Archives

by Chandani Dias Abeyagunawardena, Deputy Director, Export Development Board

Attractive proposals conducive to investment announced by the Government in the 2002 Budget are keeping Sri Lankans busy trying to get out of money and into tangible investments. Some would pick out soil and gold as two of the most basic things to buy when they are looking to "shift the assets away from the money".

Land investment would be a better deal if things really got tough; people could use land to grow something to eat. Gold is just another form of money. How valuable it is depends to some extent on what there is to buy. They "Don't buy gold" suggestion may also not look very valid as some of us South Asians always look at gold as a viable investment.

In purely monetary terms, land may not have been that good an investment either. General economic uncertainty has kept land prices flat or in some instances even pushed down. The point in productive land ownership is to increase security.

If one can own or buy a fertile reasonably sized price of land without extending himself that can immediately bring about security.

Robert Rodell from the United States of America who conceptualised regenerative agriculture, once compared gold with land and said that, "Gold is Gold and always will remain Gold and only when one is a very good goldsmith it can be turned into something better than a bar of gold; but land can improve in fertility either on its own or with help".

He said that most people who own or buy land have no sense at all of its ability to be regenerated or to regenerate itself. Many still think that the only way to improve land is to keep injecting it with high priced artificial fertiliser and, even with escalating prices, may not see any other option but to pay them.

Rodell pointed out 20 years ago, time has come to realise that by unhooking the land from its habit of getting an artificial fix of nutrients, and can start feeding itself from its own inner resources of locked up minerals and from the air's inexhaustible store of nitrogen.

Best investment

Therefore, land is the best investment not only because its basic but also because it is the foundation for the process of re-generation to take place which is of paramount importance for cultivation of crops to take place. Having selected land over gold, an investor would then ask how big should be the land he finally settle down to buy for cultivation.

Some in Sri Lanka will advise investors to get big or get out. This would make investors buy more land, borrowing if necessary. He would also buy bigger machines, build higher production capacities and ask for high returns in higher production. Without safety features such as guaranteed marketing channels, he would get hurt by over producing and holding down the prices. Farm size (acreage), value of sales, primary out put and geographic location therefore, are some of the criteria that have to be taken for consideration.

Sri Lanka has made a notable progress in diversifying its economic base through export-led industrialisation. However, economy remains primarily agrarian. Exports from agriculture sector play a key role in the economy. Share of agricultural exports from the total was 19 percent in 2001.

Cultivated area under main export crops such as tea, rubber and coconut has substantially decreased over the past twenty five-years.

The total area under tea in the country is around 180,000 hectares. Low country tea accounts for about 42 per cent of the total area. The tea area has reduced by 30 percent mainly in the mid and up-country areas during the past four decades. The low country tea area has increased by about 70 per cent. Elevation contributes to the flavour, yield and final price of the tea. High-grown tea areas have traditionally produced the biggest share of the total production but the low-grown tea areas have been producing the highest output since 1983.

Major buyers

The major buyers of Sri Lanka's tea increasingly demand tea originating from the low-grown areas. Low-grown teas are at present contributing about 56% to the total production of tea in Sri Lanka.

Coconut production of 3,055 million nuts in 2000 has been the best output ever recorded. A growth of 8 per cent has been recorded in 2000 as against 1999. Price per nut too has been rising, but due to rising costs of fertilizer and labour many of the estate owners do not receive the expected output or income.

Rubber production, however, remained 87 million Kgs in 2000. A decline of 10 per cent over 1999 has been recorded. The Central Bank reports that the declining trend is the result of competition for land for other lucrative crops and real estate development projects. Low international prices for natural rubber too contributed to the neglect of rubber lands by the small holders that produce 75 per cent of the total production. Production statistics and prices of the export and the subsidiary crops for the past twenty-five year period could guide the prospective investor in making his decisions.

Crop diversification is an aspect emphasised to maximise return on investment. More and more coconut lands in the country are being intercropped with spice crops such as pepper or fruit crops such as pineapple and mangosteen.

Investing to revitalise idling coconut lands could transform such lands into food production areas. In some countries in the region, projects to revitalise idle lands are being given state patronage. Basic infrastructures including road network, drainage and inputs such as seedlings have been provided by the state.

Investor motivation by holding training sessions on growing techniques, but grafting are being conducted. Inter cropping young mango plantations with short-term crops such as pineapple and turmeric has been encouraged.

Many decades of mono-cropping and application of synthetic chemicals and extensive erosion have left lands in many parts of the country barren. Degraded soils do not generate adequate return on investment. Countries such as Sri Lanka no longer need to make mistake made in the developed world through earlier ignorance of long-term problems created by over usage of chemicals, pesticides and fertilisers. Alternative biological or cultural practices, long prevalent among Sri Lankan farmer, could be used together with the latest findings on crop rotations, inter-crop management, resistant cultivars and integrated nutrient management in order to reduce and replace synthetic inputs.

Export performance

Production of crops under organic method is fast catching up with the Sri Lankan farming community. This is seen from the export performance of products such as organic cashew, tea, fruits, vegetables, spices and herbs. These products are increasingly exported from Sri Lanka to European destinations where organic niche market is growing at about 20% per annum.

In recent years, buyers in Europe, Japan and Australia are making more and more inquiries from Sri Lanka for organically produced agricultural product. The Department of Agriculture, the Export Development Board and Product Sector Associations such as Spices Allied products Producers and Traders' Association, therefore, are placing more emphasis to make farmers aware of the organic farming methods in order to increase production and meet current market demand.

It is learnt that the Board of Investment (BOI) together with the fruit and Vegetable Sector Exporters in the country has initiated to develop commercial agriculture in different parts of the country. Under this initiative, special agricultural zone swill be set up in which reputed exporters of agricultural products are expected to establish nucleus farms to work with out-grower farmers.

Forward contracts will be placed by the nucleus fast operators with out-grower farmers. Services such as technical know-how on farming methods, pre and post harvest technology and also inputs such as fertiliser and pesticides together with advice and guidance on their application would be provided. The Minister of lands in co-ordinating with BOI to facilitate allocation of prime lands available with the government through this initiative.

The lands Ministry in its proposed national Land Use Policy has emphasised its commitment to reserve prime agricultural land for food crops and potential export crops. Statistics compiled on land use patterns in Sri Lanka indicate that investors in Sri Lanka have a choice when it comes to investing in land.

- (Courtesy: Sri Lanka Exporter)

News | Business | Features | Editorial | Security
Politics | World | Letters | Sports | Obituaries |

Produced by Lake House
Copyright 2001 The Associated Newspapers of Ceylon Ltd.
Comments and suggestions to :Web Manager