• Globalization and Agriculture in Sri Lanka

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"A bold peasantry, a country's pride when one destroyed, can never be supplied"

— Oliver Goldsmith

Sri Lanka has a land area of about 6.5 million ha of which about 35% is presently under agriculture. Of the agricultural lands, approximately 37% is devoted to plantation crops, and about 33% to paddy which comes under the domestic sector. The domestic sector is in the hands of some two million resource-poor small holders with an average holding size of less than one hectare. They account for almost all the food and livestock produced in the country, which is valued at around Rs. 100 billion. The agriculture sector provides most of the country's food requirement, raw materials for agro-based industries and employment to about 50% of the country's population (i.e. about 9 million). Thus, agriculture is still the corner stone of the Sri Lankan economy, accounting for about 20% of the GDP and about 35% of the total foreign exchange earnings. Therefore, it is of remarkable importance in generating employment, alleviating rural poverty and ensuring national food security.

Sri Lanka recently celebrated 50 years of the independence. But, we are still not self-sufficient in most of the essential food items such as rice, maize, onions, chillies, milk powder etc., and spend over Rs. 45 billion annually for the import of foodstuffs which is almost equal to the amount spent on the war annually. This is in spite of the fact that there are about 2.5 million ha of uncultivated/underutilized land and about one million unemployed people in the country. It is ironical that Sri Lanka is sustaining such a heavy import bill when most of the imported food or their substitutes can be produced locally.

Though there has been a considerable improvement in the productivity and production of the major food crops since the independence, the productivity in agriculture has generally not been increasing and yields have been stagant in the last decade or so. On the other hand, the cost of production has been escalating with no corresponding increase in the farmgate prices of agricultural produce. As a result, the agriculture is fast becoming less and less attractive and marginal.

Faemer is out of agriculture with no alternative to turn to. This situation has posed a host of serious economic and social problems with profound implications. Thus, it is of paramount importance to formulate appropriate policies and measures without delay so as to make our agriculture attractive and remunerative in a global economy.

Impact of open economic policies and trade liberalization on domestic agriculture

Trade liberalization and globalization are supposed to increase foreign investment and trade, both exports and imports, and thereby stimulate domestic production, employment and income. Now more than 20 years have lapsed since the introduction of open economic policies in Sri Lanka. Hence, it is appropriate to examine whether the open economic policies and trade liberalisation have yielded intended benefits to Sri Lankan economy in general and to agriculture in particular. If not it is imperative that those policies be reviewed and modified to the benefit of the nation.

If we consider the volume of total exports, it has increased by 178 per cent in 1996 compared to that in 1977, the year in which trade liberalization was introduced. On the other hand, the volume of imports has risen by 245 per cent during the same period. Thus imports have grown more rapidly than the exports, showing that the liberalization has had a greater bneficial effort on imports rather than on exports. During the period of 1990 to 1996, the industrial exports increased in volume by 98 per cent whereas agricultural exports rose only by 9 per cent. Thus the other sectors have grown relative to the agriculture sector which has lagged behind. If we look at the ratio of exports to GDP, it was 31-33 per cent in 1952-53. But, in spite of the establishment of Export Development Board, Export Promotion Zones and giving tax and duty relief and other concessions, this ratio was only 29.5 per cent in 1996. This is at least partly due to the failure of the export-oriented development to stimulate agricultural exports in the last 20 years.

On the other hand, trade liberalization has increased the ratio of imports to GDP from about 18 per cent ha 1977 to about 39 per cent in 1996, rendering the economy more import-oriented than even in fifties. Thus, the open market policies since 1977 have made our economy more import-oriented than export-oriented.

Besides the import of subsidized, cheap food items such as rice, chillies, potato, onion, milk powder etc., in the recent past has pushed down the market prices to unremunerative levels as far as the domestic producer is concerned. Import of food items to meet the food shortages during lean periods may be necessary, but care should be exercised to ensure that imports do not depress the domestic market prices to such levels so as to undermine the domestic farmer. It should be noted that higher prices in the lean period can stimulate domestic production and will yield higher profits to offset the low profits or losses as a result of gluts in the harvesting season.

It is a fact that India can produce and market a variety of products, including foods, consumer goods, machinery, equipment etc., at lower prices than Sri Lanka. Thus, the threat to domestic agriculture will be further exacerbated with the removal of tariff and non-tariff following the liberalisation of sub-regional trade under SAPTA. Then, the local market will be flooded with cheap Indian goods which will undermine the domestic agriculture and national industries, thereby jeopardising the livelihood of about half the country's population. We vividly remember the plight of our farmer when food items like chillies, big onions, potato etc., were imported cheap when their produce was coming to the market. In utter desperation, some farmers set fire to their produce and some even when to the extent of taking their lives, swallowing insecticides. It is needless to add that the impact of SAPTA on domestic agriculture will be much more severe with greater far-reaching economic, social and political implications. We are also aware how cheap maize imports from USA following trade liberalisation have undermined the livelihood of hundreds of thousands of maize farmers in Mexico and the Philippines.

A new dimension has been added to this scenario as a result of the recent depreciation of South-East Asian currencies, which can have profound implications, particularly on the plantation sector, especially on rubber and coconut since South-East countries like Thailand, Malaysia, the Philippine etc., are our major competitors in the world market.

