Agriculture remains critically important for rural livelihoods, poverty reduction, and the economic growth of Sri Lanka. With approximately one third of the population engaged in agriculture, the sector contributes around 10 per cent of total Gross Domestic Product (GDP) and 24 per cent of total exports.
While Sri Lanka has been self-sufficient in rice production, the agricultural sector remains characterized by relatively low productivity, low diversification levels, limited capacity and limited technology choices for smallholder farmers to improve their productivity and to diversify. Moreover the relatively weak links between producers and domestic and international markets have led to under exploited opportunities for processing and value-addition.
A World Bank project, implemented through the Ministry of Primary Industries, the Ministry of Agriculture, and five participating provinces including the Northern, Eastern, Central, North-Central and Uva Provinces is under way with the aim of assisting Sri Lanka in modernizing its agricultural sector. With the objective of increasing agricultural production and productivity, the project is working towards reducing the country’s dependence on imports and improving the sector’s contribution to the national economy and exports. Designed to demonstrate new agricultural practices and institutional arrangements in the project areas, the project aims to link smallholder farmers into modern agriculture value chains and create attractive job opportunities.
This commercial and export-oriented agriculture is to be achieved by offering incentives and access to finance for farmers through the provision of a matching grants scheme (MGS) for agro business, fisheries livestock and poultry. The aid is intended to facilitate private sector investment, provide technical assistance, strengthen farmer producer organizations and promote smallholder–agribusiness partnerships; to increase their competiveness, business orientation and market position in order to make them more attractive business partners in the value chain. Through a competitive process the ministry will select a set of entrepreneurs for the project. The project will fund 50% of the investment requirement with the main selection criteria being the involvement of a business in the export value chain and the promotion of a value added product, with increased benefits being granted to female-headed companies.
The expected outcomes include: an increased number of farmer-producer organizations and agribusinesses investing into higher value agriculture production and value chains; increased benefits derived by farmer-producer organizations and rural communities from partnerships through productivity, higher agricultural income and higher employment.
The program also highlights the need for diversification away from basic staples such as rice towards higher value crops (fruits, vegetables) and specialized crops (spices) as well as aquaculture, and livestock. The aim of the project is to preserve and build on Sri Lanka’s farming traditions, shifting focus to diversification and the promotion of high-value and export oriented food crops crucial for income growth, poverty reduction and better nutritional outcomes in the country.
Diversification is to be achieved through investing in modern agriculture technology in the project areas and gradually freeing up farmland for fruits, vegetables, specialized niche crops and other agricultural products, which generate higher incomes. This is done with the purpose that diversification will lead to the development of specialized skills, higher levels of technology and innovation, better and environmentally sustainable crop management, and new financing and marketing arrangements, all of which provide new opportunities for development and job creation.
The overall strategic objective of the project is to support the government’s agriculture sector development policy, addressing these issues through: developing an enabling framework and incentive structure for small, medium, and large enterprises to invest in commercial agriculture and value chains, promoting partnership arrangements between private sector partners and smallholder producer for better linkages, demonstrating new agriculture technologies and innovations at sufficient scale to enhance productivity and diversification, promoting technology diffusion through capacity building and training and new models for extension service delivery and supporting sector policy analysis and research for reform.
With innovation and new technology looking to improve not only the economic efficiency in the sector, but also enhance resilience to natural disasters and climate change, the project beneficiaries include an estimated 30,000 smallholder farm households in the project areas that will benefit directly from the project’s small matching grants program as well as an additional 20,000 farm households which will be supported through technical and business training and through the establishment of professional farmer organizations.
- Sri Lanka Agriculture Sector Modernization Project