Sri Lanka’s agricultural productivity is surprisingly low: Hausmann

ECONOMYNEXT – Sri Lanka’s agricultural productivity is surprisingly low for a country at Sri Lanka’s level of income and cannot be depended on to create new jobs, while services and industry are five to six times more productive, an economist who research growth trends has said.

Ricardo Hausmann, from the Harvard University’s Centre for International Development (Harvard CID) said in terms of output, agriculture was where it would be expected to be at Sri Lanka’s level of income.

He said based on a comparison of similar countries Sri Lanka should by now have only 15 percent of its labour force in agriculture, but about 30 percent of the labour force was employed in the sector which was ‘huge’.

"In terms of agricultural employment the country has almost double the agricultural employment you would have expected to have at this level of income," he told an economic forum in Colombo.

"That means agricultural productivity on average is surprisingly low."

Hausmann, a one-time minister in Venezuela, said politicians usually blame the World Bank and the International Monetary Fund for various problems. If something was wrong with his analysis he also blamed the World Bank, for he was using their data he told an appreciative audience.

Hausmann’s Harvard CID does growth diagnostics which policy makers can use to remove constraints, and complexity research, which studies the requirements needed to produce more advanced goods.

"You may have a future in agriculture, but your future in employment will not be in agriculture since you already have too much agricultural employment," he said.

"The sources of new jobs, job dynamism will have to come from other sectors."

He said Sri Lanka’s industry was six times more productive than agriculture and services more than five times as productive as agriculture based on available data.

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In poor countries of the world most of the people tend to live in rural areas, engaged in agriculture and people became more prosperous when they moved to industry and services, in a structural transformation.

As people move out of farming, agriculture also becomes more productive.

Hausmann said if there has been a re-allocation of labour Sri Lanka’s output would have been higher.

Hausmann said he was simply raising questions from the data he was seeing.

"The question why had that re-allocation not happened already, and what are the obstacles," he said.

"It is not just the re-allocation between these broad categories. It is a re-allocation also within categories."

The current administration hopes to create high value agriculture that is capable of meeting export competition.

Other critics have pointed out that agriculture is the sector where state or political intervention has been seen most, involving subsidies as well as state promoted subsistence agriculture on small land parcels given without freehold, after cutting down the country’s dwindling forest cover.

There has also been price support to promote low quality and low productivity, restrictions on the type of crops that can be planted, restrictions on using land for alternate purposes including urbanization and expropriation of larger farmland.

Most such policies have been followed not with any evidence, but due to agrarianism, where an urban intelligentsia glorifies agriculture as part of an overall East European style rural nationalist ideology, critics say.

In promoting subsistence agriculture Sri Lanka’s planners and rural nationalists have self-achieved the ends of a Mogenthau-style plan as an unintended consequence, some analysts say. (Colombo/Jan08/2016)

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