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				3. Revitalizing Productive Sectors and the Regional Economy 3.1 Crop Agriculture 3.2 Irrigation 3.3 Fisheries 3.4 Livestock 3.5 Industries 3.6 Tourism 3.7 MSME Sector Financing 3.1 Crop Agriculture Situation Crop agriculture is one of the main means of livelihood in the Eastern Province, employing a substantial proportion of the population and generating a significant percentage of the Provincial GDP. Historically, the Province has been an important source of rice for the country and is expected to continue to play this role in an enhanced manner in the future. The Province has ample land for the production vegetables and fruits and other field crops. Following the end of hostilities in the Region, the Province is expected to expand its capacity for traditional as well as new, high value crops. Key Issues At major problems faced by the sector in the Province include: Low productivity, slow growth rate of productivity and inadequate diversification and adoption of high-value products. Non-availability of quality seed and planting material. Inefficiencies in resource utilization in the Province and inefficient agriculture system to withstand free trade policies and the effect of globalisation. A market mechanism that is too poorly developed to motivate and mobilize investment in agriculture production, processing and value addition The high risk involving production and trade, lack of capital, management, and technological skills Inadequate application of advanced technology to production and slow adoption of modern agricultural practices in production and marketing Inadequate capacity in institutions, farmer organizations etc. to suit the modern production and trading system Lack of strong agricultural research and extension system Policy Objective The overall policy objective for the development of the crop sector is to accelerate the annual growth rate of the sector in the Eastern Province to 5-8 percent during 2007-2010. This high rate of growth is required in order to be able to bring about the type structural transformation in the Province that will lead to sustainable long-term increase in productivity and per income and poverty reduction. There are three main pillars of this policy framework: Promotion of private sector investment in the efficient utilization of natural resources; Promotion of people’s empowerment and participation through appropriate reform in institutions and governance; Ensuring of the protection of the environment and public interest through suitable regulation on environmental issues and quality control. The specific goals for the crop sector are: To achieve sustainable higher level of earnings income and food security from operations in the sector; To provide an adequate diet at an affordable price to the population of the Province while selling surplus production to the rest of the country; To reduce the cost of living of the population in the Province; and To create employment opportunities. Strategies To realize its vision, the following overall strategies for the development of the crops sector will be pursued: Integrated development of the agriculture sector: The Province has the potential to produce an array of traditional as well as new crops for domestic and export markets, provided that the enabling environment is created and appropriate cropping systems are adopted. The Other Field Crops (OFCs) play an important role in improving farm income, increasing employment avenues in the rural areas and improving the nutritional status of the people. A vast potential also exists in the province to grow high value non-conventional crops with comparative advantage, for export markets and local industries. Special focus on paddy development: Paddy is of paramount importance to the Eastern Province’s economy and its people. It is also the single biggest contributor for the Province’s GDP. Developing this sector will therefore have a widespread impact on the lives of the people and the provincial economy. The Province has two out of the five top rice producing Districts in the country and accounts for around 15 percent of the nation’s total rice production. A strong focus on improving yield and productivity will make rice a strong contributor to economic development. To achieve this, the Province will focus on improving yield, increasing excess production for sale to the rest of the country and supporting development of the sector by building infrastructure, investing in research and technology development, extension and advisory services as well as providing credit facilities. Crop specialisation – Special zones will be demarcated and established for the production of fruits, nuts and other perennial crops in order to generate more income for rural households. The required inputs including the lands on lease basis and the required water for irrigation will be provided by the government. Rehabilitation and development of tree / plantation crops (coconut, cashew, palmyrah, rubber and sugar cane) – After the neglect of maintenance works over the past years, these plantation estates will be rehabilitated by providing the necessary inputs. New cultivations will also be promoted in view of increasing the production. Value addition industry will also be promoted in line with the production increase. Under this strategy, some specific considerations have been made for the plantation sector. These include: - Enhancement of coconut production and productivity by promoting new/re/under cultivation and rehabilitation of the poorly managed estates. Home gardening will also be promoted. - Revitalisation of Kantale and Hingurana sugar factories.