Features
Take-over of Sterling Company Estates
by Leelananda de Silva
From the time of independence, there has been agitation against sterling company estates. There were complaints that they were a colonial imposition, and that they were not well managed. The plantation owners themselves had begun to lose interest in some of their properties, as the profits could not be sent abroad, due to exchange control restrictions.
The estates were being managed by agency houses, and Dr. Colvin R. de Silva, the Minister of Plantation Industry, had set up a Commission on Agency Houses and Brokering Firms. This Commission had reported, but had not recommended the takeover of sterling company estates. It had recommended the control of agency houses.
Prior to that, in 1971, the Seers mission which looked into land reform issues, had proposed land reforms, but had exempted the sterling companies, as they felt that they were too important for Sri Lankan exports, to be disrupted in any way. In the meantime, there had been land reforms, to take over private land holdings of Sri Lankans, allowing only 50 acres per family.
This was the background to a sudden decision taken by the Cabinet to take over sterling companies in 1974. One Wednesday, H.A.de.S (Gunasekera) was summoned to the cabinet meeting by the Prime Minister, and he phoned me from the cabinet office and asked me what I think are the implications of a takeover of sterling companies. I had a discussion with him on the phone. He asked me to prepare a short note to be given to the Prime Minister.
Anyway, the Cabinet went ahead and made the decision to take over sterling company estates. There was no cabinet paper on this subject. It was a totally political decision. A week or two later, the Cabinet decided to take over the rupee companies, which had been left alone by the earlier decision.
The Prime Minister decided that the whole matter of the takeover of sterling companies and rupee companies should be dealt with by the Planning Ministry at this stage.
The Cabinet was not in a hurry to settle the issue of compensation relating to rupee companies. But they were eager to settle issues of compensation for the sterling companies. They were aware of the implications of this subject for Sri Lanka- British relations. From now on I was fully involved in handling this issue, along with H.A.de.S.
The Cabinet decided to appoint a committee to negotiate with the British on the matter of compensation, and H.A.de.S was appointed its chairman, and I was a member and secretary of the committee. Others in the committee included the exchange controller, a representative of the attorney general’s department (Elanga Wikramanayake), the chief valuer and one or two others.
There were many actions prior to the final settlement of compensation for sterling company estates. The British government had to be informed. The Prime Minister was visiting the UK and was meeting the British Prime Minister, Harold Wilson. He told her that the British government was neutral on the question of the takeover of estates, but that if estates were taken over, fair, equitable and prompt compensation should be paid to these companies.
The Prime minister appreciated this and promised early compensation. British aid to Sri Lanka at the time was about four million pounds annually, and this was an important consideration. At this time, there was a suggestion that Sri Lanka should obtain a credit line from the British government so that compensation could be paid promptly.
We had informed the local sterling company interests and the British High Cmmission to this effect. At this time, Hector Kobbekaduwa, the Minister of Agriculture, was visiting the UK to attend a meeting of the Commonwealth Ministers of Food Production, in London. Mahinda Silva, Secretary to the Ministry of Agriculture and I accompanied the Minister to London. Judith Hart was the Minister for Overseas Development and she was responsible for British aid. She was also chairing the Meeting of Commonwealth Ministers and we saw her daily.
We sought a separate meeting with her at her ministry to discuss the subject of compensation for sterling companies. We went to her office to meet her and was greeted by her private secretary, Tony Banks (later a Member of Parliament and Minister of State). Tony Banks was a left wing radical with a great facility for words, for which he became famous in the House of Commons later. He told us that rather than ask for credit lines, we could consider delaying compensation payments, or not paying at all. It was clear that his views were not that of the government, as Judith Hart told us more or less the same thing that Harold Wilson had told the Prime Minister.
We had to decide on the modalities of compensation payment negotiations. H.A.de.S and I informed the Prime Minister and the Cabinet that the best way to proceed was to negotiate with the British owners as one group, instead of negotiating with individual companies. There were some objections to this approach, as it was felt that we could get a better deal by negotiating with estate companies individually.
