Sri Lanka investors stumped by low labour productivity in tea estates

Aug 27, 2011 (LBO) - Investors are losing interest in Sri Lanka's plantations as rising wages without productivity gains are making companies reluctant to invest in the replanting needed to sustain the industry, a business group has warned. Sri Lanka™s competitiveness as a tea producer has declined with each successive wage hike with no commensurate increase in labour productivity, Elpitiya Plantations chairman Rajan Brito said.

The firm, part of the Aitken Spence group, made a net profit of 364 million rupees in the financial year to March 31, 2011, up 470 percent from the previous year, as gains from rubber, palm oil and hydropower compensated for a weak performance from tea.

"The future for Elpitiya Plantations is very challenging," Brito told shareholders in the company's annual report.

"On one side, with the government™s thrust and priority towards plantations and agriculture, the estates show great promise for diversification into other crops and industries.

"On the other hand, the industry is faced with twin problems of rising cost and lower productivity particularly for high and mid grown tea.

Brito said Sri Lanka™s competitiveness as a tea producer has declined with each successive wage increase.

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