Plantation Sector and the Economy
BY Dr. C. S. Weeraratna-February 7, 2020, 8:07 pm(csweeea@sltnet.lk)
A trade deficit occurs when the value of a country's imports exceed the value of exports during a given time period. A trade deficit represents an outflow of domestic currency to foreign markets and has an important bearing on the economy of the country. A substantial trade deficit over time weakens domestic industries and decreases job opportunities. As cost of imports are higher than exports, more amount of foreign currency is required , Due to this the foreign currency gets costlier (US$ is now around Rs.180,) and so do the imports as we are experiencing at present. Persistent trade deficits are detrimental to the country’s economy because it has to be financed with debt. Sri Lanka currently owes around US $ 65 billion. According to the Central Bank Annual reports the Trade Deficit in Sri Lanka, during the last five years, as indicated in Table 1 has continued to increase from US $ 7609 million in 2013 to US$ 10,343million in 2018. If we are to reduce the trade deficit, it is essential that exports are increased and imports are reduced as much as possible.
If Sri Lanka maintained a sound trade balance, which the present and previous governments should have done, the present exchange rate would not have gone down as we experience at present. If not for the factors such as remittances of migrant workers, tourists’ earnings, etc., the exchange rate would be worse.
Table 1- Exports and Imports
(in US Dollar millions)
(in US Dollar millions)
The dire need to increase our export earnings to meet the severe financial crisis we are facing today has been emphasized by many. As indicated in Table 1, exports since 2013 have not increased by any substantial amount in spite of an Export Development Board and numerous other authorities. Increasing exports is of paramount importance to improve our economy. It is because of the importance of increasing exports that the government brought a National Export Strategy. But what are we going to export? .
The extent under plantation crops is around 870,000 ha. Nearly 30% of the labour force is involved in this sector, which earns about 20% of export earnings. . Since the implementation of the Land Reform Law in 1972, the large estates of tea, rubber and coconut were nationalized and their management was given over to the State Plantations Corporation (SPC) and the Janatha Estates Development Board (JEDB). In the year 1992, a large number of these estates, nearly 300, were given on lease to Regional Plantation Companies (RPCs).
Planation sector, which includes tea, rubber, coconut, cashew, sugarcane and minor exports crops such as cinnamon, cardamom, cocoa, plays a very important role in the economy of the country. However, as indicated in table 2, production of the major export crops do not show any substantial increase during the last five years. The annual tea production has been fluctuating around 300 million kg during this period. The annual total rubber production has decreased from 130 million kg in 2013 to 83 million kg in 2018. Coconut production too does not show any tendency to increase. This appalling situation in the plantation sector can be attributed to many factors.
Table 2:
A number of issues can be attributed to this unsatisfactory state in the plantation sector. Among these are (a) Increasing cost of production ( b) Old machinery (c) Land degradation (d) Old age of crops (e) Low value addition (f) Inadequate diversification and intercropping and (g) Insufficient marketing strategies
Land Degradation: One of the important contributory factors for the decline in the productivity of the plantation sector is Land Degradation. Soil erosion, soil compaction, and nutrition depletion, cause productivity of land to decline, making crop production less profitable. In view of the importance of land degradation, the Ministry of Environment, in 2005, established an expert committee on Land Degradation. This committee comprised a number of experts in the field of land management and the main role of the committee was to advice the Ministry of Environment, on issues related to controlling land degradation. This committee has not met since Feb. 2013.
At the first national symposium on Land Degradation held in 2010, organized by the Ministry of Environment and the expert committee on Land Degradation, the participants, who were representing many land-related institutions in the country, revealed that a substantial amount of soil/ha/year is lost due to soil erosion. They were of the view that urgent action such as implementation of proper land use planning and the soil conservation and environment act, etc., need to be taken by the relevant organizations to control land degradation.
There are many ministries, departments and other institutions which are expected to take appropriate measures to control land degradation. During the last few years a large number of seminars and workshops have been held on this topic. In spite of all these, land degradation continues to take place evident by the common occurrence of landslides, depleted top soil, siltation of tanks and reservoirs, decline in crop yields, etc. The Ministry of Environment (ME) needs to activate the already established Committee on Land Degradation which would make appropriate recommendations to reduce land degradation to be implemented by ME. A land use policy has been formulated but is not effectively implemented to reduce land degradation which has serious repercussions on the productivity. The land use policy need to be implemented as an integrated programme in increasing the productivity of the planation sector.
Diversification: Productivity of many estates under planation crops is at a low level. Diversification of such unproductive lands is essential. A survey need to be done to identify these unproductive lands which need to be diversified. Such lands may be put under pasture and have cattle which will reduce our expenditure on milk imports. it will also reduce degradation of the lands resulting in less silting of the reservoirs. There are many other crops such as spice crops, floricultural and horticultural crops, etc., which could be cultivated in the unproductive lands. Among the horticultural crops, cashew has a considerable potential in increasing exports. These crops would give better returns to the cultivators. Hence, an in-depth study needs to be carried out as early as possible to determine appropriate land use in the unproductive holdings/estates giving due consideration to factors such as climate, topography, availability of labour etc. Those lands which are not going to be diversified need to be managed better.
In this regard, infilling, cultivation of better clones and their effective management including better fertilizer and pest management practices, , increased rate of replanting, reducing soil degradation and conservation practices are essential.
Deterioration of the plantation sector will exacerbate the financial and social problems we are facing.. The annual trade deficit which stands at around Rs. 1800 billion and unemployment among the rural plantation community will get worse. In view of these critical issues faced by the Plantation Sector it is necessary that the relevant authorities lead by the Ministry of Planation Industries develop a holistic national plan to resurrect the planation industry .
It is also important that the respective ministers get the service of scientists in managing the relevant scientific organizations under them.. For example, during the last few years the Rubber sector which plays a very important role in the economy of the country was headed by personnel who have little or no experience in the rubber sector.. A few years ago an "expert" was appointed to the ministry of Planation Crops who came out with an unrealistic Rubber Master Plan which would cost the country Rs. 75 billion. Such appointments surely will not enable the respective institutions to contribute positively to the areas which they are expected to develop.
