Prelude to ‘Change’ in Agro Industry of Sri Lanka | Daily News

AGRO-INDUSTRIAL ZONES

Prelude to ‘Change’ in Agro Industry of Sri Lanka

Since independence, successive governments of Sri Lanka experimented with many models to make agriculture a viable venture to uplift the life standards of the “poor farmer” to a reasonably comfortable level.

However, seventy-one years of experimentation has not brought about decent living standards to farming community, which is more than a third of the total population and the farmer is yet called “poor farmer”. Neither did Sri Lanka achieve self-sufficiency in her main food commodities. During this period of time, many countries in the world, including several Asian countries took giant and meaningful steps towards achieving self-sufficiency in their staple food crops. They also achieved an agricultural surplus to invest in industries, by establishing viable commercial agricultural industries aiming at exports to lucrative overseas markets in developed countries. This not only increased employment opportunities outside the field of agriculture, but also increased per capita income and living standards of those nations.

Commercial Plantations

Sri Lanka regrettably failed to learn from the British as to how commercially viable agricultural industries could be established by taking lessons from the way the British established coffee, tea and rubber plantations and related processing industries on her own soil. Instead, post-independence regimes relied upon experiments suggested by numerous local authorities and also by some foreign donor agencies to improve the standards of subsistence level farming operations utilising traditional and conventional methods of agriculture. But ironically, the country still depends so much on tea and rubber, which were established by British as commercial plantations and coconut for her foreign exchange needs. No other agricultural product brings more foreign exchange than these three crops.

 While our neighbours were busy inventing and adopting new technologies to increase agricultural productivity of their countries, policy makers of Sri Lanka with the “blessings” of scientists in the country ignored new technologies and kept on praising the irrigation systems developed and agricultural prosperity achieved by king Parakramabahu during the Polonnaruwa era, which obviously were great achievements during those times. Some of them not only praised those technologies, but also made attempts to adopt them in present day context instead of using modern technologies. What they failed to understand was that the technology of 11th century is not what is required today to feed a nation with a population over 21 million and to compete in a competitive and open global agricultural marketplace.

 Therefore, today’s need is to leave aside the strategies adopted during the post-independence era up to date and re-model the agriculture sector to face challenges of the 21st century, while making a substantial agricultural surplus to be invested in the industries sector in the shortest possible time frame. The only way to achieve this is to move away from subsidized, subsistence level agriculture to commercial scale agriculture and make it a thriving industry. This will not only generate additional employment outside agriculture sector, but also increase per capita income and living standards of a population, which now depends too much if not entirely on subsistence agriculture.

Other than the three main plantation crops, there are hardly any commercial scale agricultural ventures in Sri Lanka to compare with any other Asian country, although the country has an edge over many of her competitors in the neighbourhood due to;

a. Geographical location

b. Availability of quality water resources

c. Abundance of good soil structures

d. Easily trainable and educated labour

force and

e.Reasonably well-organised shipping facilities.

However, what is seriously lacking in the country is macro scale thinking in venturing into commercially oriented agricultural enterprises and industries. Neither successive governments have promoted them nor has the private sector entered into such ventures. Therefore, non-traditional agricultural exports, such as fresh fruits and vegetables are confined to micro-scale operations mainly catering to Sri Lankan nationals working overseas. This too has a stiff competition from our neighbours who export similar products at low prices, mainly due to low cost of production in those countries.

Low cost of production is due to higher productivity connected to adaptation of modern technologies. Sri Lanka at one stage unsuccessfully promoted micro-scale Export Promotion Villages (EPVs) without a clear vision as to how the low quality produce coming from these villages with a high cost of production tag could compete in the sophisticated global market.

Absence of advance technologies and quality seeds and planting materials to increase the productivity has further reduced the comparative advantage the country has over other agricultural producers in the region. This is clearly visible in the horticulture sector (foliage industry) where the country had a leading edge three decades ago, but today declined to meagre levels due to her inability to compete with countries utilising advanced technologies in production of such crops.

Proposal

The Government should invite the local private sector and foreign investors to venture into an agricultural revolution in the country. To augment this it is proposed to establish several “Agro-Industrial Zones” in various parts of the country depending on the agro-climatic suitability of the area for proposed crops, but subject to a minimum extent of land for each zone and also for each single investment, again depending upon the crops grown.

