Cinnamon stakeholders hail Budget proposals, establishment of Cinnamon Development Authority in particular
By Prof. Jayasiri Lankage
In presenting the Budget proposals of 2016, the Finance Minister announced that Sri Lanka has the monopoly for the supply of “True Cinnamon” with over 85 percent supply share in the world market.
“The value chain of cinnamon is under many different agencies which stifles the growth of this industry. Therefore, I propose to set up a Cinnamon Development Authority with private sector participation to bring all activities in the value chain under one entity and I propose to allocate Rs.50 million for this purpose.
Further, in order to enhance the skills required for the cinnamon industry, the Cinnamon Training School (CTA) will be expanded. I propose to allocate Rs.50 million for this purpose. Given that value addition in this cinnamon industry is at a minimal level, it is proposed to allocate a sum of Rs.50 million to the National Science Foundation to fund research undertaken on cinnamon and cinnamon-related activities.”
Importance of the cinnamon industry
The present government has very correctly understood the importance of assisting the cinnamon industry. Successive governments that came to power after independence have failed to realize the fact that Ceylon cinnamon spice has been one of the most important items of export in the early evolution of trade. The cinnamon that attracted the colonial powers to the country during the 16th century, the most sought-after cinnamon, has been classified as a minor export crop and later as an export agricultural crop.
Not only that major export crops cultivated in Sri Lanka such as tea, rubber, coconut and cashew are excluded from this list of export agricultural crops, they are classified as plantation crops and placed under the purview of the Plantation Industries Ministry. Though the Export Agriculture Department in its website http://www.expoagric.lk/ has categorized cashew as an export agricultural crop (EAC), it is assigned to a separate Supplementary Plantation Crops Ministry.
“During 1975, the ratio of cinnamon to cassia in the total world export was 53:47. The ratio came down to an average of 19:81 in the 1980s and in the 1990s the ratio further came down to 13:87 of the average world export of 75,763 t. of cinnamon and cassia.” (Madan and Kannan)
Cinnamon a major source of revenue
During the early period cinnamon was collected from chenas (henas), home gardens (gewatu) and wild natural groves in the central hills of Sri Lanka. During the time of the Sinhala kings, the mainstay of state revenue had been the taxes on land and its produce. Cinnamon was the major annual land tax (kada rajakariya) or the source of revenue of the Sinhala kings. King Rajasingha I (A.D. 1581-1593) organised (Mahabadda), the Cinnamon Department, under a Chief Revenue Officer named Maha Vidane.
During the Portuguese, Dutch and British rule, they reorganised and continued the Cinnamon Department under a Maha Mudali, but placed at its head a European officer called Cinnamon Captain. British Governor Frederic North assumed the title of ‘Cinnamon Captain’ himself in 1799. This shows that much of importance was placed by foreign rulers on the cinnamon industry to enhance their trade in this commodity, which fetched a very high price in that era.
Cinnamon Development Authority
The crying need for a Cinnamon Authority has been made by all stakeholders for the last 25 years as the industry is scattered among many government institutions and ministries hampering the true potential of the growth of the industry. Cinnamon is unique from other spices and agricultural crops as it is indigenous to Sri Lanka producing more than 90 percent of the world production and the only monopoly Sri Lanka has.
On behalf of the stakeholders of the cinnamon industry, we express our gratitude to the government for allocating funds to set up a Cinnamon Development Authority with private sector participation to bring all activities in the value chain under one entity and proposing to allocate Rs.50 million for this purpose.
We believe that in order to develop any commercial ventures, the involvement of the private sector is crucial. When considering the obstacles we had to undergo in setting up the CTA this is a welcome measure on the part of the government. ‘Good actions and intensions reap good rewards.’ This authority must not be linked to any other spice like pepper as we have even less that 3 percent of the world production in pepper.
Export agricultural crops
The Export Agriculture Department is empowered by the Parliament Act No 46 of 1992 of Government of Sri Lanka for the promotion of export agricultural crops. The mission of the department is to “Develop the export agricultural crop sector for enhanced earnings of foreign exchange while ensuring improvements to farmers’ economy and safeguards to environment.”
According to the department’s website http://www.expoagric.lk/, the crops that are perennial in nature other than tea, rubber, coconut and cashew, where over 50 percent of their annual production is exported, are considered as export agricultural crops. The emphasis is paid to crops such as pepper, cinnamon, cardamom, clove, nutmeg, coffee, cocoa, citronella, lemongrass, vanilla, betel, arecanut, kitul, etc.”
