The immense challenges facing the plantations came into focus at the recent symposium on the Future of the Plantations organised by the Sri Lanka Association of Economists. The low productivity of labour, high cost of credit for working capital, shortages of labour and the long-term viability of estates were among the problems cited. Yet the plantation crops - estates and small holdings - will be critically important for the country's economy.
The resolution of the emerging problems and increased productivity on the estates and small holdings would be an important determinant of economic growth. We cannot afford the luxury of letting the plantation crops decrease in productivity and thereby not contribute to the country's economic development.
Mr. Mahendra Amarasuriya pointed out that the private sector inherited the highest cost, least productive plantations in the world. Low labour productivity was one of the main reasons while the neglect of good cultural practices too had played a role. Added to this was that private firms were burdened with high interest rates for working capital and low international prices. More recently these companies have faced better conditions with higher prices for both tea and rubber and an ADB credit line for capital expenditure.
Yet labour continues to be a problem. Labour costs are high in relation to total production costs. The productivity of Sri Lankan labour is said to be low compared to the South Indian estate worker. Besides this, it was pointed out that sometimes labour does not turn up for work. Trade union pressures continue to be a hampering factor in organising the plantations more effectively. Signs of a more pragmatic trade union approach were however emerging.
Dr. Anura Ekanayake pointed out that in recent years productivity had risen on tea lands. Besides this, while the land area in plantations had come down, the land area under tea small holdings had risen. Today 60 per cent of tea production is from small holdings which comprise only 44 per cent of the land area under the crop. This itself points to the higher productivity among tea small holdings compared to the estates.
Dr. David Dunham struck a futuristic note. He pointed out the lack of clarity in plantation policy. He stressed the need to change the mode of thinking and to look at the future of plantations from a different perspective. He emphasised the need for diversification on the plantations, not merely agricultural diversifications but also into other avenues of productive ventures.
He put forward the view that labour of the future would have different lifestyles. Lifestyles akin to those of the modern factory worker would have to emerge in order to retain estate labour. Better wages, a transformation of the social amenities on estates, changes even in the mode of attire and devices to reduce the tedium of estate work are needed for the future sustainability of estates. Dunham advocated a new corporate culture for the plantations.
What the symposium on the Future of the Plantations brought out was that there was an urgent need to find innovative means of making the plantation crops not only economically viable but also socially sustainable. There would be a need to view the plantations as resources for exploitation in many different forms. Viewing the estates as mono cultural units is not economically rational. Why should estate lands not be utilised for growing other crops or undertaking other economic enterprises, if these are more productive?
There is a need to tie the productivity of labour to improved labour conditions. Innovative means must be found to change the low status occupation of estate workers to one of greater dignity, higher remuneration and better styles of living. The small holdings which now produce the bulk of the country's tea do so with little support.
There is a need for more comprehensive support services linking the manufacture of tea to credit and extension. The symposium underscored the need for new thinking and planning for our plantations. A need which must be addressed quickly and thoughtfully if we are not to lose a productive sector in the economy.
An appreciable increase in retail/foreign activity helped the market to sustain the upward momentum. The average daily turnover was in the region of Rs 150mn-200mn., mainly due to a large volume of blue-chip stock cross-overs.
Advances to declines ratio was in the region of 2:1 and seems to be improving even further.
Foreign activity monitored during the week seems to be in the region of 45% to 55%. Due to the rapid appreciation of the market, it is foreseeable that a temporary correction is due very soon (Maybe in the last week of June or first week of July).
The hand-over of Hong Kong back to China has been perceived by the international fund managers as a positive step in the global economic set-up, therefore large volumes of investments have been flowing into Hong Kong. This is evident by the increase in the Hang-Seng index over the last four years (1992-4200, 1997-15,000). As most fund managers are based in Hong Kong, the momentum gained there could also have a spin off on our own CSM reaching dizzy-heights towards the end of August/September.
The business community seems to be happy with the way the Cabinet reshuffle was carried out the previous week, due to certain changes that would most probably freeze the infamous labour charter. The labour charter would have given the Sri Lankan employee more powers than their counterparts in other competing third-world countries.
This would have made Sri Lanka less competitive in attracting foreign investments. Also the reshuffle showed the strength/stability of the government, when certain powerful coalition members were stripped of their portfolios and certain others side-lined and trimmed of their existing powerful ministries.
