Business
Advocata Institute releases comprehensive report on the tea industry of Sri Lanka
Advocata Institute released its latest report titled “Market Competitiveness of the Tea Industry of Sri Lanka” on Thursday, December 28, 2023. The report is authored by Sudaraka Ariyaratne, Research Consultant at Advocata Institute.
The report begins with an introductory chapter that details the historical evolution of the island’s tea industry. The report finds that the present standing of the industry in the context of the international market is not too grim, but argues that issues related to the labour market, capital investment, value addition, and quality control limit the industry’s competitiveness in the global stage. The rest of the report takes the form of four discussion papers, each on the four areas of concern listed above, that present an economic theory-based lens to approach these issues, and discuss potential solutions.
The attendance-based minimum wage model is partly responsible for the high costs of production of Sri Lanka’s RPCs, and their low productivity, helping make Ceylon tea uncompetitive in the international market. In contrast, the smallholder sector, with its market-based wage model, stands out as a more efficient counterpart. Despite being billed as a guarantor of a living wage, the minimum wage model imposes a ceiling on the earnings of estate workers, and also helps preserve the traditional power structures of tea plantations, in which estate workers sit at the bottom. Discussion Paper 1 establishes an economic framework to analyse the minimum wage model, and explores the strategies that RPCs could pursue, with the help of policymakers and other stakeholders of interest, to enhance the industry’s competitiveness under the minimum wage model. The paper also evaluates alternative wage models proposed by stakeholders, that take a more market-based approach to employment within the industry.
Long-term capital investments, such as replanting and infilling, are an essential element of sustained land productivity in the tea industry of Sri Lanka; however, neither RPCs, nor smallholders, seem incentivised to undertake investments of this form. Discussion Paper 2 establishes an economic framework, based on the Growth Diagnostic Framework by Hausmann, Rodrik, and Velasco (2005), to discern the causes of low levels of long-term capital investments in Sri Lanka’s tea estates. The paper finds that to varying degrees, the low rate of returns, uncertainties about the appropriability of returns, and low savings prevent RPCs and smallholders from embarking on long-term capital investments into tea lands. The paper explores the different routes the industry may take, with the help of policymakers and other relevant parties, to overcome these binding constraints to long-term investments, to facilitate the long-term sustenance of the industry.
Sri Lanka has the highest level of domestic value addition among black tea producing countries, but little is known about the economics of value addition. Discussion Paper 3 explores what it means to add value to made tea, what explains the present levels of value addition in the Sri Lankan tea industry, and how profits from value addition are distributed along the value chain. Additionally, the paper establishes an economic framework, based on Porter’s competitive advantage theory, to approach value addition from a strategic point of view, with the aim of optimising returns to the local industry. Based on this framework, the paper explores different strategies the industry may pursue, either in the mass market or in the specialty market, to increase the international competitiveness of Ceylon tea, and enhance the returns to the domestic stakeholders.
Quality is an important determinant of the premium that Ceylon tea fetches in the international market. In the absence of symmetric information between the buyers and sellers of Ceylon tea, high quality sellers receive lower prices than they deserve, which both drives them out of the market, and lowers the overall price and quality of Ceylon tea. Discussion Paper 4 establishes an economic framework, based on George Akerlof’s theory of adverse selection and the theoretical foundations of economics of trust, to understand how asymmetric information on quality negatively impacts the market for Ceylon tea. The paper also explores several strategies, both regulatory and incentive-based, that policymakers and industry stakeholders may pursue to eliminate asymmetric information from the market for Ceylon tea, in order to enhance the premiums that the industry receives.
The report is set to be presented to President Ranil Wickremesinghe, Ministers Mahinda Amaraweera and Jivan Thondaman, and relevant stakeholders of the tea industry in the coming days.
The report on Market Competitiveness of the Tea Industry of Sri Lanka can be accessed on www.advocata.org
Advocata is an independent policy think tank based in Colombo, Sri Lanka. We conduct research, provide commentary and hold events to promote sound policy ideas compatible with a free society in Sri Lanka. Visit advocata.org for more information.
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By Ifham Nizam
Australian High Commissioner to Sri Lanka Matthew Duckworth described Omega Traders’ latest investment in a modern dhal-processing facility as a strong example of how cross-border supply chains can translate into productive investment, local value addition and new business opportunities in Sri Lanka.
The investment, which adds a 150-metric-tonne-per-eight-hour-day processing capacity to Omega Traders’ operations, marks a significant expansion of the company’s manufacturing footprint as it celebrates 45 years in Sri Lanka’s food commodity industry.
Speaking at the inauguration of the new Lentil and Orid Dhal Processing Factory in Wattala, last Friday, H.C. Duckworth said the facility represented more than an increase in production capacity, pointing to the wider economic value created when Australian agricultural production is connected with Sri Lankan processing and distribution.
‘This facility is not operating on its own. It is part of a long supply chain and a trade partnership between Sri Lanka and Australia, Duckworth said.
