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Sri Lanka: Priorities for Agriculture and Rural Development

BACKGROUND 

  • About 80 percent of Sri Lanka’s population lives in its rural areas.
  • The rural poor account for 95 percent of the country’s poor.
  • The rural poverty rate (headcount index) declined only slightly from 29 percent in 1990/91 to 25 percent in 2002, which is more than three times the poverty rate in urban areas (8 percent). 
  • In the estate sector, (covering tea, rubber, coconut), poverty actually increased from 21 percent to 30 percent during the same period.
  • Agriculture’s share (including estate) in the GDP, which has continuously declined, was    17.2   percent in 2005.
  • The contribution from agriculture sector to employment has decreased from 36.8 percent in 1995 to 30.5 percent in 2005.

Government’s Vision for the Agriculture Sector

“An agriculture sector contributing to regionally equitable economic growth, rural livelihood improvement, and food security through efficient production of commodities for consumption for agro-based industries and for exporting competitively to the world market.”

ISSUES AND CHALLENGES

  • Weaknesses in strategy and policy: A slowdown in the average annual growth rate in agricultural GDP in real terms - from 3 percent in the 1980s to 0.4 percent in the 1990s – has contributed to the persistent poverty in Sri Lanka. The continuing "top-down," supply-driven" planning process, weak prioritization of expenditures in agriculture, and under-performing programs have limited the rural sector growth. An appropriate legal and regulatory framework has also constrained the sustainable development of water resources. The lack of clarity in the roles and responsibilities of central government agencies and provincial councils (to whom many responsibilities have been devolved) poses challenges.
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  • Heavy public sector regulatory interventions in commodity and input/factor markets: Restrictive commodity, input, and factor market policies are squeezing the returns from farming, limiting investments by farmers to increase productivity and income, and discouraging diversification to higher value and non-farm activities. Restrictions on land use and sales have limited both the economic benefits from land ownership, and diverse livelihood strategies. Weak land administration has also contributed to both insecurity of tenure and increase in transaction costs. Frequent changes in agriculture trade tariffs have exacerbated domestic price uncertainty.
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  • Weak delivery of services in rural areas: The institutional framework for decentralization in Sri Lanka is complex and unwieldy, with overlapping responsibilities, and its implementation has been piecemeal. The ‘provincial councils’ function more as de-concentrated structures and have not been able to enhance the quality of services. The lack of a well-designed fiscal and administrative transfer system, inadequate capacity in sub-national governments for revenue generation and resource mobilization, and a conflicting legal and regulatory framework, have resulted in inefficient service delivery. Poor infrastructure and services have, in turn, restricted rural non-farm growth.
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  • Destructive impact of civil conflict and tsunami: The    long drawn out conflict between the Government and LTTE in the North and East,   and the tsunami that ravaged the northern, eastern and southern coasts of the country in December 2004, have caused significant loss of life and infrastructure, and disrupted basic services. .

PRIORITY AREAS FOR THE WORLD BANK'S SUPPORT

1. Fostering Agricultural and Rural Non-Farm Growth and Competitiveness

  • Improving Agricultural Growth Performance: The Government’s ten year Horizon Development Framework 2006-2016    Discussion paper says “The Agriculture and food security policy will focus on rational allocation of land, improvement of productivity and non-conversion of non-marginal land to other uses. This envisages the expansion of the agriculture sector to ensure self sufficiency in food. To enhance access to improved technologies, seed and phyto-sanitary regulations need to be liberalized to encourage greater private sector participation. The agricultural research system and extension services need to be more pluralistic and demand driven. Tariff protection for various commodities should be phased out gradually.
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  • Strengthening Water and Irrigation Resources Management: Approving the National Water Bill will be crucial to the sustainable development of water resources. In water resources management, priority should be to shift regulatory and expenditure frameworks from supply-driven goals to comprehensive planning and management within a river basin framework, and reform institutional structures and procedures. In the irrigation sector, priority should be given to balanced expenditures between new assets and operation and maintenance, joint management of irrigation systems or turn over to farmers, and costs recovery to ensure longer term fiscal sustainability. There is also an urgent need to look into dam safety, hydrological data collection, flood forecasting, and watershed management to reduce vulnerability to natural hazards..
  • Creating the enabling environment for rural non-farm growth: This requires improving the quality of, and access to, infrastructure (roads, power, wholesale markets) and services (market information, land administration services, credit), including increasing the capacity and reliability of power supply, while reducing costs and regional disparities in connectivity; and expanding the rural road network and improving their maintenance to reduce transactions costs and improve access to markets..

2. Promoting more equitable access to assets.

  • The prompt amendments to the LDO to grant full ownership rights to farmers is needed, but potential adverse socioeconomic consequences should be carefully identified and mitigated. Due to its sensitivity, consensus building with civil society should be a priority. To implement the national title registration system, the Registration of Titles Act (RTA) needs to be amended, including: eliminating registration restrictions on co-owned land; allowing titles for people without ownership documents on the basis of occupancy; and protecting interests that are difficult to register formally. Land administration also needs to be streamlined for efficient service delivery. These reforms and other policies are being framed into the National Land Policy. This policy will also need to spell out the criteria for the allocation of competing uses. Land-related issues in the North-East are also important — in particular, the property rights of displaced people in conflict affected areas.

3. Strengthening Institutions for the Poor and Rural Livelihood

  • Strengthening Rural Service Delivery: Improving the capacity of local governments to meet the rural communities' needs would require well-defined roles of the different tiers of governments and mechanisms. Support for the basic infrastructure services will help improving the rural investment climate and creating employment opportunities and linkages between farm and non-farm sectors.
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  • Empowerment and Rural Livelihood: Community-based approaches can serve as an important vehicle to build social capital and enhance the capacity for collective action at the local level. Empowerment of the poor and particularly women, has proven to be a very powerful instrument in promoting better opportunities for productive investments and expanding access to income generating activities and markets in the poorest rural areas. Community-driven approaches are also an important mechanism to assist the conflict- and tsunami-affected families.



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