The ETF (Employees Trust Fund) would be transferred from the Labour Ministry to the Treasury. This has raised fears that the ETF monies would be expended in purchasing military hardware.
Senior employees of Dankotuwa Porcelain have been charged by the SEC for insider trading and relevant fines have been imposed. This is a warning to senior corporate executives and others who would be in a position to participate in insider trading.
Recommended stock: DFCC/NDB/JKH/Sampath/The Finance/Ceylinco Insurance/Kegalle/ Richard Pieris/Ceylon Cold Stores.
Speculative: Kelani Tyres/Royal Ceramics/Chemanex/Sathosa Motors/United Motors/ Tea Smal Holders.
At the Eleventh Joint Meeting Of The Sri Lanka-Japan and Japan-Sri Lanka Business Co-Operation Committees Dr. Daya Wijayawardena, Director (Export Agriculture) of the Sri Lanka Export Development Board, presented a paper on Prospects in Agriculture and Food Processing. The meeting was held on May 30 at the Ceylon Chamber of Commerce Secretariat in Colombo. We publish here extracts of his presentation,
Sri Lanka is primarily an agricultural country and likely to remain so in the near future.
Agriculture contributes around 23% of the total export earnings of the country and the agricultural sector, including forestry, accounts for around 20% of the GNP. The population of Sri Lanka is expected to increase from the current level of 18.3 Mn. to around 21.3 Mn. by the turn of the century. Forty five percent of the total employment is in the agricultural sector and in the rural areas 65% of the population is dependent on agriculture for their livelihood. Therefore, agricultural output needs to be increased substantially not only to meet the requirements of the growing population but also to earn foreign exchange to enhance the quality of life.
The agricultural sector of the country could be broadly classified into two sub sectors. A tree crop sub sector usually organised into plantations specializing in the cultivation of a few crops for export purposes and a large domestic sub sector where the cultivation of annual food crops for the domestic market predominates. Paddy is the major crop in the latter sub sector where over a million farmers are engaged in its cultivation on an area approximately a quarter of the cultivated extent of the country.
The plantation sector in Sri Lanka comprising the major export crops tea, rubber and coconut covers nearly 40% of the land utilisation in agriculture. The cultivation of sugar cane as a plantation crop is a recent development. The area under sugar cane has increased from 2,125 Ha. in 1980 to 24,862 Ha. in 1996, an increase of 1070%. The area under export agricultural crops has shown a significant increase, achieved through crop diversification of agricultural land, intercropping in other plantations etc.
Sri Lanka has an extremely favourable climate for year round crop production. Variations in the microclimate facilitates the cultivation of a wide range of products. Her close proximity to the Japanese market with direct access by air and sea provides an added advantage. The institutional arrangements required to provide the right conditions for production for export of a wide range of non-traditional agricultural products are in place. The availability of a modern plant quarantine facility (a generous gift of the Japanese Government) will ensure stringent quality and sanitary requirements.
Japan is an important market for a large number of our value added products. However, in the agricultural sector, we have still not exploited the full potential. There is potential to expand trade as well as for Japanese investment in the form of joint ventures with Sri Lankan companies in the following agricultural sectors.
Japan is an important market for black, green and organic tea.
Sri Lanka exported black tea to Japan amounting to 5677 MT in 1994 and 7688 MT in 1995. Most of the imported black tea is used in the manufacture of canned liquid tea.
The export of green tea and other teas including organic and instant tea from Sri Lanka in 1994 and 1995 were 733 MT and 149 MT respectively. We are made to understand that the Japanese consumer is very health conscious and therefore there is an opportunity to market more organic tea. There is also the possibility of promoting high value gift tea packs to cater to the upper end of the market. You will appreciate that there is an opportunity to promote and expand trade in quality black tea and organic tea in value added form as tea packets and bags.
Total exports of Natural Rubber from Sri Lanka in 1996 was Rs. 5.6 Bn. and the total exports of rubber products was Rs. 10.4 Bn. However, the value of rubber products exported to the Japanese market in 1996 was 10% of the total exports amounting to Rs. 664 Mn. We have the potential to expand exports of value added rubber products, such as bicycle tyres and tubes, solid rubber tyres, rubber foot-wear, foot-wear components, moulded rubber ccmponents for industrial use and other latex based items, such as household, industrial and surgical gloves.