There were about 125 companies, owning over 150,000 acres, who were willing to be represented as a group. There were few others who were not part of this group. The Prime Minister felt that we must show a degree of goodwill towards the British and allow them to negotiate as a group. We informed Alec Ward, the acting British High Commissioner in Colombo and Trevor Moy who was Chairman of George Steuarts, who was negotiating for the British companies of this decision and they were pleased.
Alec Ward and Trevor Moy were my counterparts in all the discussions I had, many of them in private during this period. H.A.de.S allowed me to handle these details. In all these discussions between the government and the British, we worked through the British High Commission in Colombo and I cannot remember ever contacting our High Commissioner in London for any assistance.
There was one other important decision made by the Cabinet during this period, and that is regarding the level of compensation. Prior to that decision, we had to do a lot of home work in the Ministry of Planning. Fortunately for us, at that time, there was Derek Robinson, a Fellow of Magdalen College, Oxford, and an expert on statistics (Derek was later to be chairman of the Social Science Research Council of the UK) assisting the ministry through a UN project on the question of labour wages on the estates.
We requested Derek to suspend his work and do some research into the share prices of sterling company estates on the London Stock Exchange. He was to come up with a figure of about £20 sterling per acre. This was a very low figure, as prices of estates were being kept artificially low, due to exchange controls in Sri Lanka.
There were also two other instances of recent estate transaction on the London Stock Market. Pelmadulla Holdings, with about 15.000 acres, had been sold to Middle East investors at about £20 per acre. Grand Central Estates, with about 20,000 acres in Sri Lanka had been bought by a Sri Lankan entrepreneur (Upali Wiyawardane) for about the same price on the London stock exchange.
There were also a few transactions by the State Plantations Corporation, which was under the Ministry of Plantation Industry of which the Minister was Dr. Colvin R. de Silva. Four or five estates had been bought at about £60 per acre. Based on all this information, the Cabinet decided that the British should be offered £45 per acre as compensation. This was the price which was recommended by the Planning Ministry.
Compensation was to be paid over a period of time which would be negotiated. This figure of £45 was known, outside the Cabinet, only to H.A.de.S and to me. The other members of the committee were not told of this figure or that there was a decision of the Cabinet on the level of compensation. Those days, this kind of secrecy did work.
Alec Ward and Trevor Moy informed H.A.de.S and me that they would like their delegation for compensation talks to be led by Sir Michael Walker, former British High Commissioner to Sri Lanka who was now living in retirement in England. We agreed to this and their delegation consisted of Sir Michael Walker, Alec Ward, Trevor Moy and two or three others. We met a few times at the Planning Ministry in H.A.de. S’s room on the eighth floor of the Central Bank building, over three days. It was very amicable. H.A.de. S was a superb negotiator and he did it with a great sense of humour and respect for the other side.
At this point, let me record an engaging story. Eric Lubbock, former British parliamentarian and Liberal M P for Orpington now reincarnated as Lord Avebury, a member of the British House of Lords was in Colombo, on holiday. I had met him briefly through a friend and I got to know his views about the sterling companies. I then alerted a Lake House journalist, through Mervin de Silva, the Ministry Director of Information, on this matter.
Lord Avebury’s view, very colourfully expressed, was that the estate owners should not be given any compensation whatever. One or two days before the British delegation met us for compensation talks, there was a news item in the local newspapers that Lord Avebury had suggested that the British had exploited the Sri Lankans for long enough and that they should not pay any compensation for the estates.
After the preliminary greetings, the compensation talks started with an opening statement by Sir Michael Walker. He said that he was at his London club a few days before, where he met Sir Percival Griffiths, authority and historian of Indian tea and he had asked for his views regarding the value of tea estates. Sir Percival had suggested £300 per acre.
