Dynamics of Agricultural Transformation in Sri Lanka:
Implications of Agricultural Trade Policy for Food SelfSufficiency, Diversification and Productivity
Jeevika Weerahewa
Professor of Agricultural Economics
Department of Agricultural Economics and Business Management
Faculty of Agriculture,
University of Peradeniya
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1
Organization
 Justification, purpose and objectives
 Agricultural Policy Framework
 Production, trade and consumption: Food self sufficiency
 Agricultural productivity improvements
 Land productivity
 Total factor productivity
 Agricultural diversification
 Agriculture GDP
 Crop and livestock diversification
 Export diversification
 Way Forward
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Justification
 Rationale for intervening in agricultural markets
 Food security
 Food self-sufficiency
 Import substitution and export promotion
 intended and unintended effects of such interventions
 Sri Lanka as a case study: Sri Lanka has always been cited in
development literature as a case due to its peculiar
characteristics
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Objectives
 To present the agricultural policy framework adopted by
the government of Sri Lanka
 To document associated transformation of food
production portfolio and food consumption basket of the
country.
 To present the degree of agricultural diversification and
productivity growth
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Agricultural Policy Framework
1948 to 2016
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5
Evolution of agriculture policy
 Liberal policy: For 10 years after independence in 1948
 Import substitution: Since 1958 to 1977
 Tightening controls during 1970-1977
 Quantitative restrictions
 Heavy government controls on importation and distribution
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 Open economic policies in1977
 Sri Lanka was one of the first developing countries to embark on
liberalization
 Elimination of almost all quantitative restrictions, tariff bands, public
sector involvement in importation and distribution
 WTO commitments in 1995
 Binding of all agricultural tariffs at 50% (one of the lowest level among
developing countries)
 This was possible because trade liberalisation had become bipartition
policy by this time (based on favorable results of liberalization)
 2005-2014: Back to protectionism
 Revenue considerations
 Change in political ideology (backlash against the Washington
Consensus)
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Food Self-Sufficiency
Rice, Wheat, Vegetables, Fruits, OFC, Livestock
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Rice
 Rice is the staple of Sri
Lanka
 Part and parcel of its
culture
 Rice self-sufficiency has
been the objective of the
successive governments
 Variety of incentives
 At present; self sufficient
(with a surplus production)
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Maize
300
250
200
Production
150
Imports
Consumption
100
50
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2012
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
1997
1996
1995
1994
1993
1992
1991
1990
1989
0
 Considers as a
success story
 Private sector
involvement in
marketing
 High yielding varieties
 Border taxes
 Large extents of lands
under cultivation of
maize
10
Vegetables
1200
 Almost self sufficient
 Emerging export
markets
1000
800
Production
600
Imports
Exports
Consumption
400
200
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
0
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Fruit
 Almost self sufficient
 Growing export
markets
800
700
600
500
Production
400
Imports
 Banana
 Mango
Exports
300
Consumption
200
100
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
0
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OFC
1000
900
800
700
600
Production
500
Imports
Exports
400
Consumption
300
200
100
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
0
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 Highly politically
sensitive
 Small sub-sectors
 Large import taxes,
unpredictable and
large fluctuations in
rates and modes
 Grown by small
scale farmers
13
Sugar
 The country
produces less than
20% of the
requirement
700
600
500
400
Production
Imports
300
Consumption
200
100
 Contract grower
system; three large
sugar factories
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
0
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Milk
 The country can
produce only 20% of
the requirement
 Largely imported in
powder form from
Australia and New
Zealand
 Self sufficient in fluid
milk
 Milk villages
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 Wheat
 Dhal
 Mung bean….
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Agricultural Productivity
Land Productivity
and
Total Factor Productivity
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 Enhancing and accelerating sustainable agricultural
productivity is a central component of a comprehensive
strategy to meet the rising demands of a growing world.
 Productivity growth — a measure of output per unit of input —
allows more to be produced while maximizing the use and
impact of scarce resources.
 Agricultural productivity is often described in terms of yield,
such as output per hectare of crops or gallons of milk per dairy
cow.
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Land productivity of rice, maize and OFC
5
4.5
4
3.5
1977-1981
1982-1986
3
1987-1991
1992-1996
2.5
1997-2001
2002-2006
2
2007-2011
2012-2014
1.5
1
0.5
0
Rice
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Maize
OFC
19
Land productivity of onion, potato and vegetables
18
16
14
12
1977-1981
1982-1986
1987-1991
10
1992-1996
1997-2001
8
2002-2006
2007-2011
6
2012-2014
4
2
0
Onion
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Potato
Vegetables
20
 However, yield alone is an incomplete measure of
productivity.
 Yield can be boosted by adding such factors as
machinery and labor, or by increasing applications of
crop protection products and fertilizer and feed.
