By Prof. C.S. Weeraratna University of Rajarata
According to a recent news item, 60,000 tonnes of rice is going to be imported within the next few weeks, indicating that we have not yet become self sufficient in rice in spite of many agricultural development programmes implemented since independence. A colossal sum of money is spent annually to import food (Table 1) most of which can be produced locally. In the year 2000, Rs. 10,777 million was spent on importing sugar, Rs. 8,946 million on milk and milk products, Rs. 286 million on rice and Rs. 561 million on wheat flour.
The main group of foods consumed in the country is carbohydrates and according to the statistics of the Central Bank of Sri Lanka, we produce only 50% of our carbohydrate requirements. This is very perilous, and if a situation arises where we are unable to import wheat, rice and sugar due to a shortage of foreign exchange or any other calamity, there would be widespread starvation affecting the poor to a greater extent.
It is the domestic sector constituting nearly 2 million farmers, which supplies most of the food requirements of the country. In spite of massive investments, the annual production of rice and other essential food items does not show any substantial increase during the last few years. The overall index of agricultural production which increased gradually during 1992-95 has declined subsequently as shown in the graph.
The agricultural production indices of the SAARC countries during 1988-1996 are indicated in Table 2. The data in this table indicate that the performance of the food production sector in Sri Lanka has fallen since 1994, while in other SAARC countries it has increased. Thus, all this data point out to a stagnating /declining level of food production in the country.
With the increase in population, stagnating/declining level of food production, and depreciation of the value of the SL Rupee, the expenditure on food imports would continue to increase in the next decade. As indicated earlier, if a situation arises where we are unable to import our major food requirements, there would be widespread starvation.
Increasing the total food production depends on a large number of factors such as food production and import policies of the government, availability of good quality inputs, an efficient support system, which basically consists of research, training and extension, and an effective marketing system. At present, a large number of organisations such as the Dept. of Agriculture, Dept. of Agrarian Services, etc. are involved in providing support services to the domestic food production sector. In spite of a plethora of institutions for agriculture research, training, extension and development involving annually around Rs. 6-7 billion or even more perhaps, Sri Lanka continues to import about 50% of essential food requirements.
Agriculture, in addition to its positive contribution to economic and social welfare of the country, plays an important role in providing food to the people thereby increasing the level of food security, but our food security situation stands at a very low level. Hence, it is important that appropriate action is taken to coordinate the activities of all the organisations involved in the domestic agricultural sector and make them more efficient and effective to increase local domestic food production, which is stagnating at present.
By Arjuna Mahendran
So it's finally official. The National Bureau of Economic Research (NBER) has found that the U.S.A. is, and has been, in recession since March this year. Add to that the Conference Board findings show personal consumption expenditure in the U.S. shrinking at an annualised rate of 1%. A very grim picture indeed. The only consolation we can derive from these statistics is that by the time they are published, the recession is already halfway through. So we should see recovery by mid-2002.
That, by the way, is the cheerful view. There are some eminent economists who yet maintain that the U.S. is caught up in an asset bubble much like that which felled the Japanese economy in the early 90s and kept it from reviving for the past decade. And the gloomy view? The recession being prolonged until U.S. stocks and shares and other asset prices come down to realistic levels.
Into the breach steps Mr. George Dubya Bush Jr. He'd be darned if his term as President is fouled by recession. So what came naturally to Bill Clinton is going to be dragged in kicking and screaming by Dubya. Bin Laden and his cronies did Dubya a great favour. They enabled the passage of a 120 billion dollar fiscal package through Congress faster than a cowboy to the draw.
Central Banks around the globe (including Sri Lanka) followed the Fed and dutifully cut interest rates. Even the stubbornly neurotic European Central Bank which had previously kept away from rate cuts did so. Thus Bin Laden on September 11 did more for global economic recovery than some EU member governments did, screaming themselves hoarse about the impending slowdown and having reached the stipulated limits for their fiscal deficits under the EU agreement.
Meanwhile the Fed has brought its Fed funds rate down 4.5 percentage points so far this year to 2%, its lowest level in a decade. You could thus be forgiven for thinking that enough has been done to ensure a rapid recovery. Not, however, if you are a member of the Bush administration. For these guys can't afford to fail in their efforts to ensure a speedy recovery. Or Hillary Clinton will make mincemeat of Dubya in the 2004 elections.
One obstacle in their way was the US bond market. Those pesky bond traders had bid up long-term interest rates on the assumption that the Fed would have to start raising interest rates next year when the recovery commences. But by the mere act of markets raising these rates, they were making it more costly for investors to fund long-term projects and thus perversely stalling the recovery which they had implicitly taken for granted. So the Bush economic team acted. One morning in early November they scrapped issuing the 30-year U.S. Treasury bond. The market was shocked. But it had the desired effect. Long-term bond prices rose thereafter and yields fell.
The next obstacle was Japan. Those inscrutable Asians just couldn't seem able to throw up a leader who could bash politicians' heads together and come up with a credible economic restructuring plan. So an inspired leak from the Bush administration was made to the Financial Times on Thursday 22nd November saying that the U.S. and Japan had agreed that Japan would print more Yen and buy U.S. bonds. The theory was that this would have the dual effect of weakening the Yen, helping Japan export more goods, and driving down long-term interest rates further in the U.S. So both countries, and the rest of the world, would recover as these two mighty economic engines rev-up.
