Tips on how to end poverty or run the country?

Nuwan Siriwardhana

February 13, 2007, 8:51 am

We watched a program done by Harsha de Silva (who is in this picture) on Sirasa TV interviewing World Bank’s vice president Mr Patel and a big shot from ADB after the donors’ meeting. Harsha de Silva was critical of government approach on poverty alleviation and e Sri Lanka. But the World Bank vice president came up with Mahavilachchiya example to show how well e-Sri Lanka program is producing results. If Mahavilachchiya is this productive, why isn’t it being replicated as we saw in the budget proposal? Who is stopping this? Didn’t Mr Weeratunga who is also in this picture visit this village and promote it everywhere recently? Do we need any more tips from World Bank?

samarajiva

February 13, 2007, 9:05 am

Harsha is the one giving the tips, not the World Bank.

Suthanthiran

February 13, 2007, 10:45 am

I see a DINOSAUR, a HUNTER, a VICTIM, and a SPY. (not in any order)

harsha de silva

February 13, 2007, 4:16 pm

dear mr siriwardhana

yes i was critical of the government’s poverty reduction program. poverty in this country has gone down by just 3% over the last 10 years; still around 23%. our impressive growth rates have not resulted in reducing poverty in any significant manner across the country.

in mainly agricultural areas poverty still runs at over 30%. poverty in the siyambalaanduwa ds division is 52%. but poverty in the urban areas, mainly the western province, has reduced by 50%. for example, poverty in kotte is some 5%. why? because successive governments have not been able to undertake reforms in agriculture and millions of rural people are ‘imprisoned in quarter-acre plots’ while those in the urban areas are benefiting from reforms in services and industry by integrating with the rest of the world. unless serious reforms are undertaken in land markets and farmers given title to their land and given the tools to compete, we will continue to have high poverty rates in the rural areas. there is no disagreement there. these are economic truths. you cant force farmers to grow paddy by giving them unsustainable subsidies and expect them to make profits. today farmers have to sell their paddy at below cost! we need markets to function if we expect farmers to participate in a market economy!

same with education. unless we undertake reforms in education and allow competition in higher education we will not be able to ride the coming knowledge economy wave. we need more engineers, more computer scientists, more bio-tech graduates and so on. but the state monopoly in higher education is strangulating the creation of these graduates in the numbers we need. just look at india; see the benefits of opening up higher education has done to the growth and poverty reduction potential in that country. i can go on, but will stop here due to limitations of time and space…

my critisicm on the e-srilanka program was specifically on the nenasela program (if you recall the discussion). i was refering to the sustainability of nenaselas in light of them being handed over on a platter to certain individuals on a non-transparent basis. the vishwa gnana kendra (VGK: the original nenaselas) were to be given to operators on a competitive basis. they needed to have certain minimum criteria of running a succesful business and had to produce a viable business plan. not given as political favours. what is happening now is a classic case of ‘political rats coming out of the woodwork for the subsidy cheese’. i am sorry to burst your bubble, but that is the truth. even praful patel agreed there were a number of issues with that. also, e-srilanka was designed to have two regional telecom networks; one in the deep south and one in the northeast. what happened to those? what happened to the rural roll out subsidy? where is the money collected by the international incoming levy?

wanni has done a great job in mahavilachchiya. in fact i said there is a lot to learn from him and i mean that. in fact, he called me while the program was being airred and expressed his delight at the discussion. we need more mahavilachchiyas. i agree with you on that.

but what i was telling mr lalith weerathunga was, inter alia, that we need to use ICT in a meaningful way to help farmers; they need crucial marketing information. they need to know what the demand is like for the various options of produce he has before putting the seeds in the ground. he should know the price trends for those different options. once his produce is about to be harvested he should know where he can get the best price for it. if he has taken the produce to the wholesale market, he should know where he can get the best price etc. all these can be efficiently undertaken using ICTs. there have been a number of starts, but nothing has really come about.

so in sum, what we need is reforms in agriculture to give the farmers the freedom to decide what they should grow by removing restrictions on paddy lands; giving them the option to merge quarter-acre plots in to bigger economically viable and efficient commercial agriculture by giving them title; giving them the marketing insights through ICT-driven information (through nenaselas or what have you); strengthen the agriculture extension services to provide technical advice; help them intergrate in to the formal financial markets through buy-back agreements that can serve as collateral and finally establish a vibrant market for agriculture via public-private partnerships. if we can do that perhaps we can shift millions of farmers out of poverty. if not in 2016 we will still be talking about why there is so much agricultural poverty in this country. mr lalith weerathunga is an intelligent and experienced civil servant who very well understands what needs to be done. i was only reiterating it.

