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Moving up the processing ladder in primary product exports: Sri Lanka's “value‐added” tea industry

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  • Gaminda Ganewatta
  • Robert Waschik
  • Sisira Jayasuriya
  • Geoff Edwards

Abstract

Governments in many developing countries, influenced by the experience of the East Asian newly industrialized countries, have adopted policies to enhance domestic processing of primary commodities as a tool for accelerating employment growth, export revenues, and development. Sri Lanka has traditionally exported tea in the form of bulk (commodity) teas, but “value‐added” teas such as packaged teas, tea bags, etc., have expanded in recent years. This article examines factors affecting the processing of value‐added tea products in Sri Lanka by modeling export supply behavior. Estimates of the long‐run relationship and short‐run dynamics of export supply are presented and discussed. The price of value‐added tea relative to bulk tea, and industry capacity, are identified as the main determinants of export supply, while exchange rate changes have no discernible effect. The policy implications of the analysis for enhancing further expansion of such value‐added teas are presented. These are of interest for both policy makers and development analysts. In particular, the reasons that undermine the effectiveness of exchange rate policy as an instrument to stimulate value addition of primary products have much relevance for similar developing countries.

Suggested Citation

  • Gaminda Ganewatta & Robert Waschik & Sisira Jayasuriya & Geoff Edwards, 2005. "Moving up the processing ladder in primary product exports: Sri Lanka's “value‐added” tea industry," Agricultural Economics, International Association of Agricultural Economists, vol. 33(3), pages 341-350, November.
    • Handle: RePEc:bla:agecon:v:33:y:2005:i:3:p:341-350
    DOI: 10.1111/j.1574-0864.2005.00073.x
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    Cited by:

    1. Deepananda Herath & Alfons Weersink, 2007. "Peasants and plantations in the Sri Lankan tea sector: causes of the change in their relative viability ," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 51(1), pages 73-89, March.
    2. R. P. Dayani Gunathilaka & James C. R. Smart & Christopher M. Fleming, 2017. "The impact of changing climate on perennial crops: the case of tea production in Sri Lanka," Climatic Change, Springer, vol. 140(3), pages 577-592, February.
    3. Rathnayake, Chinthani & Griffith, Garry & Sinnett, Alexandria & Malcolm, Bill & Farquharson, Bob, 2023. "Developing an Equilibrium Displacement Model of the Sri Lankan Tea Industry," Australasian Agribusiness Review, University of Melbourne, Department of Agriculture and Food Systems, vol. 31(2), April.
    4. M. W. A. De Silva & N. S. Cooray, 2022. "The Export Performance of the Sri Lankan Tea: An Econometric Analysis," International Journal of Research and Innovation in Social Science, International Journal of Research and Innovation in Social Science (IJRISS), vol. 6(4), pages 224-227, April.

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