Major export crops cultivated in Sri Lanka such as tea, rubber, coconut and cashew are classified as plantation crops and come under the purview of the Plantation Industries Ministry. Though the Export Agriculture Department has categorized cashew as an export agricultural crop, again it is assigned to the Supplementary Plantation Crops Ministry. The cinnamon that attracted the colonial powers to the country during the 16th century, the most sought-after spice cinnamon, is classified as a minor export crop and later as an export agricultural crop.
The very basis of classification of export agricultural crops is anomalous. Some of them are classed under plantation crops. The creation of different government departments and authorities in charge of these crops without an overall national policy has hindered the development of the spice sector. Although there are many state institutions responsible for the development of this sector, no significant growth has been achieved since independence.
Lack of policy
This shows that with the change of governments and for creation of ministries the agricultural policy of the country has been changed without any valid reasons. Whenever a different party comes into power they abandon the policy formulated by the previous government. This type of ad hoc decisions hindered the development of this sector. A number of policies have been formulated during the past by the governments when they were in power.
National policy formulation
The national policy formulation process should be widely consultative. The national policy formulation and implementation should be carried out with the representation and consultation of all the stakeholders of the spice industry comprising the private sector, public sector, professionals, industry experts and consumer representatives. This should fit into the overall agricultural policy as an integral part of the national economic development and poverty alleviation.
The policy framework for the cinnamon industry should aim at value addition, organic cinnamon, accelerate the growth of the cinnamon industry, create new employment for youth in cinnamon growing areas and secure a fair standard of living for the growers and producers and adhere to the other related national policies that have been formulated on land, environment, youth employment, international trade and commerce.
In order to resolve the myriad administrative and management problems afflicting the cinnamon industry, the government should commit itself to developing a national policy, learn from past experiences and study past successes and failures. The national policy should harmonize the different interests of all stakeholders towards a common goal in support of the sustainable development of the cinnamon industry.
Cinnamon is the leading spice in terms of foreign exchange earnings and employment. Sri Lanka is the largest producer and exporter of Ceylon cinnamon (Cinnamomum Zeylanicum Blume) in the world – claiming 90 percent of the world production. Presently, the area under cinnamon cultivation in Sri Lanka is estimated to be 25,132 hectares, of which 75 percent of plots belong to smallholders.
The cinnamon industry in Sri Lanka brought US $ 833 million in exports in 2010. According to the statistics available, approximately 31,000 hectares of cinnamon are grown in the country producing around 16,000 metric tonnes annually, of which exports over 12000 metric tons of cinnamon barks in different grades per year, mainly in bulk form. This industry employs about 16,000 cinnamon processors involving 350,000 families.
Historically, the cinnamon spice has been one of the most important items of export in the early evolution of trade. The Sinhala kings sold cinnamon to the merchants who came to Colombo and other ports at a very low price. There are records of trade in Ceylon cinnamon in Roman times. Cinnamon originating from Sri Lanka was recognized as of superior quality and also referred to as “sweet cinnamon”.
Cinnamon and Chinese cassia found their way to the Middle East at least two centuries before the Christian era. It was mainly by the sea route that the spice trade developed. The Phoenicians were expert sailors and they were traders including spices. Arabians were also engaged in direct sailings to the East to collect spices about 2000 years before the Christian era. They concealed the origin of Ceylon cinnamon from the western world for many centuries in order to enhance the value of cinnamon.
It is said that at one time cinnamon was valuable than gold. The Arabs, who traded in it with the Greeks and Romans but they kept the source, a closely guarded secret to maintain their monopoly. They brought the spice via overland trade routes to Alexandria in Egypt, where it was bought by Venetian traders from Italy who held a monopoly on the spice trade in Europe.
It was the quest for spices that led to exploration of the world in the 15th century. Cinnamon was the most important spice that attracted the Westerners to the country. According to Baldaeus, “Cinnamon was the ‘Helen or Bride’ for whom, the Netherlanders and Portuguese had for so many years contended.”
Dr. Colvin R. de Silva in his Ph.D. thesis ‘Ceylon Under the British’ records, “If the vagaries of wind and wave brought the Portuguese to Ceylon, the lure of cinnamon kept them in the island.”