- Increase in the extent under cashew cultivation in Eastern Province from the present extent of 2632ha to 6983 ha by 2012. - Expansion of rubber cultivation to Padiyathalawa and Maha oya areas – as an initial step, an extent of 40 ha will be cultivated as an experiment block to assess the suitability of rubber in the region. - Promotion and popularization of palmyrah cultivation – with special attention to value added palmyrah products. Agro-industrial development: The development of agro-industry will be a major vehicle of growth and redistribution. To stimulate the growth of agro-industry, it is necessary to improve the production and productivity and value addition, strengthen the marketing of agro-based products, and provide necessary infrastructure. Improved agricultural services: Emphasis will put on the ensuring the availability of agricultural services including those related to research, extension, post-harvest technologies, marketing and farm mechanisation. Food drive programmes -- A number of national food drive programmes such as Yaya demonstration, aswedumization of the abandoned paddy lands, home gardening programme will be implemented through the relevant line agencies in order to increase the food production and to safeguard the livelihoods of rural poor. Priority Programmes and Projects The main priority programmes of the agriculture crops sector include Production and productivity enhancement (for non-plantation and plantation crops) – to be promoted through increasing the cultivated area and the cropping intensity. In the paddy sector improved irrigation facilities and management techniques and the diversification of paddy fields should increase cropping intensity to about 150%. Crop diversification -- encouragement of cultivation of new crops and the adoption of cultivation practices stemming from market trends, and encouraging farmers to get involved in the commercial aspects of agriculture rather than household self-sufficiency. The promotion of home gardens, fruit crop and the perennial crop expansion will be integral aspects of crop diversification. Promotion of industrial crop and, agro-based industries – through diversification and commercialization. The approach to agro-industry development will be directed towards establishing industrial zones, providing credit lines to enable investors to establish their operations, and promoting private sector initiatives in establishing new industries. In addition, it is necessary to introduce industrial crops such as grasses, maize, soybean, groundnut, sesame, sunflower and sorghum in the low yielding areas in the Province and to accelerate the local production of raw materials for animal feed and mixes. Farm mechanisation and post-harvest technology -- Due to the labour shortage, appropriate farm mechanization will be introduced to facilitate primary farm production as well as post-harvest handling and marketing. Agricultural marketing: Access to markets to markets will be improved through the provision of improved market facilities, and the facilitating of farmers to engage in the identification, production and marketing of high value commodities. The agricultural marketing system will be strengthened through the establishment of economic centres, storages, public as well as community marketing centres, information systems and related services such as the formation of farmer and producer organizations. Agricultural research and extension systems development: Strong emphasis will be put on the renewal, revival and expansion of agricultural research stations, institutions and manpower in line with the needs of the dynamic crop sector to built up in the Eastern Province. Integrated farming systems management: This programme will cover the areas of water resource management, soil fertility improvement, promotion of Integrated Pest Management(IPM) and other aspects of integrated development of the farming system of the Eastern Province. Investment Plan for Development of the Crops Sector The Investment Plan for the development of the agriculture crops sector in the Eastern Province is as follows: Table 3.1 Investment Plan for Agriculture Sector: 2007-2010 3.2 Irrigation Situation The shortage of water for crops and the inefficient use of water are some of the major contributing factors to the situation of low production and productivity and poverty in the Eastern Province. Because of this situation, the cropping intensity in the area remains low particularly due to the underutilization of lands in both yala and maha. As such, the development of the irrigation sector is of fundamental importance in promoting economic growth in rural agro-based economy in the province. Due to the inadequate funds allocated for the operation and maintenance of these schemes and the conflict situation prevailing in this Province during the last two decades, satisfactory maintenance of irrigation and other water systems could not be carried out. This situation has been by severe damage caused by heavy floods including the Tsunami. Due to the dilapidated condition of the channel system, water losses are very high and hence resource utilization is well below the designed level. The malfunctioning of Salt Water Exclusion Schemes has caused salt water intrusion into the cultivable lands and groundwater. The farmers are facing many hardships in transporting commodities to and from their paddy fields due to the poorly maintained channel roads. Dearth of vehicles, lack of training of technical staff, lack of quarters facilities, shortage of office equipment and furniture, lack of quality control labs are the other constraints faced by the sector. Key issues The major issues that have to be addressed with regard to irrigation in the Eastern Province include: Unsatisfactory water delivery: inadequate irrigation is part of a vicious cycle of farmer dissatisfaction, low rates of fee collection, weak irrigation budgets and as a result, inadequate maintenance. This cycle needs to be broken. Dilapidated condition of the channel system: Water losses are very high due to the dilapidated condition of the channel system, and hence water utilization is well below the designed level and that causes the schemes to suffer from inadequate water. Potential threat to head works: Because of the dilapidated condition of the system, there are potential threats of failure of head-works (breach) in most of the Schemes. Land and groundwater contamination and depletion: Cultivable lands near the coastal area and groundwater are contaminated by the salt water intrusion due to the malfunctioning of Salt Water Exclusion Schemes. In places of groundwater is also becoming major issue. Unsatisfactory irrigation support services: There are two underlying problem areas that - Dearth of vehicles in the Department of Irrigation -- causes inferior quality of work due to inadequate of inspection, as well as slow progress of work due to delays in relaying instructions. In general, there is negligence of work in the remote areas and inability to accept more work due to the transport difficulties. - Shortage of furniture and equipment – this causes delays in progress of work causing delay in communication, ineffectiveness or inefficiency or both in documentation & reporting and wastage of manpower. Objectives The main objective of the Eastern Provincial Irrigation Programme is to conserve, preserve and provide all irrigation water required for the sustainable agricultural development of the Province. In