Government Of Sri Lanka NATIONAL EXPORT STRATEGY OF
Government of Sri LankaNATIONAL EXPORT STRATEGYOFSRI LANK ASPICES AND CONCENTRATESSTRATEGY 2018-2022
The National Export Strategy (NES) of Sri Lankais an official document of the Government of Sri LankaFor any queries about the NES, please contact :Ministry of Development Strategies and International TradeAddress: Level 30, West Tower, World Trade Centre, Colombo 01.Phone : 94 (0) 112337629Phone : 94 (0)112337627E-mail : info@modsit.gov.lkSri Lanka Export Development BoardAddress: No. 42 Nawam Mawatha, Colombo-02, Sri Lanka.Phone : 94-11-230-0705 / 11Phone : 94-11-230-0715E-mail : edb@edb.gov.lkThis Spices and Concentrates Strategy was developed on the basis of the process,methodology and technical assistance of the International Trade Centre (ITC) within theframework of its Trade Development Strategy programme.ITC is the joint agency of the World Trade Organization and the United Nations. As part of theITC mandate of fostering sustainable development through increased trade opportunities, theChief Economist and Export Strategy section offers a suite of trade-related strategy solutionsto maximize the development payoffs from trade. ITC-facilitated trade development strategiesand road maps are oriented to the trade objectives of a country or region and can be tailoredto high-level economic goals, specific development targets or particular sectors.Technical support was provided by Charles Roberge, Abhilash Puljal, Ayanthi Gurusinghe,and Bodhi Wanniarachchi.Financial support was provided by the European Union, as part of the ‘European Union –Sri Lanka Trade Related Assistance : Increasing SMEs’ trade competitiveness in regional andEuropean Union markets’ project. The contents of this document can in no way be taken toreflect the views of the European Union.The views expressed herein do not reflect the official opinion of ITC. Mention of firms, products,and product brands does not imply the endorsement of ITC. This document has not beenformally edited by ITC.The International Trade CentreStreet address:Postal address:Telephone:Fax:E-mail:Internet:ITC 54-56, rue de Montbrillant 1202 Geneva, SwitzerlandITC Palais des Nations 1211 Geneva 10, Switzerland 41-22 730 0111 41-22 733 ut : Jesús Alés (www.sputnix.es)
Government of Sri LankaNATIONAL EXPORT STRATEGYOF SRI LANKA2018-2022SPICES AND CONCENTRATESSTRATEGYPhoto: (CC BY-SA 2.0) Cinnamon Vogue
Photo: (cc) pixabay
[ iii ]JOINT MESSAGE OF THE SPICEAND CONCENTRATES INDUSTRYSince ancient times, Sri Lanka has been renownedfor its spices. Known globally as the ‘spice Island’,Sri Lanka is the ninth most important exporter of spices in the world. Sri Lanka is also the largest exporterof ‘True Cinnamon’ in the world. Despite Sri Lanka’sestablished reputation as an island which has aprominent identity associated with spices, Sri Lankahas even greater aspirations to become the ‘leadingexporter of high quality, value added spices and concentrates meeting world standards’.The Sri Lankan spice sector is dominated by smallfarm holders with over 70 % of the cultivated landshaving smallholdings and home-gardens. Sri Lankaexports around 30 thousand tonnes of various kindsof spices annually. However, the spice sector has significant potential to expand its current reach and contribute to Sri Lanka’s social economic developmentby the creation of jobs and increasing export revenue.The tangible potential of the spice sector in Sri Lankahas been recognised by making it a priority sectorin the National Export Strategy. The National ExportStrategy for the Spice sector was established throughconsultations between private and public-sectorstakeholders in the industry. The overall aspiration ofthe National Export Strategy is to position Sri Lankaas a trade hub in the region driven by investment &innovation. Thus, the sector strategy for spices seeksto propel the industry to greater heights by establishing Sri Lanka as the key export destination for spicesin the region.The demand for spices globally is increasingly drivenby the health-conscious lifestyles and ethical practices, particularly among a mobile youth population.Spices demand is also created by its increased utilisation as natural preservatives in a variety of processed food products and the strengthening ofeconomies in the Asia Pacific region leading to increased disposable incomes. Organic spices are another strongly expanding segment. Lately, especiallyin the European, Middle Eastern and Asia Pacific markets, there is a growing consumer preference for certified organic and Fair-Trade spices.With Sri Lanka’s natural endowments such as soil& climatic conditions and an available infrastructurefor the growth and production of spices, Sri Lanka iswell positioned to benefit from these rapidly changingglobal trends and to cater to these demands. In orderfor Sri Lanka to increase export revenue by cateringto the current trends, Sri Lanka needs to optimise itsstrengths and reduce bottlenecks in production andsupply.The implementation of the National Export Strategyand the Plans of Action devised by the sector consultations will be crucial to drive the industry forward andto realise the immense potential of the Spice sectorin Sri Lanka. This is a much looked forward to policyproposal and it is the expectation of all stakeholders in the Spice industry in Sri Lanka to integrate therecommendations to establish Sri Lanka as a worldleader in Spices.D.A. PereraMr. Vernon AbeyratneChairmanChairmanSpice Council Spices & Allied Products Producers’and Traders’ Association ( SAPPTA )[ JOINT MESSAGE OF THE SPICE AND CONCENTRATES INDUSTRY ]
