1. Distribution of Income and Well-being

Table 4  provides the data for income distribution and inequality for the VHHD countries and the comparative data for Sri Lanka. The data for the Gini index (ratio) which are given in World Bank’s tables on World Development Indicators are based partly on income and partly on expenditure or consumption. They are therefore not strictly comparable across countries. The measure of inequality based on expenditure does not take into account the fact that the poor tend to be in a continuing state of indebtedness and the rich save a significant portion of their income. Table 4 contains data taken from the World Bank Tables and the Human Development Report. The lower the ratio the closer is the country to equality. The large majority of countries in the VHHD category have equitable distributions of income and low levels of inequality compared to the rest of the world. The Scandinavian countries, Finland, Czech Republic, Slovak Republic, Japan and Germany have scores ranging from 24.7 (Denmark) to 28.3 (Germany). The next layer comprises a group of countries which have ratios below 40. These include France, Italy, Spain, Greece, Portugal, Australia, Canada, New Zealand, several East European countries and South Korea. The US has a ratio of 40 the highest in the Western group of countries. We do not have data for the oil-rich countries except for Qatar which has a score of 41. For all these countries the index has been calculated on shares of income Singapore, Chile and Argentina have high scores ranging from 42 for Singapore to 52.1 for Chile. It should be noted that these are three countries which have shown a commitment to the concept of limited government and score high on that indicator.

The other indicators of inequality – the inequality index used in the Human Development Report, and the shares of income of the lowest quintile compared to that of the highest quintile- throw light on the structure of inequality. In the countries with low inequality, the share of the lowest income quintile is around 8% and the share of the highest quintile 35%-37%- ratio of the highest to the lowest is between 4:1 and 5: 1. The data for Singapore indicates a ratio of 10: 1

Sri Lanka shows a Gini ratio of 48 calculated on the shares of income (2102 /2013) Household and Income Expenditure Survey and 40.3 on the shares of expenditure (World Bank World Development Indicators 2012). The ratio of the highest quintile of income to the lowest quintile is slightly above 10:1

The analysis in the HDR  makes a cogent case for the reduction of inequality as a vital condition for reaching the  VHHD  condition. Income inequality is intrinsically linked to inequality in health and education. The higher the Gini ratio the higher the disparities in health and education.  The HDR  measures the inequality in the three basic dimensions of development – health education and income and provides an overall measure of human inequality in these societies.   According to this measure human inequality is highest in  Chile Argentina, South Korea and the United States all of whom have a co-efficient of human inequality above 15. Countries with the lowest co-efficient are  Norway Denmark, Sweden, Finland  Netherlands  Slovenia Czech Republic all of whom have scores below 7.

If Sri Lanka’s objective is to become a society in the VHHD category with a strong pro-active government with a high component of public goods and services, then its development strategy and policies have to be suitably crafted and directed towards this end. On the one hand, government budgetary policies need to ensure that the upper-income quintiles are appropriately taxed and that there is an equitable redistribution through public goods and services. On the other hand, policies must result in an equitable, inequality-reducing distribution of the gains of development. This would require policies and action on several fronts. Wages and incomes policy, broad-based participation in the capital market, promotion of the mini, small and medium enterprise sector, reduction of regional inequalities in development are among few of the elements in an equity-oriented strategy that is needed to take Sri Lanka in the direction of a distribution of income and wealth that is intrinsic to VHHD. The structure of income distribution would have to improve considerably if it is to reach the levels in countries with moderate inequality in the range of 30-40 and move much further in the direction of equality to be among those countries with low equality in the range of 25-30. These targets would have to be effectively incorporated into strategies aimed at reaching the lower rungs of VHHD  by 2025  and the higher levels by 2035.


  1. Human Capital and the Educational Attainment of the Population

What clearly distinguish the countries in the VVHD category from those in the lower categories are the indicators relating to human capital. In the computation of the HDI, these are the mean years of schooling of the population and the expected years of schooling made possible through the prevailing system. Table 5 provides the relevant data for the educational attainment of the population in VHHD  countries. The mean years of schooling for the VHHD countries are generally between 10 and 12 years and the expected years of schooling are above 15. The gross enrolment in tertiary education for the majority of these countries is over 60%. When these are translated to the educational attainment of the population, we find that approximately one quarter to one-third of the total of the population above 25 years of age has had tertiary education. A high level of educational attainment of the population is therefore an essential precondition of very high human development.  It is this level of educational attainment that provides them with the capability – technological economic social and political –  needed to reach and sustain the VHHD condition.

