Impact of On-farm and Off-farm Labor Allocation on the Sustainability of Farming in Oman Hemesiri Kotagama, Slim Zekri and Hamam Alfarsi Department of Natural Resource Economics College of Agricultural and Marine Sciences Sultan Qaboos University International Conference on Food Security, Agriculture Sustainability and Pulses 5 –6 DECEMBER 2016 -Crowne Plaza, Muscat

Agricultural Sustainability Food Security and Pulses Justification Water, Land vs Labor as relatively most constraining factor in Oman’s farming. Al Batinah farmer organization Chairman’s observation: Scarcity of labor Sustainable Agricultural Development Strategy (SADS, 2014): Report on Land Use, Tenure and Management Omani labor leaving farms Agricultural Sustainability Food Security and Pulses

Agricultural Sustainability Food Security and Pulses Research Problem Why are Omanis leaving farming? Is there a scarcity of labor for farming in Oman? Agricultural Sustainability Food Security and Pulses

Agricultural Sustainability Food Security and Pulses Theory and Literature Undistorted factor markets are a perquisite for efficient allocation of resources. Apergis et al., (2014) based on a study conducted on Middle East and North African (MENA) countries, for the period of 1970 to 2011 have concluded that: the boom in the oil sector have had an adverse effect on the agricultural sector. This effect has been attributed to the “Dutch disease” phenomenon: Where, the boom in the oil sector would increase real wages in the oil related off-farm sector siphoning labor out of the relatively low waged farm sector (Reed, 2012). This could also be due to government intervention in labor markets with increased wages in non-farm sector. Agricultural Sustainability Food Security and Pulses

Agricultural Sustainability Food Security and Pulses Theoretical Model If there are no off-farm employment opportunities the optimal time spent farming is T**F If off-farm work is available, the optimal time spent farming decreases to T*F (where the marginal returns to off-farm employment are equal those to farming/ slopes equal). The optimal time spent working off-farm is equal to T*O - T*F. The option with off-farm employment is preferred as a higher indifference curve is achieved. Agricultural Sustainability Food Security and Pulses

Quantitative Model (FL+OF+HL] Max GR (OR) 6414.94   Extent (Spring + Summer) 3.81 3.67 534.58 Profit/month 423.00 4632.00 -720.00 Perennials Forage Vegetables Livestock Per unit Family labour Alternatives Date Banana Lemon Rhode G Alfalfa Tomato Pepper Cauliflower Melon Cattle Goat Sheep Off Farm Hired Labor Gross Margin (OR/Feddan) 311.64 189.42 121.38 102.06 1160.00 1103.34 594.30 344.82 393.96 200.00 50.00 70.00 Out put Level 2.79 0.00 1.01 0.87 2.40 1.00 Input output co-eff Resource use Const Resource Level Land Land Spring (Fed) 0.50 0.10 4.05 <= 5.00 Land Summer (Fed) 4.92 Water Water (CuM/Year) 8910.4 10019 8349.2 11232.6 12246 2760.9 1175.5 1615.6 2714.6 6123 1224.6 33015.74 Labor Labor Family (Person/Year) 0.26 0.17 0.24 0.18 0.27 0.28 0.22 0.16 0.13 0.03 1.30 Labor Hired (Person/Year) = Labor Off-farm (Person/Year) CS Perenial 0.55 -0.45 -38.70 61.30 Agricultural Sustainability Food Security and Pulses

Agricultural Sustainability Food Security and Pulses Measures Household income (OR/Year/Household) Land use intensity (Land cultivated Spring + summer/ Land Owned*2)*100 Proxy on domestic food production/food security Agricultural Sustainability Food Security and Pulses

Agricultural Sustainability Food Security and Pulses Data Sources Secondary sources: The agricultural census of Oman (MAF, 2004 and 2013), Report on cost of crop and livestock production in Oman (MAF), Study on profitability analysis of selected farms in the Batinah region of Oman Al Said et al., (2007). Primary data of: Survey on farm labor use in Oman conducted by the Department of Natural Resource Economics. Agricultural Sustainability Food Security and Pulses

