By: Staff Writer
September 28, Colombo (LNW): Sri Lanka’s next major export opportunity may not require discovering entirely new industries. It may instead depend on transforming what the country already produces—from agricultural commodities into sophisticated, processed and globally competitive products.
A recent Institute of Policy Studies of Sri Lanka study points directly towards this possibility, revealing that the wider agrifood sector contributes 24.5% of GDP and accounts for 42% of employment. Primary agriculture alone contributes 8.3% of GDP.
The figures indicate that agriculture’s economic significance extends far beyond farms. The sector feeds manufacturing and generates activity across transportation, storage, packaging, wholesale, and retail and export industries.
The greatest untapped opportunity appears to lie in the transition from farming to processing.
According to the IPS study, every US$1 of final demand in food and beverage manufacturing generates US$1.85 in total economic output. For primary agriculture, the corresponding figure is US$1.20.
The difference is crucial. Processing creates additional layers of economic activity and can allow Sri Lanka to earn more from the same underlying agricultural resources.
This is particularly important for an economy seeking foreign exchange and higher-productivity employment.
The study identifies six promising export clusters—cinnamon, spices such as pepper and vanilla, coconut products, processed fruits and vegetables, seafood and tea. Several already demonstrate strong market potential.
Coconut-related exports surpassed US$1 billion in 2025. Fruit and vegetable processing exports increased 302% during the past decade, while seafood exports have benefited from preferential access to international markets under GSP+.
But the numbers also expose a fundamental contradiction. Sri Lanka has internationally recognised agricultural products, yet much of the potential value remains outside the country because processing, branding, technology and product development have not expanded sufficiently.
Dr. Asanka Wijesinghe, the study’s author, highlights the importance of strengthening the connection between agriculture and industry. Agriculture supplies 38% of food-processing inputs, while food processing obtains 19% of its inputs from domestic agriculture.
That relationship needs to become deeper and more predictable.
Processors require consistent quantities, quality standards and reliable delivery. Farmers, meanwhile, need access to technology, finance, research and assured markets. Without stronger contractual and institutional links, both sides face uncertainty.
The IPS study identifies complex tariffs, policy instability, inadequate agricultural research and development and insufficient support for value-added production as constraints.
These are not minor administrative issues. They directly affect investment decisions. An investor considering a processing plant must calculate whether raw materials will be available, whether tariffs will remain predictable, whether export markets can be accessed and whether infrastructure can support competitive production.
Sri Lanka therefore needs to move beyond simply promoting agricultural exports. The larger challenge is building an integrated agrifood industrial strategy.
That means encouraging processing close to production areas, investing in research and technology, improving quality standards, strengthening farmer-industry partnerships and creating predictable trade and investment policies.
The export prize is potentially significant. But unless the country can convert agricultural strength into industrial value, much of that opportunity will continue to remain on the farm rather than in the export market.
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