New land policy urgently needed to uplift farming communities
While addressing the recent Sri Lanka Economic Association annual sessions, President Maithripala Sirisena said that efforts have to be made to replace the import of food to this country.
It has to be mentioned with due respect that such a policy would be similar to the disastrous policy of import substitution that was followed in the 1970s (leading even to starvation as imports were banned) and the last decade or so when heavy tariff protection was resorted to.
There are several issues here. Anything and everything cannot be produced here unless the country has a global competitive advantage in doing so. It is better to produce a surplus of such competitive products, export the excess and import other items which are available in the world market at lower prices benefiting the long forgotten consumer, without heavy tariff protection of such items.
However, it may be justified in producing the staple rice if necessary under a reasonable degree of import tariff protection for food security purposes. Here the goal should not be ‘self sufficiency in rice’ as in the past but the wellbeing of the farmer so that they will not have to face problems such as spending several days on the roads with their produce as they do now.
As the President has stated at a later meeting we need a new land policy. In fact the Land Development Ordinance (LDO) of 1935 is still the basic land policy in force today. It must be replaced and the goal should be the wellbeing of the farmer and the consumer, in other words a human development orientation.
Less than $2 per day
According to the World Bank about 23.9 per cent of Sri Lanka’s population earns less than US$2 a day per person (2010).
The same ratio in Malaysia gained its independence a couple of years after Sri Lanka was 2.27 per cent. Nine out of 10 who are poor here live in rural areas with the rural population being about 17 million. Undernourishment and malnutrition are rampant while many pregnant women are anaemic.The main reason for rural poverty is reported to be low productivity in rural agriculture. In fact the agricultural value addition per employee here was $1,046 as against $10,127 in Malaysia, $50,720 in Japan, according to reported data
Restrictive tenure conditions
The bulk of land (over 80 per cent) especially in rural areas is owned by the government which has leased it out (later most of it was converted to grants) in small lots. The tenure conditions are so restrictive that holders find it difficult to improve the productivity of the land. Since most of the lots are not owned, the farmers find it difficult to access bank loans and invest.The subsequent subdivision among those who inherit is so heavy that there are reported to be more than 1.4 million lots which are less than 40 perches in extent out of a total of 3.3 million land parcels, held by 3.6 million households, according to government data in 2002 and it may be worse in 2015.
This is mostly subsistence farming and mixed cropping and one of the reasons for low value addition in rural agriculture. The use of machinery on small scattered irregular plots requires long journeys and is often inefficient and for the same reason consolidation for increasing output and reducing unit costs is difficult. In addition as small quantities are produced, it is infeasible to undertake further processing and provide for exportation. As fragmentation of holdings becomes worse with each generation and incomes decline, the youth especially the educated leave the land in droves due to poor returns/ low wages and migrate to the already crowded urban areas, or go abroad legally or illegaly to work under harsh conditions, leaving the children and the elderly behind creating a severe social problem.
Undeveloped Value Chain
The situation is further worsened by the fact that little attention is being paid to strengthening the value chain for agricultural produce that should consist of quality planting material production, well maintained irrigation works, warehouses, cold rooms, paved rural roads, marketing and research institutions, etc. The research programmes and extension services being undertaken appear to be ineffective in controlling disease and pest attacks to increase yields.
Worse still the price the subsistence farmer gets from the market for his produce does not compensate him adequately and so they are eternally in debt. Consumers too are affected as the transporters/traders in particular demand high prices to make up for high wastage (30-40 per cent) in transit. Thus the reliance on imports is high to make up for shortages, leading to a worsening of the trade balance.
Other problems include soil erosion, pollution of underground water resources, widespread illicit felling of trees and sand/gravel mining in rainwater catchment or forest areas, land grabs often aided and abetted by politicians and encroachment of forest land by land hungry farmers resulting in human animal/elephant conflicts, the land man ratio being high. The abuse of the natural environment has resulted in a reduction of the primary forest cover.
Additional problems
The usual solution resorted to by the authorities has been to set up at central and provincial government level numerous ‘top-down’, under-funded, poorly coordinated, inefficient and mostly corrupt public institutions to service the sector with underpaid and de-motivated officials. Through these institutions Samurdhi payments and guaranteed prices at enormous expense have been thrown in while other subsidies like low priced fertiliser, planting material and disaster relief often get diverted, are of a low quality and not delivered on time.
Productivity
Thus nothing much has happened so far to improve the wellbeing of some 17 million people who depend directly or indirectly on rural agriculture. Why? One of the reasons could be that the wellbeing of the farmer and consumer is not uppermost in the minds of politicians who sought only short term political gain. The way out appears to be to find solutions to improve farm productivity and further processing possibilities to create better paid employment opportunities and to increase export earnings.
