Columns
Reflections on 65years of economic change and development
View(s):Tomorrow we celebrate 65 years of regaining independence from British rule. It is a brief period in Sri Lanka’s long history of more than 2500 years, yet these 65 years have witnessed profound and irreversible changes in the economy and society.
There have been achievements we can be proud of, as well as inadequacies, concerns and discontents. It is a time to reflect on these and resolve to put the house in order so that the country achieves a much higher level of economic and social development in the next decade.
Structural change
The economy has been transformed from a predominantly agricultural one at independence, and for several decades after, to one in which industry and services contributes more to GDP. The decline in the relative importance of agriculture in the economy is a structural change that occurs with development.
Today agriculture contributes only about 12 percent to GDP, yet it absorbs about a third of the population. The reduction of the proportion of the population dependent on agriculture by increasing productivity and increasing agricultural output is an important challenge for the future.
Agricultural transformation
Not only has the relative importance of agriculture declined but its composition too has changed. The 19th Century witnessed the introduction of the plantations and the neglect of paddy and other food crop agriculture. This process was reversed from around the third decade of the 20th century, when the country adopted the Donoughmore Constitution that gave internal self-government. The transformation of the agricultural sector gained further momentum after independence. Paddy production and food crops became the centre of growth in the 1950s and 1960s.
One of the noteworthy post-independence achievements is self-sufficiency in rice to meet the demand of a 20 million population. This is a significant achievement considering the fact that in 1950, we imported about half the rice requirements for a 7 million population. Today only about 11 percent of the country’s import bill is on food imports. There have also been agricultural exports, as for instance of maize.
Increase agricultural productivity
Despite these achievements productivity of most crops is comparatively low. Average paddy yields at around 4.3 metric tonnes per hectare are less than half the achievable levels. Tea crop yields on plantations are about one half the yields in other tea producing regions such as Kenya and South India yields and on small holdings. Most other food crops too have low yields.
An important challenge in the years ahead is to increase yields in crops to improve farmer incomes, increase food production, generate higher exportable surpluses and reduce food prices. To achieve these breakthroughs there must be increased expenditure on research and an effective extension service. Both these are weak links in the country’s development strategy.
Tea
Tea cultivation that was considered only a plantation crop at independence is now mostly cultivated on smallholdings that account for about 70 percent of tea production. Yields are much higher in small holdings than on estates, and it appears, that tea cultivation is more sustainable on small holdings than on estates whose productivity is low and face serious labour shortages and problems. Tea continues to be the most important agricultural export, as at the time of independence, though manufactured export earnings are higher. However, the net export earnings of tea are high as the import content for tea production is low, while the import content for manufactured exports is high.
Future strategies
The Government has taken several initiatives to increase agricultural production. The opening up of the North and East has given new opportunities for increased agricultural production. However, there has to be a new vision on how best agriculture could contribute to increased national output. There is a need to reconsider the mode of agricultural production in the light of labour shortages, technology advances and the value orientation of youth. Large scale farming by private enterprises appears to be the way forward. The government must take steps to promote such large farms and agribusinesses especially for potential exports.
The growth of industry for export has been a striking development of the last three decades. Consequently, there is a mistaken view that agriculture need not be promoted as industry provides better income and employment opportunities. This bias requires to be corrected, as agriculture still has a potential for growth and can contribute significantly to national income, as well as employment and income generating opportunities, and to improve household food security.
In fact the higher level of poverty in rural areas makes it imperative for the development of a productive, efficient and diversified agriculture.
Export industries
Last year saw a decline in manufactured exports due to the slowdown in the global economy. More important, in the past 65 years exports as a proportion of GDP and the country’s share of world exports has declined.
These are dangerous trends for an export-import economy. Increasing the exportable surplus, being efficient and competitive in global markets and diversifying exports are vital for the country’s development.
Social indictors
The improvements in social indicators are significant achievements and the consequent demographic changes have had a profound impact on the economy.
Paradoxically, the attainments in health and the consequent rapid rise in population, coupled with our social welfare policies, were in large measure responsible for the retardation in our economic growth. The economic growth of about 5 per cent per year on average over the past has been inadequate to absorb the large numbers entering the labour force and created a serious problem of unemployment and was also responsible for retarding per capita income growth and living standards.
The demographic transition to the third phase of low population growth confers some advantages and new opportunities. At the same time it will bring with it new problems of an ageing population. It is essential for medical services to cater to illnesses of the ageing population and to develop facilities for caring for the elderly in the next decade when the aged population would be increasing.
Future perspective
Many developments of the last 65 years are likely to gain momentum and impact more significantly in the coming decades. Increased urbanisation, consumerism, higher expectations and an acceleration of globalisation are some of these that would bear heavily on future directions of the economy. It is vitally important to recognise the economic changes that have occurred, the consequent changing values and perspectives of our people and the changes in the global economic order in determining the country’s economic policies. Often policies are based on past economic situations and ideological positions without recognition of changes that have occurred. Consequently policies are often neither realistic nor pragmatic.
In the late 1950s, the late Joan Robinson, the renowned Cambridge economist, made an insightful observation that we were a people who wanted to taste the fruits of development without planting the tree and nurturing the plant. Much of our future economic attainments would depend on whether we develop a work ethic and a discipline conducive to economic development.
Much would also depend on whether we can establish ethnic and religious harmony, law and order, improve the quality of education and skills, strengthen our economic infrastructure and develop a capacity for implementation. Politics plays a vital role in economic development. Unfortunately ‘good politics’ is often bad economics.
Follow @timesonlinelk
comments powered by Disqus