Partial Submission of Global Country Study (2830003) Semester-4 Country selected: Sri Lanka College Code: 732 College

Name: LDRP Institute of Technology & Research, Gandhinagar Student Information: Student Name Jayprakash Maheshwari Jay Budhdhabhatti Sahdev Parmar Mehul Virsodiya Kaushal Gandhi Mayur Vaghela Student Enrolment Number 107320592005 107320592006 107320592009 107320592016 107320592027 107320592047

Faculty Guide: Prof. Hemali Broker Facultys Email: hemalibroker@ldrp.ac.in Facultys contact number: (M) 90990 12233

Introduction of the Topic:

Agriculture (Tea) Situation in Sri Lanka As per the GTU guideline, we have studied introduction of Sri Lankan country scenario and various sectors, its development and its roles in countrys economy as well as agricultural sectorcore competence industry which affect the tea industry in Sri Lanka. As we know that agriculture is the base of each and every country, in the same way Sri Lanka is also based on the agriculture and the most of the population of the Sri Lanka get the employment from the agriculture industry.

Introduction of Sri Lanka:

The Sri Lankan flag includes saffron and green stripe representing the Hindu and Muslim minorities, the majority of the population is Buddhist. In each corner are representations of the sacred bow tree leaf. The name Sri Lanka means Hallowed Island. Geography and Climate: Sri Lanka is an island in the Indian Ocean just north of the equator. The country has had a highly developed civilization from as early as the 5th century BC. Its location on the sea routes between Europe and Africa and Asia led to contact with many of the great civilizations to the east and west and resulted in British colonization, which ended in 1948. In 1972 the country, then known by the name the British gave it, Ceylon, officially changed its name to Sri Lanka. Despite its small size Sri Lanka has a great deal of geographic and climatic diversity. Mountains rise in the centre of the island, the tallest, Mount Pindurutalagala, rises to 2,524 m (8,281 ft). The rest of the island is a coastal plain. The island has two monsoonal climatic regions, a dry and a wet zone. The wet zone comprises the southwest corner of the island and most of the mountainous centre. Here, yearly rainfall levels can exceed 3,700 mm (146 in) per year. In the dry zone, comprising the northern and eastern parts of the island, rainfall is limited to about three months of the year, when up to 1,500 mm (60 in) of rain may fall. Because of the prolonged periods of drought, the dry region does not

support the lush vegetation of the wet zone. Lowland temperatures average 28 deg C (82 deg F) all year round. Sri Lanka (formerly Ceylon) is an island in the Indian Ocean, lying east of the southern tip of the Indian subcontinent, from which it is separated by the Palk Strait. Sri Lanka is about the size of Tasmania, with an area of 66,000 square km, including 870 square km of inland waters.

population in major cities (in million)

colombo Gampaha Kurunegala Kandy other

11% 10% 7% 66% 6%

(As per sri lankan population census)

Sri Lanka's official languages are Sinhala and Tamil, although English is commonly used in government and is spoken competently by about 10 per cent of the Sri Lankan population.

languages in sri lanka (%)

74

18

7 1

Sinhalese

Tamils

Urdu

others

(As per sri lankan population census)

The below table contains the information about the population (%) of major religions in Sri Lanka:
major religions Buddhism Hinduism Christianity Islam Other Total population in % 69 15 8 7 1 100

(As per sri lankan population census)

Civil conflict The government forces and the Liberation Tigers of Tamil Eelam (LTTE) from mid 1983 Sri Lanka was afflicted by a serious civil conflict. Hundreds of thousands of people were displaced by the fighting and it is estimated that over 70,000 people were killed. The conflict followed the most destructive explosion of communal rioting in the history of Sri Lanka. The riots proved a turning point in Tamil militancy. Through a ruthless strategy of elimination of any opposition, the LTTE, under the leadership of Velupillai Prabhakaran, became the largest and most powerful Tamil group. It began a major military campaign against the Sri Lankan Government, with its main aim the establishment of a separate Tamil state, Tamil Eelam, in the north and east. In February 2002, the Sri Lankan Government and the LTTE signed an agreement for an indefinite ceasefire, which was supervised by a small peace monitoring mission led by Norway. Six rounds of peace talks were held between September 2002 and April 2003 when the LTTE suspended participation, citing dissatisfaction with the pace of progress towards granting interim regional autonomy in the north and east. The LTTE Successive Australian Governments have consistently and strongly opposed all forms of terrorism, including LTTE terrorist acts. On 21 December 2001, the Minister for Foreign Affairs gazette the LTTE as a terrorist organization for asset freezing purposes in accordance with

