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Advocata Institute releases comprehensive report on the tea industry of Sri Lanka

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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.

Advocata spokespersons are available for live and pre-recorded broadcast interviews via 0740289818



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Cost-effective clearance of goods across borders to determine worth of Customs Paperless Declaration

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Containers held up at the Port of Colombo

By Ifham Nizam

The introduction of the Customs Paperless Declaration from October 1 could mark an important step in Sri Lanka’s efforts to modernise trade, but its real value will depend on whether it reduces the time and cost of moving goods through the country’s borders, Customs House Agents & Traders Association President Mohamed Niyas said.

Niyas warned that digitising Customs declarations alone would not necessarily translate into faster cargo clearance or lower costs for businesses.

‘Expecting a dramatic improvement in clearance speed under the present conditions is like expecting Ferrari performance from a Morris Minor configuration, he said.

For importers and exporters, the issue extends well beyond paperwork. Every additional hour or day that cargo remains in the clearance chain can have wider consequences for businesses, including increased port and storage-related costs, additional working-capital requirements, uncertainty over delivery schedules and disruptions to production and distribution.

Niyas said the competitiveness of Sri Lanka’s trading sector ultimately depended on how efficiently goods could move through the country’s border-clearance system.

‘The real bottleneck is not merely the absence of paper. It is the entire clearance ecosystem—the limitations of the existing ASYCUDA World system, excessive regulatory interventions by Other

Government Agencies, multiple approvals, physical examinations, manual interventions, fragmented processes and institutional constraints, he said.

He cautioned that unless these bottlenecks were addressed, there was a risk that the paperless initiative would merely digitise existing bureaucracy.

‘If these underlying constraints remain unchanged, there is a real risk that the new paperless system could become another “copy-and-paste road show”—where an old, complex clearance process is simply transferred onto a digital screen without fundamentally changing the process itself, Niyas said.

For businesses dependent on imported raw materials, machinery, components and other inputs, clearance efficiency can directly affect the wider supply chain.

Delays at the border can create uncertainty for manufacturers, distributors and retailers, while exporters can face difficulties meeting delivery schedules when imported inputs or export consignments are held up.

Niyas therefore argued that the success of the October 1 initiative should be judged by its impact on trade flows rather than by the number of declarations processed electronically.

‘Paperless does not automatically mean faster, he said. ‘Digitising a slow process does not make the process fast. It only makes the slow process digital.’

He said Sri Lanka needed to move towards what he described as “process-less Customs”—a system in which unnecessary procedures are eliminated rather than simply converted into electronic procedures.

Among the reforms he called for are simplification of Customs declarations and approval workflows, improvements to the functionality of ASYCUDA World, greater use of risk-based inspections and better integration of Other Government Agency approvals.

Niyas also called for the elimination of repetitive document submissions and physical endorsements, greater use of pre-arrival processing, sufficient capacity for digital document uploads and clearly defined service-level timelines for Customs and OGAs.

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China backs Sri Lanka’s Non-aligned stance to counter regional pressures

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Chinese Ambassador Wei Huaxiang delivering the keynote address in Colombo

By Sanath Nanayakkare

As global attention has fixed on the high-level diplomatic choreography at the United Nations General Assembly in New York, a subtler, yet profound geopolitical signal was sent from Colombo, yesterday.

In a major address marking the founding anniversary of the People’s Republic of China, newly appointed Chinese Ambassador Wei Huaxiang chose to anchor bilateral relations not just in modern trade or infrastructure, but in a shared respect for Sri Lanka’s legacy of non-aligned independence.

By explicitly invoking Sri Lanka’s foundational role in the 1976 Non-Aligned Summit, Beijing was doing something unexpected in an era defined by fierce great-power rivalry: it was officially validating a small island nation’s right to maintain an independent foreign policy stance.

The Strategic Value of Independence

For decades, nations caught in the crosshairs of major-power competition have faced intense pressure to pick sides. Yet, Ambassador Wei’s embrace of Colombo’s non-aligned tradition signaled a different diplomatic playbook. Instead of demanding alignment, Beijing was framing its partnership as a reliable counterbalance to regional pressures. By honouring Sri Lanka’s diplomatic autonomy, China was effectively reassuring smaller economies that sovereign independence and robust economic cooperation can coexist.

Beyond Ports and Industrial Zones

This diplomatic framing reframed the narrative surrounding major collaborative ventures like the Colombo Port City and Hambantota Port. While foreign analysts often view these projects exclusively through the lens of strategic rivalry, Beijing’s diplomatic messaging tied them back to a historical ethos of solidarity—evoking memories of the 1952 Rubber-Rice Pact.

By marrying economic projects with a stated respect for non-alignment, China is positioning itself as a steadfast stakeholder that respects Sri Lanka’s internal agency during difficult economic and political seasons.

As both nations look toward major milestones in 2027—including the 70th anniversary of diplomatic ties—this nuanced diplomatic move revealed how historic traditions are being leveraged to navigate modern multipolar realities.

For global observers, the takeaway was clear: in the shifting architecture of Asian geopolitics, respecting a nation’s historical neutrality may just be the most effective way to secure a lasting partnership, a diplomatic masterclass that Ambassador Wei Huaxiang executed in style.

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Sri Lanka Insurance Life appoints Dr. Sameera Dharmasena Chief Executive Officer

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Dr. Sameera Dharmasena

Sri Lanka Insurance Life (SLIC Life), the nation’s largest and strongest Life Insurer, is pleased to announce the appointment of Dr. Sameera Dharmasena as its new Chief Executive Officer, effective 22nd September 2026.

Dr. Dharmasena is a distinguished insurance professional with over 21 years of experience in the Sri Lankan insurance industry, having held senior leadership positions across several leading insurance companies affiliated with some of Sri Lanka’s largest business conglomerates. His extensive career spans both local and multinational insurance environments, bringing together broad industry expertise, strategic leadership and a strong commitment to the advancement of the insurance profession.

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