H.A.de.S, following on Sir Michael, brought to his notice, the remarks of Lord Avebury, and as H.A.de.S said, a noble lord in the British upper house. H.A.de.S asked whose views we should take seriously- Sir Percival’s who was a relative nonentity in Britain or Lord Avebury’s. This was the only time during the negotiations that I saw Sir Michael losing his temper, calling Avebury a maverick and a chap who is not taken seriously in his own country.
Anyway this set the tone for the negotiations on the price. A couple of hours later, Sir Michael had come down to f 100 an acre. After two days regarding prices, modes of payment, time periods and so on, the main issue came to a head. H.A.de.S offered a final £42 per acre. Sir Michael stuck to £45. At this point, Alec Ward came round to me and suggested that we offer 50 pence more, that is £42.50 and that we can finalize the deal.
I told H.A.de.S what Alec had told me and we decided to make that offer, which ended the negotiations regarding the price level. That 50 pence was worth £75 000 in total, but the price was well within what the Cabinet had decided to offer. Then there were the negotiations on the methods of payment. It was decided that payment will be made over a period of four years. The price offered was to remain fixed in terms of sterling, and not in rupees in the event of devaluation. Hector Kobbekaduwa, the Minister made a statement to Parliament, about the decisions of the compensation committee, which I drafted, with a schedule of sterling company estates.
The takeover of sterling company estates was taking place within the overall framework of land reform. Mrs. Bandaranaike was anxious that her coalition partner, the LSSP, was kept away from the management of these properties. Hence, when the rupee companies were taken over at about the same time, the legislation for that purpose was described as Land Reform Act No. 2 ((1 assisted Nalin Abeysekara, the assistant legal draftsman, in drafting this legislation).
The original Land Reform Act was the responsibility of the Ministry of Agriculture and sterling and rupee companies were also to be the responsibility of that Ministry at this stage. It is my impression that the LSSP was not in favour of the takeover of either rupee or sterling companies. If the LSSP had wanted these estates to be taken over, they could have easily made use of the opportunity of the Agency Houses Commission to make recommendations on those lines. That was not done.
Later on, I was involved in the distribution of the estates between the two corporations- the State Plantations Corporation (SPC) and the Janavasama (JEDB). The SPC was with the Ministry of Plantation industries and the Janawasama was with the Ministry of Agriculture. By the time the properties were to be assigned to the two corporations, the political coalition had broken down and the two ministers were both from the same party.
There was not much acrimony about the division of assets as a result. K.H.J Wijeyadasa from the Ministry of Agriculture was the other official engaged in the decisions to divide the assets. Wije was an old friend of mine from university days, and a public servant of great integrity. What happened then was political, but it turned out to be rational.
The Minister of Agriculture was from Kandy, and the up country plantations, went to the Janavasama. The Minister of Plantation Industries, Ratnasiri Wickramanayake, was from the low country and most of the low country estates went to the SPC. This meant that most of the tea estates were with Janavasama, and most of the rubber and coconut properties went to the SPC. This was a logical outcome in terms of efficient plantation management.
One other related matter that I wish to record was my membership of the Committee on Land Ceilings, which was appointed by the Cabinet. It was chaired by R.T. Ratnatunga, former Settlement Officer and its membership included the Chief Valuer, W.M. Tilakaratna, Deputy Governor of the Central Bank, R.K.W. (Raja) Goonesekara, Principal of the Law College and several others.
This committee was established prior to the legislation on land reform. We met three or four times and we had some papers prepared by the Ministry of Planning, examining the implications of alternative land ceiling limits. I discussed this subject of land ceilings with the Prime Minister and my impression was that while she might have favoured a higher limit, she had no clear directions to offer me. The two main alternatives being discussed at the time was 25 acres and 50 acres for a family. There were two or three on the committee who wanted the lower limit and I went along with the higher one, as I felt that would be more fair and more feasible to manage as a viable economic unit. The majority of the committee opted for the higher limit of 50 acres, which ultimately became the policy of the government.