Anura Senaratne

February 13, 2007, 5:57 pm

Harsha,

One big issue faced by the Sri Lankan farmers is the burden of ‘bedum nadu’. There is a section of farmers who are involved perpetually on such land cases, for no fault of theirs and spend their little income making the lawyers rich.

Is there a solution in ICT? Can’t we computerize the land registry so that the number of such these cases will be brought down to a minimum and farmers spend their time at the paddy fields instead of courts and lawyers’ offices?

Another angle you can look at.

Of course the lawyers might not be happy.

Donald Gaminitillake

February 13, 2007, 9:32 pm

‘bedum nadu’. is not only a problem with the farmers but all over Sri Lanka.
There was Australian funding for land registry but later went missing!!!! (unknown reason for public)
I saw a news paper article that they are going to use GPS mapping.

Anyway the present situation takes over several months to a year to register a deed at a Land registry.(without any strings)

Also the deeds are kept and listed by the lawyers name not according to the location.

Example
A Lawyer who practice in Kandy may write a Gift deed to a land in Colombo but he will register this deed in Kandy Land registry under his name.

100 years ago we may have had few lawyers and this may have been the system. One could always cross checked. But today we have thousands of Lawyers. It will be very difficult task to put this mess in order.

Donald Gaminitillake

Landgrants

February 14, 2007, 12:17 am

This is a very good read about how land parcels in rural areas in third world can be best valued and used by a guy called Mark Frazier. http://www.openworld.com/downloadable-reports-and-white/new-catalysts-for-sustainability-a-global-opportunity-for-digital-philanthropy/

This guy was in Sri Lanka and advocated the same some time back but nobody listened to him. But according to his website there are a lot of other countries who use his strategies.

harsha de silva

February 14, 2007, 10:35 am

anura

reforms in the land markets is a fairly complex process, and yes, computerization of the land registry is perhaps one of the necessary conditions.

i discovered a website for what is called ‘sri lanka land titling and related services project’ under the ministry of lands. http://www.ltrsp.slt.lk/faq_ltrsp_sri_lanka.htm

it would be good (for someone who’s got a bit of time; i am over my head these few days) to go in and see what the status is…

harsha

Helaya

February 15, 2007, 3:27 pm

Donald,

You are trying to screw all banana trees like a Kottoruwa. Follow this link and find that the work for land titling is already started. Don’t critisize everything without doing reasearch work.

Upul Arunajith

February 20, 2007, 4:34 am

INTRODUCTION OF A PRICE GUARANTEE MECHANISM AS A MEANS TO POVERTY REDUCTION IN THE RURAL FARMING COMMUNITIES IN SRI LANKA.

In the outset I must state that I am no economist by any stretch of imigination and with the limited knowledge on the subject of this Poverty Elimination I take the liberty to offer a very abstract solution to the root cause of the problem as I perceive and interprit the situation.

The root cause of the poverty among the paddy farmers in Sri Lanka is the absence of a mechanism that will guarantee the price for the crop during the harvesting season. For the most part during the harvest, due to excess supply the intermediaries will artificially keep the price low to the extent the poor farmers will loose if they were to sell the crop at the prevelent market price. End of the day it is the intermediary who will reap the benefit of the hard work of the farmer. Nonetheless burdened with debt some farmers are reluctantly though compelled to sell their produce to
intermediaries / brokers at frustratingly low prices merely to service their loans. In doing so they never be able to get out of this vicious cycle and the clutches of the intermediary who suck the blood out of a poor farmer leaving them with sufficient blood to work another sason.

This has been the case with Wheat, Corn, or for that matter any commodity. However, in the developed world this problem has been resoved by way of a price discovery and guarantee mechanim by way of introducing Futures trading.

To provide a quick overview of a Futures contract, this is a stamdardised contract interms of Quality, Qunatity and Price for a particular commodity i.e Wheat and the farmer can sell the commodity ahead of time at a pre-determined price. Once the contract consumated it is good until executed by the tow parties and guaranteed by th ecommodity
exchange and the clearing house corporation.

There was a similar market that was developed for the farmers during the time when Mr. A S Jayawardena was the governor of the Central Bank. With the present “Wheeler Dealer” type chief ruining the countries Central Bank who has peripharal interests other than running the countries monetory systom, inititives such as the introduction of a Futures market cannot be discussed.