line with the above objective the following specific objectives point to major development thrust areas are identified: Improved operation and maintenance – this is essential to irrigate the full extent. Restoration of the tanks to their designed levels – by undertaking urgent flood damage repair. Rehabilitation of Irrigation Schemes -- many tanks need to be rehabilitated and therefore they could be maintained by FOs. Institutional strengthening -- apart from improvements in human resources management, the Provincial agencies need vehicles and other equipments to cope with the needs in the future. Provision of accommodation -- quarters need to be given to facilitate on-call duty in all areas of the Province. Apart from the residential quarters, availability of circuit bungalows will ease inspection visits. Strategy Integrated development of irrigation systems: The policies in the irrigation sector envisage improvement to water quality and irrigation efficiency, operation and management, rehabilitation of existing canals and head works, drainage and flood protection, salt water exclusion and the development of new irrigation schemes. Improvement of operation and management functions and procedures: In the Eastern Province, the operation and management (O&M) of existing schemes is not satisfactory. Therefore, apart from the provision of funds for O&M, it is expected to vest powers and responsibilities in the users in an effective manner to resolve the issues connected with O&M. The government remains as a facilitator and regulator rather than a service provider. The Department’s scope of work will be reshaped to focus on areas such as watershed management, comprehensive river basin management and development of water resources to meet the ever increasing needs. Improved safety and attention to environmental concerns: It is a responsibility of the government to ensure the safety of irrigation schemes and to provide adequate water to stakeholders who depend on these schemes for their livelihood. As such, the existing irrigation schemes will be rehabilitated to function at their optimum operational level. In addition, the existing drainage and flood protection schemes will be rehabilitated to protect the farming community from floods. The extrusion of salt water is another priority. The challenge of water shortage for irrigation due to sharing the water with other competitive users is expected to be addressed by developing untapped water resources. Therefore, construction of new irrigation schemes to utilize untapped water is also a priority policy emphasis. Priority programme and project areas Operation and Maintenance of Irrigation, Drainage & Salt Water Exclusion Schemes In addition to providing sufficient funds for O&M, it is essential to vest powers and responsibilities in the users in order to resolve the issues connected with O&M. The state should become a facilitator and regulator rather than a service provider. Therefore, the Department's scope of work has to be reshaped to focus mainly on areas such as sustainability, watershed management and comprehensive river basin development where the Department's skill is required to develop water resources to meet the ever increasing needs. Rehabilitation & Urgent Improvements of Irrigation Schemes It is the state’s responsibility to ensure the safety of the Irrigation Schemes and to provide adequate water to the stakeholders who depend on these schemes for their livelihood. Therefore, the existing dilapidated Irrigation Schemes have to be rehabilitated to function at their optimum operational level. Rehabilitation & Urgent Improvement of Drainage & Flood Protection Schemes There is an obligation to protect the farmers from floods by maintaining the Drainage & Flood Protection Schemes. Therefore the existing dilapidated Drainage & Flood Protection Schemes have to be rehabilitated to function at their optimum operational level. Rehabilitation & Urgent Improvements of Salt Water Exclusion Schemes In order to prevent the cultivable lands and groundwater from salt water contamination due to sea water intrusion, the malfunctioning Salt Water Exclusion Schemes have to be rehabilitated. Rehabilitation & Urgent Improvements of Irrigation Roads The maintenance of Channel Roads and Scheme Access Roads has been neglected for many years due to lack of funds and most of these roads are in an impassable condition now. These roads have to be rehabilitated to relieve farmer hardships. Development of New Schemes The challenge of water shortage for irrigation due to sharing the water with other competitive sectors can be addressed by developing untapped water resources. Therefore, wherever possible, new schemes have to be constructed to utilize the untapped water resources. Building Measuring Devices & Introducing Drip, Sprinkler Irrigation Systems Another way of facing the challenge of reducing the irrigation water withdrawals from 80% to 65% without affecting the farmer's demand is by increasing the efficiency in irrigation and drainage. Building measuring devices to quantify the water issue and introducing drip irrigation and sprinkler irrigation systems to reduce water wastage will help to achieve this goal. Finding solutions for the problems connected with Groundwater The major groundwater issues are related to the fact that groundwater is essentially an unregulated resource. Therefore it is essential to appoint groundwater regulatory committees at divisional level, empowered to exercise necessary regulatory activities and take appropriate action against those who violate the regulations. Capacity Building and Institutional Strengthening of the Provincial Irrigation Department Appropriate improvements have to be incorporated into the existing mechanism to improve the capability and effectiveness of the Provincial Irrigation Department to ensure that the system would cope with the anticipated workload and deliver the goods at the desired level. Improvements should address the major issues such as dearth of vehicles, lack of training for technical staff, lack of quarters, facilities, shortage of office equipments and furniture, lack of quality control labs etc. Investment Programme A number of development initiatives in the irrigation sector have been added to develop the agriculture sector in the medium term. The Department of Irrigation has undertaken the national level development priorities while the Provincial Irrigation Department and the Department of Agrarian Services are responsible for the provincial level initiatives. The number of schemes identified by the national