It is evident from the above that trade liberalization does not guarantee either an increase of domestic production or agricultural exports. As a matter of fact, the open market policy since 1977 has made our economy more import-oriented than export-oriented, and on the whole it has done more harm than good to the domstic agriculture and peasant farmer. We cannot afford to be obvious to the adverse effects of import liberalisation on domestic agriculture and should waste no time in taking appropriate steps to ensure survival of our domestic agriculture in a global economy.

Thus what is the seriously needed in this crucial hour is a coherent and consistent agricultural policy which protects the small farmer and guarantees a reasonable price for his produce. All developed countries frame policies to protect their farmers. Why not we? As Pirth (1997) rightly questions, are the EU, NAFTA and other economic alliances so open as to lead their farmer to the point of committing suicide? No! Then, why are we so insensitive to the plight of farmers who provide us our daily plate of rice? I am not aware of any developed country in the world that has totally done away with all types and forms of protection. Many developed countries protect their local industries in a very subtle way through various direct and indirect modi operandi. They use names other than protection to describe them. They adopt trade barriers, anti-dumping regulations, non-tariff barriers, licensing scheme etc. to achieve the same results (Fernando, 1997). They even go to the extent of imposing restrictions on the same results (Fernando, 1997). They even go to the extent of imposing restrictions on the supplier by reference to the matters such as human right violation, environmental pollution, use of child labour and ethnic discrimination in the country of origin.

Under the label of green protectionism, embargoes are imposed by certain development countries on timber harvested in a non-sustainable manner or tuna caught with dolphin-killing methods by developing countries, thereby effectively closing their markets to foreign competitors. The UNCTAD estimates that the North's non-trade barriers have reduced. Third World exports by 20% which will worsen further in the future. In 1992, the UNDP estimated that protectionist measures taken by the North 24 industrialized nations were costing Third World countries half a trillion dollars each years, which was approximately 12 times the amount of annual aid they receive from prosperous nations. Japan and S. Korea which are often quoted as the models of free market economy do not permit liberalization-led interventions detrimental to the domestic agriculture. Their liberalization is on a selective basis so as not to jeopardize national interests and national industries.

On other hand, Sri Lanka allowed an almost laisser-faire economy to operate in the past 20 years to the detriment of local industries and domestic agriculture. As a consequence, many small and cottage industries died a natural death, hindering industrial growth. In agriculture, the poor farmer has been reduced to dire straits, posing a serious threat to food security in the country. Our country is not yet ready to face the fierce competition arising from import liberalization. We know that the competition is not fair and the playing field is not level. Thus until we could provide basic amenities to the local industries to be competitive in the global market, we should provide them necessary "protection", lest they would be simply devoured by the transnational and multinational companies.

What should be done to make our agriculture competitive in a global economy?

Here, it is pertinent to examine the major factors that have made the agricultural imports more competitive than the local produce. The UNDP in its Human Development Report (1997) pointed out that when poor countries open their economies, they expose many poor agricultural producers to overwhelming and unfair competition from subsidized imports. It also underlined that survival in agricultural markets depends less on comparative advantage than on comparative access to subsidies.

It is a fact that the industrial countries still continue with their income support to farmers and export subsidies so as to make their agriculture exports competitive in world markets. For instance, in 1995, industrial countries spent about $ 182 million on agricultural subsidies. The subsidies provided may not only be direct, but can be indirect and hidden and may relate to agricultural inputs such as fertilizers, irrigation, agro-chemicals, electricity, machinery, and equipment, transport, storage, agricultural credit, etc. For instance the electricity in Sri Lanka is more expensive than even in countries like USA, Germany and Japan.

While industrial and powerful nations continuing with production and export subsidies openly, we are doing away with agricultural subsidies. This has proved extremely inimical to our economy because it effectively prevents the agricultural produce of Sri Lanka from being competitive in the world market and thereby preventing earning substantial foreign exchange. Besides, it will lead to dumping of subsidized cheap imports into the country, which will undermine the domestic agriculture and the livelihood of peasant farmers. The availability of cheap imports may also tend to delay the government in taking appropriate action to increase domestic food production.

If our agriculture is not efficient and competitive, the remedy is not to import subsidized and cheap foodstuffs to the detriment of the peasant farmer, but to take appropriate measures to improve the productivity and ensure a reasonable price for the produce. In this connection, measures such as increasing productivity, reducing cost of production, reducing post-harvest losses, value-addition and product diversification, developing new markets, conducting market promotion etc, underpinned by appropriate macro-economic policies are of prime importance.

Workshop on globalization and agriculture: Issues, challenges and opportunities

Our nation is in a critical stage of economic development, facing formidable challenges posed by globalization and regionalism. Political independence has no meaning unless we can free ourselves from hunger, poverty and debt. The task ahead is gigantic and daunting, but the challenge has to be met.

It is in this context that the Section B of the Sri Lanka Association for the Advancement of Science has decided to organise a Workshop on "Globalization and Agriculture: Issues, Challenges and Opportunities" with a view to formulating appropriate policies and other measures to make our agriculture and agro-based industries competitive in a global economy.

The Minister of Agriculture and Lands, D. M. Jayaratne and the Minister of Justice and Constitutional

Affairs, Ethnic Affairs and National Integration and Junior Minister of Finance, Prof. G. L. Peiris and many public as well as private sector personel in the field of agriculture and allied fields, including policy makers, planners, agricultural economists, agricultural scientists, etc. will attend this workshop. It will be held at the SLAAS auditorium, Wijerama Mawatha, Colombo 7 on June 30, 1998 from 9.00 - 16.30 hours