Australia's obligations under United Nations Security Council Resolution 1373 of 28 September 2001. Consequently, it is a criminal offence in Australia to use or deal with assets owned or controlled by the LTTE, or to provide assets to the LTTE, whether directly or indirectly. Political overview There are two political parties named Sri Lanka Freedom Party (SLFP) and United National Party (UNP). Power has fluctuated between these two main political parties and Mahinda Rajapaksa is the current president of sri lankan freedom party and Mr. Dissanayake

Mudiyanselage Jayaratne is the current Prime Minister. The President is considered both the Head of State and Head of Government. Mr. Rajapaksa, the ruling People's Alliance candidate, was elected President on 17 November 2005. Defections to the Government of 18 disaffected UNP members and the six Sri Lankan Muslim Congress members in January 2007 meant that President Rajapaksa's centre-left Government was able to govern with a majority. Since the conclusion of military hostilities in May 2009, eight provincial council elections have been held. On 26 January 2010, Presidential elections were held nation-wide the first time in over two decades that voting could take place in all parts of the country due to the end of the conflict. On 27 January, the Sri Lankan Commissioner for Elections, Mr. Dayananda Dissanayake, announced that Mr. Rajapaksa had been re-elected for a second six-year term as the President of Sri Lanka. The Sri Lankan Supreme Court ruled on 2 February that the second term would start on 19 November 2010. Economic overview Sri Lanka began economic liberalisation, and a move away from socialism, after the UNP's defeat of the left-leaning SLFP government in 1977. Sri Lanka's export-oriented policies have seen a shift from a reliance on agricultural exports to an increasing emphasis on the services and manufacturing sectors. The services sector accounts for almost 60 per cent of GDP. Manufacturing, the fastest growing sector, is dominated by the garment industry. The agriculture sector, though decreasing in importance to the economy, nevertheless accounts for around 12 per

cent of national output and employs more than one third of the workforce. The public sector remains large, with the state continuing to dominate in the financial, utilities, health and education sectors. Sri Lanka, a contracting party to the General Agreement on Tariffs and Trade (GATT) from 1948, ratified the Marrakesh Agreement in June 1994 to become a founding member of the World Trade Organization (WTO). The country historically has been one of the driving forces for trade liberalisation in the region and is particularly active in the South Asian Association for Regional Cooperation (SAARC). In 1998, Sri Lanka signed a free trade agreement (FTA) with India, the first stage of which came into force in February 2000. Sri Lanka is one of a number of countries that have expressed an interest in joining APEC (Asia Pacific Economic Cooperation). Sri Lanka has seen strong economic growth of 7.5 per cent in 2011, according to the International Monetary Fund (IMF), due to improving economic fundamentals and the introduction of reforms to the tax system and financial sector since the end of the conflict in May 2009.
year inflation % 2008 22.6 2009 3.4 2011 6.9

However, the IMF cautions that the country must continue to implement reforms to maximize its growth potential and ensure the benefits of growth are broadly distributed. Bilateral economic and trade relationship Two-way trade between Australia and Sri Lanka in 2010-11 was valued at $335 million, with exports totaling $213 million. Vegetables, dairy products and wheat were the main merchandise exports. Tea, clothing and rubber tires were Australia's main imports from Sri Lanka. Education plays a significant role in the relationship, with Australia the leading provider of tertiary education services to Sri Lanka. About 5,500 Sri Lankan students currently attend tertiary and vocational institutions in Australia. A number of Australian tertiary providers

operate distance education facilities in Sri Lanka including Monash College, an affiliate of Monash University, the Australian College of Business and Technology, an affiliate of Edith Cowan University, and Royal Melbourne Institute of Technology (RMIT). The University of Southern Queensland provides a distance learning program in Sri Lanka which is offered by the Institute of Chartered Accountants of Sri Lanka.

Introduction of Tea-manufacturing Companies:

Sign of Quality for Pure Ceylon Tea Ceylon tea is divided into three groups: High or Upcountry (Udarata) Mid country (Medarata) Low country (Pahatha rata) tea The name "Ceylon Tea" or "Sri Lankan tea" is still regarded as a sign of quality throughout the world. Tea produced in Sri Lanka carries the "Lion Logo on its packages, which indicates that the tea was produced in Sri Lanka. The use of the Lion Logo is closely monitored by the Sri Lanka Tea Board, which is the governing body of the tea industry in Sri Lanka. If a tea producer demands to use the Lion Logo on his packaging, they need to gain permission from the Sri Lanka Tea Board. The tea board then performs a strict inspection procedure, the passing of which allows the producer to use the logo, along with the "Pure Ceylon Tea - Packed in Sri Lanka" slogan on their tea packaging. Most of the Sri Lankan tea exporters now focus on adding more value to the exports rather than exporting raw tea. Grading names which are used in Sri Lanka to classify its teas are not by any means the indication of its quality but indicate its size and appearance. Mainly there are two categories. They are "Leaf grades" and "Smaller broken grades".