and the provincial administration and the Department of Agrarian Services are given in Table 3.2. Table 3.2 Irrigation Schemes and the Irrigable Area under each Scheme by Districts The NEIAP -11 programme funded by the World Bank and the PEACE programme funded by the JBIC are also aimed at irrigation development in the Eastern Province and are executed by the national as well as the provincial Irrigation Departments. The NEIAP-11 is mainly focused on village rehabilitation and development, rehabilitation and improvement of selected major irrigation schemes and capacity building of farmers and implementation agencies. It has undertaken 3 major projects in three districts namely (a) Allai scheme in Trincomalee (b) Rugam scheme at Batticaloa and the (c) Karavahu scheme in the Ampara District. The PEACE programme is aimed mainly at income improvement of the rural community in the north and east through agricultural development in the Northern and Eastern Provinces, particularly in the Trincomalee District in the Eastern Province. Under PEACE, rehabilitation of Kurangupanchankulam scheme, Puluganawa tank, and the Boroppola tank will be given priority. The Unichchai tank will be undertaken with the ADB funds. In addition Gal-oya river diversion and the development of Janaranjana wewa are also being implemented under SIRUP. Apart from this, several mega projects have been identified by the Ministry of Irrigation and Mahaweli Authority of Sri Lanka for the supply of water on a sustainable basis for agriculture. So far funding sources for these mega projects have not been identified and at present the initial works are being undertaken with domestic funds. The proposed schemes, anticipated cost (TEC), project duration and the number of beneficiary farmers are given in Table 3.3. Table 3.3 Details of the Proposed Mega Irrigation Projects in the Eastern Province (2007 – 2010) Besides the above mega interventions, two medium scale new schemes have also been identified in the Trincomalee and the Batticaloa Districts. The Per-Aru reservoir scheme in the Trincomalee District is one of them and studies have revealed that the project is feasible. Funding sources for these two projects are yet to be identified. The overall investment requirement for the irrigation sector in the Eastern Province by years from 2007 to 2010 is summarized in Table 3.4. The investment needs by both the national and the provincial governmental departments are included therein. Table 3.4 -- Investment Plan for the Irrigation Sector 3.3 Fisheries Development Situation Sea fish production in the province is currently around 35,500 tons. In recent years it has shown a strong increasing trend. Most of the growth has taken place in the Trincomalee District (currently 14,500 tons); while production in Batticaloa and Ampara Districts is lower (10,800 and 10,100 tons, respectively). With the increase in the deep sea fishing vessels, an increase in fish production at around 5% per year is expected, contributing towards a 2.5% increase in GDP. Two thirds of all district production is landed at the towns and gravest of the Trincomalee District. The largest part of the catch is landed at Manmunai followed by Valachchenai in the Batticaloa District. Lagoon fish production is not usually presented as a distinct category in Sri Lankan fish production statistics, and it is not clear if the lagoon catch is included in marine fish production or in inland and aquaculture production. A long term time series for lagoon fish catch in the Batticaloa District showed a fluctuating trend. However, lagoon fish production in Ampara District shows a trend of fourfold increase over the last decade, with a slight decline in the late 1990s. Objectives The fisheries development policy is aimed at exploiting the country’s aquatic resources in a sustainable manner, while conserving the coastal environment. The diversification of production and exploitation of off shore deep sea fisheries though the introduction of modern technology and efficient fishing methods will be given priority. It is also planned to reduce pressure on coastal resources through the implementation of a fisheries management programme. Government investment will also provide appropriate infrastructure such as harbours, shore facilities and marketing facilities. The following are the specific policy objectives of the fishery sector. Specific objective include: Improvement in the nutritional status and food security of the people by increasing the national fish production Minimizing post-harvest losses and improving quality and safety of fish products to acceptable standards Increase in employment opportunities in fisheries and related industries, and improvement the socio-economic status of the fishing community Increase in foreign exchange earnings from export of fish products Conservation of the aquatic environment Strategies Investment in fish harvesting and wholesale auctioning through (a) Setting up a credit programme for purchasing fishing gears, (b) Fish stocking, (c) establishment of fishing community centres, co-operatives and the fishermen training centres. Investment in post harvest sector. This includes rehabilitation of existing and non functional ice plants, purchase of ice making machines, provision of chilling rooms and the fish transport trucks. Apart from this, establishment of two tuna processing plants and a canning factory is also envisaged. Improvements in infrastructure and input services for fisheries. This particularly envisages improvement and rehabilitation of harbour, anchorages and landing sites, development of access roads and control of beach erosion etc. Promoting investment in aquaculture by providing loans at concessionary rates for crab fattening, low cost culture systems, shrimp and finfish hatcheries, etc. Development Programmes and Projects The following have been identified as priority areas in the development of the fisheries sector. (A) Development of harbours, anchorages and landing sites (B) Development of inland fisheries and aquaculture (C) Fisheries industry and Management (D) Social development Investment Programme The Investment Plan for the Fisheries Sector in the Eastern Province is outlined below: Table 3.5: Major Programmes and Investment Requirement 2007–2010 3.4 Livestock Sector Development Situation The livestock sector represents one way of accomplishing several national goals such as employment creation, poverty reduction and eradication of malnutrition. Further, it serves as a potent medium for empowerment of women and youth. The topography and agro climatic