Promoting Agricultural base SME and Increase the Food Production in Sri Lanka

The SME sector in Sri Lanka is considered as the backbone of the economy with their significant characteristics on employment generation, GDP growth, improving innovation capability and stimulating of other economic activities in Sri Lanka. In the country, more than 80% of businesses run by SME’s which are mainly in foods processing, manufacturing and construction fields. In addition, they  supply about 35 percent of employment and about 20 percent of total industrial value addition (Galagoda, 2008).

The economic environment is not conducive to sustainable livelihoods due to the need for large scale infrastructure rehabilitation, landownership issues, and lack of capital. Poor people  become poorer due to increasing prices of consumer goods and at the same time Sri Lanka still imports foods from other countries because of the lack of food production which could not fulfill even are our domestic consumption. But even India, Pakistan and Bangladesh have higher populations  which are mostly poor, but they are still exporting surplus food productions to the Asian nations  as well as the  USA, European and other countries in the world. Our country is mostly based on agriculture even though still we are importing  rice from countries like Pakistan and Bangladesh due to the shortage of our product.

There are large numbers in Sri Lanka without adequate food: persons who are hungry, malnourished or undernourished. There is growing evidence of increasing malnutrition in Sri Lanka. The rising prices of food are likely to aggravate this situation, especially in households that do not produce food. Although the country does not have serious food shortages malnutrition affects nearly one-third of children and one quarter of women. Almost one out of five children are born with low birth weight and about 29 per cent of children under five are reported to be underweight, rising as high as 37.4 per cent, in some deprived districts.

Imbalances in trade and large fiscal deficits undermine food security, especially of low-income households. Strong agricultural production through Small and Medium Entrepreneurial fundamentals, and effective safety nets are needed to improve the country’s food security. Increasing food production  is  essential  to minimize dependency on food imports  from other nations. Healthy macroeconomic conditions are a prerequisite to ensure food security, in a food deficit country such as Sri Lanka. A strong economy is vital to ensure that the country could import the basic food needs of those commodities that cannot be produced in the country or are inadequately produced.

Which sectors should mainly focus attention on food security?

Almost 75 percent of the population is still classified as rural, which for all intents and purposes means mainly engaged in agriculture. It is an obvious fact that the agricultural sector should be seriously consider to strengthen domestic food production in the rural areas. The only way  to strengthen their household income is developing and promoting SMEs. Then the Agriculture sector must be considered, which will strengthen domestic food production in rural areas.

Impact of food insecurity

In Sri Lanka, agricultural growth has been only 1.2 per cent per year and lagged behind those of other sectors. Production of several crops declined over a period of time and even when there was growth these have been modest. The yield levels attained in almost all crops is much less than the potential. This applies as much to plantation crops as well as  to small holder agriculture.

Agricultural growth could contribute to reduction of poverty, hunger and malnutrition. Poverty and food insecurity are largely problems in the rural and estate areas in Sri Lanka.

Governments need to focus on building up the agricultural sectors of rural areas  by training farmers and food manufacturers to better understand technical requirements and meet international standards. The first step in ensuring food security in developing countries is to educate farmers so that they can access and understand standards and regulations of export markets. The training can be provided through seminars, hands-on workshops and publications, which enable exporters to more easily, overcome technical barriers to trade.

The households in Sri Lanka most affected by food insecurity are spread across all rural areas identified. The reasons for such high food insecurity are associated with a number of factors namely; a) high level of indebtedness; b) constraints to livelihoods establishment such as some households still clearing land, households are still building up their productive and liquid assets; c) some households depending on unreliable income sources such as gifts and donations and casual wage labour, accompanied by under employment; and d) structural factors such as household limited access to land.

