Smart Information Systems To Improve Quality Of Food Products
Smart Information Systems To Improve Quality Of Food Products
Business Model Description
Invest in or provide project financing to: Develop a smart information system to improve information availability of key conformity assessment services focused on agriculture in Sri Lanka.
This will include investment to promote existing training programmes related to quality and technical aspects of export regulations (e.g. health, safety, environment, food safety, phytosanitaryband animal quarantine) among public and private sector and strengthen existing vocational training institutes by implementing a training of trainers programme.
Investment in businesses offering capacity building and information services relevant to market needs, to provide access to private standards (e.g. organic farming, kosher, halal, Good Agricultural Practices (GAP) and Good Manufacturing Practices (GMP). Examples of companies Active in this IOA space:
SGS Lanka (Pvt) Limited: Offers a complete range of services for exporters, importers, manufacturers and governments covering testing related to chemical, microbiology, textile and toy labs undertaken by a workforce of more than 200 qualified professionals. SGS Lanka is ISO 9001:2015 certified and laboratories are accredited to ISO 17025:2017.
Sri Lanka Standards institute (SLSI) is the the national standards body of Sri Lanka formulates standards that are adopted by the authorities which was established in 1984 (Act No. 6 of 1984). It offers a variety of services that covers product and system certifications, quality assurance etc. SLSI is the designated WTO/TBT National Enquiry Point on Standards and Technical Regulations.
Expected Impact
Improves quality and safety of agri based products leading to improvement in domestic food security and an increase in the potential for value added agricultural exports
How is this information gathered?
Investment opportunities with potential to contribute to sustainable development are based on country-level SDG Investor Maps.
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Country & Regions
- Sri Lanka: Western Province
- Sri Lanka: Southern Province
- Sri Lanka: North Western Province
- Sri Lanka: Northern Province
Sector Classification
Food and Beverage
Development need
In 2021, Agriculture was 7.3% of GDP, comprised 21.8% of Goods Exports and employed 27% of the Labor Force . With the ongoing economic crisis, livelihoods have been under threat and as a result caused a food security crisis linked to both availability and quality of food products, leading to malnutrition concerns that could reverse gains seen in development indicators (1),(2),(3),(4).
Policy priority
National Agriculture policy recognizes creation of Sustainable Food Security with improved food Quality as a Main Segment of the policy framework (5). National Nutrition Policy (2010) focuses on ensuring food and nutrition security for all citizens (21). Food Production National Program 2016–2018 focuses on crop production and productivity.
Gender inequalities and marginalization issues
Low-income households have food security concerns with high food prices and drop in agri production. UNICEF’s April 2022 national survey (6) showed that 70% of households have reduced their food consumption. Due to the ongoing economic crisis in 2022, focus from quality of foods has shifted leading to access issues including compromised export capacities in the sector.
Investment opportunities introduction
Sri Lanka requires numerous interventions to improve agricultural productivity and output. One such investment is the impact that a National Quality Infrastructure (NQI) can have on the agricultural sector. Based on global analyses by World Bank, NQI-related activities in an economy account for an estimated 3 % to 16 % of GDP and affect more than 75 % of GDP.
Key bottlenecks introduction
Lack of accredited quality infrastructure service providers, delay in adapting to climate-sensitive practices, lack of consistent policy on agriculture related quality infrastructure and relevant thresholds that can facilitate business access to global value chains are some key bottlenecks that need to be addressed.
Food and Agriculture
Development need
Sri Lanka’s National Quality Infrastructure (NQI) has progressed over many years establishing the key institutional framework required to operate its main functions (7). World bank NQI Gap Assessment states that NQI related activities in an economy account for 3%–16% of GDP and affect more than 75% of GDP (WB 2016, p.47)(8)
Policy priority
Revised National Quality Policy (9) of Sri Lanka (2016) recognizes the importance of aligning with the needs of Sri Lanka’s evolving economy to serve as the key government instrument for establishing and overseeing the NQI strategy of Sri Lanka.
Gender inequalities and marginalization issues
Disruption to international food trade due to the pandemic and ongoing crisis is a major concern for food security in Sri Lanka. Sri Lanka's rank in the Global Food Security Index (GFSI) has declined from 66 (2019) to 77 in 2021. Vulnerable economic sectors such as agriculture needs more focus to ensure food security and food quality aspects have to be kept in check to minimize unhealthy food choices compelled by food insecurity.
