NDB approves Rs. 2.5 bn to strengthen Plantation sector
With a rich heritage of over 150 years Sri Lanka's plantation sector
still maintains its grandeur as an integral part of the country's socio
economic composition, with its notable contribution of 2.7% (tea, rubber
and coconut) to the national GDP and also as one among the largest
employers.
The national production of both tea and rubber is contributed by
Regional Plantations companies (RPC's) and small holders with greater
contribution coming from the latter.
Sri Lankan tea, considered among the best in the world since command
much higher prices than its global competitors. Sri Lanka presently
produces around 326 mn kg of tea annually.
While still being considered as an important contributor towards the
world's tea production and exports; Sri Lanka is required to sustain a
few challenges which include raising long term financing required by the
industry for its capital expenditure.
Rubber industry, introduced to Sri Lanka in 1876 has since been an
integral part of country's export agriculture. At present, the country
ranks among the world's top ten largest producers and one of the largest
exporters of natural rubber.
Sri Lanka Rubber Industry consists of two main sectors of raw rubber
and high value new product innovations in finished rubber goods.
Presently, Sri Lanka produces about 152 mn kg of natural rubber
annually.
Plantation sector by nature requires heavy capital investments
especially in the area of field development, which needs to be
undertaken on a regular basis for improvement of production and yields.
NDB's role in the Plantations sector
Thus from its inception, as a development financier, NDB has played a
significant role in funding the plantations sector of Sri Lanka. Sri
Lanka's endeavor to improve the plantations sector has been facilitated
through dedicated credit lines from multilateral agencies such as Asian
Development Bank (ADB).
Two such major credit lines were made available to Sri Lanka by ADB,
i.e Plantations Sector Reform Project (PSRP) during the late 1990's for
the purpose of reforming the plantation sector and then secondly
Plantation Sector Development Project (PDP) as a booster to the sector
which was reformed some time ago. NDB as a premier development financier
has played a noteworthy role under these schemes.
Plantations Sector Reform Project (PSRP)
Along with the plantations sector being reformed and management and
ownership of the estates being transferred to the private sector, the
private sector was faced with the challenge of sourcing long term
financing required for the development of estates taken over. ADB
extended its support by way of a long term financing of around USD 40 mn
to the sector through the government, where Central Bank of Sri Lanka
performed as the Apex Body.
NDB: financing and building capacity in sector reforms
In this backdrop, NDB has been playing multiple pivotal roles. Most
importantly, it played the role of a financial partner to the private
sector, which was at that time embarking on a nationally important
project of reviving the plantations sector.
This was done by providing long tenure loans required for the field
development activities and factory modernization activities which was of
dire need at that time.
The total tenure of these loans extended up to 15 years inclusive of
a long grace period up to 5 years. Total facilities approved by NDB
under this credit line amounted to approximately Rs 2.5 bn.
Plantations Sector Development Project (PDP)
Once reformed in 1990's the sector was provided with a further
financing booster through PDP in early 2000's which was again made
available by ADB. The total value of the credit line was around Rs. 2.5
bn and NDB was proud to be ranked as the lead Participating Credit
Institution (PCI) among 7 PCI's with approximately Rs 1.2 bn worth of
loans being granted. These loans also carried long tenures extending up
to 15 years inclusive of similar long grace periods.
Therefore, NDB has been providing much needed financing assistance
for the development of these national assets, which are significant in
terms of earning foreign exchange to the country as well as in terms of
providing employment.
NDB's lending with its own funding
Having identified the need for long term funding and the working
capital financing required for the sector, NDB has continuously
supported the sector by way of both long term loans and securitization
facilities even after the above said credit lines were fully exhausted
(in the absence of concessionary funding from multilateral funding
agencies).
Total credit facilities approved amounting to approximately Rs 2.5 bn
in 2012 to the plantation and agri-business sector is the best
credential for its continued support even in the absence of credit
lines.
NDB not only partnered with its plantation sector customers in
developing fields, factory modernization and working capital funding,
but also in their strategic investments overseas. |