Off-farm Income in Oman Agricultural Sustainability Food Security and Pulses

Farming Systems in Oman Farm size distribution in 2013 (Average Farm size 2.1 Feddans) Feddans No of Holdings Total Area (Feddans) Cropped area (Feddans) %of Holdings % of Total area 0.01-0.99 110233.0 24875.8 20825.7 71.58 7.0 1.00-1.99 12596.0 17414.1 11981.3 8.18 4.9 2.00-4.99 14371.0 44911.8 23562.0 9.33 12.7 5.00-9.99 9046.0 62677.4 28509.8 5.87 17.7 10.00-19.99 5501.0 72161.9 32122.2 3.57 20.3 20.00-29.99 1210.0 28423.0 11684.5 0.79 8.0 30.00-39.99 409.0 13769.1 5242.8 0.27 3.9 40.00-49.99 174.0 7612.3 2752.2 0.11 2.1 50.00-99.99 273.0 18442.5 6961.5 0.18 5.2 100.00-199.99 120.0 15944.7 4050.1 0.08 4.5 200.00 and more 75.0 48777.5 22544.5 0.05 13.7 Total 154008.0 355010.1 170236.4 100.0 Agricultural Sustainability Food Security and Pulses

Duality in land ownership Duality: 90% people owning 25% land area vs 10% people owning 75% of land!!! The small farms are cultivating more than 50% of farm area, whilst large farms are cultivating less than 50% of the farm area. Small farms use more labor per unit of land. Small farm income per unit of land is high. Agricultural Sustainability Food Security and Pulses

Recent Policy/Strategy Agricultural Sustainability Food Security and Pulses

“Farmer’s” main occupation in year 2013 % of Total 2013 Agricultural 15.9 Government sector 52.9 Non-agricultural private sector 12.3 Other 2.3 Unknown 16.6 Total 100.0 Agricultural Sustainability Food Security and Pulses

Type of labor by farmed area Agricultural Sustainability Food Security and Pulses

Results: 2.1 Feddan Average Farm Condition Gross Revenue (OR/Y/HH) Land Use Intensity Family Labor 1061 75% Family Labor + Off-farm 5304 61% Family Labor + Off-farm + Hired Labor 4973 The gross revenue from an average 2.1 farm is below the poverty line (34 OR/Month/Per capita). There is an incentive to move away from farm to Off-farm employment. It reduces land use intensity 11%. Use of hired labor increases income and land use intensity. Hired labor use is illegal. 0.55 labor/persons would be used. If allowed to hire legally it is beneficial to food security. Tanfeedh recommendations are appropriate for the agricultural sector too. Agricultural Sustainability Food Security and Pulses

Results: 5 Feddan farms 1 Expatriate labor per 5 feddans Family labor is not sufficient to achieve high LUI. There is an incentive to move to off-farm employment as income increases 2 fold. But LUI decreases by 47%. 1 Expatriate labor per 5 feddans is sufficient and increases HH income and LUI. However labor is constrained during planting and harvesting periods. Allowing for temporary hired labor further increases HH income and LUI. Condition Gross Revenue (OR/Y/HH) Land Use Intensity Family Labor 2502 75% Family Labor + Off-farm 5320 28% Family Labor + Off-farm + Hired Labor 6414 Family Labor + Off-farm + Hired Labor + Temporary Labor 6632 94% Agricultural Sustainability Food Security and Pulses

Tanfeedh: Labor Markets Agricultural Sustainability Food Security and Pulses

Agricultural Sustainability Food Security and Pulses Conclusions Income from an average 2.1 feddan farm is insufficient for livelihood, whilst 5 and more feddan farms are viable for livelihood. There are incentives to move for off-farm employment, with higher wages in the off-farm sector at a cost to local food production. Policy of 1 expatriate labor per 5 feddan is insufficient during planting and harvesting periods. Allowing temporary labor hiring is recommended (as Tanfedh). Agricultural Sustainability Food Security and Pulses

Policy Recommendation At present a flexible labor market policy of allowing temporary labor hiring will improve family income and local production. In the longrun agricultural productivity need to drastically improve to retain Omanis in farms and simultaneous removal of labor market distortions. Agricultural Sustainability Food Security and Pulses