ECONOMYNEXT – Sri Lanka has blocked several multinational companies that wanted to set up industries using coconut husks to protect less efficient local businesses, Plantation and Community Infrastructure minister K V Samantha Vidyaratna said.
Investment Protectionism
The revelation was made in parliament after Kurunegala district National People’s Power member of parliament Sujeewa Dissanayake complained that ‘multinational companies’ in Wariyapola and Panduwasnuwara areas were paying higher prices to coconut farmers for husks.
The demand for coconut husks has grown with the increasing use of coconut husks for moisture retention and as a growth medium.
Local industries in coconut fibre products, were less efficient and using simple methods (saraler krama) than larger firms and were facing difficulties, he said.
“With the entry of large factories, there is competition,” Minister Vidyaratne told parliament. “Last year, by November 2025, the husk of one coconut went to around 22 rupees in some places.
“With that some local industries cannot engage in this. Where technology is more advanced and mechanization is high they can do it profitably.
“A number of foreign companies came to set up large industries related to coconut husks. In this context, we did not approve the investors to protect smaller local companies.”
Foreign investors not only bring capital, but also markets and new technology, which will improve labour productivity and returns to labour, preventing out-migration to countries with monetary stability where wages are higher.
Plantations like coconut rubber, coffee and tea were among the first areas to get foreign direct investment into Sri Lanka.
In a budget for 2026, President Anura Kumara Dissanayake said Sri Lanka planned to push Sri Lanka’s economic growth to 8 percent a year.
However, analysts say growth cannot be increased by resisting change, or promoting low tech less efficient industries at the expense of higher tech ones, and killing foreign investments and blocking higher prices for farmers who produce raw materials for industry.
Sri Lanka is also an exporter of coir fibre pith (cocopeat) which is used as a growth medium, bristle fibre and mattress fibre.
Price Signals
In protecting local industrialists with protectionist political power, and preventing higher prices for husks, reducing revenue and profits to coconut farms which are available to farmers in other countries, Sri Lanka would also discourage coconut farming.
Meanwhile, many coconut land owners in the traditional Coconut Triangle, who are resident in Colombo, are splitting the land for residential development as coconut farms are not profitable, Minister Vidyaratne said.
There was a plan to improve the farms under a ‘cluster system’ with state intervention, he said.
“To control the splitting of this land we have a special board (kutti kiree-may mandalaya) established within our ministry and without its approval we do not allow land splitting,” Vidyaratna said.
“So, we are using laws.”
Coconut land owners are diverting and selling out of farming because Kurunegala, is rapidly urbanizing with industrial and residential development.
By stopping land being put to optimum use, and preserving the status quo, Sri Lanka may also be reducing economic output as well as restricting freehold land rights, which was the key to growth and prosperity in countries that emerged out of serfdom.
Expanding Controls
In an expansion of protectionism catering to rent seeking elements, Sri Lanka has recently banned the import of tinned fish, going beyond the Rajapasksa era import taxes.
The rent seeking tinned fish sector, with high import tax, was only one of several that had pushed up protein prices with maize autarky probably causing the most damage and contributing to malnutrition of children of poor families, as well as rice taxes, critics have said.
In Sri Lanka, import taxes and especially licensing, on foods like maize has a history of deep-rooted corruption involving regional and national politics, linked to collectors, dating back over three decades, those with knowledge of the sector says.
Meanwhile Minister Vidyarante said which had pushed up the cost for making coconut fibre. Coconut husk chips is a growing global industry.
In another twist, the Coconut Development Authority, had also asked to control the cutting up of husks, Minister Vidyaratne said.
But other agencies were promoting the activity, which he said was identified as a ‘problem’.
In sharp contrast to coconut, in the rubber sector, Sri Lanka is importing raw materials to make solid tyres.
Coconut Extension
Sri Lanka was trying to boost coconut production by expanding the land extent and also boost productivity by infilling and replanting.
Sri Lanka in 2024 had produced 2.7 billion coconuts. The government was meanwhile trying to boost coconut production to 4.2 billion nuts by 2030 by giving subsidies for fertilizer as a short term measure.
According to the Coconut Research Institute figures the average yield of a coconut in Sri Lanka was 55 nuts a year.
“That is not enough,” Minister Vidyaratne said. “That is not profitable for the farmer.
“In India it was 80 nuts a year for a tree. In Malaysia and the Philippines, it was 120 nuts a year.”
There was a plan to expand coconut in the North to 40,000 hectares by 2027. For that 600 million was allocated in the budget for the Northern Coconut Triangle. For the home gardens 500,000 trees were given.
There were around 900 coconut-based industries registered at the Coconut Development Authority.
A subsidy of 30,000 rupees per acres was given for anyone building irrigation systems that adhered to proper standards.
Sri Lanka had 484,677 hectares under cultivation based on 2024 data, Minister Vidyaratne said, based on calculations made by the Coconut Research Institute and Coconut Development Board, using Census Department data.
There were 65 million trees in Sri Lanka.
Sri Lanka’s exports of coconut products which include activated carbon, coconut milk, bristle fibre, coconut ice cream and coconut oil had grown to 1.127 billion US dollar by November 2025.
“We expect total exports to have grown to 1.25 billion in 2025,” Minister Vidyaratne said.
In 2017, coconut exports were only 598 million dollars which had grown to 855 million by 2024.
Coconut cultivation expanded rapidly during British rule, going beyond the export of fibre seen during the Dutch period.
As foreign investors found new markets, foreign capital and new technology came and locals followed.(Colombo/Jan23/2026)
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