Development of Agribusiness Enterprises - Asian Productivity ...

government has therefore taken steps to privatize some of the seed production units under the
Department of Agriculture, and will soon enact a Seed Act. The lack of quality seeds for
suitable varieties is another major constraint faced by papaya growers in Sri Lanka.
Although credit schemes are available, rural agribusiness enterprises cannot obtain
loans in time due to delays and strict conditions stipulated by the banks. This has hindered
the promotion and development of agribusinesses.
Due to the current unrest in parts of Sri Lanka, the government has been compelled to
introduce a 12.5-percent Goods and Services Tax (GST) and a 5.5-percent National Security
Levy, which has forced up production costs of the small-scale agro-processors, as they
depend on the big companies for various inputs. For example, small-scale yogurt
manufacturers have to purchase yogurt containers from plastic cup producers. With the
additional tax being levied on packaging materials, the small-scale producers cannot compete
with the big producers, who are entitled to reclaim GST.
SUCCESSFUL PROGRAMS FOR PROMOTING
AGRIBUSINESS ACTIVITIES
Dedicated Economic Centers
Dedicated Economic Centers are aimed at promoting area-specific activities, taking
into consideration the locational advantages of each site and existing infrastructure. In 1998,
the government allocated SL Rs.100 million for the establishment of Dedicated Economic
Centers. The first center was established at Dambulla, in Matale district, which is centrally
located to Central, North Central and Wayamba provinces. Agricultural produce from the
rural areas of those provinces is rapidly transported to the center, which has become a hub
for fruit, vegetables, onions, grains, spices and other agricultural commodities.
The value-added of all agro-produce – rice, cowpeas, onions, fruit and vegetables –
occurs at this center. About 100 agro-enterprises are successfully engaged in different
agribusinesses (packaging of grain and vegetables, rice milling and spice processing) at the
center, which provides the agro-processors with access to quality raw materials in the
required quantities as well as to low-cost infrastructure that is provided by the government.
The highly successful pilot program is handled by the Ministry of Constitutional
Affairs and Industrial Development. The concept paper for the centers was submitted to the
government by the Industrial Development Board. Other centers will be established in
suitable locations around the country in order to promote agribusiness.
Credit Schemes
Credit schemes launched both by the government and various non-governmental
agencies have been very successful in promoting the development of agribusinesses in Sri
Lanka. The major credit schemes – Small and Medium Industry (SMI) Credit Projects – were
launched by the Asian Development Bank and the World Bank. From 1979 to 1996,
agribusinesses were developed mainly as a result of these loan schemes. Of the total 16,642
loans, about 5,149 were issued to agro-industries including food processing and other agroprocessing
enterprises, wood and wood products, and rubber products.
Another credit scheme, initiated and coordinated by the National Development Bank
(NDB), was the Small and Micro-industries Leader and Entrepreneur Promotion Credit
Scheme (SMILE). This scheme was successful in promoting agro-industries, food
processing, horticulture and animal husbandry. This loan scheme has provided interest-free
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