1. Inclusive Growth: What does it mean, and how do we operationalize it?
Joanne Asquith
Independent Evaluation Department
Asian Development Bank

2. Outline Why Inclusive Growth? What is Inclusive Growth
ADB’s Sri Lanka Program
Inclusion in Infrastructure Investments
Conclusions

3. Outline Why Inclusive Growth? What is Inclusive Growth
ADB’s Sri Lanka Program
Inclusion in Infrastructure Investments
Conclusions
So let’s start by looking at why inclusive growth is important

4. Rising Income Inequality
Widening income inequality within countries
Increased substantially since 1990 in most developed world
Marked increases in Asia and Europe
Latin America declined but remains the most unequal
Overall, increased in advanced economies by an average of 5.25 Gini points
Change in Net Gini Index,
Sources: Norris et al Causes and Consequences of Income Inequality: A Global Perspective. IMF Staff Discussion Note.

5. Change in Income Inequality 1995-2014

6. Why Inequality Matters
Stifles growth
Minimizes impact of growth on poverty
Undermines social cohesion
GDP change from 1% point income rise
Source of Data: Norris et al Causes and Consequences of Income Inequality: A Global Perspective. IMF Staff Discussion Note.

7. Outline Why Inclusive Growth? What is Inclusive Growth
ADB’s Sri Lanka Program
Inclusion in Infrastructure Investments
Conclusions
So we know where inclusive growth comes from, but what is it exactly?

8. Making Growth More Inclusive
Social protection
e.g. conditional cash transfers
Inclusive Growth
Not any, but broad based growth
High growth
Access to opportunities: health and education

9. Outline Why Inclusive Growth? What is Inclusive Growth
ADB’s Sri Lanka Program
Inclusion in Infrastructure Investments
Conclusions
So we know that inclusive growth supports growth that is sustainable, that it promotes equal access to opportunities, and it provides safety nets to those who cannot participate.
So what does ADB’s program look like in Sri Lanka?

10. ADB Sri Lanka Program
As you can see, the bulk of ADB’s investment in Sri Lanka is in infrastructure = energy, water, and transport infrastructure. And this has grown over the last 10 years.
Demonstrates that a conscious effort is to ensure infrastructure projects promote inclusive growth i.e. that they benefit lower income groups
So infrastructure projects need to do a better job of impacting on lower income groups
Depends crucially on project design.
Not just infrastructure, but projects on access to opportunities designed so that they directly impact lower income groups

11. Outline Why Inclusive Growth? What is Inclusive Growth
ADB’s Sri Lanka Program
Inclusion in Infrastructure Investments
Conclusions
So let’s start by looking at why inclusive growth is important

12. Transport Connections
Access to markets/jobs/economic centers or to health and education, road itself may not be sufficient if cost of transportation is high
Economic corridors (tourism, agriculture), livelihood training, access to credit
Gender focus in all
Maximize safeguards, minimize vulnerability e.g. to land grabbing, deforestation, human trafficking, road accidents
Choice of labor-intensive construction methods – temporary employment
Transport is ADB’s largest area of investment. Over one third. So big responsibility falling on the transport sector in terms of achieving IG.
Placing all this on one project may be difficult but the inclusive growth outcomes of the investment need to be considered. So IG requires:
Better project design requires better diagnostics
Close coordination with government to include a focus on policy
Cooperation with other donors
So, its not just about the supply or roads, but about the distributional impact. Not just about roads contributing to growth but to inclusive growth i.e. who are the people that won’t benefit….the elderly, the poor, and the disabled.
In South Africa, cash transfers to the elderly is used by households to afford the cost of public transport and allow younger members of households to seek work in larger economic centers.

13. Energy Affordable new connections in low income or rural areas
Reliable energy supply
Renewable energy sources
Provision of small scale credit and technical training

14. Water and Sanitation Expanding water supply connections and sanitation
Estate sector households less likely to have drinking water
Uneven access across ethnic groups
Water pricing – those who consume most pay most
Ensure access by poorest, elderly, and disabled
Also a significant and growing share of ADB support. Here issues are about access, affordability, and quality.
Life line tariff for everyone. Tariff is set very low so water board has problems meeting its costs.

15. Conclusions
Inequality stifles growth, minimizes impact of growth on poverty, undermines social cohesion
Inclusion is not automatic, not just growth but inclusive growth – growth with equality of opportunity, and social protection
Better diagnostics for better project design
Coordination with government (policy context)
Working better with other development partners
Pursuing inclusive growth means including lower income groups in the growth process
It does not mean growing first and then redistributing the benefits of growth later