Investment opportunities introduction
The changing economic landscape through urbanization and export market access provides an opportunity to increase number of food manufacturing and exporting establishments. Quality infrastructure plays a vital here by ensuring products offerings are environmentally sustainable and safe for consumers.
Key bottlenecks introduction
Key challenges include lack of a centralized body to overlook NQI in Sri Lanka, lack of NQI knowledge amongst private, lack of understanding amongst SMEs about the benefits of improving quality infrastructure at a firm level and demand supply gaps in testing mechanisms.
Agricultural Products
Pipeline Opportunity
Smart Information Systems To Improve Quality Of Food Products
Invest in or provide project financing to: Develop a smart information system to improve information availability of key conformity assessment services focused on agriculture in Sri Lanka.
This will include investment to promote existing training programmes related to quality and technical aspects of export regulations (e.g. health, safety, environment, food safety, phytosanitaryband animal quarantine) among public and private sector and strengthen existing vocational training institutes by implementing a training of trainers programme.
Investment in businesses offering capacity building and information services relevant to market needs, to provide access to private standards (e.g. organic farming, kosher, halal, Good Agricultural Practices (GAP) and Good Manufacturing Practices (GMP). Examples of companies Active in this IOA space:
SGS Lanka (Pvt) Limited: Offers a complete range of services for exporters, importers, manufacturers and governments covering testing related to chemical, microbiology, textile and toy labs undertaken by a workforce of more than 200 qualified professionals. SGS Lanka is ISO 9001:2015 certified and laboratories are accredited to ISO 17025:2017.
Sri Lanka Standards institute (SLSI) is the the national standards body of Sri Lanka formulates standards that are adopted by the authorities which was established in 1984 (Act No. 6 of 1984). It offers a variety of services that covers product and system certifications, quality assurance etc. SLSI is the designated WTO/TBT National Enquiry Point on Standards and Technical Regulations.
Business Case
Market Size and Environment
USD 50 million - USD 100 million
Agricultural employs 27% of the labor that will benefit from increase in exports.
The National Export Strategy for Sri Lanka (2018-2022) highlights in its NQI strategy implementation will result in an additional tax revenue equivalent to 1-3 % of the GDP with a five-year period(7).
The Public Investment Programme (PIP) 2021-2024 recognizes that the agriculture value chains face a multitude of problems including the fragmented nature of the value chains, low economic scale of production and lack of quality assurance(10).
Indicative Return
Full implementation of NQI strategy expects 62% IRR (7)
> 25%
IRR is based on the calculation of all interventions related to investment in the NQI infrastructure as compiled by UNIDO based on World Bank estimates. This is based on USD 15.5 million investment that will provide a 1-3% increase in tax revenue leading to a IRR greater than 25%.
Investment Timeframe
Medium Term (5–10 years)
The medium-term payback period is estimated based on different investment opportunities involved within the NQI strategy implementation in Sri Lanka and outlined in the Business case.
Ticket Size
< USD 500,000
Market Risks & Scale Obstacles
Business - Supply Chain Constraints
Business - Supply Chain Constraints
Impact Case
Sustainable Development Need
The development of NQI will enhance market access for Sri Lanka's exports related aspirations and ensure that post-harvest produce will fit quality standards resulting in more uptake.
Promotion of investments in this space creates a level playing field for businesses and promotes SMEs' access to global markets by creating a conducive environment for such enterprises to gain international recognition by the export of certified products at a reasonable price.
Climate change is creating unreliable harvests affecting food security and safety, requiring countries to invest in NQI to make the agriculture supply chain more resilient and efficient.
Gender & Marginalisation
Improved NQI facilitates increase in export opportunities by fulfilling country and product specific requirements for standards and there by overcoming non tariff barriers which is an impediment for SMEs and women led exports (compared to large firms) that aspire to engage in international trade.
Expected Development Outcome
Development of NQI will enhance market access of Sri Lanka exports and ensure that post harvest produce will fit quality standards resulting in more uptake.
Improved NQI ecosystem is an essential feature that can be integrated into Good Agricultural Practices (GAP) and Good Manufacturing Practices (GMP). Such developments will reverse food scarcity, malnourishment and improve income for all stakeholders such as farmers, manufacturers, exporters and the government.
By more investments going into NQI strategies and systems, impact of climate change such as harvest losses can be managed in line with green trade developments and market expectations.
Gender & Marginalisation
Improved NQI facilitates increase in export opportunities by fulfilling country and product specific requirements for standards and there by overcoming non tariff barriers which is an impediment for SMEs and women led exports (compared to large firms) that aspire to engage in international trade.