The Portuguese established a monopoly in Sri Lankan cinnamon trade from 1506 to 1656. Then the Dutch captured the Portuguese establishments in 1658 and secured the monopoly of cinnamon trade. With the British invasion of the country in 1796, the monopoly of cinnamon trade changed hands again.
During the closing years of the British period, the profits derived from the trade monopoly of cinnamon were reduced and also due to the abolitionist attitude of Governors Horton and Colebrooke, it was finally abolished in 1833. By this time, European consumers had become satisfied with the cheaper substitute cassia from China and Malayan archipelago and Sri Lanka lost the cinnamon market in Europe.
Distinctive features of Ceylon cinnamon
The value of Ceylon cinnamon cultivated in Sri Lanka is due to the quality of bark and specially the presence of aroma-giving volatile compound known as ‘terpenoids’. The presence of terpenoids gives the Ceylon cinnamon its characteristic flavour profile. The high quality of the bark of Ceylon cinnamon is influenced by the soil and the climatic conditions. Dry soil like silver sand (maradan vali) and frequent rain are conducive to the production of finest quality cinnamon.
This finest quality cinnamon is of a thin smooth bark, with a pale brown colour, highly fragrant odour, sweet, warm and pleasing aromatic taste. Its flavour is due to the presence of terpinoids chemical constituents, which are totally absent or present on only trace quantities in cassia. Cinnamon produced in Sri Lanka, offered to the market in the form known as ‘quills’, has its characteristic organoleptic properties, as well as a smooth tender pale brown appearance.
Cinnamon Training Academy
Cinnamon Training Academy (CTA) Limited, Public Company was incorporated in Sri Lanka on June 13, 2006 and registered under the Companies Act. The shareholders of the company are members of the Ceylon Cinnamon Association (CCA) and the Spice Council (TSC), who are dedicated for the development of the cinnamon Industry.
The main objective of the CTA is to train an adequate number of cinnamon processors under international food standards and issue nationally accredited certificates to them. An inadequate number of cinnamon processors restricts the cinnamon industry’s production capacity. There is a hope to increase the cinnamon exports by 30-50 percent within the next few years.
The CTA was formed to find long-term solutions to arrest the prevailing conditions such as severe shortage of cinnamon peelers that restricts the cinnamon industry’s production capacity. It intended to train an adequate number of cinnamon peelers and issue nationally accredited certificates. The proposal to allocate funds to enhance the skills required for the cinnamon industry and expand the objectives and services of the CTA will no doubt assist in socio-economic development and poverty alleviation of the country.
‘Value addition’ has been identified as the most fitting strategic action to be implemented to capture higher market share in international spice trade. Time has come for Sri Lanka to diversify the cinnamon products. The bulk form of exportation limits the development of the overall cinnamon industry such as, a few employment opportunities, poor technology transformation and low return to the investments.
There are many other countries that produce cinnamon and cassia in bulk form; therefore it is difficult to compete with them in the world market. Those countries have higher production capacity, higher productivity and are selling their products at low prices in the world market. The importing countries reprocess and add value to our cinnamon and re-export as final product and earn a higher income. Very often they mix cheaper substitute cassia with Ceylon cinnamon. The most suitable way to overcome this problem is to add value to our cinnamon and export them to special niche markets in Europe, Japan and the USA. However, there is a good demand for Sri Lankan cinnamon products due to its intrinsic quality and flavour. Therefore, we should set our goals accordingly to gain more profit. When we consider the value addition, there are a few areas that are identified by the industry.
Allocating funds to the National Science Foundation for research undertaken on cinnamon and cinnamon-related activities is a timely measure. Promoting industry- related research in developing cultural industries will help to foster wealth creation and development of the country. The industry is central to the economy of modern society. It is essential to a developing country like ours to widen the development base and meet the growing needs.
We fervently hope that these funds allocated would be used for the betterment of the cinnamon industry and manufacturing value-added (MVA) products and services. Agricultural research and technological improvements are prerequisites for increasing agricultural productivity and generating income for farmers and helping poverty alleviation.
The Ceylon Cinnamon Association, Spice Council and cinnamon industry stakeholders are consulted in doing this research. We all in the cinnamon industry must appreciate and thank Sarada De Silva for all his efforts over the last 40 years.
(Prof. Jayasiri Lankage is the General Secretary of the Ceylon Cinnamon Association)