(Excerpted from the author’s memoirs)
Features
Sri Lanka’s rice conundrum: Time to stop managing crises and start fixing the system
Prof. Ranjith Senaratne,
Emeritus Professor in Crop Science and former Vice-Chancellor,
University of Ruhuna and General President of the Sri Lanka Association for the Advancement of Science (2023) and
Prof. Prasad Jayaweera,
Dean, Faculty of Computing, University of Sri Jayawardenapura
Rice is not merely another crop in Sri Lanka. It is our staple food, an integral part of our history and culture, and a foundation of the civilisation that flourished around our ancient hydraulic systems. Revered as Buddha Bhogaya, the Buddha’s crop, rice has sustained our people for more than two millennia. Yet, remarkably, a country with such a profound relationship with rice continues to lurch from one rice crisis to another.
At one time, we have a surplus. At another, we face shortages. Prices rise sharply, consumers complain, farmers struggle to obtain remunerative prices, millers and traders become the focus of public attention, imports are hurriedly arranged, and governments announce yet another set of measures to contain the crisis. Then, after the immediate problem subsides, the matter recedes from the national agenda, until the next crisis arrives.
Why does this keep happening despite decades of agricultural research, policy interventions, expert committees and public debate?
Perhaps because we have been asking the wrong question. The fundamental problem is not simply how to produce more rice. Nor is it merely a question of prices, imports, fertiliser, farmers, millers or markets. The rice conundrum is a complex national systems problem.
We cannot solve a system by fixing its parts in isolation
Sri Lanka’s rice sector is an intricate web of interconnected systems involving agriculture, land, water, climate, technology, finance, energy, transport, markets, trade, governance, institutions and consumer behaviour. A decision made in one part of this system can have consequences, sometimes unintended, in another.
A change in fertiliser policy, for example, can affect productivity and production costs, which in turn influence farmer profitability, market prices and the need for imports. Irrigation decisions affect not only production, but also water availability, energy use and environmental sustainability. Guaranteed prices influence farmers’ cropping decisions, while import policies can simultaneously protect consumers and weaken incentives for domestic production. Likewise, market concentration can affect both the price received by farmers and the price paid by consumers. This is precisely why isolated interventions so often produce disappointing results. We keep treating symptoms while leaving the underlying system largely untouched.
For decades, we have generated valuable scientific knowledge on individual aspects of rice production and marketing. But knowledge generated within disciplinary and institutional silos does not automatically translate into solutions to complex real-world problems. What is needed now is a fundamentally different way of thinking.
From a “rice crop” to a “rice system”
The first step is to stop looking at rice simply as something that is grown in a paddy field.
The rice system begins with land, water, seed, inputs, technology and finance. It extends through cultivation, harvesting, drying, milling, storage, transport, wholesale and retail marketing, and finally to the consumer’s table. At every stage, there are different interests, incentives, constraints and actors: farmers, farmer organisations, input suppliers, machinery operators, millers, traders, wholesalers, retailers, financial institutions, government agencies, researchers and consumers.
And hovering over the entire system are climate change, changing consumer preferences, technological transformation and national economic conditions. A weakness anywhere in this chain can compromise the performance of the whole system.
Consider post-harvest losses. If significant quantities of rice are lost because of inadequate drying, storage or processing facilities, increasing production alone cannot solve the problem. Similarly, if farmers produce efficiently but face weak markets and poor bargaining power, productivity gains may not translate into improved livelihoods.
The question, therefore, should not be “How much rice can we produce?” but “How can we make the entire rice system work better?”
That requires us to see the connections.
The missing ingredient: reliable, real-time information
There is another fundamental weakness that deserves urgent attention: we still lack a comprehensive, integrated, interoperable and reliable national information system for rice. Information is scattered among different institutions, often collected using different methodologies and not necessarily available when decisions need to be made.