Introduction of Sectors in Sri Lanka:

Sri Lanka is a developing economy based largely on agriculture, services, and light industry. Agriculture accounts for approximately 21 percent of the gross domestic product (GDP) and

employs 38 percent of the workforce. Agricultural output is divided between cash crops from plantation agriculture and food crops from subsistence agriculture. Cash cropsnamely tea, rubber, and coconutsare largely grown on plantations. Rice is the principal food crop and the main livelihood for over 70 percent of Sri Lanka's rural population. Manufacturing industries account for approximately 19 percent of the gross domestic product and employ about 17 percent of the workforce. The service sector is the largest of the Sri Lanka economy, employing 45 percent of the workforce and contributing roughly 60 percent of GDP. Tourism, banking, finance, and retail trade are the major components of the service sector.

Foreign trade is an important segment of the Sri Lankan economy. Major imports include petroleum, consumables, machinery and capital equipment, motor vehicles, and various manufactured goods. Major exports include garments, tea, rubber, coconut products, foodstuffs, gems, and jewelry.

Sri Lanka is the largest exporter of black tea in the world and the third largest producer of natural rubber. A variety of gemstones, for which Sri Lanka is world famous, are also exported. Significant quantities of high-grade graphite, for which Sri Lanka is a world leader, are also exported..

Sri Lanka is a mixed economy, in which both the private sector and the state sector engage in the production process. Foreign investments are encouraged and several free zones have been established. The country's banking system is well developed, so that both foreign and local banks function in the economy. The 3 plantation cropstea, rubber, and coconutsaccounted for 30 percent of the gross domestic product in 1948 and the bulk of the output was exported. Manufacturing was an insignificant activity in the economy. Banking and commerce were, for the most part, only used to support plantation agriculture. Nearly all foreign exchange earnings were derived from the plantations. The country depended on imports for nearly three-fourths of its food requirements and almost all of its manufactured goods. During the first era, development policy focused on achieving the objectives of equity and economic growth. The instruments adopted to achieve economic growth were aimed at import

substitution industrialization, both in manufacturing and foodstuffs. The key measures used to achieve this growth strategy were the imposition of various restrictions on imports, and the encouragement of domestic production. Extensive social welfare programs such as price subsidies on food, statutory price controls on consumer goods, and the provision of free education and health services were the instruments used to achieve greater equity. The welfare programs achieved significant improvements in the area of human development, including lower mortality rates, increased life expectancy, and high literacy rates. However, high welfare expenditures restrained the nation's capital growth and ability to invest, slowing economic growth and causing high unemployment and low wages. The second era of Sri Lankan economic development (post-1977) marked a shift towards a free market economy. The strategy aimed at liberalizing the economy from excessive government controls and it chose the private sector as the engine of growth. Policies were designed to accelerate economic growth by stimulating private investment through various incentives and also to increase the country's foreign earnings by promoting export-oriented economic activities. The liberalization policies, pursued under the watchful eye and participation of the International Monetary Fund and the World Bank, met with success at the beginning. The transition to a free market economy based on a liberalized trade and exchange rate regime has brought benefits to the Sri Lankan economy. Unemployment, a problem for decades, has reduced significantly, and remains at historically low levels (8 percent in 2000). Nonetheless, the high levels of inflation , fueled by the sharp deterioration of the Sri Lankan currency, combined with the mounting cost of civil war has raised the cost of living to very high levels. The soaring cost of living has made many Sri Lankans struggle to satisfy their basic needs. Over 45 percent of the population depends on benefits under the income supplement programs initiated by the government. Role of Agriculture Sector in Sri Lankan Economy Tea sector and its economic importance to Sri Lanka In absolute terms, the tea industry is a major export producer, particularly as its net foreign exchange earnings are very high. In 1991, Sri Lanka emerged as the largest exporter of tea to the world market. The share of Sri Lankan tea in international markets in 1995 was 23 per cent. However, Kenya was reported to have overtaken Sri Lanka in 1996 as the largest tea exporter.

