Choices: Kiri or kekiri?

July 11, 2006 (LBO) - Do infrastructure reforms increase disparities between the wealthy areas around Colombo and the rest of the country? Do they yield kiri for Colombo and kekiri for others? The Central Bank's Consumer Finance Survey which gives us a snapshot of the household distribution of infrastructure services at the provincial level in 2003-04 yields some evidence, albeit imperfect, because the Central Bank does not have time-series data.

However, in combination with 2001 data from the Telecom Regulatory Commission on the distribution of fixed telephones in Sri Lanka, it is possible to make some broad assertions about how telecom reforms have affected regional disparities. Access First, let us compare the distribution of access to unreformed infrastructure services: water and electricity versus access to the reformed infrastructure service of telephony (fixed and mobile) in 2003-04: Not surprisingly, the Western Province is ahead of all others in all three sectors. One would expect the next positions to be held by the Northwestern, Central and Southern provinces. For the most part, they are. The exceptions are the Northern Province's (actually, Jaffna and Vavuniya districts where the survey was conducted) surprisingly high ranking in telephony (3rd, ahead of the Central Province, which was the traditional runner up in telephony) and the low ranking of the North Western Province in access to piped water (7th, even behind the Eastern Province). The provincial disparities are highest in piped water to the house (51 per cent of households in the Western Province have access while only 3 per cent do in the Northern Province (Jaffna and Vavuniya districts).

They are the lowest in access to electricity (92.4 per cent of households in the Western Province versus only 62 per cent in the North Central Province). Leaving aside the horrible quality of service provided by the Electricity Board in the more rural areas, it appears that the unreformed CEB has not done too badly not only in fair allocation of resources, but also in absolute terms. Without exception, more households have access to electricity than to telephones in all the provinces. It must be noted that the CEB insists that it provides electricity to only around 65 per cent of households. Being the monopoly, it should know. But the Central Bank stands by its figures, claiming that at least 5 per cent of households are connected illegally. The CEB employees who aid and abet this illegal activity know this, but understandably do not report the real numbers. Even the piped water picture is not too bleak. After all, it is only in the Northern and North Western provinces that more households have access to telephony than to piped water. But in terms of provincial disparities, piped water is the worst. The ratio between the highest and lowest provinces is 17:1, compared with 5:1 for telephony and 1.

5:1 for electricity. Over time? The Central Bank does not have time-series data at the provincial level, so it is not possible to look at how the sectors have done in terms of overcoming provincial disparities. However, a rough indication is available for telecom services.

Using 2001-02 data from the Central Bank and the Telecom Regulatory Commission, the percentage of fixed phone per households was calculated. In 2001, the total number of mobile connections was less than one million, or around a quarter of the present number. If anything, the predominantly urban mobile distribution at that time would have exacerbated the disparities in fixed phone connections. The changes are stunning. The Northern Province which was dead last in 2001, is now in third place having increased household penetration by 440 percent (recall that mobiles were prohibited in the North and East prior to the ceasefire, so the comparison is accurate in this case). The North Western Province which was fifth is now second, with an increase of 142 percent.

The slowest growth is found in the first-place Western Province (1.5 percent) and in last-place Uva (5 percent). In the former, it is clear that the expansion of mobiles, simply added to the number of phones per household whereas in places like the Northern and Northwestern provinces, the mobiles appear to have served as the sole household phone (note that the Central Bank data was collected prior to the spurt in CDMA growth which started in 2005). Even Uva showed growth, with the percentage of households with access to telecom increasing from 8.7 to 9.1. So the spectacular growth in 2001-04 was a tide that raised all boats. But it strikingly favored the laggards as indicated by the narrowing of the gap between the most connected and least connected provinces from 12:1 to 5:1 and by dramatic shuffling of the rank-order, caused by rapid growth in the laggard provinces, except Uva and Sabaragamuwa, which regress further Table 1: Rank order in household access to telephones and household connectivity growth

Rank order in household access to telephones and household connectivity growth

	Rank order 2001	Rank order 2004	% Growth connected households
Western	1	1	1.5
Central	2	5	18.3
Southern	3	4	54
East	4	6	45
NWP	5	2	141.7
Sabaragamuwa	6	8	47.2
Uva	7	9	5
NCP	8	7	99.9
North	9	3	439.9

Kiri Given enough time and competition, reformed infrastructure does reduce disparities among regions. The reforms that started to have effect in the mid 1990s, with the licensing of the fourth mobile operator and the two fixed entrants in 1995-96, the partial privatization and managerial reform of Sri Lanka Telecom in 1997, and improvements in regulation starting from 1998, did result in allowing the rural people of this country greater access to telecom services. Of course, it must be noted that the dazzling growth in the Northern Province (Jaffna and Vavuniya districts) was only made possible by the cease fire agreement of 2002, the lifting of the nonsensical ban on mobile telephony in conflict areas, and the courageous decision by Dialog Telekom to provide service in that region within three weeks of the signing of the CFA. The botching of the internationally backstopped peace process does not leave room for much optimism that this kind of growth can be maintained. It is even possible that the frustrated defense authorities will start shutting down the telephone networks in the North and East, following their predilection for closing roads after bombs go off (and the tendency of the current government to agree to every such request). The announced investments by mobile operators combined with deep cuts in prices, will likely reduce the disparities even further in the coming few years, if some form of peace holds. Is there evidence that the government owned and controlled electricity and water sectors will show such results, either in absolute growth or in reducing regional disparities?

Will there be gamata kiri as in telecom if the government colludes with the JVP in preventing reforms?