Championing value addition in agri exports

The importance of enhancing value addition in agri exports came under the spotlight at the second and final day of the Ceylon Chamber of Commerce Summit yesterday.

The keynote Speaker in the session, which kicked off the second day’s proceedings, was Myong-Keun Eor, Honorary Senior Fellow, Korea Rural Economic Institute. Following his presentation a host of experts comprising Annes Junaid, MD, CBL Natural Foods Ltd., Irfan Thassim, Managing Director Oceanpick Ltd, and Prof. Buddhi Marambe, Faculty of Agriculture, University of Peradeniya engaged in a panel discussion moderated by Rizvi Zaheed, Managing Director, Hayleys Agriculture Holdings Ltd. 

Following are excerpts from the panel discussion

From left: Oceanpick Ltd Managing Director-Founder, Irfan Thassim, Lanka Fruits & Vegetable, Producers, Processors & Exporters Association Chairman, Annes Junaid, Moderator Hayleys PLC Executive Director-Head of Agriculture, Rizvi Zaheed, Korea Rural Economic Institute Honorary Senior Fellow Dr. Myong-Keun Eor and University of Peradeniya Faculty of Agriculture, Prof.Buddhi Marambe

Q: What sort of a role does knowledge play in agri exports and value additions?

Junaid: Sri Lanka needs to move away from resource-based to knowledge-based to stay ahead of the game in achieving the $ 50 billion export target. We have to pitch ourselves to the global niche markets. There is a lot of room for growth in the agriculture sector.

Having said that, it is also important to get the sector-based institutes such as EDB, Ceylon Tea Board and Coconut Development Board in place to support such value-added niche markets. Also expanding the agri-based exports is crucial to promote agri exports in new markets.

Prof. Marambe: We all have to think out-of-the-box and collectively. Agriculture exports contribute to about 24% of our total exports, but we are very high in product concentration and export destination concentration. That is a big risk in the whole process when you are trying to hit the $50 billion mark in the years to come, unless we try to expand in both cases.

Looking at value addition, we all know that we do a very little value addition to our exports. For example, tea being the most important export product, we still do only 50% of value addition to it and export 50% in raw form, which is a pity. We have to ensure that value addition takes place even in the production process and that’s where technology, expertise, State and private sector come together to export a better product for the betterment of the country.

One such big problem I see in the value addition process is that even if value addition takes place, most of the value addition products are quite simple. Unless we think big in future, bringing in technology and R&D into picture, we cannot be ahead of the competition. Unless we have the proper blend of management, product processing and technology, we are not going to make it.

Thassim: I see a huge vacuum in the apparel sector against all other sectors in the way they perform. Apparel does over $ 4 billion per annum which is around 40% of our total exports; fisheries does around $250 million. We have a very logical set of resources in Sri Lanka. We are an island nation, we have a massive labour pool. I would discourage the fact that we should move away from the resource base. If the private sector needs to win, there is no shortcut rather than being vibrant, aggressive and innovative. There is a lot to learn from the apparel sector.

 

Q: Do you think subsidies are necessary for the agriculture sector? What would you recommend for the development of agriculture in Sri Lanka?

Dr. Eor: I think the Government subsidy is kind of a medicine for agriculture and agricultural exports at the beginning stages. However, if the Government continues the subsidies over the years, the farmers tend to depend on the subsidies. Thus, the Government should prohibit subsidies slowly and proportionately. In Korea the Government subsidy is on the transport or logistic cost of the agriculture exports; generally, inland transport and packing cost. 

 

Q: Sri Lanka is losing competitiveness in our key export crops. Are we looking at crop substitution? Agriculture may not be our ticket out of the middle income trap. What are your comments?

Junaid: I do not agree Sri Lanka is losing competitiveness in our key export crops because we are exporting premium quality fruits to the export markets and that is why we are in the global market. Competitiveness is subjective and even with competitiveness we still can fit into the niche markets. There is a huge growing niche market out there with other major markets also opening. So there is still vast opportunity for our crops, especially for fresh fruits. It is true that our input cost is very high, but the market is so vast that we have room to cater to those niche opportunities. 

 

Q: What measures do you think that Sri Lanka policymakers can take to improve productivity? Mechanisation of agriculture results in loss of jobs. What are your views?

Prof. Marambe: The agriculture sector is definitely growing in real terms. Sri Lanka is well ahead of all SAARC countries in terms of rice cultivation productivity. On a policy level, they have allowed good quality seed material, which can provide high yield. I think the mechanisation is necessary for agriculture provided the size of land where you can effectively utilise the machinery.  

 

Q: There is a high labour movement from agriculture to non-agri sectors, as a result of which many of the lands are abandoned. What are your views on the young labour moving out of agriculture?

Prof. Marambe: You cannot expect every youth to be in the agriculture sector. There are many youngsters who are keen on entrepreneurial farming. Thus, we shouldn’t worry about getting all into agriculture and mess it up. The important fact is that the youth who are capable of handling it should enter agriculture and go ahead. I personally don’t believe it is a major issue because there are articulate, capable youth who really get into commercial farming. 

 

Q: Did the garment sector become world class after the period of consolidation in which many garment manufactures closed down? If so, does something similar need to happen to agriculture?

Thassim: The overriding phenomena there was the industrial leadership the sector had, the world-class vision. I think that the sectors must go for a quantum leap with the right vision to achieve these goals. 

Junaid: The value-added sector definitely needs some kind of boosting. With the opening of some of the markets like China, where they open up for value added and even for fresh exports, we have new markets coming in. These new markets demand volumes and it is a challenge the industry needs to tackle. It is also imperative to adapt and embrace new technologies to boost productivity many-fold. 

 

Q: What regulatory, legal and logistic changes are required with respect to land use to benefit the growth of agriculture?

Prof. Marambe: The last agriculture policy in Sri Lanka was in 2007. For the past eight years there was no printed document and that policy remained just as it was with no strategy. Under the new Government, the Ministry of Agriculture has embarked on new agriculture policy where the land use component is a crucial factor. The faculties of agriculture are direct collaborators and counterparts in this exercise. 

One important factor that we must keep in mind is that Sri Lanka has three climatic zones, seven agro climatic zones and 46 agro ecological regions. Unless we opt for agro ecological intensification with respect to agricultural production in this country, I don’t think we can ever reach our ultimate goals and targets. So, that’s one factor we need to give serious consideration in terms of agricultural development.