How much rice will actually be produced? How much is in storage? What is the likely demand? Where are the emerging production shortfalls? What are the stocks held by different actors? How are prices moving along the value chain? What are the likely consequences of climate conditions? Without timely and reliable answers to such questions, policymakers are forced to make critical decisions with incomplete information. This is not merely an administrative inconvenience. It is a national food-security vulnerability.
Sri Lanka should therefore seriously consider establishing a National Rice Intelligence and Decision Support System (NRIDSS), an integrated digital platform that brings together relevant real-time information from agriculture, meteorology, irrigation, markets, trade, statistics and other institutions. Such a system could support production forecasting, market monitoring, import decisions, early warning and evidence-based policy formulation. In an increasingly uncertain climate and volatile global economy, this should no longer be regarded as a luxury. It is becoming an essential component of national food-system governance.
The deeper problems cannot be ignored
A systems approach would also force us to confront some uncomfortable structural realities. Why does productivity remain relatively low despite decades of research? Why are so many holdings too small to achieve economies of scale? Why are modern technologies and precision agriculture not being adopted more rapidly? Why do farmers often have limited bargaining power? Why do substantial losses occur after harvesting? Why can market power become concentrated in a relatively small number of actors? Why are guaranteed prices sometimes announced too late to influence farmers’ production decisions? Why are policy interventions so often reactive rather than proactive? And how will droughts, floods, temperature extremes, changing rainfall patterns and emerging pests affect the stability of rice production in the years ahead? These are not separate questions. They are parts of the same system.
From crisis management to systems governance
Sri Lanka does not need another isolated discussion about rice. What is needed is a national policy dialogue and action forum that brings all relevant actors together, not merely to exchange speeches, but to develop a shared understanding of the system and agree on what needs to be done. Such collaboration must go beyond consultation or the exchange of views. The different parties need to work together from problem definition through to implementation, bringing their diverse knowledge, perspectives, interests and practical experience into a common process.
Farmers bring contextual and experiential knowledge; industry actors understand market realities and operational constraints; scientists contribute evidence and analytical capabilities; policymakers bring institutional and regulatory perspectives; while technology and data specialists can provide new tools for understanding and managing the system. When these different perspectives are brought together systematically, they can reveal interdependencies, challenge assumptions, identify feasible interventions and generate solutions that are evidence-based, practically implementable and socially acceptable.
This is the essence of a transdisciplinary systems approach: not simply working across disciplines, but bringing together multiple stakeholders and multiple forms of knowledge to co-create solutions and share responsibility for outcomes. The process should therefore go beyond presentations and speeches. It should involve systems mapping, causal analysis, stakeholder dialogue, scenario planning and the participatory identification of the critical bottlenecks and leverage points in the rice system. Most importantly, it should distinguish between what is urgent and what is important, and between interventions that merely alleviate symptoms and those capable of changing the underlying behaviour of the system itself.
We need an implementation roadmap, not another report
There is, however, one important caveat. Sri Lanka has no shortage of reports, recommendations and policy documents. What we often lack is sustained implementation. Any national initiative on the rice conundrum must therefore end not with another set of broad recommendations but with a prioritised national action roadmap. It should identify short-, medium- and long-term actions, assign institutional responsibilities, establish timelines and define measurable indicators of progress. The ultimate objective should be to move Sri Lanka from reactive crisis management to proactive systems governance.
A national opportunity
The rice conundrum may, in fact, provide Sri Lanka with an opportunity that extends well beyond rice to deal with other important crops. If we can demonstrate that a complex national problem can be addressed by bringing together science, policy, stakeholder knowledge, real-time information and systems thinking, the approach could become a model for addressing other persistent challenges, from climate resilience and water security to energy, food systems and disaster risk.
The choice before us is therefore quite stark. We can continue responding to each rice crisis as it emerges, adjusting prices, arranging imports, appealing to millers, reassuring consumers and supporting farmers, only to repeat the cycle later. Or we can step back and ask a more fundamental question:
What is it about the way our rice system is structured and governed that continually produces these crises?