However, the Japs did not play ball. Bank of Japan Governor, Hayami, has maintained a deafening silence on the issue. Various lesser economic luminaries have politely hummed and hawed, which is the Asian way of saying, "No thank you". And with good reason too. If the Yen falls much further against the dollar, Japanese asset prices will make yet another dive, plunging the value of bank collateral that is already in distress and further prolonging the decade-old recession.
Enter into the picture Larry Meyer, a very senior and respected member of the Fed's Board and super-hawk on monetary policy. In a valedictory address he made last Tuesday to a group of economists he said the Fed had not eased enough and needed to do more to stimulate the U.S. economy! The implication was that the Fed funds rate needed to go down another half percent so that the real rate becomes negative, viz. nominal rate falls below inflation. The markets reeled in disbelief. The Yen recouped all its losses of the previous week in a matter of minutes.
So expect further Fed rate cuts on December 11th. And if that doesn't do the trick, Bin Laden will be laughing all the way to his grave.
The city-state of Dubai is looking to 2010. By then, if projections are right, its population will have doubled to top 2 million. The number of tourists it attracts each year will have quadrupled to 15 million. And its oil production will have dropped to zero. These simple facts help explain why Dubai, one of the seven states that make up the United Arab Emirates (UAE), is embarked on what appears to be a wild spending binge at a time when the world's economy is sunk in gloom.
As other airlines go broke, the latest deal sees Emirates, owned by the Dubai government, announce the biggest order of passenger planes in history. The $15 billion buying programme, equal to Dubai's annual GDP, could add 58 aircraft to the carrier's 36-strong fleet, including top-of-the-line models from Boeing and Airbus.
Yet, like many of the other eye-catching investments Dubai has trumpeted in recent years, the purchase is only partly about cash commitment. Less than half of the aircraft are firm orders. And although these include 22 giant, double-decker Airbus 380s, Emirates is entitled to hefty discounts by virtue of being the first customer for the $230 million aeroplane. What is equally important to the commerce-rich but oil-poor sheikhdom is the publicity value of looking bold and talking big.
Income sources
The need to keep the buzz going is particularly acute just now. Dubai's main sources of income have all been hit by recent events. The flourishing transit trade through its ports has suffered from the general spending caution in the region, plus the steep rises in insurance rates. Tourism, seen as the main vehicle for future growth, has plummeted: Dubai itself is placid, balmy and cheap, but looks uncomfortably close to Afghanistan.
Oil prices are down, and America's anti-terrorist campaign has raised the heat on smuggling and money laundering, lucrative staples of Dubai's free-wheeling economy. To maintain the pace of ambitious expansion plans, the emirate has more than ever to rely on entrepreneurial flair, slick promotion and a reputation as the best place for shopping, schooling, boozing, medical care and making money between Singapore and Europe.
Into its Luxembourg-sized patch of beach and desert, Dubai has already packed such attractions as the world's largest man-made port, its tallest and most luxurious hotel, its most capacious-ever shopping bag (certified by Guinness), and some of the flashiest events on funsters' racing and golfing calendars. It already boasts a Media City, a Gold and Diamond Park, and a $250 million Internet City complete with an Ideas Oasis, devoted to the achievement of what it calls e-volution.
Artificial island
This summer Dubai announced the construction of the world's biggest artificial island, a $3 billion luxury housing estate in the shape of a palm tree whose 17 fronds, each 2 km (1.2 miles) long, will triple the length of its shoreline. Other projects in the works include a $10 billion housing development called Dubai Marina, a $1.6 billion Festival City, a $150 million zoo and a recreation of "Old Dubai".
The city's airport handled 12.3 million passengers last year, and opened a spanking new 20 million-capacity terminal. This week Dubai's crown prince, Sheikh Muhammad bin Rashid al-Maktoum unveiled plans for a third terminal: the price tag could be $2.5 billion.
Opinion is divided over whether Dubai can pull all this off. Nay-sayers, of whom there are plenty, point to the shakiness of its nascent stockmarket and the past two years' 30% fall in rental values as signs of diminished confidence. Referring to the practice of speculating with borrowed money, a local economist accuses the ruling al-Maktoum family of "margin trading with their own economy". The only thing of value here, he says, is the Dubai brand name.
Yet the same economist notes that Dubai, like the other small emirates in the federation, carries an excellent insurance policy. Neighbouring Abu Dhabi, whose territory makes up 85% of the UAE and has immense reserves of oil, is believed to top up Dubai's 150,000 barrels a day in oil exports with 100,000 of its own. The Big Brother also happens to hold big stakes in Dubai property.
The al-Maktoums themselves are no paupers. Aside from owning more of the world's racehorses than anyone else, they are believed to hold assets worth over $10 billion. Dubai itself is very much a family business. Despite the arch-capitalist atmosphere, half the sheikhdom's top hotels, its airport, seaports, refinery, dry dock, aluminium smelter and two of its three banks, among other assets, are government-controlled. There are no elections of any kind, and the press is essentially a publicity claque for state policy.
Twenty years ago, foreigners, mostly low-paid workers from the Indian subcontinent, made up less than half the population. Now put at 90%, the proportion may reach 95 % by 2010. If they begin to demand greater rights, they could prove the real challenge for Dubai's future. (Courtesy - The Economist)
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