Financial Times

Row between state firms could lead to loss of coir grant
By Duruthu Edirimuni
Sri Lanka is on the verge of squandering an opportunity of winning a lucrative grant later this month to set up a research centre for the coir industry, due to a tug of war between two government agencies.

Common Fund for Commodities (CFC), a Food and Agricultural Organisation (FAO) affiliated fund, has warned that funding amounting to US$ 480,000 will be withdrawn if Sri Lanka does not give a positive response to implement the centre, the main focus of the new pilot mill research project.

The total project cost is US$ 760,000 and it will be used to set up an efficient coir processing and quality control system for the coir industry. This is a pioneering project since there is no other research centre for the coir industry in Sri Lanka. Approved last June by the CFC, it will help set up a laboratory, a training centre and a mill over an 18 month period.

The counterpart funding will be from a fund controlled by the Coconut Development Authority (CDA), Coconut Research Institute (CRI) and Coir Council International (CCI), the apex body for the coir industry. The coir industry stakeholders annually contribute a sum in excess of Rs 17 million to this fund. CFC has appointed Industry Technology Institute (ITI) -- which made the proposal to the CFC -- as the project-executing agency and the fund will be disbursed once the CDA signs a memorandum of understanding (MoU) with ITI making the latter the executing agency. But the CDA wants to be the executing agency for the pilot mill project and has declined to sign the MoU with ITI. CDA Chairman, Percy Wadugedara, said he feels that since the CDA is a fully-fledged government entity, it should be appointed as the project-executing agency for the project.

"All the stakeholders in the coir industry, along with the CCI and the ITI agreed that it should be granted to the CDA," he said. However, Murtaza Jafferjee, Director, CCI vehemently denied this. He said the CCI did not agree to the CDA being appointed as the project-executing agency. "In fact, the CDA has been dragging its feet for the last nine months, placing various obstacles to kill the project for reasons best know to them," he added.

ITI sources also denied that the institution had agreed to the CDA request. They said it will take a long time, approximately another year, to do a project proposal again and get it approved by the CFC. Plantations Minister Anura Priyadarshana Yapa, under whose authority the CDA functions, also wants the project-executing agency to CDA.

Jafferjee said the CFC has warned that if the agreement between the CDA and the ITI does not reach them by the end of this month the project will be offered to another competing coir producing country.

"ITI was accredited to be the project-executing agency by the CFC and CDA cannot dictate terms to the primary funding agency," he said. He pointed out that since the building will be put up on a land belonging to the CDA it will revert back to the CDA at the end of the research project. "There is nothing for the CDA to complain about," he said, adding this is an unnecessary tug of war since the country stands to gain from this project. He further cautioned that if Sri Lanka loses the project the coir industry faces a serious risk from a competing country like Vietnam who would take up the project and develop superior technology.

Jafferjee said a key obstacle facing Sri Lanka's coir industry is the absence of an effective quality control system. "Coir mills continue to use old and labour-intensive fibre extraction technologies and cleaning methods," he said.

According to a report done by The Competitiveness Programme (TCP), Sri Lanka is the single largest supplier of coir fibre to the world market. Together with India, it accounts for 90 percent of global coir exports. Although Sri Lanka has traditionally been the lead exporter of coir fibre and pith, India holds the dominant position in terms of revenue generated by the industry, given the higher value-added component of its coir exports.

Comparison of the value of coir products exported from India and Sri Lanka show that lower-value commodities like fibre and coir pith account for over half of Sri Lanka's coir exports, while more than 95 percent of India's export revenues are from value-added coir based products.

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