[ iv ]ACKNOWLEDGEMENTSThe Spices and Concentrates Strategy was developed as part of the NationalExport Strategy ( NES ) of Sri Lanka, under the aegis of the Ministry ofDevelopment Strategies and International Trade ( MoDSIT ) and the Sri LankaExport Development Board ( EDB ), with the financial support assistance of theEuropean Union ( EU ), as part of the ‘EU-Sri Lanka Trade Related Assistance.’The document benefited particularly from the inputs and guidance provided bythe members of this sector that steered the formulation of the sector Strategy,namely :NameDesignationInstitutionMr. D.A. PereraManaging Director, ChairmanEOAS Organics ( Pvt ) LtdSpice CouncilMr. Vernon AbeyratneChairmanSpices & Allied Products Producers’and Traders’ Association ( SAPTA )Ms. A.P.P. DisnaDirector - RegulationDepartment of Export AgricultureMr. Christopher FernandoExecutive DirectorMalwatte Valley PlantationsMr. M.I.S. JayasekeraDirector ( Standardization )Sri Lanka Standards InstitutionMr. Sarada De SilvaChairmanCinnamon Training AcademyDr. P. RanasingheSenior Deputy Director– Herbal Technology SectionIndustrial Technology InstituteMr. Viren RuberuDirectorKahawatte PlantationsProf. Achini De SilvaLecturerFaculty of Agricultural Sciences,Sabaragamuwa University of Sri LankaMr. M.Z.M. FarhadNational Sector SpecialistUNIDOEU/ITC/UNIDO Project Sri LankaMs. Malani BaddegamageDirector– Export AgricultureExport Development BoardMs. Gayani WijethilakeAssistant DirectorExport Development BoardThe full list of public and private stakeholders that contributed their precious timeto the design of this strategy are detailed in Appendix 1.[ SRI LANKA SPICES AND CONCENTRATES STRATEGY ]
[v]CONTENTSJoint Message of the Spice and Concentrates Industry iiAcknowledgements vAcronyms viiiEXECUTIVE SUMMARY 1SPICES AND CONCENTRATES – THE ELIXIR OF LIFE 5OVERVIEW OF THE GLOBAL SPICE SECTOR 7GLOBAL TRENDS IN THE S&C SECTOR AND DRIVERS FOR SRI LANKA 7TOP MARKETS FOR SPICES 10SRI LANKA – THE SPICE ISLAND 11THE VALUE CHAIN DIAGNOSTIC 17FOCUSING ON THE MOST PRESSING ISSUES 19THE WAY FORWARD 23THE VISION 23THE STRATEGIC OBJECTIVES 23THE FUTURE VALUE CHAIN 24OPPORTUNITIES FOR THE SPICES AND CONCENTRATES INDUSTRY 26MOVING TO ACTION 31IMPLEMENTATION FRAMEWORK 31PLAN OF ACTION 2018–2022 35Appendix 1 : List of participants in the public–private consultations41Appendix 2 : List of spices43Appendix 3 : Ceylon cinnamon – a gift from Sri Lanka44Appendix 4 : Spice product tree45Appendix 5 : Trade and investment support institution analysis for the S&C sector46REFERENCES 48[ CONTENTS ]
[ vi ]LIST OF FIGURESFigure 1 : Industries and product categories that use essential oil 6Figure 2 : Global spice trade for HS codes 0904 to 0910, 2012-2016 ( US ) 7Figure 3 : Top European Union spice markets’ growth ( % ) 10Figure 4 : Spice production locations in Sri Lanka 11Figure 5 : Sri Lanka – spice export profile 13Figure 6 : Current spices value chain in Sri Lanka 17Figure 7 : Strategic objectives of Sri Lanka for the S&C sector 23Figure 8 : The future value-chain of the S&C strategy 24Figure 9 : Strategic and operational objectives 32Figure 10 : Institutional framework for S&C sector development 33LIST OF TABLESTable 1 : Export value and share in Sri Lanka’s exports of focus spices 12Table 2 : Major export destinations for Sri Lankan cinnamon in 2016 14Table 3 : Major Sri Lankan pepper export destinations in 2016 14Table 4 : Major Sri Lankan clove export destinations in 2016 15Table 5 : Major Sri Lankan nutmeg export destinations in 2016 15[ SRI LANKA SPICES AND CONCENTRATES STRATEGY ]
[ vii ]ACRONYMSThe following abbreviations are GMPHSITCITIBoard of Investment of Sri LankaCompound annual growth rateCeylon Cinnamon AssociationCinnamon Trading AcademyDepartment of AgricultureDepartment of Export AgricultureSri Lanka Export Development BoardEuropean UnionFood and Agriculture Organizationof the United NationsGood agricultural practicesGeographical IndicationGlobal Information SystemGood manufacturing practicesHarmonized SystemInternational Trade CentreIndustrial Technological SIUNIDO[ ACRONYMS ]Ministry of Development Strategiesand International TradeMinistry of FinanceMinistry of Primary IndustriesMinistry of Plantation IndustriesNational Export StrategyPure Ceylon CinnamonPlan of actionResearch and developmentSpice Council of Sri LankaSpices and concentratesSpices & Allied Products Producers& Traders AssociationSri Lanka Standards InstituteUnited Nations Industrial DevelopmentOrganization
