(MENAFN - Muscat Daily) Muscat- Oman has recently adopted a policy of revenue diversification in which the agricultural sector is expected to contribute prominently.
Undistorted factor markets are a perquisite for efficient allocation of resources and growth in production. In 2013, only 16 per cent of Omani households reported agriculture as the main occupation and 53 per cent reported non-agricultural government employment as the main occupation, with the balance being employed in private and non-formal sectors. This situation is hypothesised to be related to the labour market where government legislated higher remuneration in the non-agricultural government sector vis-a-vis agricultural sector influences Omani farmers to move to non-agricultural employment, causing reduced cultivated area and farm production.
Researchers from Sultan Qaboos University (SQU) conducted a study to examine the nexus between labour market policies, agricultural employment and sustaining of local production for food security in the sultanate. The study used operations research methods to quantify the impact of labour market policies on agricultural employment, farm gross income and land use intensity (proxy for farm production and food security). The research was carried out by Dr Hemesiri Kotagama, assistant professor, and Hamam al Farsi, a graduating student, at the Department of Natural Resource Economics of the College of Agricultural and Marine Sciences at SQU.
It was found that in an average farm of 0.9ha (2.1 feddans), with 1.33 persons of family labour available, only 75 per cent land use intensity is achieved, with a gross income of RO1,061 per year per household, which is below the legislated minimum income from low-skilled employment in the non-agricultural government sector (RO4,632 per year per household).
The household gross income would increase to RO5,304 per year per household with non-agricultural employment of one person and 0.33 persons in agricultural employment, which explains low employment of Omanis in agriculture. Farm production too decreases with land use intensity decreasing to 61 per cent. Farms of 2.1ha (5 feddans), with availability of 1.33 family labour earn a gross return of RO2,502 per year per household, which is again less than the salary in the non-agricultural government sector and only achieves a land use intensity of 75 per cent. The household income would increase to RO5,320 per year per household with one person in non-agricultural employment and 0.33 persons in agricultural employment. Farm production too decreases with cropping intensity decreasing to 28 per cent.
However, with the current government policy of allowing to hire one expatriate labourer per 2.1ha (5 feddans) and with one Omani person in non-agricultural employment and 0.33 family labour in agricultural employment, gross income increases to RO6,414 er year per household. If temporary labour hiring is allowed at peak farm labour requirements, the gross income could be increased to RO6,632 per year per household. The current policy on hiring one expatriate labour per 2.1ha along with non-agricultural employment of Omani labour is in the short-run optimal.
The research indicates that income from an average 0.9ha farm that uses family labour is below the national poverty line of a household in Oman, providing strong incentives for farmers to fetch for non-agricultural employment with legislated higher income. Oman has thus been experiencing a movement of labour from agriculture to the non-agricultural sector at the cost of reduced land use intensity and thus reduced local food production.
On the other hand, relatively larger farms of 2.1ha too do not generate enough income to be above the poverty line. This is the incentive for family labour to move out of agricultural to the non-agricultural employment to increase household income. As a consequence, farmland is abandoned resulting in low land use intensity and reduced local crop production. Thus, the current policy of legislatively allowing employment of one expatriate labour per 2.1ha is optimal in terms of increasing Omani household income and agricultural land use intensity. Land use intensity could be further improved by allowing temporary employment of labour during labour peak requirements of the farm.
The current government policy intervention in the labour market by legislatively determining wage rates in the nonagricultural sector and the low productivity of the farm sector provides an incentive to Omani farm labour to leave agriculture. As a result, farm production is reduced. The current policy of allowing the employment of one expatriate labour per 2.1ha (5 feddans) farm is optimal by enabling hiring of temporary labour during peak labour demanding periods.
The gross income and land use intensity of farms could too be improved by allowing for employment of temporary expatriate labour to substitute the Omani labour that moves to non-agricultural labour. A flexible labour market policy of allowing temporary labour hiring will improve Omani household income and local farm production. However, the implications of non-Omani management of farms and the long-run feasibility of hiring expatriate labour for farming need to be examined to ensure sustainable farming and food security in Oman. A policy of allowing part-time employment is beneficial to the agricultural sector. In the long-run, both farm productivity needs to improve to be competitive with the legislated income receivable from non-agricultural employment and ideally labour markets need to operate freely to enhance food security and assure employment of Omani labour in agriculture.