Estate sector the poverty has increased to 30% in 2002 which is way above the 1990-91 levels.  However with the increasing prices of Tea the thinking is that a stronger social welfare programme can lead to the poverty level dropping.

Recent research reveals that the overall poverty levels have dropped down to 15.2% which means the pro poor approach of driving the economy is working on this count. In fact it is the best in the Asian region. The challenge however is that the levels of inequality can be greater.

War in Colombo?
Sometimes until disaster strikes on our door we never realize. With terrorism reaching out to Colombo particularly against civilians, we now see the emergence of public opinion in support of overtly waging war on the LTTE. But the challenge for policy makers and the senior private sectors heads is to analyze the root causes, like may be the key indicators like poverty and see what initiatives can be done to correct this. US trade representative Robert Zoellick recently spoke on the liberalization of International Trade and there by drive poverty down. May be its time that the private sector absorbs such strategies and focus on areas like the Estate sector. The best case in point is the utilization of the FTA with India and Sri Lanka on Tea, is below ten percent for the last three years due to non trade barriers. May be if this benefit is made a reality Sri Lanka could have stabilized the poverty head count in the Estate sector without letting it decline.

Eastern Model – Opportunity to deflect LTTE
In the last one and half years I have heard many a rhetoric of strategies on bringing Peace to Sri Lanka. In the last 25 years all this conceptualization has not brought any results. I feel the best opportunity we have to deflect the core cause of the LTTE leader of having a Tamil home land is if Sri Lanka rallies behind the recently appointed Eastern Chief Minister. It will be a classic case study to the world where a blue blooded ex combatant of a terrorist organization has joined the democratic process and there by becoming the Chief Minister of a geographical area. The challenge is the pace at which the socialization process can happen where the new governance structure can drive the key pivots like IDP resettlement successfully, spruce up the economic development and practice a governance model with a strong language policy that is acceptable to the area. It is up to every citizen of Sri Lanka to shoulder this responsibility.

International Perspective
If Sri Lanka makes the Eastern model work we will see a major swing in opinion of the International community where the current LTTE leadership is also asked to follow suit - to may be replicate the Eastern Model. This can be the turning point to my mind in this complex stage where there are many ideologies emerging as the way out. The fact remains is that Sri Lanka cannot afford a 150 billion expenditure on the war when the oil bill is estimated to reach a 4 billion dollars this year which is more than the combine annual turnover of the top two export revenue earners -Tea and Garments.

There are many other theories in this analysis if Poverty is the cause of terrorism. Some arguments are that material conditions do not drive poverty but it is a person’s beliefs and values. However other studies reveal that even a terrorist sleeps at night and it is the fundamentals that drive extreme behaviour.  Russel Ackoff, Emeritus professor at Wharton School of Business designed to promote private businesses role in combating terrorism says ‘The basic problem that spurs terrorism is mis - distribution of wealth within a country. The challenge is that we don’t understand how to close that gap that makes matters worse”