THE CONFERENCE PROCEEDINGS - IFEAT

MAJOR CHALLENGES IN THE INDUSTRYThough the industry – both the government and the private sectors - have initiated many developmentprogrammes there are still many constraints to be overcome if Sri Lanka is to be competitive in themarket. Some of the limitation factors associated with the essential oil industry include:• Instability of market prices which has an undesirable impact on both the farmers and theprocessors• Lack of long term backward integration for new cultivation• Establishing effective supply chain• Lack of initiatives for moving up the value chain; need to move beyond essential oils• Environmental/climate changes affecting everyone globally and we have to deal with themwhen they occur.DEVELOPMENT PROJECTS IN THE INDUSTRYSri Lanka offers very good opportunities for the expansion of the organic essential oil business as wellas various added value products. The smallholder families use very little fertiliser; there is very littlepollution; the industrial base is not that large; the underground water streams are not contaminated, sothere is negligible pesticides or heavy metal pollution. So organic essential oils is a niche market areawhich is growing and in which Sri Lanka can compete. In addition, investments are taking place todevelop new products including fractions, isolates and CO2 processing – both conventional andorganic.Companies also realise that they must integrate backwards in order to ensure raw material supplies.Companies are developing new plantations for new crops and expanding the existing cultivation area,including working with existing plantation companies to encourage them to plant spices alongsidetheir traditional plantation crop production. Also they are trying to collectivise smallholders as well asorganising buy-back schemes. The end of the civil war has led to the opening up of the northern andeastern parts of the country and is offering new opportunities to develop new areas of production.Donor agencies are also assisting in the development of lands, which are now free.INSTITUTIONAL SUPPORTWithin the country there are a number of institutions that support the spice and essential oil sector. TheSri Lanka Export Development Board, which is the apex body, drives the marketing, value additionand promotion of the industry. It has supported the attendance of a few companies to the IFEATSingapore Conference to expose them to the international industry. The government places a lot ofemphasis on the minor crops and there are two ministries involved, namely the Department ofAgriculture and the Department of Export Agriculture, which overlook spices. This reflects theimportance of spices to the development of the rural economy.In addition, there are two private sector trade associations working alongside the government inhelping to promote the industry, namely the Spice Council and The Spices and Allied ProductsProducers’ and Traders’ Association.125