Boost for competitiveness of cinnamon value chain in Sri Lanka

Sri Lanka’s exports will not remain passive in the face of global downturn, vows Minister of Industry and Commerce Rishard Bathiudeen.

“We are not going to remain passive at a time when our export markets around the world turn more challenging due to the decline in leading segments and the downward revision of GDP projections for India and China. We are under no illusions that our exports will continue to be easy as the markets become increasingly difficult. In fact, we are taking active steps to safeguard our exports,” Bathiudeen announced yesterday.

He was addressing the launch event of the UNIDO-backed and Spice Council-promoted $ 1.53 m national project ‘Enhancing the Compliance and Productive Capacities and Competitiveness of the Cinnamon Value Chains in Sri Lanka’ on 23 October at the Galle Face Hotel, Colombo.

The session was also attended by Economic Development Minister Basil Rajapaksa, Deputy Minister of the Ministry of Industry and Commerce Jayaratne Herath, Economic Affairs Officer of STDF/ WTO Dr. Kenza Le Mentac and Representative and Regional Director UNIDO Ayumi Fujino.

During the event, the three-year-long project agreement of $ 1.53 m was signed between Ministry of Industry and Commerce Secretary Anura Siriwardene, UNIDO Representative and Regional Director Ayumi Fujino, and Spice Council Chairman Sarada de Silva.

Minister Bathiudeen also revealed that in 2011, Sri Lanka had successfully opened six new markets for Pure Ceylon Cinnamon, thereby increasing the total number of Ceylon Cinnamon importing destinations to 40.  

Detailing the immediate steps taken to safeguard Sri Lanka’s exports, Minister Bathiudeen said: “For the first time I am pleased to reveal that I have been personally meeting and consulting many top chamber members in the country with regard to our future exports strategies. I am now pleased to announce that as a result of these consultations during the last few months, we are now on a new initiative of setting up a Consultative Committee on Market Diversification representing the interests of a wider cross section of the economy. Also for the first time we held direct consultations with our leading exporters last September to find solutions to their issues and received very good responses. We also revived our exporters’ forum and the third forum in the series was successfully concluded in July. But more importantly, as part of moving from simple exports to more complex products, we are looking at actively joining regional production networks so that our exports become more market driven. To this end, I am pleased to inform you that the government’s efforts to further open both Indian and Chinese markets, which are seen as difficult segments, have become successful.”

Minister Bathiudeen also announced that Sri Lanka had opened six new markets for its global exports monopoly – Pure Ceylon Cinnamon.

“As a result of EDB’s market diversification efforts, in 2011 we successfully added six new countries to the list of Pure Ceylon cinnamon destinations. The new destinations are Guam, Monaco, the Russian federation, Mongolia, Brazil, and Georgia. What is interesting about the newcomer Guam is that it immediately entered the 11nth rank, among importers of Pure Ceylon Cinnamon in 2011.”

Bathiudeen added: “Sri Lanka contributes to over 70 per cent of world’s production of real cinnamon, and our own Pure Ceylon Cinnamon brand is meeting more than 80 per cent of the real cinnamon demand in global markets. Our annual production is approximately 16,000 metric tons. In 2011 we exported cinnamon to the value of $ 121 m and this volume was absorbed by no less than 40 countries. Mexico received 51% of our cinnamon becoming the lead buyer by purchasing $ 62 m of Pure Ceylon Cinnamon, followed by the US, with 12 per cent. In fact, Mexico has been the number one buyer of our cinnamon for some time. We have realised that the cheap substitute called cassia has become a growing threat to our cinnamon in international markets.

“I believe that today’s initiative, which is valued at US$ 1.5 million, will be a right step towards securing our cinnamon status in the global marketplace. Since upgrading the quality of our human resources, it is an essential step to enhance our value chains and achieve better cinnamon exports. It is essential that we secure our dominant position, in Sri Lanka’s cinnamon exports and even enhance other exports too, if we are to achieve $ 15 billion by 2015. I am given to understand that the value of today’s initiative is US$ 1.5 million. I am thankful to the World Trade Organisation and the Treasury for meeting almost US$ 1 million in funding, the rest being funded by UNIDO. I wish to commend the Spice Council for its efforts in this initiative. More importantly, I wish to extend my Ministry’s fullest support to this initiative.”

Spice Council Chairman Sarada de Silva said: “Over 700,000 farmers are involved in our spice industry. As a result of cinnamon price increase, around 350,000 involved in the sector have benefitted. We support the Government’s cess on bulk exports since we want more value addition taking place. It is the Spice Council that proposed this cess.”

UNIDO Representative and Regional Director Ayumi Fujino addressing the event expressed her surprise about Sri Lanka’s cinnamon strength. “I was not aware that Sri Lanka has 90% share of international markets for true cinnamon. Under our trade capacity building thematic, UNIDO is pleased to assist Sri Lanka Cinnamon value chain initiative.

However Fujino warned: “Pure Ceylon Cinnamon is threatened by possible loss of international market share by the cheap substitute cassia. This is a challenge that Sri Lanka has to take on.”