That is the question that needs to be answered. Sri Lanka has the scientific expertise, institutional capacity and stakeholder knowledge required to do so. What is needed now is the willingness to bring these fragmented sources of knowledge together and examine the rice sector as one interconnected system.
Our ancient civilisation understood the importance of interconnectedness: land, water, agriculture and society were organised as parts of a larger whole. Perhaps, in confronting the modern rice conundrum, we need to rediscover that systems wisdom, this time supported by modern science, technology, real-time data and transdisciplinary thinking. The time has come to stop merely managing the rice crisis. It is time to fix the system that keeps producing it.
It is against this backdrop that the Sri Lanka Association for the Advancement of Science (SLAAS) proposes to convene shortly a “National Policy Dialogue and Action Forum on the Rice Conundrum in Sri Lanka”, bringing together the key stakeholders across the rice system. The Forum is intended to provide a platform for moving beyond piecemeal and reactive interventions towards a coordinated, evidence-based and transdisciplinary systems approach, one capable of generating lasting and pragmatic solutions to what has become an “island-shaking national issue”.
Features
This curse of partisan politics in Sri Lanka
78 Years of Demagoguery, Not Democracy
by Brigadier Ranjan de Silva
rpcdesilva@gmail.com
On the 4th of February every year, we raise the lion flag and speak of democracy. We speak of 78 years of “self-rule.” But honesty demands we ask: what kind of rule have we actually had? It was not democracy. Democracy is government for the common good, constrained by law, informed by reason, and accountable to truth.
What Sri Lanka has had for 78 years is demagoguery — government by manipulation, by party, and by passion.
Defining the Curse:
The dictionary defines demagoguery as “political activity that seeks support by appealing to the desires and prejudices of ordinary people rather than by rational argument.” Its tools are simple: divide the people, promise the impossible, demonize the opponent, and govern for the next election, not the next generation. That is the political culture we inherited in 1948 and perfected since.
78 Years of Evidence:
The record is not ambiguous. Policy by Pendulum – 1948–2024. Instead of a national development plan, we got a partisan wrecking ball. 1956: The “Sinhala Only Act” was passed not after linguistic study, but as an election mobilization tool. 1970-77: The SLFP nationalized private enterprise and imposed import controls. 1977: The UNP reversed course with an open economy overnight. 2005-2014: Mega infrastructure was built on Chinese loans with no feasibility transparency. 2015-2019: Those same projects were called “white elephants” and stalled. 2020-2021: The organic fertilizer ban was announced as a populist “green” policy, reversed 6 months later after it collapsed agriculture and food prices. The Colombo Port City, Hambantota Port, and the Central Expressway all followed the same pattern: started, stopped, rebranded. The country pays twice. The party takes credit once. Economics as Election Candy. Demagoguery is expensive. 1960s: Subsidized rice to win rural votes, leading to the 1971 food crisis.
2005-2014:
Fuel subsidies and public sector hiring sprees that doubled the wage bill. 2019:
Unfunded tax cuts that removed Rs. 500 billion in annual revenue with no offset. By April 2022, external debt hit $51 Billion and we defaulted for the first time. The party that cut taxes was not in power to manage the IMF program. The party that inherited it was blamed for the austerity. This is the cycle. Institutions captured. A democracy needs referees. We turned them into party cadres. The 17th Amendment 2001 created independent commissions. The 18th Amendment 2010 abolished them. The 19th 2015 restored them. The 20th 2020 gutted them again. Police transfers, university vice-chancellors, and state bank chairmen have all been decided by party headquarters, not merit.
When the institution serves the party, the citizen gets leftovers.
Identity over Ideas: From 1956 to 1983 to 2009 to 2022, our elections have been won on fear, not spreadsheets. “They will erase your language.” “They will sell the country.” “Only we can protect Buddhism/the minorities/the nation.”
Rational debate on debt, productivity, or climate adaptation never wins a rally. Prejudice does. That is demagoguery by definition.
