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by Somachandre Wijesuriya and Dr. Lionel Weerakoon

Southern Province was the locality for two armed youth uprisings against the state at the cost of thousands of young lives.

The deep felt causes of such human action are basically economic. Much government and foreign assistance poured into the province to ameliorate the situation. In spite of that the region lags behind the Western Region in economic parameters. Financial assistance in the form of bank loans was given to the small and medium sector under IRDP initiatives. Yet, only 3% of the entrepreneurs that received assistance for the past 20 years remain in business. What are the reasons?

These writers are of the opinion that all initiatives on sustainable development of humans are unproductive unless such projects have developed linkages to local and international markets that would generate incomes and employment.

The failure of previous programs was exactly on this aspect. Linkages to markets are not possible without marketing strategies.

Asian Development Bank is currently dispersing US $ 15 million in the Southern Province under an agriculture based program of alleviating rural poverty. Developing entrepreneurial abilities of Southern Province Small and Medium Scale businesses is the objective.

The administrative arm of this project is the Project Office of the Southern Province Rural Economic Advancement Project (SPREAP).

The project commenced with the development of an Operational Plan and this was the guidelines for the experts. The Marketing Expert (ME) and the Agribusiness Expert (AE) were assigned jointly to develop Brief Business Profiles and intervene in the development of marketing and agribusiness of the province.

The two experts (the writers) started with a situational analysis and developed 10 Brief Business Profiles.

The analysis yielded facts regarding the impact of open economic policies and globalization process on Southern Region Development. The region still remains basically an agricultural locale with export and domestic crops being predominant. The impact of globalization was such crops like chillies once grown well in Hambantota, Embilipitiya areas faced competition from imported chillies resulting in the acreage being diminished.

The cinnamon industry faces the threat of extinction in 2004.The wastage of fruits and vegetables is above 40% due to post harvest problems and this sector is completely overwhelmed by imported fruits comprising apples, grapes etc.

Monocropping is no longer profitable. Only 25% of coconut lands are being used with 75 % left fallow due to lack of knowledge in scientific crop farming.

These weaknesses also are opportunities to implement a sectoral strategy in agri marketing. The competitiveness of the cinnamon industry is a matter that is taking the attention of The Competitive Initiative (TCI) established under the aegis of the government. The organization has worked out a strategy under the guidance of Professor Michael Porter's competitive theoretical models. This takes a holistic view of the industry and strategies take into consideration the establishment of an anchor firm to promote cinnamon in new markets in EU and Northern America.

The strategy developed by the two experts evolved around building a value chain to reach markets. The value chain is farmer-Extension Officer-Processing Quality-Market. The chain is built with the participation of stakeholders comprising farmer/grower, government extension officials, processors and finally packers, brokers, distributors in the marketing process.

In this value chain the two experts identified weak areas for intervention in a number of sectors. In the fruit sector non availability of quantities and quality demanded by exporters is a constraint. In order to arrest this situation a brief profile titled "Business Proposal on Home Garden Development Project for Supply of Fruits for Export" was developed. This profile developed the concept of clustering farmers in order to scientifically manage fruit trees in home gardens and obtain a higher yield using best farming practices.

Cinnamon is a major earner of foreign exchange and the main constraint is productivity which is 470 kg/ha. It can be increased to 1000 kg/ha with best crop practices.

These include soil and water conservation, filling vacancies, tree management, applying recommended amounts of fertilizer, weed control and removal of shade. The second weakness in the value chain is processing. Processing centres should be up-graded to ISO and Hazard Analysis and Critical Control Points (HACCP) for the peeling process. Cinnamon is a food item and in most cases is consumed without further processing. Therefore, unless these quality measurements are in place by year 2004 (next year) the country will be edged out by competitive factors. This is an urgency which has been recognized by the Competitive Initiative (TCI). The strategies worked out by TCI will not work without ground support.

The sectoral marketing strategy identified major and minor agri-sectors which need urgent attention.

In Galle District the major sector is Cinnamon while in Matara it is Fruits and Vegetables. In Hambantota, Cashew cultivation is important. In the case of minor sectors mushrooms are common to Galle and Matara districts while Grapes are valid in Hambantota. Vegetables were identified as another minor sector in Borala, Denepitiya and Weligama triangle in Matara district.

Floriculture too is a minor sector which needs innovative marketing support in Galle and Matara districts. In building the value chain the same principle is recommended; i.e. identifying and removing constraints on each stage of the value chain.

For instance, the present production of cashew is 600 kg of raw nuts /ha whereas it can be improved to 1000 kilos/ha. Removal of this constraint has to be coupled with the processing industry which needs inputs of technology. The farmers and processors have to be organized in clusters for this purpose. The world demand for cashews is short of 300,000 mt.

Developing the marketing value chain is normally limited to a single organization in which it is called the Company Value Chain. Each department carries out value-creating activities to design, produce, market, deliver and support the firm's products. Marketers alone cannot deliver superior customer value and satisfaction. The same value chain can be built sectoraly with the stakeholders of a regional industry.

This paper identifies this observable fact. The concept of Sectoral Value Chain can be applied regionally or countrywise to add value to its products and be competitive in a Global Product Life Cycle. The process will lead to the development of agriculture and agri-based industries in Southern Province. Yet, if even one link in the chain is unattended the objectives will not be realized. The totality of the concept cannot be ignored. SPREAP lacks strategic vision in its operation plan to recognize the important role of Total Quality Marketing in an environment of global concern for quality.

Marketing throws much light on allocation of resources for sustainable development. The country imports more than 3000 m/t of grapes annually. A sectoral approach will ascertain whether import substitution is possible under best crop management practices. Funding of such crops can be taken on a rated priority basis.

Without a marketing analysis funding is on ad hoc basis. In fact, although the ADB fund is agriculture oriented with the aim of alleviating rural poverty, industries like bakeries and tyre moulding shops are eligible for assistance. The sectoral approach minimizes this because market analysis guides investments.

Hitherto, sustainable development has been a series of ad-hoc measures without any consideration of the market forces. The impact of such attempts has been limited on the economic development process. This paper is an attempt to share our experience with organizations interested in bringing a planned marketing oriented program to future attempts.

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