Constraints to agribusiness development in sri lanka
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Constraints to Agribusiness Development in Sri Lanka. Agribusiness. A generic term that refers to the various businesses operate along the chain from farm suppliers to consumers. The agribusiness system includes three sub sectors; Input supply, Commercial farm production, and

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Constraints to agribusiness development in sri lanka

Constraints to Agribusiness Development in Sri Lanka


Agribusiness

Agribusiness

  • A generic term that refers to the various businesses operate along the chain from farm suppliers to consumers.

  • The agribusiness system includes three sub sectors;

    • Input supply,

    • Commercial farm production, and

    • Processing and distribution.


Importance

Importance

Dynamic private agribusiness sector that links farmers and consumers

  • A major driving force in the agricultural and rural non-farm sector growth

  • A promising option of achieving a socially inclusive growth


Distribution of food beverage and tobacco industries by province 2007

Distribution of Food, Beverage and Tobacco Industries by Province - 2007


Constraints to agribusiness development in sri lanka

3,000

2,661

2,500

1,973

2,000

No of Enterprises

1,444

1,500

1,000

745

580

426

500

352

229

191

111

18

11

0

Less than

10-19

20-39

40-99

100-499

500 &

10

above

No of Employees

1995

2007

Distribution of Enterprises by Number of Employees in the Food, Beverage and Tobacco Industries, 1995 and 2007


Objective

Objective

  • To identify the constraints faced by the agribusiness sector in Sri Lanka.


Method

Method

  • Review of existing literature

  • Validation through discussions with relevant stakeholders


Constraints to agribusiness development in sri lanka

Constraints to Raising Agricultural Productivity and Farm

Incomes in Sri Lanka

Increased dependence on non-farm sector

LOW AGRICULTURAL HOUSEHOLD INCOMES

Increased demand for off-farm labour

Macro-policy

high fiscal deficits

Increasing wage cost

Low farm profitability

Institutional weaknesses

Reduces market/ demand for agric commodities

Limits credit and raises interest rates to private sector

Low agric productivity

Poor water service delivery

Lack of water policy

Reduces investments in value-addition/ storage/ agro-processing

Limited incentive for crop diversification

Limited access to and use of improved technologies

Limits access to credit

Controls on crops grown

Restrictive labour regulations

Increasing transaction costs in input and agric marketing

Limits incentive for investments

Lack of tenure security

Increased price uncertainty

Limited private sector participation in seeds and technology markets

Weak extension system (public and private)

Restrictive land policy

Weak links between public research & extension

Collapse of public extension system

Poor rural infrastructure

Trade policy unpredictable & distorts incentives

Absence of clear seed regulations/ IPR

Restrictive quarantine regulations

Distorts incentives towards some crops

Lack of national agric strategy & policy

Inadequate legal framework for technology r&d and distribution

Agricultural Sector

Non-Farm Sector


Framework

Framework

Firm Strategy, Structure and Rivalry

Chance

Factor Conditions

Demand Conditions

Government

Related and Supporting Industries


Factor conditions

Factor Conditions


Constraints to agribusiness development in sri lanka

Land

  • Majority of the farmers operate small lands in the extent of ¼ to 2 acres

  • Maintaining the continuity of supply, quality and determining the sourcing price is virtually impossible

  • Need to establish commercial agribusinesses with larger extents

    • Nucleus farms


Constraints

Constraints

  • More than 60% of the land is owned by the government

  • Uncertainties to the rights of ownership of private land

  • Restrictive land policies

  • Need government facilitation and collaboration in establishing large commercial farms


Experiences cic

Experiences - CIC

  • Transfer of the two government owned seed paddy farms, Pelwehera and Hingurakkoda to the CIC Agribusiness through Public Enterprises Reform Commission (PERC)

  • Joint venture with the Mahaweli Livestock Enterprises (Pvt) Ltd and the CIC for a dairy project in Batocaloa

    • 2300 Ac of land from the government

    • Investments in processing equipment, other infrastructure, training of outgrowers etc by the CIC


Labour

Labour

  • High cost of labour

  • Low labour productivity

  • Low availability at competitive rates

    Impact

    • Labour contributes significantly to the total cost of production


What needs to be done

What needs to be done?

  • Commercial agribusinesses must focus on

    • Industry specific training

    • Attitude development

    • Employee motivation programs

    • Incentive schemes linked with productivity


Seeds and planting material

Seeds and planting material

  • Poor quality

  • Unavailability of commercial varieties

  • Low productivity

  • High postharvest losses

    Impact

  • High unit cost of production


What needs to be done1

What needs to be done?

