By Uwin Lugoda
The recently approved Cabinet proposal to set up Export Production Villages (EPVs) around Sri Lanka is expected to save the country $ 1 billion in the next four years, learns The Sunday Morning Business.
The project proposal for the initiative that was approved by the Cabinet of Ministers on 3 November stated that the Government plans to reduce Sri Lanka's dependency on imports of raw material for export purposes and save the country $ 1 billion between the years of 2021 and 2024.
"The programme is set to link up existing agriculture, fisheries, and services sectors to export companies. It will have the dual goal of developing rural production within a formal enterprise model and link those with the export supply chain, as well as to upgrade local production industries as import replacements," said the programme proposal which was presented by Trade Minister Dr. Bandula Gunawardana.
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Trade Minister Dr. Bandula Gunawardana.[/caption]
The Government aims to establish cluster villages making similar products for export and provide opportunities for them to be exposed to the market as well as provide opportunities and support for the producers to minimise the issues they may face when starting a formal business or exporting goods.
The cabinet proposal for the initiative, which was prepared by the local Trade Ministry, stated that they planned for the EPVs to cover sectors such as agriculture, fisheries, mechanical, and services, and thereby set a sustainable existence of those Export Villages by entering into future trade agreements with top-level export companies.
The proposed programme is set to utilise the required allocations from the Sri Lanka Export Development Board (EDB) and is subject to the guidance of the Ministry of Trade. According to the cabinet proposal, the Ministry expects to establish a 1,000 EPVs in total, and is going to need the combined resources of both the public and private sectors.
The Government is looking to invest Rs. 5 million for each of the EPVs according to the proposal, and is planning to obtain Rs. 6 million from the Treasury to develop them.
However, this was not the first time such a plan was implemented, as in 1977, a similar programme was introduced in pursuit of economic liberalisation policies, by the Government in order to develop the country. This programme was initiated in 1980 under the Ministry of Trade, with an aim to create employment and enhance the income and standard of living of the rural people in addition to encouraging foreign exchange earnings.
The core idea of the major strategy of the EPV programme was to organise production in villages directly for the export market. Under this programme, it was expected to start production based on advanced and secure marketing arrangements such as supply contracts for specific products at pre-agreed prices. The products were expected to be directly purchased by export companies. The avoidance of involvement of intermediaries in the process of marketing was expected to bring about higher prices and more benefits for the producers.
The EPV programme was expanded and became more popular by the late 1980s, and EPV companies functioning in a number of districts were based on a wide range of products, rather than on agricultural products alone.
However, a research study done by the former Agrarian Research and Training Institute (ARTI), now the Hector Kobbekaduwa Agrarian Research and Training Institute (HARTI), in 1990 to evaluate the programme, highlighted that the EPV strategy had not worked in the rural setup as expected. The main reason was its inability to establish self-sustained commercial organisations of village producers with the required capacity to stay involved in the competitive market in the long run.
This initiative was revisited in 2019, when the former Primary Industries and Social Empowerment Minister, Daya Gamage stated that Sri Lanka was in discussions with the World Bank to obtain a $ 250 million loan to set up 5,000 EPVs across the country in order to boost the nation's export sector. During the 2019 Global Spice Road Symposium in Colombo, he explained that the villages will be linked with 33 specialised agro and fish processing zones which are currently being set up in the country.
The new proposal also looked to help exporters who are being impacted by the Covid-19 pandemic and the import restrictions which followed. The Central Bank reported that imported consumer goods only amount to 19.8% of total imports, while 57% of imports are intermediate goods for production. One example of this comes in the form of the confectionery industry which has experienced a 340% special commodity levy on block fat and margarine in June. The industry, directly and indirectly, employs over 600,000 people while exporting to over 55 countries and bringing in $ 100 million in export revenue to the country annually, according to the Lanka Confectionery Manufacturers Association (LCMA).
Trade Minister Dr. Bandula Gunawardana.[/caption]
The Government aims to establish cluster villages making similar products for export and provide opportunities for them to be exposed to the market as well as provide opportunities and support for the producers to minimise the issues they may face when starting a formal business or exporting goods.
The cabinet proposal for the initiative, which was prepared by the local Trade Ministry, stated that they planned for the EPVs to cover sectors such as agriculture, fisheries, mechanical, and services, and thereby set a sustainable existence of those Export Villages by entering into future trade agreements with top-level export companies.
The proposed programme is set to utilise the required allocations from the Sri Lanka Export Development Board (EDB) and is subject to the guidance of the Ministry of Trade. According to the cabinet proposal, the Ministry expects to establish a 1,000 EPVs in total, and is going to need the combined resources of both the public and private sectors.
The Government is looking to invest Rs. 5 million for each of the EPVs according to the proposal, and is planning to obtain Rs. 6 million from the Treasury to develop them.
However, this was not the first time such a plan was implemented, as in 1977, a similar programme was introduced in pursuit of economic liberalisation policies, by the Government in order to develop the country. This programme was initiated in 1980 under the Ministry of Trade, with an aim to create employment and enhance the income and standard of living of the rural people in addition to encouraging foreign exchange earnings.
The core idea of the major strategy of the EPV programme was to organise production in villages directly for the export market. Under this programme, it was expected to start production based on advanced and secure marketing arrangements such as supply contracts for specific products at pre-agreed prices. The products were expected to be directly purchased by export companies. The avoidance of involvement of intermediaries in the process of marketing was expected to bring about higher prices and more benefits for the producers.
The EPV programme was expanded and became more popular by the late 1980s, and EPV companies functioning in a number of districts were based on a wide range of products, rather than on agricultural products alone.
However, a research study done by the former Agrarian Research and Training Institute (ARTI), now the Hector Kobbekaduwa Agrarian Research and Training Institute (HARTI), in 1990 to evaluate the programme, highlighted that the EPV strategy had not worked in the rural setup as expected. The main reason was its inability to establish self-sustained commercial organisations of village producers with the required capacity to stay involved in the competitive market in the long run.
This initiative was revisited in 2019, when the former Primary Industries and Social Empowerment Minister, Daya Gamage stated that Sri Lanka was in discussions with the World Bank to obtain a $ 250 million loan to set up 5,000 EPVs across the country in order to boost the nation's export sector. During the 2019 Global Spice Road Symposium in Colombo, he explained that the villages will be linked with 33 specialised agro and fish processing zones which are currently being set up in the country.
The new proposal also looked to help exporters who are being impacted by the Covid-19 pandemic and the import restrictions which followed. The Central Bank reported that imported consumer goods only amount to 19.8% of total imports, while 57% of imports are intermediate goods for production. One example of this comes in the form of the confectionery industry which has experienced a 340% special commodity levy on block fat and margarine in June. The industry, directly and indirectly, employs over 600,000 people while exporting to over 55 countries and bringing in $ 100 million in export revenue to the country annually, according to the Lanka Confectionery Manufacturers Association (LCMA).