Party Interest subverted the National Interest. The core damage of 78 years of partisan politics is this: the nation became secondary to the party. Need power sector reform? Impossible, because our unions will strike. Need to cut 300,000 ghost employees? Impossible, because our voters will defect. Need a 20-year education and export plan? Impossible, because it won’t show results before the next election. So, we borrowed. We patched. We lied. The result: a railway system that still runs on 1950s engines, hospitals without paracetamol in 2022, and a brain drain of 300,000+ skilled workers since the crisis. The parties rotated. The country declined.
The Opposition’s Original Sin and here, all parties share guilt equally. In opposition, the job is not to govern. It is to destroy. The UNP in the 60s called the SLFP “communist.” The SLFP in the 70s called the UNP “imperialist.” The JVP called both “traitors.” The SJB, SLPP, and NPP today use the same script with new logos. Every tax is “anti-people.” Every reform is “a sell-out.” Every crisis is proof the other side is evil and must be removed at any cost. Then they win. And implement 80% of what they opposed. Because demagoguery has no principles, only positions. 78 years of unmerciful, bad-faith criticism has not produced accountability. It has produced cynicism. The public now believes all politicians are the same — because for 78 years, they have behaved the same.
Breaking the Curse:
Changing the party in power will not end this. We must change the incentives that reward demagoguery. Three reforms are non-negotiable: Bind future Parliaments to national policy. Pass 10-year frameworks for energy, education, and public debt with 2/3 majority protection. Infrastructure and fiscal rules should outlast one government, as they do in Chile and New Zealand. Depoliticize the state. Independent commissions for police, elections, public service, and bribery must have constitutional budgets and appointment panels that exclude MPs. No more 18th/20th Amendment style rollbacks. Demand better from voters We must stop rewarding the best slogan and start demanding the best spreadsheet. Town halls over rallies. Costings over promises. A 5-year plan over a 5-minute speech.
In 1948, we did not inherit democracy. We inherited an election. For 78 years we have used that election to choose our favourite demagogue. The prize has been debt, division, and decay. The curse of partisan politics will only end when citizens and leaders agree on one principle: Party second. Country first. Until then, February 4th will remain a ceremony, not a celebration.
Features
Developing markets for fruits, vegetables and flowers in the Gulf
Export diversification – Missing the wood for the trees – Part II
by Gomi Senadhira
Sri Lanka established its diplomatic presence in the Gulf region only in the early 1980s. First, a small embassy was opened in Abu Dhabi, covering the UAE. Then in 1982, embassies were opened in Jeddah and Kuwait. The embassy in Jeddah covered Saudi Arabia while Kuwait was responsible for Kuwait, Oman, Qatar and Bahrain. Commercial Diplomats were also assigned to these two embassies. A senior private sector executive, with experience in marketing, was posted to Jedda as the commercial counsellor. I was posted to Kuwait as a second secretary (Commercial). Our instructions were very clear. Focus not only on traditional exports. Product diversification was a priority.
Developing Markets for Agricultural Products
At that time, Minister Lalith Athulathmudali had just launched his Export Production Villages (EPV) programme. He believed that the EPVs working closely with the exporters would provide an ideal opportunity for rural households to directly benefit from the government’s new open trade policy. Agricultural products, particularly fruits and vegetables, were a key component of this approach and the ministry thought that the Gulf countries, with large Sri Lankan communities, would have a ready-made market for these items. Thus, from day one we were compelled to explore the market for nontraditional exports; fruits and vegetables (F&Vs) were on the top of our priority list.