However, the introduction of a Futures market under the auspices of the incumbent government must be given serious thought as a means to atlest reduce poverty befre one can think of poverty elimination among the sri lankan farming community

Upul Arunajith

harsha de silva

February 20, 2007, 9:34 am

upul

this is EXACTLY what i was telling mr lalith weerathunga et al. there is a pilot project called ‘govi gnana seva’ at the dambulla dedicated economic centre which in the long run is suppossed to become a ICT based forwards futures mechanism.

harsha

Dimuthu

February 20, 2007, 9:39 am

Upul,

You seem to think the sole root cause of the poverty of the Sri Lankan (and elsewhere) farmers is the intermediaries.

Why don’t you forget agriculture for a moment and think about other markets. Think about Motor cars, TVs or computers. There are intermediaries in all these markets but that had not made car manufacturers or TV manufacturers poor? Why only farmers are poor?

I do not think you have to go beyond the very basics of economics to realize why farmers are poor. They produce a product with a less demand and high supply. So you can figure out where they position in the demand supply curve and what they get in return.

The ‘solution’ you suggest is to introduce a price guarantee mechanism. You know there is such a mechanism already in place and you also know that does not work. Whenever there is excessive supply the prices will obviously come down. That is basic economics. One cannot perpetually maintain an artificial price.

You also talk about future trading systems. In fact, the effect of the future trading systems suggested by Mr. A. S. Jayawardena has the same impact of the agri-loans given to farmers. Banks continue to provide loans to the agriculture sector but that had made a little difference in the lives of the farmers.

So it is very clear neither guaranteed prices nor future trading systems nor subsidies can raise the living standards of the farmers.

There is no point trying to develop the agriculture sector in Sri Lanka. We already produce whatever we want. One may suggest we should export agri products, but that is not even worth trying because India, Bangladesh and China can put agri products to the world market at much cheaper prices. We are no where compared to them.

Currently the agriculture contributes to 18% of the GDP. In every developed country this percentage is less than 5%. (In Singapore and Hong Kong it is zero percent) So when the country develops naturally this percentage has to come down.

The best we can do is not to rant about the agriculture sector but see how we can absorb part of the current agri workforce to the industries and services sector. (Like giving jobs at factories and hotels to the children of farmers) That is the only was we can improve the living conditions of the rural poor.

As long as they stay within the agriculture sector, there is no way one can sensibly improve the living conditions of the poor. Even in the developed countries (with so many subsidies) farmers remain one of the poorest sections of the society. So how can we make them rich?

harsha de silva

February 20, 2007, 9:53 am

dimuthu

you are right at a longer-term macro level. but it is not easy to convert paddy farmers in to chip makers. i dont mean this in a bad way, but it takes time and more than anything, opportuniries in the chip making sector. it has to be demand driven.

but, in the context of ICT for agriculture, what upul is suggesting is the proven technique to reduce (if not eliminate) the price volatility at the farm-gate. this is what LIRNEasia is also intereted in; how can we use ICT in the agriculture sector.

harsha

Dimuthu

February 20, 2007, 9:53 am

Contrary to the popular belief, ICT based future mechanisms or whatever will not remove the intermediary.

As somebody observed now the intermediary is a sarong clad mudalali and if there is an ICT based system in the middle, there will be a new intermediary who will not wear a sarong but a suit and a tie. The intermediary costs will remain same.

e-Choupals in India have not improved the lives of the farmers. They have actually reduced their income (because part of the farmers revenue now going to maintain the ICT systems)

harsha de silva

February 20, 2007, 10:24 am

dimuthu

you are right. intermediaries play a very importnat role; from collecting to transporting to marketing to providing working capital.

only people who think they understand argiculture markets (as opposed to who actually do) say silly things like ICT solutions are meant to remove the intermediaries who add value to the chain.

the point in this discussion however, is using ICT to reduce volatility in agriculture markets by reducing the assymmetry of price information via forwards or futures markets (or whatever else), not eliminating middle men.

harsha

Dimuthu

February 21, 2007, 7:22 am

Harsha,

Can I ask a simple question?

Has anyone done a cost-benefit analysis of this effort of using ICTs to reduce the volatilities in agri markets or whatever?

In other words,

What is the economical benefit brought to the farmers by this? and

What is the cost of ICTs? (capital and recurrent)

Does the benefit justify the cost?

harsha de silva

February 22, 2007, 9:25 am

dimuthu

there have been a number of small reports done by various people to assess the ‘benefit’ side, but nothing comprehensive including the ‘benefit’ side.

lirneasia will be starting some serious work on this topic in the coming months; focusing on what the ‘transactions costs’ are on the demand side; how they are incurred, what component can be reduced through ICT and how efficiencies can be improved in the wholesale agriculture market (including less volatility) etc. the cost is a supply side question.

harsha