conditions of the Eastern Province are ideal for livestock development. Suitable farmland and water are available as unutilized resources in the province and necessary manpower both skilled and unskilled is available in abundance. The following are identified as recommendations and areas of advocacy for livestock development in the Eastern Province. Improvement of rural credit facilities Ensuring equitable access to new technologies and markets Development of livestock infrastructure Development of small/medium scale livestock enterprises Optimal utilization of available resources Key Issues Loss of traditional farming knowledge Traditional farmers leaving war affected areas, to other areas and abroad, has created a knowledge vacuum, as they are not there to pass on their experience to successors in animal husbandry. Hence, there is a need to strengthen the area of training, both the trainers as well as the farmers. Loss of productive stocks Loss of high producing stock, together with their knowledgeable owners who had the expertise to maintain them, can be a serious problem in future production enhancement projects. On that account, such upgrading programmes should be carried out taking into consideration the ability of the current farmer to sustain a high producing animal. Here both knowledge and capacity are important. Further non-availability of quality breeding animal/birds also hampers the livestock development of this Province. Loss and damage of productive assets Most animals are allowed to roam around and this is the case with cattle, goats, sheep and indigenous poultry breeds, but commercial poultry other than indigenous breeds need protection. Hence, there will be a need to promote building poultry pens and housing for expected crossbred livestock. Most of the equipment needed for agriculture and livestock production has been lost due to the conflict. Disruption of transport, distribution routes and marketing systems Livestock products are easily perishable commodities, (milk meat and eggs) therefore efficient transport, storage and preservation facilities are needed in order to make this sector a viable one. Credit facilities Obtaining credit from formal sources is not easy and the farmers who lost their assets and animals need capital to restart their economic activity. Establishment of a special credit scheme to revive the livestock sector is an urgent need in this province. This scheme should have a concessionary interest rate and credit risk should be covered by insurance. Objectives National Livestock Development Policy The national policy on livestock development is to mobilize resources to enhance the livestock production by upgrading livestock animals mainly cattle, buffalo, goat, swine and poultry and to develop the livestock industry to make it increase the contribution to the national economy and increase savings of foreign exchange. The dairy sector takes priority in livestock development. Quality improvement of dairy herd will be achieved through upgrading the native herd. Poultry sector development will be encouraged through private investment and the role of the public sector will be limited to regulatory functions for animal disease management, research and quality assurance of inputs and outputs. Eastern Province Objectives The key objective of livestock sector development in the province is to strengthen the economy through increasing the productivity in the sector by transforming present subsistence levels to market based commercial production. The specific objective is to increase farm returns to livestock keepers by improving the productivity of the livestock sector, provide necessary infrastructure facilities, which are vital for the production and marketing of livestock produce, to introduce value addition to diversify the livestock sector in the province, to promote extensive management of cattle for meat and intensive management for milk production and to organize the livestock farmers into Producer Co-operatives and similar Farmer Organizations for collective marketing of farm produce and enhancement of farmer returns. Key Strategies and Interventions The main strategies and development interventions to achieve the stated objectives in line with the national livestock policy are as follows: Upgrade low productive local indigenous cattle population through artificial insemination for productivity improvement using exotic genetic material with high production potential. Provide production support at farm level to increase the supply of breeding cattle and goats to potential farmers by establishing animal breeding units, integrated model farms, new dairy farms etc. Introduce new genetic material with higher potential into the local goat population to produce highly productive commercial breeds by strengthening existing goat breeding units at the Goat farm in Uppuvelly, establishing new goat breeding units at Batticaloa and Ampara, and procuring high breed stud goats. Encourage community participation in production, value addition and marketing of livestock produce by strengthening livestock breeder cooperative societies and farmer-managed societies by providing funds, technical assistance and acknowledging their role as a major stake holder in livestock development projects implemented in the Eastern Province. Promote marketing facilities by improving existing chilling centers and establishing new chilling centers at strategic locations in all three districts in the province. Encourage private sector participation in milk processing, value addition and marketing by linking local milk collection points with national collectors ie Milco, Nestle and Kotmale Milk Company. In addition to that it is planned to establish milk processing plant in Batticaloa. Expand production capacity of Milco (pvt) Ltd by establishing a sterilized milk plant, yoghurt processing plant, ice cream plant and new ghee processing line. This will help to reduce huge cost of transportation of raw milk from abundant areas. In addition to that it will create 150 -200 direct employment opportunities for youth and experienced personnel in Eastern Province. Provide a remunerative farm gate price to livestock produce, particularly milk, to assure a reasonable income to the farmer by strengthening farmer based organizations and eliminating unhealthy practices in milk collection. This is expected to reduce the middlemen from exploiting farmers. Promote the production of feed ingredients such as maize, rice bran gingelly poonac and coconut poonac and promote the establishment of rural based animal feed resources