From cane baskets to cardboard boxes
Fortunately, the market for the F&Vs products in the region was at a very early stage of development. That provided an opportunity for Sri Lankan exporters, who were also inexperienced, to work with the importers and grow together. For example, in Kuwait, one of our first customers for F&Vs was a small supermarket where the manager was a Sri Lankan. After the first shipment arrived, he invited me to inspect the shipment. I visited the supermarket and was shocked by what I saw. While produce from other countries was packed nicely in cardboard boxes, our packaging mirrored transport to Manning market, cane baskets! As a result, fresh produce had suffered significant damage. A long report, with photographs, to the trade ministry produced an immediate response. After all, this was a pet project of the Minister. Within weeks, shipments were packed in cardboard boxes. Immediately afterwards, an expert on packaging from the Commonwealth Secretariat was sent to Kuwait with an official from the EDB to study the problem.
By then, we had also managed to develop a friendship with the management of the Salmiya supermarket, a large upmarket supermarket patronised by wealthy Kuwaitis and expats. It was a cooperative and the chairman was a Kuwaiti public servant. I could only meet him after 6 PM when his large office functioned as a diwaniya, a cherished cultural space in Kuwaiti society. Guests moved in and out the room. I had to spend time with them sipping many cups of tea. Though that meant at least two hours on each visit, it helped greatly to develop a close relationship. The general manager was an efficient and friendly Palestinian. After many visits we had succeeded in getting an order for F&Vs. The day after the first shipment arrived, I got an urgent call from the GM to come and inspect it. Once again, I was in for a surprise. Inside the cold room, the consignments from other countries were stacked neatly on top of each other, while vegetable boxes from Sri Lanka had collapsed once placed on top of each other, crushing the produce within.
Fortunately, our packaging experts arrived in Kuwait soon after this incident. They spent two days in the Salmiya Supermarket, studying the packaging from other origins. We were also successful in assuring the GM our packaging would improve. After that, packaging improved and exports moved smoothly. With that, Sri Lanka emerged as a small but reliable supplier to the mainstream market, not just the ethnic segment of the market.
Export of Fresh Vegetables by Sea
Towards the end of my tour, a Sri Lankan businessman requested me to find a buyer for cabbages, which he was prepared to export in large quantities by sea. I introduced him to the largest fruit and vegetable importer in Kuwait. Their regular suppliers of similar vegetables were Jordan, Lebanon and Syria. Luckily, the company was keen to diversify the supply sources. A few weeks later, the first container load of cabbages from Sri Lanka arrived in Kuwait. Immediately after the arrival of the container, I visited the company. They were pleased with the quality and the price and were looking forward to importing more fruits and vegetables. Unfortunately, that turned out to be a one-off event. Later on, when I was back in Sri Lanka, the exporter informed me that he couldn’t continue with it due to the problems with the local supply chains.
Floriculture
During the period I was asked by the EDB to explore the market for floricultural products, more particularly for cut flowers. At that time Kuwait was a relatively large importer of cut flowers and live plants. The main suppliers were the Netherlands and Colombia. Importers were also reluctant to move out of the established supply chain, particularly due to “snob value” associated with the product from Europe. However, after some difficulties, one importer agreed to place a pre-paid trial order. After the arrival of that shipment, he was impressed by the quality of the product and the orders expanded rapidly. As a result, by the end of 1985 Kuwait had become a major buyer of Sri Lanka’s floricultural products.
From village to global markets
As a result of the proactive promotional work undertaken by the EDB and the embassies in the region, by 1985, Sri Lanka had managed to acquire a small but significant share of the F&V and floriculture markets in the GCC countries. We had also identified domestic supply chain issues that hindered exports. All that was done, long before Southeast Asian or African countries even entered into that market. In fact, my Southeast Asian colleagues used to contact me often to reserve “durian” for them at the “Sri Lankan supermarket”.
Most importantly, a substantially large share of produce from Sri Lanka in Kuwaiti supermarkets originated in the EPVs. Of course, that didn’t just happen. The ministry (or the minister) using the carrot and stick approach “encouraged” exporters to buy the produce directly from the newly established EPVs. (The writer can be reached at senadhiragomi@gmail.com)
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Features5 days ago“Wrap Me Up in My Blazer”— A Gentlemanly Bradby Reminiscence
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