Objectives

The main objectives of establishment of “Agro-Industrial Zones” are to;

 a.Generate investor confidence in investing in agriculture sector

b.Provide an opportunity for investors to venture into macro-scale commercial agricultural ventures utilizing modern technologies and infrastructure facilities

c.Increase agricultural productivity by introducing large-scale commercial farms utilising above-mentioned advance technologies

d.Introduce modern processing facilities to enter the competitive global market

e.Enhance agricultural productivity and thereby obtain a surplus from the agricultural sector in the short and medium term

f. Reduce cost of production of fruits, vegetables and other horticultural crops to reduce their retail prices in the consumer market, thus reducing the cost of living at national level

g. Generate employment to several thousands of unemployed youth and also to unemployed graduates and diploma holders in agriculture

h. Use commercial ventures in the Agro-Industrial Zones as “nucleus farms” to the small-scale farms in the peripheral areas thus increasing productivity in those small-scale farms. Small-scale farmers could then work as “contract farmers” to “nucleus farms”

i. To make use of these zones as breeding grounds for young agricultural entrepreneurs and utilizing the zones as training facilities for modern agriculture

j.Create ancillary industries connected

to export agriculture ventures

k.Achieve a quantum leap in export

earnings from the agriculture sector of the country

Methodology

A suitable formula for the proposed “Agro-Industrial Zones” is detailed below;

 a.Tropical fruit crops – Low country dry zone, Low country wet zone, Low country Intermediate zone, Mid country wet zone, Mid country intermediate zone, – Minimum extent of a zone – 500 hectares

Minimum extent for a single investment – 100 hectares

 b.   Vegetables Low country dry zone, Low country wet zone, Low country intermediate zone, Mid country wet zone, Mid country intermediate zone Minimum extent of a zone – 250 hectares

Minimum extent for a single investment – 50 hectares

c. Fruits, vegetables, flowers, culinary herbs and foliage plants under protected environments (greenhouses) – Up country intermediate zone, Up country wet zone – Minimum extent of a zone – 25 hectares

Minimum extent for a single investment – 1 hectare

As a first step, a zone for each category could be established in selected locations and lands could easily be found from under-utilised government farms belonging to the Departments of Agriculture, Animal Production and Health, Export Agriculture, Forest and National Livestock Development Board etc. Such established Agro-Industrial Zones should provide investors with easy access to required infrastructure facilities such as lands, electricity, access roads, communication, water etc. The Government can seek assistance from agencies such as World Bank, IMF, Asian Development Bank, USAID, for the initial investments in setting up such zones.

Each zone will comprise of all required facilities for investors in addition to the above-mentioned infrastructure.

These facilities will be provided through private investments and companies investing in provision of such facilities too should be given the same incentives offered to direct investors in crop production. Facilities such provided would be;

a. Pre-cooling and cold storage facilities

Drip/sprinkler irrigation facilities

depending on the crop requirements

c.Farm machinery and equipment

d.Crop protection services

e.Agricultural inputs

f.Advanced technology as a fee based service (Extension)

g. Laboratory facilities including analytical services

h. Seeds and planting materials

(nursery services)

i. Processing facilities

j.  Packing and packaging services

k.Transport facilities

l. Marketing of produce (local and/or overseas) including forward contracts

m.  Waste disposal and effluent treatment systems

Any investor could take up facilitation of one, more or all of the above services within one or more zones established in the country.

To harness the full potential of such a scheme, the government should facilitate the following;

a.Land on long lease, preferably 33 years

b.Water (fee based) for agriculture and related industries

c.Road network

d.Electricity supply

e. Credit at low rate of interest with suitable grace periods depending on the venture and the crop grown. (Recommended to follow the Indian model in disbursement of credit where it is compulsory for banks to lend a certain percentage of their credit portfolio to agricultural projects at lower rate of interest.)

f. Tax concessions to investors including above-mentioned service providers

g.Export rebates on freight until sea and air freight rates are brought down by shipping and airlines when the export volumes are substantial

h. Funds for feasibility studies to be conducted by qualified expatriate consultants/companies before the zones are established to obtain complete proposals for every zone including the suitability of each zone for selected crop/s, local and international markets for the same etc. (Since almost all agricultural models created by local experts have failed up to date, it is essential to obtain services of internationally accredited consultants/companies to carry out this task, including creation of international marketing links. When necessary, they could work along with selected local consultants /companies.)

Implementation

Establishment of “Agro-Industrial Zones” in the country could be undertaken by the Ministry of Agriculture and sufficient publicity could be given through the Sri Lankan Missions in other countries to attract investments. A special implementation and monitoring unit should be established at the ministry with sufficient powers vested upon the same in decision making to coordinate all the activities of the proposed zones.

The unit should be able to work as a “one-stop-shop” for prospective investors and work in tandem with the Board of Investment of Sri Lanka. The unit should work in coordination with the Ministries of Finance, Land, Irrigation, Forest, Livestock Development and Plantation Industries.

Conclusion

 Establishment of such zones could certainly increase productivity of crops grown in the zone, due to utilisation of advance technologies and reduce cost of production due to higher productivity and scale of operation, thereby making the final product/produce competitive in the local and overseas markets.

This could bring about the “change” the government expects in the short and medium term to make agriculture one of the largest foreign exchange earning sectors in the country by way of increasing its export volumes and the competitiveness in the global market.

 Overall increase of per capita income would increase the living standards of the population, although subsistence level farming would face competition from commercial scale operations.

This is inevitable in the development process. All industrialised and developed nations faced similar situations at one stage of their development process and Sri Lanka could not avoid the same.


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