production units. Strengthen extension services and supportive services by establishing artificial insemination circuits, bull calf rearing stations to undertake extension services such as pregnancy diagnosis, infertility treatment and bull calf rearing schemes. Furthermore establish new veterinary offices in line with the Govt. policy and appoint a Veterinary Surgeon to each Divisional Secretary division to strengthen the veterinary services at field level. Promote the liquid milk market while establishing value addition and storage facilities for milk and milk by-products. Encourage small and medium entrepreneurs, farmer societies and cooperatives with right potential to engage in processing and marketing by providing technology and financial assistance. Facilitate the role of the private sector in the poultry industry by encouraging private sector participation in the supply of breeding material, input supply and manufacture of quality, low cost poultry feed by the establishment of a small scale feed mill. Promote the establishment of commercial hatcheries(one at each district level) and supply micro incubators at the rural level to promote production of quality day old chicks at an affordable price Promote backyard poultry rearing which will encourage the transformation of subsistence traditional level poultry production into viable commercial poultry production. Facilitate the private sector investment in the production of goat breeding material by establishing private goat breeding units at village level. Promote the integration of livestock with crop cultivation to enhance productivity. Increase access to credit facilities at a concessionary interest rate. Investment Programme The Investment Programme for the Livestock Sector is outlined below. Table 3.6 Investment Programme for Livestock Development 3.5 Industries Situation The industrial sector of the Eastern Province comprises a range of large, small and medium and service oriented industries. The existence of Trincomalee natural harbour, fishery harbours, large extent of land, availability of mineral sand, forest plantations and tourism provide a favourable environment for industrial expansion. The flour mill, two cement manufacturing plants using clinker as raw material and a mineral sand processing facility are the large industries in the East utilizing the natural harbour facility. The paper manufacturing industry with a capacity of 35,000 mt per year and three garment factories in Batticaloa district are operating with limited capacity while the sugar industry at Hingurana and tile manufacturing industry are not in operation. It has been reported that 23 small industries and 6 market information centres are functioning at present throughout the Eastern Province. The Handloom Industry was a thriving Industry which provided livelihood to many in the Eastern province. The Industry which has recorded around five thousands looms in operation in 1992 is now confined to around nine hundred looms. Rice processing is one of the major current activities in the Eastern Province. At present, Eastern Province produces a significant quantity of paddy to the total paddy production in Sri Lanka. It has been reported that 200 rice mills are operating in the East contributing significant employment generation and livelihood opportunities for the region. Key Issues Marketing Facilities The non-availability of established showrooms and sale stalls have been identified as one of the major issues in the industrial sector of the Eastern Province. This has resulted in selling the products from the farm / workshop to the middlemen, who takes advantage and purchases the items at low prices. The producer or consumer does not receive the full benefit of the industrial production. Information Centre The entrepreneurs and existing industrialists in the Eastern Province are not in a position to receive the industrial information which will give them an awareness of the present industrial development trends. There is a need to develop centres to guide the entrepreneurs regarding market potential, low cost modern technology, available credit facilities, demand based skills, job opportunities, availability of basic infrastructure facilities and activities of state and private organizations. Skills Development The institutional capabilities and infrastructure facilities for promotion of technical vocational education in the Eastern Province were disrupted due to unrest and the tsunami disaster in December, 2004. It has led to the migration of good instructors and resulted in the lack of human resources and personnel to continue training programmes. Technology Transfer The food and agro-industries sector covers a wide range of industries ranging from fruit, milk, vegetable, confectionery to Palmyra, coconut products, essential medical oil, and ayurvedic drugs. The census of industry in 1982 identified 927 industries in the food, beverage, and tobacco sub sectors and they had employed about 5500 personnel. The survey held in 1997 identified about 300 industries in the above sub sector for development of this sub-sector. The availability of adequate indigenous raw material is the major advantage in developing these sub sectors. At present the main constraints on development of this sub-sector are the lack of relevant technology, necessary infrastructure facilities and trained skilled human resources. Textile Industry Lack of designing capabilities, lack of dyeing facilities, difficulty in obtaining raw material, poor conditions of the machines, lack of marketing facilities, lack of exposure to market needs, financial constraints have been revealed as major constraints in the textile industry of the Eastern province. Objectives The major policy objectives of the industries sector of the Eastern Province are: Improve the regional economy creating more employment opportunities for the local people. Encourage/ support domestic entrepreneurs while encouraging foreign investment to develop existing industries and establish new industries. Utilize natural and human resources in the East for industrial development in a sustainable manner. Improve efficiency and productivity of existing industries. Promote value addition in the food industry, agro industries, fish processing and timber industry. Increase amount of GDP contribution of the SME Sector at present of the Eastern province equal to the GDP contribution of the SME Sector at the National Level. Strategies I. Provision of infrastructure facilities to enhance industries Key infrastructure facilities such as electricity, transport, water