First it may be necessary to study the land reform movements adopted in Japan, Taiwan, Iran and particularly the semaul un dong land reform movement adopted in South Korea successfully. The initial steps in the Korean initiative was the preparation of a Land Utilisation Plan (LUP) to identify the arable and non-arable lands, soils, water resources, weather patterns, etc. The main objective of these projects was farm land consolidation. The activities under them included long-term lease, exchange, purchase by the government of the farms owned by non-cultivating landowners and occupation-changing farmers to sell them to professional farmers after re-plotting and construction of paved agricultural roadways to enable easy mechanisation ultimately to improve productivity (Doug Young Chung, Chungnam National University, Taejon,APO Seminar on Impact of Land Utilisation Systems on Agricultural Productivity,2003).
Granting ownership of consolidated farms was the overall objective of the movement in South Korea since it helps to reduce unit costs and enhance returns (productivity) while enabling farmers to commercialise and run their businesses without leaning heavily on state assistance. However, if ownership of holdings were to be given here, the social and economic consequences have to be studied carefully. One of the problems created would be the displacement of large numbers of subsistence farmers when they sell their holdings that do not yield an adequate income to owners of larger holdings and others.
An obvious solution is providing these with better paid jobs in manufacturing and service establishments as in the case of countries such as Japan, South Korea and Taiwan which undertook land reform.
Another alternative is the prohibition of selling the land and setting up of joint- stock companies of small farmers (corporatisation) after a LUP and re-plotting, under which they can go in for large scale cropping, further processing and marketing schemes as a single large unit to get a better return.
In such a case the farmer is in control of the management of production, processing and marketing and could recruit the skilled people required like any other company. Applying this methodology to the larger tea and rubber plantations to push up productvity could take the form of giving the farmers a controlling stake in the business and a position in the board of directors.
Urban/industrial clusters and
infrastructure facilities
Each large scale cropping area could accommodate a well located urban cluster/industrial area consisting manufacturing and service oriented enterprises to absorb the excess employment and the landless in rural agriculture. The planning, policies, location and the provision of infrastructure facilities such as roads, water and electricity in the clusters and in the area around them is the responsibility of the state or the provincial authorities. The private sector could be incentivised to undertake the rest of the work such as setting up of the factories and the services required. Businesses might readily do so when the primary inputs would be made available on a large scale.
Institutional arrangements
The relevant state agencies have to be restructured as leaner, better funded organisations with better paid personnel recruited on merit alone to enable the provision of quality inputs including credit if possible on collective guarantees of groups of ceditors since the poor do not possess assets to offer as collateral. Other inputs to be provided are research/technical expertise, information especially on markets and extension services.
An open market could not always ensure that farm produce is sold at a fair price but that the prices are subject to fluctuations due to changes in the market conditions as well as the weather. The state therefore has had to set up various support schemes like the Guaranteed Price Scheme all of which have failed to so far. Out of the various types of price support schemes adopted by different countries the best according to the literature is supposed to be insurance schemes to provide for the losses incurred by the farmers, along with a well targeted social security system for the needy.
But if the farms are converted to commercial concerns on the lines mentioned above they may not need much support from the state for marketing. It may be noted that diversification of crops in the larger holdings may also help to ward off losses due to price fluctuations.
Benefits
Large-scale operations like the consolidated versions of rural farming with urban clusters could contribute to increases in rural productivity, further motivated to do better by the competition/rivalry among the firms (if they are not protected) as demonstrated for instance by South Korea and Iran.They will also generate additional investment and provide better paid jobs in manufacturing and services which could discourage people especially women from going abroad for menial employment.
Such large operations would also enable an increase in food production at lower prices that could reduce hunger, malnutrition, anaemia and sickness among rural people while increasing the incomes of rural populations. More earnings could be generated from exporting the surplus. Higher rural incomes would increase the demand for various industrial goods and services from the rest of the country and speed up economic growth in the entire economy. This then is a human development oriented dynamic model of development that could directly benefit about 17 million people living in rural areas. It could complement the slower, less dynamic ‘trickle down’ process often resorted to currently and lead to the greater benefit of the entire country.
Design a new land policy
It has been a long disastrous journey with subsistence farming and heavy protection where rural agricultural policies and operations here are concerned. therefore it is time to take action – first design a new land policy to replace the 1935 policy as the President has pointed out and formulate other policies and programmes mentioned above required to improve agricultural productivity with the primary goal of enhancing the wellbeing of the farmers (especially in the neglected peripheral areas) and the consumers. This should apply to tea and rubber plantations as well. These could be followed up with other human development programmes relating to education and health, with clear objectives to usher in higher (real, inflation adjusted) incomes, alleviation of poverty and reduction of inequality of incomes. It has to be mentioned with emphasis that it is extremely important to undertake frequent evaluation and monitoring of implementation of these to ensure realisation of the desired objectives.
(The writer is an economist)