 Need to calculate the productivity growth
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Total Factor Productivity
Growth in input usage
Growth in output
Growth in TFP
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1000 ha of Rainfed
ropland Equivalents
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Agriculturl lands in Sri Lanka:
1961-2012
4,000
3,000
2,000
1,000
0
100
50
0
1961
1963
1965
1967
1969
1971
1973
1975
1977
1979
1981
1983
1985
1987
1989
1991
1993
1995
1997
1999
2001
2003
2005
2007
2009
2011
1961
1963
1965
1967
1969
1971
1973
1975
1977
1979
1981
1983
1985
1987
1989
1991
1993
1995
1997
1999
2001
2003
2005
2007
2009
2011
Number of tractor equivalens
2012
2009
2006
2003
2000
1997
1994
1991
1988
1985
1982
1979
1976
1973
1970
1967
1964
1961
Tonnes of N, P2O5 and K2O
nutrients
350,000
300,000
250,000
200,000
150,000
100,000
50,000
0
1000 persons economically active
in agriculture, +15 years
1961
1963
1965
1967
1969
1971
1973
1975
1977
1979
1981
1983
1985
1987
1989
1991
1993
1995
1997
1999
2001
2003
2005
2007
2009
2011
1961
1963
1965
1967
1969
1971
1973
1975
1977
1979
1981
1983
1985
1987
1989
1991
1993
1995
1997
1999
2001
2003
2005
2007
2009
2011
Head of Cattle
Equivalents
Fertilizer usage in Sri Lanka:
1961-2012
Farm machinery usage in Sri Lanka:
1961-2012
35,000
30,000
25,000
20,000
15,000
10,000
5,000
0
Livestock capital in Sri Lanka:
1961-2012
150
Employment in Agriculture:
1961-2012
4,500
4,000
3,500
3,000
2,500
2,000
1,500
1,000
500
0
23
Decomposition of Agricultural Output Growth in Sri Lanka: 1961-2012
0.0400
0.0300
0.0200
TFP
0.0100
Input
0.0000
1961-70
1971-80
1981-90
1991-00
2001-10
2001-12
-0.0100
-0.0200
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Agriculture
Diversification
Crop and Livestock Diversification at the Farm level, Diet
Diversification and Export Market and Product Diversification
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Diversification as a signal
 Risk minimizing strategy and positively affect economic growth and
development
 As economies grow, there is a gradual but definite movement out of
subsistence food crop production, generally in a monoculture
system, to a diversified market-oriented production system.
 Farm level: to increase and stabilize farmers' incomes and rural
employment
 Consumer level: diet diversification versus nutrition security
 National level: Stability in export earnings
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Allocation of food expenditure across
food items
120
Other food and drink
Sugar
100
Fruit
Eggs
Milk & Milk products
percentage
80
Dried fish
Fish
60
Meat
Coconuts
Vegetables
40
Pulses
Condiments
20
Bread
Wheat flour
Rice
0
1980/81
1985/86
1990/91
1995/96
2002
2005
2006/07
2009/10
2012/13
HIES survey period
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Land use pattern: More concentrated?
1600000
1400000
1200000
1000000
Vegetables
800000
Fruit
OFC
600000
Rice
400000
200000
0
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Share of Agriculture GDP
(Value Added)
Other
Agricultura
l Crops
3%
Firewood
and
Forestry
5%
Plantation
Dvt
2%
Fishing
13%
Tea
9%
Rubber
1%
25
20
Coconut
8%
Paddy
12%
Value added per unit area
MinorExpor
t Crops
3%
15
10
5
OFC
36%
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Livestock
8%
0
Highland
Crops
Tea
Minor Export
Crops
Coconut
Paddy
Rubber
32
Livestock populations: More and more
chickens?
20000000
18000000
16000000
14000000
12000000
10000000
8000000
6000000
4000000
2000000
0
buffalo
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neat cattle
swine
sheep
goats
Chicken
33
Livestock populations: Excluding chicken
4000000
3500000
3000000
2500000
2000000
1500000
1000000
500000
0
buffalo
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neat cattle
swine
sheep
goats
34
Diversification at the farm level
 Income diversification: Pluriactivity
 No full time farmers
 Vertical and horizontal levels
 Need data at the household level to precisely comment
on the farm level diversification
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What did we export in 2014?
What_did_Sri_Lanka_export_in_2014-.pdf
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Agricultural export basket: Tea, tea and
tea?
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How did the markets for tea change?
 Where_did_Sri_Lanka_export_Tea_to_between_1962_and_
2014-.pdf
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Value added versus Primary exports of
tea, rubber and coconut
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Conclusions and
Way Forward
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Concluding remarks
 Our policies and institutions have been oriented towards
self sufficiency in rice.
 Even though there are advances in technology not much
crop diversification had been taken place.
 We can see a transformation in the diet but the local
production could not keep up with this demand so we
ended up importing most of our food needs.
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 We can also see a significant increase in demand from the
world market for high value agricultural products (processed
food, safe food, organically grown food, foods with functional
properties etc.) but still a large portion of our exports are
primary products.
 The export basket and export destinations are not sufficiently
diversified.
 Though there are incentives for exporters there has not been
sufficient investments in the food processing sector to produce
what the world market needs.
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 This insufficiency in investments is partly due to erratic policy
framework of the country.
 WTO monitoring mechanism is questionable
 Use of specific duties instead of ad-volarum
 Use of para-tariffs to increase protection
 Use of tariff formula
 Up until land market imperfections are resolved or innovative
cooperate farm management systems are evolved, gains
through economies of scale cannot be expected.
 Climate change and out-migration of labor are two key
challenges faced by the agriculture today.
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Thank You
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