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| Sunday, 1 May 2005 |
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Business |  |
| News Business Features Editorial
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Plantations within reach of 'pot of gold' by Lloyd F Yapa The latest news is that the agriculture sector has registered negative growth in the year 2004, while the industrial and services sectors, (particularly the latter) have managed to perform better than they did last year. The lacklustre performance of the agriculture sector is attributed to the drought. But one remembers, that the sector, which consists of two distinct sub-sectors, namely the peasant and plantation, has seldom been able to put in a stellar performance even, when the rainfall was adequate. The main reason may be that the products of this sector are primary commodities, the demand for which had not risen in a significant way, unlike in the case of say durable manufactured goods. Another reason could be that the sector had not received the attention it deserves. Whatever it is, stagnation in the sector means that the living conditions of about half the population of the country, confined to the rural areas, have hardly improved over the years. Strategies recommended to alleviate this condition include development of rural infrastructure as well as agrarian reform and industrialisation. The purpose of this article is, however, to discuss a different strategy - the exploitation of the potential, latent in the plantations, thereby bringing prosperity at least to a part of the rural population. Why plantations? The question that many readers may ask is why select plantations for special treatment? The simple answer is the presence of economies of scale in the plantations, unlike the small farms in the peasant sector, (which are competing with each other producing similar commodities, for which the prices are not determined by them). It is true, that plantations also produce commodities, the prices of which are not determined by them. However, the plantations, are run by companies on modern businesses lines. Therefore they have the ability to add value (by further processing, diversification and differentiating their products) to command premium prices. For instance, one of the high value products, that the coconut sector can diversify into is virgin coconut oil, (extracted from the fresh kernel), which has been found by US and Philippine researchers to be effective in controlling viruses, which cause AIDS and SARS, as it contains a substance called lauric acid. A ton of virgin oil is supposed to sell at $6000 per ton, as against $600 for a ton of oil from copra. The 'gold' lies hidden in such opportunities. The plantation companies also can gain access to capital, technologies, knowledge of markets and above all modern management skills to undertake this task aided by the low unit (fixed) costs which are the result of the large scale of production. Enabled in this manner i.e. by providing social, political and economic stability as well as some special facilities and services our plantations could be within easy reach of the 'pot of gold' i.e. the opportunities available to command premium prices. |
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