and telecommunication are vital for the functioning of industries. Investors prefer to minimize their upfront investment cost and operational cost by locating in areas where those facilities are readily available. Immediate infrastructure needs of industries therefore have to be addressed to meet this requirement. II. Establishment of Industrial Zones and Estates Industrial Zones and estates are accordingly built to facilitate industrial development. Using public funds is the conventional practice. The proposed strategy is to encourage private investment in these areas on BOO/BOT basis with private sector participation. Public funds are also utilized with a view to accelerating regional industrial development. The investment opportunities available in the Industries sector are tourism and recreational activities, cement plants, oil storage facilities, petroleum based products, manufacture of fertilizer, port related activities/ship building and repairs, light industries and local resources based SMEs, large and small scale infrastructure developments, agriculture, agro-forestry, power generation, livestock development, ice manufacturing and cool room facilities etc. III. Market Promotion and development of cooperation among SMEs Joint R&D Work and Skill Development The development of Small and Medium Industries has been assigned to the Provincial Council under the 13th Amendment to the Constitution. The Provincial Department of Industries is responsible for this function. At present the Department of Industry in the Eastern Province is conducting a few training programmes which are inadequate. In addition, however, the Department is playing a vital role as a facilitator in filling the gap in the field of human resources development, providing physical resources, technology modernization and transfer and entrepreneurship development. Setting up marketing promotion centres is an important requirement in all districts, so that the micro and small industries can keep their products in the show rooms of sales outlets in these market promotion centres. This will enable the industrialists to sell their products at very reasonable prices so that capitalisation by the middleman will be minimized. IV. Setting up agro processing industries in the production zones Agriculture, dairy, forest based industries have a great potential in the local and export markets. Maize, gingelly, sunflower have a great export market potential while the dairy industry can provide alternative employment for local people. The availability of forest and timber resources has a great potential to develop forest industry in the region. V. Revitalization of the textile industry Reactivate unutilized looms, assistance in setting of dye houses, establishing marketing outlets, introduction of new technology, impact knowledge and skills on designing, facilitate raw material supply, exposure to market trends are the major strategies to revitalize the textile industry in the Eastern Province. VI. Provision of Concessions At present, Board of Investment provides two kinds of concessions to stimulate local and foreign investments throughout the country. Income Tax concession is a major incentive which provides ten to twenty years tax-free period until qualified industry will stabilize. Permission to import capital goods, construction material and raw material on duty free basis is the other concession. The above concessions will also be available for revival of sick companies as well as for the proposed new companies. These concessions are applicable to the Eastern province. VII. Strong Private –Public Partnership The industry sector in the Eastern Province will be driven under a private-Public partnership and expect to develop an inventive culture. This strategy will make necessary action to induce private and foreign direct investment for the provision of sufficient infrastructure facilities for the industrialists. Programmes and Projects The main programmes and projects for industrial development in the Eastern Province during 2007 – 2010 are outlined in Table 3.7. Table 3.7 Programmes and Projects for Industry Sector Investment Plan The Investment Plan for Industrial Development in the Eastern Province is outlined in Table 3.8. Table 3.8 Investment Programme for Industrial Development 3.6 Tourism Background situation The Eastern Province has a huge potential for the development of tourism. A comprehensive tourism development plan is therefore needed to exploit the tourism potential of the East in a sustainable manner and to become the foremost tourist destination in Sri Lanka. Key Issues Poor quality and slow progress of tourist infrastructure development Financial resource constraints on rapid development Haphazard development which causes user conflicts in many locations Unplanned development and underutilization of available resources Negative media reporting Underdeveloped tourism products and market Objectives Utilize the maximum tourist potential in the East for its contribution to sustained economic growth and development of the country. Develop the tourism industry in the East to serve both international and local tourists, looking beyond the current setback situation. Position the East as a leading tourist destination which offers a variety of tourist attractions and a unique experience in nature. Diversify the tourism base focusing on eco, coastal, wellness and community tourism. Enable the government and the private sector in partnership to develop tourism to its desired potential, sustaining and conserving the natural and cultural resources utilized for its activities in a responsible manner. Incorporate local knowledge and value systems into tourism development in the East. Strategies Domestic tourism development as a preamble for international tourism. Successful international tourism can only be built on a strong base and a quality operation of domestic tourism. It is therefore important to facilitate the development of domestic tourism to its fullest potential. Initiate well designed marketing and promotional tourism campaigns overseas. A comprehensive public relations and promotional campaign is essential with the active participation of the private sector, overseas tour operators, airlines operating to Sri Lanka, investor and expatriate community, diplomatic missions and other stakeholders. Setting in place a strong internet-based communications capability enabling interactivity will be given highest priority. Provide effective and comprehensive support services and facilities. Strong tourism support services and facilities