Value Addition as a Strategy of Strengthening the Food-Processing Sector in Sri Lanka; a Case Study of MDK Food Products (Pvt) Ltd.

Abstract

This study aims at identifying the means of enhancing value addition within the food-processing sector, which would be directed towards the economic development of Sri Lanka. Firstly, the study has analyzed the sector’s contribution to the economic development and its relative importance in terms of value addition, employment and labor productivity using latest available data. The growth in the above three parameters for nine industrial categories were measured and assigned to the productivity and employment quadrants based on their performances. This reveals that, out of nine industrial categories, only the food, beverage and tobacco products sector,has recorded affirmative growth in all three parameters. Unfortunately, net agriculture surplus in terms of foreign trade was rapidly deteriorated during the past 2 decades within this industrial category emphasizing the inattention at improving value addition. Thus, it is important to encourage value addition and increase the productivity level within the sector as a means of facing international competition. An in-depth case study representing the domestic food-processing industry was undertaken to ascertain the value-added initiatives in terms of two dimensions i.e. innovation and coordination, which is to be adopted at firm level. The case study reveals that by adopting value added initiatives, the firms can enhance value addition and productivity levels. In this regard, the role of the fi rm as the value generator and the role of the government as the facilitator can be highlighted.