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| Sunday, 18 August 2002 |
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| News Business Features Editorial
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Private - public sector link to export village products by INDUNIL THENUWARA Exports are the lifeline of Sri Lanka's economy. Although only primary agricultural products were earlier exported by Sri Lanka, industrial exports now account for the biggest share. Apparels contribute 53 per cent of the total exports, while tea accounts for only 18 per cent, Minister of Enterprise Development, Industrial Policy and Investment Promotion Professor G.L. Peiris said recently. Addressing a media conference on Export Processing Companies (EPC), he said the EPC programme was conceptualised and put together by the Export Development Board (EDB) to get the participation of the rural masses in the export effort, harness the resources in the provinces and generate employment in rural areas. It has been introduced as a further step in the Export Production Village Companies Programme (EPV) which had been operated by the EDB since 1981. Prof Peiris said that fruits and vegetables used to be sold by villagers for nothing. "They can earn more from these products if they are linked with exports. Further, the prices of these items would also depend on the vagaries of the weather. However, with processing, such uncertainties could be limited," he said. "We should get villagers to produce high quality products and get the private sector to export these. The whole process should be linked to village economies." According to EDB Director General L.S.G. Tillekeratne, EPVs, a concept unique to Sri Lanka, are legally constituted entities registered with the Registrar of Companies. The main benefits of an EPV are exploiting rural raw material resources and human skills to get the best for the rural economy; creating employment opportunities for youth in rural areas at low capital costs per person; preventing migration of rural youth to urban areas in search of employment; ensuring the benefits of exporting to rural producers by eliminating middlemen and improving the living conditions of villages; helping develop the rural infrastructure and creating an entrepreneurial culture, reducing their dependence on subsidies; and rural empowerment. "The foreign exchange that comes in from exports is mostly earned by large companies. The actual producers do not get anything. They also believe that exporting is only for big companies. The lack of awareness of the export market, know-how, technology and resources keeps small-timers away from this sector. This should not be the case and that is why we launched this programme," he said. When setting up an EPV, a survey is first carried out in an area to establish the availability of resources that could be harnessed for export in that area. The company is formed as a collaboration between the village producers and the exporting companies. The village producers are the shareholders of the company. At least 50 shareholders are required to register a people's company while no one could own more than 10 per cent of the shares. The initial seed capital is provided by the government. "Once the company gets on its feet, the government moves out of the venture," Tillekeratne said. The producers sell their produce to the company, which in turn sells this stock to the exporters. The producers as shareholders are entitled to a dividend at the end of the year, thereby enabling them to earn their daily living by selling their produce and earn yearly profits as company shareholders. The first EPV was established in Dambadeniya 20 years ago to make reed tea packs for export. Reed was an abundant resource in the area and most villagers had a flair for weaving. So an EPV was formed and the EDB, which was acting as the go-between in the programme, linked the company to an exporting company which bought the produce manufactured by this company. This company now has its own training centre. Fruit and vegetables, medicinal herbs, mushrooms, fish, duck rearing and handicraft are some of the sectors which have given rise to export production villages. The constraints to the development of an EPV were identified by Tillekeratne as share subscription being limited to producers who are ordinary villagers, limited capital contribution, lack of management expertise, dependence on the EDB and the lack of quality and consistency in the supply of products. The new EPC programme has been identified as a possible solution to these constraints. It is carried out by the EDB in collaboration with the Ministry of Rural Economy with the assistance of the Agriculture Ministry. It is a partnership between the EPV and the private sector (exporting company). The exporter will hold 51 per cent of the shares of the EPC while the EPV holds 28 per cent. The Ministry and the EDB will hold 16 per cent and five per cent of the shares respectively. As this procedure will involve large investments on processing machinery, which the producers will find difficult to finance, the exporting company will be allowed to have the majority stake. This will also make the exporter more committed to the project. Once the project gets going, and the producers' financial capability improves, the government will dispose its stake to them. The EPCs will process and add value to the products manufactured by the EPVs at regional level so that the levels of foreign exchange earned would be higher. EPCs will be formed with the objective of linking EPVs with export trading houses, maximising value addition to primary products in the provinces for export, reducing post-harvest losses of agri produce which occur in transportation and handling, reducing cost of production in export products to be competitive in foreign markets, creating employment opportunities for rural youth and attracting investments to the provinces for viable export-oriented projects. Eight EPCs providing employment to 4170 people are expected to get off the ground soon. An exporting partner in the project, M.A. Junaid of Cecil Food (Pvt)Ltd. said the company is associated with a fruit and vegetable processing project at Galgamuwa. The first consignment from this project is expected to be exported in October. |
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