I would also like to remind you that in the rubber re-planting programme, treated rubber wood would be available for the manufacture of furniture. At the moment, components such as brush handles and other household items are manufactured and exported to Japan.
The total area under coconut cultivation is 442,286 Ha. Total nut production per annum is approximately 2,600 Mn. Out of this production nearly 76% is consumed locally and the balance is processed for export. The total export earnings from the coconut sector in 1996 was Rs. 7,390 Mn.
(a) Desiccated Coconut (D.C.)
There are about 58 D.C. mills in the country and about 90% of the production is exported, earning an annual income of more than Rs. 3,000 Mn.
Total D. C. imports to Japan and the Sri Lankan market share in the past 6 years has increased.
This increase was a direct result of a promotional programme carried out in Japan with the assistance of JETRO, where a team visited Sri Lanka to assess the supply and quality standards of our millers. Although Sri Lanka is situated further from Japan relative to the Philippines, there is significant potential to expand trade in this sector since the Sri Lanka D.C. has a natural flavour, taste and whiteness that is greatly appreciated around the world.
(b) Coconut Fibre and Fibre Based Products
Sri Lanka is a major producer and exporter of coconut fibre. Total export revenue in 1996 amounted to Rs. 1,760.7 Mn. Out of the total volume of fibre exports, exports to Japan amounted to 14.5% and consisted mainly of twisted fibre. Coir fibre products that are exported to the Japanese market are brooms and brushes of various kinds including Tawashi brushes, door mats, matting, coir dust briquettes etc. There is significant potential to further expand trade in this area relating to the above products as well as other products like rubberised coir based products for the automobile industry and other uses, coir matting, geo-textiles etc.
The trend for environmental friendly, biodegradable, natural products has opened up new areas for application of coir fibre. One such area is the road construction industry. Due to the low cost of raw material, geo-textiles manufactured from coir fibre is increasingly used in the road construction industry to stabilize soil on slopes and embankments.
Introduction of coir fibre into the automobile industry in Japan has the prospects of opening up a large market for this product.
(c) Coconut Charcoal
There is potential to expand trade in activated carbon and charcoal.
Sea food exports to Japan from Sri Lanka consists mainly of Frozen Shrimps, Tuna and Lobsters. Exports in 1996 amounted to Rs. 2.5 Bn. or US$. 45 Mn.
The major importer of Sri Lankan Frozen Shrimps is Japan. While there is potential for Sri Lanka to further increase supplies of cultured Frozen Shrimps, the best prospects to increase exports in the near future to the Japanese market are Shrimps, Sashimi quality tuna, Lobsters and Crabs in the live form. At present live Lobsters and Crabs are exported from Sri Lanka to Singapore, Hongkong, U.S.A., European and Japanese markets. Production of Lobsters and Crabs through culture methods for which the technology and other production facilities are available in Sri Lanka, would go a long way in exploiting the niche markets in Japan.
In the case of Ornamental Fish, Japan is the third largest importer after Europe and U.S.A. In this area good prospects exist for Sri Lanka to expand trade further and also to supply certain additional varieties, such as Discus Fish and Koicarp Fish which are currently imported by Japan from Malaysia. The only assistance needed to develop exports of special varieties is the supply of brood stock and technology for breeding. All other facilities are available.
Herbs and spice
There is substantial demand for medicinal and culinary herbs in the Japanese market. Although there is potential for developing medicinal herbs for exclusive export to Japan, market access has been difficult since Japan sources most of the medicinal and aromatic plants from mainland China, due to its close proximity and low cost of freight. However, Sri Lanka could meet the demand for certain types of raw material which is not produced in mainland China and also supply value added products such as herbal oils, spice based essential oils, oleoresins and isolates, as well as organic products.
Processed fruits and vegetables
Sri Lanka earned Rs. 701 Mn. (US$. 12 Mn.) by exporting processed food in 1996 which is a 7.4 % increase over the year 1995 . According to reports received from the Japan External Trade Organization (JETRO), the processed food market in Japan is not expected to experience rapid growth in the near future. However, increased imports are anticipated in processed food categories such as canned and bottled foods, frozen pre-cooked foods, fruit juices and beverages.
Japan could provide a stable market for the widening base of our non-traditional and value added agricultural products. You are aware of our open economic policies, our reliance on the private sector for development and our encouragement of foreign investment.
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