  • Long-term strategy

    • More investments on demand driven R&D to produce commercially important high quality seeds and planting materials

  • Short-term strategy

    • Carry out adaptation trials for identified preferred varieties

    • Initiation of public-private partnerships


Research and development

Research and development

  • Very poor budgetary allocation

  • Limited investments on research

    • Basic and industrial

      Impact

    • Production of inappropriate varieties

    • Low productivity

    • Poor quality output

    • High postharvest losses


What needs to be done2

What needs to be done?

  • Carry out demand driven research and extension

  • Development of the capacity of the research institutes (self sustaining)

  • Government investments in basic research like varietal development

  • Facilitate and simplify the procedures to initiate public-private partnerships


Demand conditions

Demand Conditions


What do we need

What do we need?

  • A sophisticated home demand

    • Creates a good environment for an industry to

      • Innovate,

      • Grow, and

      • Achieve a competitive edge.


Experiences domestic markets

Experiences – Domestic markets

Major Indicators of the Sri Lanka’s Food Consumption Patterns


Foreign markets

Foreign markets

  • Highly sophisticated consumers

  • Demand for

    • Value-added products

    • Non-traditional products

      That assure

      • Food safety

      • Traceability

      • “Country of origin” labelling

      • Third party certifications


What needs to be done3

What needs to be done?

  • Respond more strategically and proactively

    • Skill development

    • Efficient and accurate market intelligence

    • Better quality goods and services at international standards

    • Build a strong image on Sri Lanka

      Thereby

  • Create opportunities for growth and innovation


Related and supporting industries

Related and Supporting Industries


What do we need1

What do we need?

  • Well developed and efficient related and supporting industry and services


Infrastructure and services

Infrastructure and services

  • Inadequate and inefficient

  • National problem

    Impact

    • High transactions cost

    • Creates a disparity across provinces


Infrastructure and services1

Infrastructure and services

  • Electricity

    • Significantly high tariff rates

    • Unpredictable supply

  • Land Transportation

    • Inadequate maintenance

    • Inadequate expansion

    • Poor transport facilities


Infrastructure and services2

Infrastructure and services

  • Air and sea freight

    • Inadequate cool chain storage capacity

    • High cost of freight

    • Lack of professionalism

    • Inadequate third party logistics providers

    • Inefficient administrative procedures


What needs to be done4

What needs to be done?

Government

  • Upgrade the available facilities at the airport like provision of electricity connections

  • Simplify the administrative procedures

  • Create a conducive environment for exporters

  • Attract more foreign direct investments


What needs to be done5

What needs to be done?

  • Private sector

    • Involve in third part logistics and other service provision

    • Carryout services in an efficient and professional manner


Financial services

Financial services

  • Limited access to credit

  • High cost of credit

  • Poor knowledge and skills in accounting and basic management

    Impact

    • Low investments and reinvestments

    • High transactions cost

    • Weak financial management

    • High default rates


What needs to be done6

What needs to be done?

  • Creating an efficient financial system

  • Stable and attractive interest rates

  • Rural infrastructure development

  • Solve the problems associated with the collateral

  • Training on accounting and basic management


Agricultural extension services

Agricultural extension services

  • Public extension service

    • Relatively weak

    • Inefficient

    • Insufficient

      Impact

    • Untimely delivery of technical knowhow


What needs to be done7

What needs to be done?

  • Government

    • Restructuring the extension service

    • Adequate budgetary allocations for extension

    • More training on new technology, practices and market needs

    • Development of a properly functioning, fee-based extension service


What needs to be done8

What needs to be done?

  • Private sector

    • Development of own extension services to their input suppliers

    • More collaboration with the public sector research institutes


Business development services

Business development services

  • Lack of adequate and reliable market information on timely manner

    Impact

    • Isolate them from the supply chains


What needs to be done9

What needs to be done?

  • Provision of BDS through private sector and chambers of commerce

    • Long-term perspective

    • Demand driven

    • Fee-based


What needs to be done10

What needs to be done?

  • Develop a commercial orientation

  • Skill development and capacity building

    • Marketing, managerial and other business related skills

  • Efficient market intelligence

  • Access high value markets

    • Safe food packaging

    • Introduce new practices like Good Agricultural Practices (GAP), Good Manufacturing Practices (GMP)

    • HACCP, organic and other third party certifications


  • Standards and certification

    Standards and certification

    • High cost of certification and the requirement of multiple certifications

      • Local standards – unrecognized

      • International standards – costly

      • Unavailability of timely information

      • Poor testing facilities

      • No uniformity in test results across laboratories


    What needs to be done11

    What needs to be done?