such as travel and tour agencies, tour guides, tourist information centres are essential pre-requisites for effective functioning of the tourism industry. Although the Eastern Province is rich in tourist attractions, facilities in terms of signboards, information centres and guides are at sub-optimal level in tourist sites. Establishment of tourism zones/resorts. Three tourism zones will be established at Arugambay, Nilaveli and Passikudah with appropriate infrastructure facilities. Incentives will be provided to attract and facilitate local and foreign investment including known global and regional resort and hotel brands. Rehabilitate and upgrade the existing resorts along the Eastern Coast. The existing resorts along the Eastern coast will be developed with infrastructure and recreational facilities. Encourage the private sector to develop tourist facilities and services. The private sector will be encouraged to operate market-driven tourism services, while the Government plays the role of the facilitator and regulator. Introduce Wellness tourism for tourists seeking indigenous or Ayurvedic medical treatment. Sri Lanka has gained a reputation for providing high quality indigenous health and healthcare services using local herbal products. Therefore, its own traditional system in the East for such health services can expect a greater demand from the tourists. Position Trincomalee as the “Sun Rising Ocean City” on the East Coast. With its high tourism potential, Trincomalee will be developed as a prime tourist attraction with a holistic perspective and all development activities including port development, industrial development, air force and naval base activities, roads and infrastructure etc. will be integrated for shaping and reshaping the ultimate tourism product. Human Resources Development in the travel and tourism industry. It is of great importance to identify changing manpower requirements and training needs of the tourism industry in consultation with the private sector and ensure the programmes are undertaken for entry level training as well as skills upgrading by the Hotel School and its Satellite schools. Key Programmes and Projects Table 3.9 Programmes and Projects for Tourism Development Table 3.10 Investment Plan for Tourism Sector in the Eastern Province 3.7 MSME Sector Financing Situation Availability and access to bank financing as well as the ability to utilize such financing will be fundamental factors in stimulating the productive sectors such as agriculture, services and industries and the regional economy of East. There are branches of the state banks including People’s Bank and the Bank of Ceylon in various locations in the Eastern Province. Nevertheless the banking sector in the Province has not been very vibrant in terms mobilizing finance and making it available to local entrepreneurs and businesses in the area. With the return of normalcy to the area, it is important to position the financial sector to play an essential role in the development and restoration business ventures and also in the restoration of livelihoods in the Province. Therefore, in order to achieve the development objectives and targets that have been envisioned for the East, there is a need for state banks as well as private banks to become more proactively engaged in lending activities by way of granting short-term financial facilities for new investments. To address the above need for business finance in the Eastern Province, the Central bank has decided to establish the Regional Development Special Credit Scheme (RDSC) for the Eastern Province. Issues The financial sector of the Eastern Provinces faces following key challenges: Non-availability of special development credit schemes sponsored by donors or the Government to encourage the banks effective participation in disbursement of development credit. Lack of projects, programs or credit schemes that specifically target micro level investors. Complex and time consuming administrative procedures in the prevailing loan facilities in state banks. A tendency for people to utilize unorganized sources such as private lenders at a high cost which usually causes people to be heavily indebted. Objective The overall objective of establishing a Regional Development Special Credit Scheme for the Eastern province is to encourage new investments in Micro, Small and Medium Enterprises (MSME) sector and to expand existing enterprises by providing bank finance on concessionary rates. More specifically such facilities will be used to start new income generating projects and / or to expand existing ones in order to facilitate the achievement of the short term and medium term economic development targets that are stipulated in the Eastern Province Development Plan 2008-2010. Strategy The strategy for the implementation of RDSCS comprises the following elements: Allocate sufficient funds from donors and/or from the government to establish a credit fund for the operation of the proposed credit scheme. The government sponsored loan scheme is required to grant credit to income generating activities through participating financial institutions such as licensed commercial banks, licensed specialized banks and selected finance companies and leasing establishments which operate their branches in the Eastern Province Calculate the fund requirement for the credit scheme according to the new private sector investments required to achieve the regional development targets. Enhance the branch network of state banks and private sector banks in the Eastern Province that are engaged in the financing of development activities. Targeted Programmes and Projects It is expected that the projects that will be targeted through RDSCS will include: Small and Medium scale industries. Fisheries projects including multi-day boats, prawn farming and processing plants. Commercial scale perennial crop cultivation and processing. Dairy farming and other livestock projects. Tourism sector projects. Services sector. Any type of income generating activity. Tsunami affected SMEs. Investment Programme An allocation of Rs.3 billion will be made during the First Phase of RDSCS from 2008 to 2009. This amount would be sufficient to start the implementation of the Scheme. At later stages, the recoveries could be utilized to continue and expand the credit scheme. Table 3.11 – Investment Programme for MSME Financing next page Economic Infrastructure
- Introduction - Resettlement of IDPs - Productive Sectors - Economic Infrastructure - Social Infrastructure - Human Settlements - Public Institutions - Investment Plan