SMARTER FARMING AND AGRICULTURE EXPORTS
“As agriculture forms the chief employment and even amusement of the villagers, we may expect to find it treated as a very serious matter, and one involving much superstition. The yaksayo or evil spirits are supposed to be not only malicious but even covetous, and, therefore, the grain must be protected from harm whilst growing, and secured from theft by them when matured.” (R.W. Ievers) The long history of Sri Lanka’s agriculture and its intertwining with culture is illustrated in this quote by a 19th century writer. The essay goes on to describe the customs and ceremonies connected with paddy cultivation. These are of a semi-religious nature which may also explain the romance with which agriculture is viewed and in turn impacts policymaking. Agriculture policies are thus conservative, mainly aimed at maintaining the status quo. Support includes free irrigation, a large fertiliser subsidy, support prices for rice and trade protection measures for other crops. The problem is that despite decades of such support, farmers remain poor. Although agriculture employs 27% of the workforce, it only contributes 7% to GDP.
If extensive support still leaves farmers unable to maintain an existence, something is going wrong. Increasing the subsidies will improve but keeps farmers dependent on handouts. Can a different approach work better? To restate the economic problem in a nutshell to increase farm incomes, we need to increase the value of the output from a given acreage of land. This can be done either by increasing quantities of existing crops, lowering costs or diversifying into higher-value products. On diversifying agriculture, there are some useful lessons to draw from a failed initiative by the Mahaweli Authority in the late 1980s.
The project was to promote the export of spices, fruit and vegetables from the Mahaweli basin. It ultimately failed due to factors like the southern insurgency, the war with the LTTE and political turmoil following a power struggle in the UNP, the political party then running the government, but offers useful lessons to policymakers today. In 1978, the government of Sri Lanka launched the Accelerated Mahaweli Development Programme which telescoped an on-going thirty-year programme into six years.
The programme aimed to generate hydroelectricity and supply water for agriculture by building several large dams along the Mahaweli river. With physical infrastructure nearing completion by the late 1980s it was necessary to ensure economically viable settlements. In response to a government request for technical assistance from USAID, a project office employing foreign and local staff was established to develop export crops. Most of the details of this programme here are from an interview with a former manager of that export agriculture development project.
IDENTIFYING POTENTIAL EXPORT CROPS
The first task of the team was to identify potential crops for export. This was done by combing through agricultural products import data of major importers like Japan, Australia,
IF EXTENSIVE SUPPORT STILL LEAVES FARMERS UNABLE TO MAINTAIN AN EXISTENCE, SOMETHING IS GOING WRONG.
New Zealand, Belgium, Canada, Denmark, France, Netherlands, UK and USA. The team identified the top twenty agricultural imports to these countries by volume and value; easily extracted from the customs statistics of the countries. The seasonality of imports was also tracked. For example, strawberries in winter would fetch a premium compared to summer prices. From this, they derived not only the most attractive exports in terms of value and volume but also the seasons when demand and prices would peak. The objective was to maximise return by targeting the peak prices in the selected items.
IDENTIFYING COMPETITIVE ADVANTAGE
The next step was to understand the cost structure of the products and identify those where a competitive advantage existed. The team identified and inked with a Dutch research institute that conducted agricultural research on many of the selected crops. After discussions, they obtained the average costs of production in European countries for those products to figure if these could be competitively produced in Sri Lanka. Agronomists and researchers then set about working out local costs of production for the items. Due to limitations crops that required greenhouses and ones for which the climate here was unsuitable, were set aside. USAID assisted in identifying particular varieties that could be grown locally, for example, a strawberry that would grow in a
somewhat warm climate.
Once the costings were complete, the shortlist of targeted items was whittled down to ten. The team had a list of products which could be competitively produced locally with the planting cycles worked out to suit the needs of the target market. The top products were seedless grapes, strawberries, asparagus, pineapples, speciality banana (ambul) followed by mango, melon and gherkins.
THE NEXT STEP WAS TO IDENTIFY REAL BUYERS.
USAID facilitated visits to Europe to meet buyers, assisting in everything from the preparation of catalogues to setting up meetings. The team was thus able to negotiate with a few buyers and understand the level of interest and pricing. Sample products were shipped to potential buyers for quality checks. Unfortunately, after some successful trials, initial orders couldn’t be fulfilled due to several domestic political problems too lengthy to detail here; not least the power struggle leading to splintering within the UNP government and Gamini Dissanayake and some others breaking away.
Dissanayake was the minister for Mahaweli but with his sudden departure there was no one left in charge of the ministry. A precious cargo of planting material to meet the trial orders was left to bake on the airport tarmac as no one was willing to take responsibility for clearing it, leading to the loss of the harvest and with it, the buyer. A later attempt at gherkins had some success with a nucleus farm structure – a network of growers supplying to the nucleus farm for processing. Unfortunately, the war in the eastern province was escalating and began to affect parts of the Mahaweli zone, disrupting transport and production.
Although it was not particularly successful, the approach offers useful lessons in developing a competitive agribusiness sector.