1EXECUTIVE SUMMARYSri Lanka, the ‘Spice Island,’ has always been renownedfor its spices and its extracts or concentrates. The spicesand concentrates ( S&C ) sector plays a valuable role notonly in boosting export earnings, but also in enhancingthe rural economy and social development. The S&C industry in Sri Lanka is composed of a large variety of products, ranging from bulk spice products like true cinnamonto value added essential oils. The sector is dominated bysmallholders, and over 70 % of cultivated land is smallholdings and home gardens. Sri Lanka exports around 30,000tons of various kinds of spices annually.At present, Sri Lanka is the ninth most important exporterof spices ( specifically cinnamon, pepper, cloves, cardamom and nutmeg ) in the world, with total spice exportstouching US 273 million in 2016. Sri Lanka is the largestproducer and exporter of ‘true cinnamon’ in the world.In this strategy, the following spice products are focusedupon, listed under their appropriate Harmonized System( HS ) codes from the World Customs Organization :HS chapterHS 6 digit productHS 0904 : PepperHS 090411 : Pepper of the genus Piper,neither crushed nor groundHS090412 : Pepper of the genus Piper,crushed or groundHS 0906 :Cinnamon ( Ceylon )HS090611 : Cinnamon CinnamomumzeylanicumHS090620 : Crushed or ground cinnamonand cinnamon-tree flowersHS 0907 : Cloves,whole fruit, clovesand stemsHS090710 : Cloves, whole fruit, clovesand stems, neither crushed nor groundHS 0908 : Nutmeg,mace andcardamomsHS090811 : Nutmeg, neither crushed norgroundHS090720 : Cloves, whole fruit, clovesand stems, crushed or groundHS090812 : Nutmeg, crushed or groundHS090821 : Mace, neither crushed norgroundHS090822 : Mace, crushed or groundHS090831 : Cardamoms, neither crushednor groundhe key drivers of the global spice market have been increased demand for processed and ready-to-eat foodsand a significant rise in demand for new flavours globallyfrom a mobile, health-conscious and young population,which at the same time looks for healthy and nutrition-richfoods. The growing demand for spices is also supported bytheir increased use as natural preservatives in a variety ofprocessed food products and by the strengthening economies of countries in the Asia-Pacific region, leading to increased disposable incomes.The global spices market is growing at an annual rate ofabout 5 % ( by value ) and is projected to exceed US 10billion by 2020. The Asia-Pacific region alone is projectedto grow at an annual rate of 7 % between 2015 and 2020.This upward trend in the spice trade can be explained bythe increasing demand for spices, both by the food servicesector and by home cooks, and the growing consumer fascination with different cuisines ; the overall flavouring markethas maintained an upward trend in both volume and value.Globalization has improved the spice trade across the world.Rapid growth of online marketing campaigns and accessibility through e-commerce platforms are expected to driveindustry growth soon.However, the market is expected to change due to thestringent government regulations related to food additivesin countries such as Canada, the United Kingdom of GreatBritain and North Ireland, France, Italy and the UnitedStates of America. Several food safety organizations, suchas the United States Food and Drug Administration, haveset high standards regarding the safety of a spice intendedfor use by consumers. Consumers in the EU, United Statesand Canadian markets are paying more attention to aroma,health, flavour, hygienic packaging and product innovationrather than price. Availability of a wide variety of ready-touse spice mixes will soon be a key driver in the global spicemarket. Organic spices are another strongly expanding segment. Especially in the European, Middle Eastern and AsiaPacific markets, lately there has been a growing consumerpreference for certified organic and fair trade spices.[ Executive summary ]
2Photo: (cc) pixabayThe demand for spice-based cosmetics and medicinalproducts also is growing fast. Such products are generally more popular in Asia and specifically in South Asia. Themarket for cosmetics in India alone is US 950 million, indicating a growth of 15 % to 20 % per annum. Nutraceuticals,a relatively new and emerging category of products derivedfrom spices, is also slated to witness growth in Asia-Pacificand European markets.MARKET ORIENTATIONBased on global trends in the growing S&C sector, Sri Lankashould set the following priorities, with short-, medium- andlong-term goals. Short-term is defined as immediately to oneyear, medium-term as one to three years, and long-term isbeyond three years.Short-term goals :For the spice sector to continue to add value