Nevertheless, as an exporter of tea in bulk form, Sri Lanka has now developed into the largest producer-cum-exporter of retail consumer packets and bags to the international market. The tea sector provides direct and indirect employment to over 1 million people in Sri Lanka. Total labor employed on the tea estates in 1995 was 215,338. It is the most important agricultural product sector in Sri Lanka with respect to economic, social and environmental benefits. However, for sustainability, tea requires a long-term growth-oriented strategy with regard to land use. Another feature of the tea industry in Sri Lanka is that the production of tea packets and tea bags is expanding. Furthermore, the product base has been diversified, with the production of instant tea, green tea, organic tea (which is an environmentally friendly product) and flavored teas, albeit in limited quantities. Land area under agriculture in Sri Lanka Sector Landarea (hectares) Tea Rubber Coconuts Paddy Sugar cane 192,730 162,098 442,288 915,000 24,862 Percentage of total agricultural land 9.1 7.6 20.8 43.1 1.2 8.1

Other field crops (except fruit 173,288 and vegetables, cereals and groundnuts) Fruit and vegetables
(As per economy survey: Sri Lanka)

213,952

10.1

The above-shown graph reveals the whole countrys sector wise agricultural land expansion. The lack of labor mobility is another constraint faced by the tea sector.

Areas of tea cultivation in Sri Lanka Category Height above sea Districts level (meters) High-grown Above 1,200 Nuwara Badulla Mid-grown 600 - 1,200 Kandy, Ratnapura Low-grown Up to 600 Galle, Matara 79,836 42.25 56,863 30.00 Eliya, 52,272 27.66 Area (ha.) Percentage total of

Source: Tea Lands Survey, 1994-1995, by the Tea Commissioners Division of the Sri Lanka Tea Board

Sri Lankan tea is reputed to be of high quality and is one of the cleanest teas on the world markets. Analysis shows that residue levels of pesticides, weedicides etc. are insignificant. Countries such as Germany impose strict standards and the quality of Sri Lankan teas is within such standards. The most important feature of that policy was an export-led growth strategy aimed at promoting and sustaining rapid economic growth. Since then, successive governments have been firmly committed to that policy and have recognized the private sector as the engine of growth for rapid and sustainable economic development. Consequent to that policy, in 1992 the government decided on a programmed for restructuring the tea industry. Initially, the management of a majority of the State-owned plantations was handed over to private management companies on five-year contracts. As the management companies did not have a stake in the ownership, and as the leases were short term, there was no incentive for capital investment. In 1995, the government took the courageous decision to privatize State-owned regional plantation companies on a long-term lease basis (50 years) through the sale of 51 per cent ownership of the companies. Several regional plantation companies were privatized in 1996 and the remaining companies were to be privatized during 1997. Accordingly, Tea sectors will deal with four broad issues relevant to the import sector in Sri Lanka, viz.

the positioning of imports in the Sri Lankan economy, imports as a value added to the Sri Lankan economy, imports as a revenue earner to the economy, and lastly, imports as a growth facilitator in the economy

Import and Export details and its participation in GDP Imports (of goods) roughly amount to US$ 12 billion Exports (of goods) amount to US$ 8 billion Imports amounting to 30% of GDP Exports amounting to 20% of GDP Exports of goods finances 63% of the imports of goods

If we add remittances which amount to approximately US$ 3 billion or 7.5% of GDP, then 92% of the goods import bill is financed by goods exports and remittances. Thus, the country is in a position to support its import (goods) flows as long as the foreign reserves are in a healthy position. In any country in the early stages of development this is what we observe, an import-intensive growth. In Sri Lanka, the import composition statistics further provides evidence of this. Consumer imports amounted to 50% of overall imports at the time of Independence. Today, they amount to only 19% of overall imports. On the other hand, intermediate goods used for industries and services that accounted only for 11% of overall imports at the time of Independence, have doubled its share to 22% of overall imports today, clearly indicating that the input of imports in Sri Lankan production has increased. Sometimes, when there is a call for depreciation of currency by exporters there is also the concern of the impact on the importintensive exports and import-intensive services and thus the overall growth trajectory, as imports will become more expensive.

References
http://www.dfat.gov.au/geo/sri_lanka/sri_lanka_country_brief.html http://infolanka.asia/opinion/sri-lanka/introduction-of-tea-to-sri-lanka http://www.wikipedia.com/tea%20industry/Politics_of_Sri_Lanka.htm
http://www.dfat.gov.au/geo/sri_lanka/sri_lanka_country_brief.htm http://www.srilankalaw.com/Practice.htm http://lankalegal.com/legal_system.htm http://www.icj.org/IMG/SriLanka-BriefingPaper-Mar09-FINAL.pdf

http://www.eb.com:180/cgi-bin/g?DocF=macro/5006/0/15.html
http://en.wikipedia.org/wiki/Sri_Lankan_local_government_elections,_2011 http://www.everyculture.com/Sa-Th/Sri-Lanka.html