His comments placed the Omega Traders’ investment within a broader commercial context: Australia brings agricultural production and established export capabilities, while Sri Lanka provides processing capacity, labour, market access and opportunities for further value addition.
The investment comes as Sri Lanka continues to look towards greater domestic processing and value-added manufacturing rather than relying solely on the import and distribution of finished commodities.
Dr. (Mrs.) Siddhika G. Senaratne, Director General/CEO of the Sri Lanka Standards Institution (SLSI), who attended the inauguration as Guest of Honour, highlighted the importance of quality assurance in food processing and the role of standards in maintaining confidence across the supply chain.
The facility is equipped with new-generation cleaning, processing, sorting and quality-control machinery, including advanced colour-sorting technology, automated systems and an in-house quality-control laboratory.
The additional capacity will support Omega Traders’ three principal Mysoor Dhal brands — Rainbow Jumbo Dhal, Komas Dhal and Rozanna Dhal — which serve different segments of the Sri Lankan market.
But the investment also has a distinctly local agricultural dimension.
Through its Orid Dhal operation, Omega Traders plans to source locally grown black matpe from Sri Lankan farmers and process it at the new facility.
That creates a domestic value chain linking farmers to industrial processing and consumers, while potentially increasing demand for locally produced agricultural commodities.
Duckworth said this type of business partnership could generate benefits for both countries.
‘Australia produces some of the world’s best agricultural products and we are very efficient and very capable at trading them. But that alone is not going to bring success to Australia. Just as building a factory like this is not going to bring success to Sri Lanka, he said.
‘It’s when we bring these entities together that our products produced in Australia can be processed in excellence here in Sri Lanka that enables this to be a success, the H.C. explained.
The investment therefore combines two complementary supply streams: imported agricultural commodities, including Australian-origin products, and locally produced black matpe for the Orid Dhal operation.
For Sri Lanka, the business significance extends beyond Omega Traders itself. Increased processing capacity creates demand for logistics, packaging, distribution, services and agricultural inputs, while supporting employment within the food-processing ecosystem.
HR-led transformation places people, culture and business performance at the heart of the organisation
Ideal Motors (Pvt) Ltd,has achieved a significant milestone by securing multiple prestigious workplace and organisational culture accolades in 2026, reinforcing its position as an employer of choice in Sri Lanka’s automotive sector.
Among its latest achievements, Ideal Motors has been recognised as one of the 20 Great Workplaces for Young Talent in Sri Lanka 2026, ranked No. 1 and awarded the Gold Medal in the Small and Medium category of Best Workplaces™ in Sri Lanka 2026, and ranked No. 18 among Best Workplaces™ in Asia in the Medium Scale category—the highest-ranked Sri Lankan organisation in the category. The company also received Industry Excellence for Workplace Culture – Trading Industry.
The Young Talent recognition was presented at the Great Place To Work® CXO Forum 2026 held on 10 September 2026 at Cinnamon Life, Colombo. The recognition followed an evaluation of more than 100 certified organisations and highlights workplaces that create meaningful opportunities for employees under 35 to develop, contribute and grow.
At the Best Workplaces™ in Sri Lanka Awards Gala 2026, held on 11 September 2026 at Cinnamon Life, Colombo, Ideal Motors achieved another historic milestone by entering the Best Workplaces Sri Lanka list for the first time and securing the No. 1 Gold Medal in the Small and Medium category. The company also achieved No. 18 in Best Workplaces™ in Asia, reflecting the strength of its workplace culture beyond Sri Lanka.
These achievements represent more than a collection of awards. They reflect the transformation taking place within Ideal Motors, where people, culture and business performance are increasingly viewed as interconnected drivers of sustainable growth.
Over the past few years, the organisation’s HR function has evolved from a predominantly administrative role into a strategic business partner, with greater emphasis on employee experience, capability development, engagement, performance, communication, wellbeing, diversity and inclusion, and data-driven HR practices.
The Automobile Association of Ceylon (AAC) conducted a seat belt safety awareness programme in front of its headquarters and along Galle Face Centre Road, encouraging motorists and passengers to make seat belt use a habit on every journey.
AAC staff, working alongside officers of the Sri Lanka Police Traffic Division, distributed specially designed hanging tags and stickers to drivers. The material carries a clear reminder that seat belts protect drivers as well as passengers in both the front and rear seats.
The public awareness drive was held ahead of the requirement taking effect on 20 September 2026, under which seat belt use becomes mandatory for every occupant of a vehicle travelling on an expressway.
AAC emphasized that the regulation should be understood as a life-saving measure rather than only a legal obligation. Wearing a seat belt can help prevent occupants from being thrown inside or from a vehicle during a collision and can lessen the severity of injuries.
The Association said road safety legislation must be supported by sustained public education, visible enforcement and responsible behaviour by all road users. The participation of the Traffic Police helped the campaign reach motorists directly in a busy part of central Colombo.
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