and intensifymarket development, public and private industry representatives identified the following as the most pressing issuesthat should be addressed rapidly : Diversify into production of spice mixes and spice-basedsauces.Medium-term goals : Limited availability of high-yielding planting stock and lowuse of associated techniques causes slow productivitygrowth and low adoption of improved varieties ; Absence of good quality packaging and labelling ; Insufficient availability of skilled and unskilled labour,which is exacerbated by limited training opportunities ; Implementation of standards and codes of conduct atproduction and processing levels ; Limited links between the public and private sectors ; Poor dissemination of trade information and limited promotion and inadequate brand promotion of spices in destination markets ; Limited use of contract farming methods between producers, processors and exporters ; Limited postharvest storage infrastructure, leading to highpostharvest losses ; Low technology and mechanization adoption ; and Traceability for organics and Fair Trade segments. Increase market penetration in existing markets by improving product quality, enhancing packaging and labelling and increasing production volumes. Diversify into new markets, alongside existing ones, withspice mixes and spice-based sauces.Long-term goals : Produce organic and Fair Trade spices and their extractsfor existing and new markets. Encourage multinational pharmaceutical companies toinvest in joint ventures with local enterprises for development of medicinal and high end food products.[ SRI LANKA SPICES AND CONCENTRATES STRATEGY ]
3THE WAY FORWARDStrategic objectivesThe S&C sector has significant potential to make socioeconomic contributions to Sri Lanka through export-led growth.To realize this potential, competitive constraints and structural deficiencies must be addressed, and identified opportunities should be leveraged. The following is a delineation ofthe proposed vision and strategic approach in this direction.The Plan of Action ( PoA ) will respond to this vision by addressing the sector’s constraints and leveraging opportunities in a comprehensive manner. To this end, specific effortswill be made to meet the following strategic objectives.All stakeholders of the S&C sector value chain in Sri Lankaagreed on the following vision statement :“ To be the leading exporter of high-quality,value added spices and concentratesmeeting world standards”Coordinating activities, monitoring progress and mobilizing resources for implementation will be critical tosuccessful achievement of these targets. As such, a public-private advisory committee for the S&C sector was established, operationalized and empowered. The S&C advisorycommittee is responsible for overall coordination, provisionof policy guidance and the monitoring of industry development against the strategic objectives.An effectively organized and supported committee canplan industry development strategically. High-level support from the Government, in collaboration with strongchampionship by the private sector, will be the real drivers to transform Sri Lanka into a global S&C destination.Strategic objective 1: Led by industrystakeholders, strengthen, integrate and simplifythe policies and governance framework relating tospices. Review and revise the existing regulations that relate to the spices andconcentrates sector. Strengthen existing and build new links, both public and private, alongthe spice value chain for increased effectiveness and coordination.Strategic objective 2: Improve production andproductivity of Sri Lanka's spice sector byensuring quality control and safety compliance inaccordance with global standards. Improve access to high -yielding and quality planting material. Increase production and improve postharvest and processingtechniques through technology adaptation. Expand mapping of cultivation areas and strengthen extension services. Improve application of standards along the spice value chain, includingimprovement in the capacities of laboratories to test productcomposition and for pesticide residue.Strategic objective 3: Become globally recognizedas an innovative player in the value added spicemarket segment. Strengthen value addition through research and development (R&D) andproduct development. Improve market intelligence (information and data collection anddissemination), develop spice sector brand recognition and inceraseoutreach on geographic indicator (GI) and intellectual property issues.[ Executive summary ]
5SPICES AND CONCENTRATES– THE ELIXIR OF LIFESpices have been globally traded since ancient times, giventheir importance in seasoning foods and serving as medicines. Spice production is dominated by a few countries,making spices one of the most profitable commoditiesamong agricultural products. Spices are ‘used for flavour,colour, aro
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