Developing the North and East

Challenges and opportunities

by Nimal Sanderatne, Sunday Times, Colombo, August 14, 2011

The Sri Lankan economy has functioned with only part of its potential capacity for the good part of its last three decades. Although some economic activities prevailed despite the war, most of the region was a battle zone rather than a thriving economy. This applied to all three sectors of the northern and eastern economy: agriculture, industry and services.

Although agriculture survived, it was perhaps the worst affected. Paddy and food crops could not be grown in many areas owing to the shelling, mines and difficulties of obtaining agricultural inputs. Border areas too were affected badly. Fisheries that were the life blood of many communities were severely restricted by the prohibition of fisheries in the security zone. The few industries that were established in this region were closed and most of them in ruin or disrepair; services, except perhaps banking and communications were also severely disrupted and operated on a curtailed level. Internal trade was severely disrupted and restrained without a free flow of goods from other parts of the country. Both domestic and foreign tourism came to a standstill with some of the tourist hotels in the East being utilized by the LTTE.

There is now an opportunity to use the resources of this region for the country’s development. The development strategy that is worked out and the efficacy of its implementation would make a vital difference to the economy of the region, its contribution to national output, the employment of youth in particular and incomes and livelihoods of the population of the region. Several preconditions must be established to usher in a period of economic growth and prosperity. The full economic potential can only be realized if an equitable, durable and permanent political settlement is ushered in. The satisfactory resettlement of the displaced families is a precondition for their contribution to the economy and enabling them to obtain a livelihood rather than be a burden on the state. The successful rebuilding of the devastated areas and the reconstruction of economic and social infrastructure are basic requirements. This requires a massive investment.

The north

About 25 per cent of the economy of the north is derived from agriculture. Trade and services are the other important sectors. There is already a resurgence of agricultural production in the north, though there are severe constraints. The Jaffna peninsula grows a variety of food crops that are consumed in the country. The Jaffna economy must be transformed into a modern one where agriculture would be more productive and expanded and agro-processing developed. Nonetheless agriculture would be of lesser significance in the future economy that has to be diversified.

In the long run the real potential of the Jaffna economy lies in the development of industry and services. Several industries in the north could be revived and new ones established. The revival of the Kankesanthurai cement plant, the Paranthan chemical manufacture and the Valaiachchenai paper industry are among the industries that could be revived. There are plans to develop two salt urns to make the country self-sufficient in salt once again.The development of the harbour and airport and improvement of roads and bridges would contribute much to the development of the North. The development of education and technological skills, such as information technology, provides the means for new avenues of productive employment. There is potential for tourism in the north as is evident from the fact that the peninsula is currently attracting tourists. However this is a sector that has to be improved considerably by way of accommodation and transport. The development of the region to enhance its economic capacity would require considerable investment owing to the destruction caused by the war.

The eastern economy

The economy of the eastern province depends mainly on agriculture and fisheries with about 70 per cent of the population deriving their incomes and livelihood from it. Besides this the eastern province is one of the most fertile and agriculturally productive regions of the country and has been the granary of Sri Lanka. About one fourth of the country’s paddy production is from this region. During the period of the conflict only about one half of the extent of cultivable paddy land in the eastern province was cultivated due to serious security conditions.

Since the end of the war additional extents of land have been brought under cultivation and the current Yala harvest is expected to reap the benefits of this as paddy production in the country is expected to increase by about 0.5 million metric tons. Although the region has some of the highest yields in paddy, the average yields are not very high and therefore there is potential for increasing paddy productivity. Increasing average productivity from about 5 metric tons to about 8 metric tons per hectare is a realizable goal. The programme to increase paddy production requires a larger amount of high yielding seed varieties to be developed, fertilizer availability to be improved and appropriate farm mechanization to be introduced to reduce the cost of production and overcome labour shortages at peak periods.

The other crop with potential is maize cultivation due to its demand as the major ingredient for animal feed. Large scale maize cultivation is being promoted with the provision of hybrid seeds and contractual marketing. There has been a substantial increase in maize with the area under maize cultivation about doubling. The target is for the eastern province to produce 25 per cent of the country’s maize requirement. Vegetable cultivation especially under irrigation and controlled conditions also offer a huge potential. A vital factor for the development of agriculture in both the eastern and northern provinces is the provision of irrigation facilities. Although irrigation capacity has been improved through the renovation of tanks and irrigation schemes, there are a large number of minor tanks in the eastern province that await rehabilitation.

The eastern province has a large extent of shrub jungle. These lands could be used for the cultivation of valuable cash crops. There is a need to examine the soil conditions, study recent rainfall patterns, water availability and irrigation methods to determine the suitable crops to be grown. Once the agronomic conditions are determined and suitable crops identified, these lands should be given on long term leases to companies for cultivation.

Large farms managed by companies for growing cash crops such as cashew, mango and other perennial crops, would be the most suitable mode of production. These companies would have the capital and technology to develop these lands. Unfortunately there has been a traditional reluctance of governments to give land to private firms. There are several companies that are involved in agricultural development. These and new firms could develop these lands productively for export crops that are much in demand.

Livestock development

The eastern province is one of the major milk producing areas in the country. It is estimated that nearly 15 per cent of the national cattle population and about 15 per cent of the total milk production are produced in the eastern province. Suitable farmland and water are available in the province. However the recent war conditions disrupted the milk collection network. There has also been a significant loss of animal stock thereby resulting in a decline in livestock production in the province. There is an urgent need to provide better veterinary services as their inadequacy is a severe constraint to the growth of livestock in the eastern province. The productivity of local animals could be enhanced by importing high yielding cattle and goats and the animal stock improved by artificial insemination services. If these facilities could be improved milk production could be doubled in the next five years.

Tourism

The potential for development of tourism in the east is well known. The private sector has refurbished hotels that had been neglected and new facilities of various grades are being developed: from guest houses to star hotels. The immense improvement in roads and the new bridges are making travel pleasant and quicker. The availability of air transport too has enhanced access to this region. No doubt tourist growth would contribute much to the region’s economic growth and in turn contribute to the country’s economic growth.

In conclusion

There is one serious mistake the country must guard against. That is the misconception that peace alone would be adequate to realise the economic potential of the north and east. Peace provides the backdrop and environment for the pursuance of appropriate economic policies for the development of the region, but vast amounts of investment, proper implementation of development programmes and the need to design new economic activities and modes of production for the region are vital.

At this historic point in time when there is an opportunity to develop this region, there are many pre-conditions that have to be established to realise the full economic potential of the region. Large investments, proper planning of the region’s economic development programmes, effective implementation and private sector participation are important. A durable political solution to the ethnic discontent is an essential precondition for sustainable economic development of the north and east.