    • Government

      • Low cost credit

    • Initial support in developing laboratory facilities

    • Well coordinated quality assurance programs

    • Private sector

      • Skill development and capacity building

      • Well focused training programs

      • Well developed information services


    Structure strategy and rivalry

    Structure, Strategy and Rivalry


    Constraints1

    Constraints

    • Uncoordinated, long and fragmented supply chains

    • Poor integration of small-scale producers into supply chains

      • Limit the access to new technology, financing options, and wider markets

        Impact

      • High quantity and quality loss

      • Difficulties in exploiting market opportunities


    What needs to be done12

    What needs to be done?

    • Private sector

      • Better supply chain collaborations with small-scale farmers

      • Development of nucleus farms


    Government influence

    Government Influence


    Constraints to agribusiness development in sri lanka

    Role

    • Government actions can be considered as a mega-force in developing countries.

    • It could play a greater role in strengthening the competitiveness of the agribusiness sector.


    Institutions

    Institutions

    • Overall responsibility

      • Ministry of Agricultural Development and Agrarian Services

    • Plantation crops

      • Ministry of Plantation Industries

      • Ministry of Supplementary Plantation Crops Development

    • Livestock

      • Ministry of Fisheries and Aquatic Resources

      • Ministry of Livestock Development Plantation crops

    • Floriculture

      • Ministry of Sports and Public Recreation


    Institutions1

    Institutions

    • Ministry of Export Development and International Trade

    • Ministry of Enterprise Development and Investment Promotion

    • Ministry of Land and Land Development

    • Ministry of Irrigation and Water Management

    • Ministry of Industrial Development

    • Ministry of Finance and Planning


    What needs to be done13

    What needs to be done?

    • Simplify the institutional set up

      • Duplication of work

      • Resource wastage

      • Red tape

      • Inefficiencies

    • Create an efficient and smooth functioning system


    Institutions private sector

    Institutions – Private sector

    • National Agribusiness Council (NAC)

    • Ceylon Chamber of Commerce

    • National Chamber of Commerce

    • Federation of Chambers of Commerce and Industry

      Playing an important role in developing the agribusiness sector


    What needs to be done14

    What needs to be done?

    • NAC is the most important private sector institution that deals with agribusiness sector of Sri Lanka

      • Strengthen by incorporating a diverse set of associations which are active and has a good representation


    Policy environment

    Policy environment

    • Trade policy

      • Subjected to unpredictable and frequent changes

        Impact

      • Create an uncertain environment

      • Business planning become difficult


    Policy environment1

    Policy environment

    • Imports

      • Unpredictable and high tariff structure

      • Customs duty, surcharge, cess, Ports and Airport development Levy (PAL), excise (Special Provision Levy), Social Responsibility Levy (SRL), VAT and Nation Building Tax (NBT),…

        Impact

      • Create an uncertain environment

      • High cost of inputs

      • Difficult to compete based on price


    Policy environment2

    Policy environment

    • Exchange rate policy

      • Appreciation of the Rupee

        Impact

    • Create an unfavorable environment for export-oriented agribusinesses

    • Difficult to compete based on price


    Government what needs to be done

    Government – What needs to be done?

    • Ensure consistent government policies on agriculture, land, trade and investment in agriculture

    • Provide improved access to infrastructure facilities like roads, power, communication, and water

    • Improve the access to credit at a reasonable cost

    • Develop a related and supporting industry that could cater to the agribusiness sector

    • Produce and supply of high quality seeds and planting materials of commercial varieties


    Government what needs to be done1

    Government – What needs to be done?

    • Invest on demand driven R&D and effective extension services

    • Provide more information, assistance and training for extension workers, farmers and private sector

    • Promote more agribusinesses based on nucleus farm production concept

    • Simplify the regulations in initiating more public-private partnerships

    • Facilitate to obtain improved technologies on production, processing and packaging


    Private sector what needs to be done

    Private sector – What needs to be done?

    • Invest more on agribusinesses based on nucleus farm production and processing

    • Play an active role in strengthening public-private partnerships

    • Develop more innovative postharvest technologies and agribusiness products

    • More focus on the development of supply chain collaborations


    Private sector what needs to be done1

    Private sector – What needs to be done?

    • Link with small farmer enterprises and help them to develop their commercial orientation

    • Provision of demand-driven business development services

    • Focus on developing the skills of labour

    • More investment in developing the Sri Lankan image


    Thank you

    Thank You


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