To increase income and economic opportunities for women led households, female employees and women owned/led businesses that are dependent on agri sector value chain activities.
Primary SDGs addressed
2.a.2 Total official flows (official development assistance plus other official flows) to the agriculture sector
Not Available
Not Available
12.3.1 (a) Food loss index and (b) food waste index
Not Available
Not Available
Secondary SDGs addressed
Directly impacted stakeholders
People
Gender inequality and/or marginalization
Planet
Corporates
Public sector
Indirectly impacted stakeholders
People
Gender inequality and/or marginalization
Planet
Corporates
Public sector
Outcome Risks
Outcomes would depend on the successful implementation of NQI strategy which requires both public and private sector stakeholders to work collaboratively to gain maximum impact.
More locally produced food may be exported, which can reduce the amount of food in local markets.
Capacity building measures need to follow standard procedures so the strategy can be adequately implemented in particular for smaller businesses so it is accessible and affordable to maximize uptake.
Gender inequality and/or marginalization risk: Lack of initiative to uplift the agriculture sector will deepen the regional and income disparities in the country.
Impact Risks
If targets are not achieved, exports will not gain sufficient market access to stay competitive in international trade with implications on forex earnings and revenues for stakeholders in the agri-value chain.
Lack of NQI affects farmers and manufactures accessibility to engage in GAP and GMP which undermines engagements in green trade initiatives that promotes environmental sustainability.
Lack of investment in NQI would lead to many economic and business losses, negatively impacting MSME revenues and business growth prospects.
Impact Classification
What
Improvements in quality standards in the agriculture sector with ramifications on food security, quality of agri products including farm productivity, adaptation efforts to address climate change.
Who
Households and consumers will have access to quality food at affordable prices, corporates and exporters will have better market opportunities and economic gains.
Risk
Sri Lanka faces risk of inconsistent and adhoc policy changes such as for the organic fertiliser policy. Therefore, potential policy changes may affect the scalability and commercialization.
Contribution
Increases exports in both fresh and value added forms while contributing to domestic food security through reduced wastage and enhanced safety.
How Much
According to estimates, National tax revenue will increase by adding 3 % of the GDP (increment as fiscal income)
Impact Thesis
Improves quality and safety of agri based products leading to improvement in domestic food security and an increase in the potential for value added agricultural exports
Enabling Environment
Policy Environment
National Agriculture Policy is a sectoral policy that works towards a vision for achieving a sustainable food security to achieve national prosperity. The vision for creating a socially-acceptable and sustainable food system in Sri Lanka is set to be achieved via 10 goals (5).
National Export Strategy consists of NQI strategy which outlines the plan of actions required to create a NQI ecosystem that promotes exports, improved State capacities to assess risks and enforce regulation, protect consumers and the environment and a level playing field for businesses (7)
The Public Investment Programme (2021-2024) is prepared with a medium-term perspective for estimating the amounts of investible resources that become available to the government and indicating how these will be allocated to different sectors and agencies (10).
Imports and Exports Control Act No.1 of 1969: An Act to provide for the control of the importation and exportation of goods, for the regulation of the standards of exportable goods and for matters connected to the proces (12)
National Environment Act (Amendments) Act No.56 of 1988 and Act No.53 of 2000: (The original act of 1980 has been amended) An Act to establish a Central Environmental Authority to make provision with respect to the powers, functions and duties of that Authority (13)
Financial Environment
Financial incentives: Gains and Profits from Agro processing is subjected to a lower income tax rate of 14% (15).
Enhanced depreciation allowance depending on the level investment such as investment between USD 3-100 million has a rate of 100% in all provinces except Northern Province, more than 200% if Northern Province (16)
Regulatory Environment
Directions issued under the Consumer Protection for Sri Lankan Standard (SLS) Marking Act No. 1 of 1979 (14)
Regulations under the Consumer Protection Act No 9 of 2003: An Act to make provision for the regulation of internal trade; for the protection of the consumer; for the establishment of fair trade practices (15)
The Sri Lanka Accreditation Board for Conformity Assessment is the National Accreditation Authority of Sri Lanka established under the Sri Lanka Accreditation Board for Conformity Assessment Act. No. 32 of 2005. Responsible to promote accreditation activities and provide the necessary accreditation services to facilitate conformity assessments in the provision of goods and services for domestic and export markets.