For Sri Lanka, these indicators- 10.8 mean years of schooling, 13.6 expected years of schooling gross enrolment in tertiary education of 14% and the share of the population with tertiary education at % of the total population – indicate the large shortfall in human capital compared to VHHD countries. The shortfall of 3 to 4 years in the Sri Lankan span of schooling is the critical gap; it covers the span of tertiary education that is vital for reaching the VVHD condition.

There are other very important attributes of the human capital in the society in the VHHD category. A significant proportion of those with tertiary education is engaged in research which keeps these societies at the cutting age of science and technology. The number of research personnel per million population range between approximately 3200 in Switzerland to 6000 in South Korea and 7500 in Finland. Apart from capability in science and technology the high educational attainment of the population results in a civil society with the intellectual capability to evaluate the outcomes of human development and sustain a discourse on the values that should guide social, economic, and political development. The educational systems of the countries in a condition of very high human development attempt to produce the required knowledge output for all these purposes. Undoubtedly, there are issues relating to higher learning such as the limits of specialization and the need for major reforms in approaches to learning and curricula. They are complex issues that are still being debated in the VHHD countries and higher education systems in these countries are undergoing continuous change. But the paramount need for tertiary education in the VVHD condition is not in dispute.

In this context, the country experiences that are relevant for Sri Lanka are those that have developed rapidly and reached the condition of VHHD within the time span of about 20 to 25 – South Korea and Singapore. Both these countries identified the need for high educational attainment as an overriding priority for rapid development. They then undertook the systematic expansion of the tertiary education system and dedicated a massive effort with large scale resources to achieve this goal. Sri Lanka can learn from the South Korean example.

In 1980, the Ministry of Education implemented a number of reforms designed to make the system fairer and to increase higher education opportunities for the population at large. In a very popular move, the ministry dramatically increased enrollment at large. The number of high school graduates accepted into colleges and universities was increased from almost 403,000 students in 1980 to more than 1.4 million in 1989. This reform decreased, temporarily, the acceptance ratio from one college place for every four applicants in 1980 to one for every three applicants in 1981. In 1980, the number of students attending all kinds of higher educational institutions was almost 600,000; that number grew almost 100 percent to 1,061,403 students by 1983. By 1987 there were 1,340,381 students attending higher educational institutions. By 1987 junior colleges had an enrollment of almost 260,000 students; colleges and universities had an enrollment of almost 990,000 students; other higher education institutions enrolled the balance.” (Wikipedia)

South Korea also made strategic use of educational facilities abroad and sent large cohorts of students to study abroad. The number of students learning abroad was estimated at approximately 250,000 in 2010

The available data for gross enrolment in tertiary education gives an astounding figure of 103% for South Korea. This means that almost all students in the tertiary age group are in tertiary educational institutions. The figure for Sri Lanka as computed for the Human Development Report based on national and UNESCO data is 14%. The other countries excluding the oil-rich countries have gross enrolment in tertiary education ranging from 54 (Switzerland) to 95% (USA).

Recently the academic community and other interested groups in Sri Lanka have agitated for a substantial increase in the allocation of resources for education fixing a target of 6% of GDP. Government has recently declared its intention to increase the allocation to reach this target. There is some ambiguity regarding the sources of financing (total expenditure on education would include both public and private expenditure) as well the use of the additional resources. The over-riding priority in tertiary education is the rapid expansion of enrolment in tertiary education. The present situation is one in which around 150,000 students who qualify for admission to tertiary education annually are unable to obtain a tertiary education for lack of free government facilities and inability to pay for education in a private institution.

A necessary condition of Sri Lanka’s attainment of the VHHD level would be the rapid expansion of enrolment in tertiary education to reach at least a gross enrollment of 50% by 2025 and 75% by 2035. This would require a long term tertiary education plan covering a span of about two decades. It would need to identify the financial and human resources, the public, private mix, the academic/vocational mix, the R&D component including the strategic use of foreign educational facilities in two stages over a 20 year period.