Other household constraints contributing to food insecurity include loss of employment, high food prices, sickness, lack of veterinary services and fishing gear inhibiting the affected households to fully realize their income potential. Due to these constraints, the affected households use coping mechanisms such as borrowing money, eating less preferred foods, pawning, selling jewellery to buy food. Furthermore, households use income on debt repayment, with less percentage of the household income spent on livelihood inputs, delaying the establishment of livelihoods.

Among the other reasons for this situation are the unequal distributions of people to land and water resources in our country and the unequal distribution of incomes and poverty within our regions. Some recent proximate reasons that have aggravated the situation are climate change, droughts, floods and forest fires causing soaring food prices. The financial crisis and economic recession has not helped either.

Issues & Recommendations

The  population is gradually increasing in our country as there is no change in agriculture produce. Some other countries in the Asian region has surplus agriculture products even they have a large number of  the population who are living under poor conditions. So many agricultural  products  seasonal yields are higher than  off season. I observed the price of Banana in the  northern  part of Sri Lanka in April, May season  which was selling  at 10 to 40 rupees in the local markets. At the same time the imported bananas were  sold  at  approx..120 to 180 in Colombo. The middle man got the best in this  deal, the real farmers are  discouraged  and depressed  not wanting  to continue this  by their next generation. Because  the cost of producing  is very high when they compare turnover  of their products. The farmers do not  encourage  their children to continue this, they  find   them  some other ways of  earning their living, which has  rapidly reduced  the agriculture production of our  country.

Sri Lanka is a  disaster prone country which is frequently impacted by flood, drought, and other disasters. Farmers are struggling without   a proper  insurance mechanism to protect their farming and also as they have so many collateral issues to access  loans to invest to improve their SME. Still most of the rural SME sectors are depending on traditional methods rather than adopting to new technics into their production  as well  as they do not have any chance  to develop their skills  and the  younger generation are not much interested  and   moves  away from agricultural activities.

So these issues cause them to sell their product at  a low price which demotivates  them all to leave  rural food productivity. Most of them are wasting their products without proper storage and value addition methods where the middle man  gets the  benefit than the farmers in the field.

·         Primarily it  requires a strong, forward looking policy favoring agricultural extension and communication for agricultural and non-agricultural rural development with a focus on food security.

·         Another proposes the establishment of a platform to promote dialogue and collaboration among all relevant sectors to favor extension/ communication activities for food security.

·         And the third proposes public sector institutional change to enhance the new and expanded policy and strategy.

·         Establish and strengthen rural technology-based incubation center promotion programs.

·         International organizations could take the lead.

·         Develop productivity enhancement and entrepreneurial management skills, including soft skills, in existing enterprises.

·         Encourage and develop PPPs for policy implementation at the central, provincial, and local levels.

·         Develop dedicated financial instruments as “challenge funds” for promoting rural entrepreneurship.

·         Identify sectors based on local needs and immediately establish a value chain analysis program.            

·         Promote a rural entrepreneurial culture on a priority basis and change the mindset of local people/ communities as these are critical for promoting SME.

·         A comprehensive program (institutional and programmatic) for capacity building in rural entrepreneurship in terms of knowledge, skills, and attitude is needed.

·         SME requires that business development service (BDS) providers play a major role.

·         Develop a training manual and reference materials on RED.

Recently our President noted that the objective of the Government was to create a self-sufficient economy within the country by stopping the import of food items that could be cultivated locally.
He pointed out that the Government spent Rs. 154 billion annually to import various food items. Out of the 38 food items that were being imported, almost all of them except for four food items, including dhal, gram and apple, could be cultivated within the country.
The support of both the state and private sector would be obtained to implement a plan to produce the food items locally.

Based on president statement I would like to point out that, SME sectors based on food production must be strengthen through making special policy which must consider accessibility of finance,  marketing, quality and technological adaptation. Although government must give special attention in insurance cover, subsidies and skills training assistance for them these policy change can increase the share of SME in food production to GDP will be raised and income in agriculture sector will also increase. While these strategies will be considered in policy level which will be influencing to increase the level of food security forever.