ECONOMYNEXT – The Asian Development Bank (ADB) plans to allocate more money for Sri Lanka’s tea industry in its 2020 lending program, having dropped an initiative for regional plantations companies to raise funds through tea bonds.
The funding strategy had shifted from bond issuance to an overall financing strategy for the industry, the ADB said in a report.
The lending agency had earlier proposed that Regional Plantations Companies (RPCs), hit hard by the long slump in tea prices and heavy debts, could raise funds through US dollar-denominated ‘tea bonds’.
These were to sold to foreign investors with assistance from the ADB to fund badly needed efforts to revive estates through replanting tea bushes and infilling.
The aim was to support the modernization of the plantation sector through the issuance of tea bonds that would fund capital expenditures for plantations’ tea and rubber production and improve access of Sri Lanka issuers to international markets.
However, the ADB report said Sri Lanka’s capital market was still in a developmental stage and lacked depth to provide needed funds.
Instead it proposed development of a financing strategy for the tea sector that will be assimilated in a 2020 pipeline project.
The ADB said its studies identified challenges for the long-term sustainability of the tea industry and quantified the financial gap in the tea sector.
“Aside from the shortage of labor in the sector, the study also identified a lack of investments in replanting that has resulted to declining yields due to aging tea bushes,” it said.