Marketplace Participants
Private Sector
Several firms related to chemical, mechanical, biologicals, calibration and other testing centres (17)
Government
Sri Lanka standards Institution (18), Sri Lanka Accreditation Board for Conformity Assessment (SLAB) (19), Department of Measurement Units, Standards and Services (MUSSD) (20), National Plant Quarantine Services (NQPS), Department of Agriculture, Animal Quarantine Office
Government
Department of Animal Production and Health (DAPH), Central Environment Authority, Food Control Administration Unit, Directorate of Environmental and Occupational Health, Ministry of Health, National Institute of Occupational Safety and Health, Sir Lanka Export Development Board (SLEDB)
Non-Profit
Chambers of Commerce
Multilaterals
The United Nations Industrial Development Organization (UNIDO), The World Bank, The European Union, International Trade Centre, Food and Agricultural Organization
Target Locations
Sri Lanka: Western Province
Sri Lanka: Southern Province
Sri Lanka: North Western Province
Sri Lanka: Northern Province
References
- (1) Department of Census and Statistics (2022). National Account 2015 Base. http://www.statistics.gov.lk/NationalAccounts/StaticalInformation/2015/Reports/Annual_A49/GDP_co_2010-2021
- (2) Central Bank of Sri Lanka (2022). Annual Report 2021.https://www.cbsl.gov.lk/sites/default/files/cbslweb_documents/publications/annual_report/2021/en/9_Chapter_05.pdf
- (3) Department of Census and Statistics (2022). Quarterly Report of the Sri Lanka Labor Force Survey - Second Quarter 2021. http://www.statistics.gov.lk/LabourForce/StaticalInformation/QuarterlyReports/2ndQuarter2021
- (4) United Nations Office for the Coordination of Humanitarian Affairs (OCHAO and The UN Resident Coordinator's Office (RCO) (2022) Sri Lanka Food Security Crisis - Humanitarian Needs and Priorities: June – Sept 2022 https://srilanka.un.org/en/185471-sri-lanka-humanitarian-needs-and-priorities-plan
- (5) The National Agriculture Policy (2021): https://www.agrimin.gov.lk/web/images/pdf/Policy/2021.03.27%20%20NAP/NAP%20Web%20Version%20-%2026%20March%202021.pdf
- (6) UNICEF: Sri Lanka Appeal Humanitarian Action for Children (2022): https://www.unicef.org/appeals/srilanka
- (7) National Export Strategy: National Quality Infrastructure (2018-2022): https://www.srilankabusiness.com/pdf/nes/sri-lanka-quality-6-web.pdf
- (8) World Bank NQI gap analysis (as highlighted in National Export Strategy: National Quality Infrastructure (2018-2022): https://documents1.worldbank.org/curated/en/551541613369354247/pdf/National-Quality-Infrastructure-Strategy-of-Sri-Lanka-2018-2022.pdf
- (9) National Quality Policy (2016): https://www.slsi.lk/images/downloads/NationalQualityPolicy-2016_compressed.pdf
- (10) The Public Investment Programme (2021-2024):https://www.npd.gov.lk/images/publications/PIP_2021_2024.pdf
- (11) Sustainable Development Council Website for SDG indicators: https://data.sdg.lk/access/2
- (12) Imports and Exports Control Act No.1 of 1969: https://www.customs.gov.lk/wp-content/uploads/2021/06/Gazette-2184.21_E.pdf
- (13) National Environmental Act Amendment (2000): http://env.gov.lk/web/images/downloads/acts/nea_amendment_no_53_of_2000.pdf
- (14) Directions issued under the Consumer Protection for Sri Lankan Standard (SLS) Marking Act No. 1 of 1979: https://www.slsi.lk/index.php?option=com_content&view=article&id=63&Itemid=267&lang=en
- (15) Consumer Protection Act No 9 of 2003: http://www.caa.gov.lk/web/images/Act/CAA_Act_E.pdf
- (16) Guide to Income Sources (page 52 - Enhanced Depreciation Allowance): http://www.ird.gov.lk/ta/publications/Acts_Income%20Tax_2017/Guide%20to%20income%20sources(Draft).pdf
- (17) SGS Lanka: https://www.sgs.lk/
- (18) Sri Lanka Standards institute: https://www.slsi.lk/index.php?option=com_content&view=article&id=36&Itemid=357&lang=en
- (19) Sri Lanka Accreditation Board for Conformity Assessment (SLAB): https://www.slab.lk/
- (20) Department of Measurement Units, Standards and Services (MUSSD): https://www.measurementsdept.gov.lk/index.php?lang=en20)