Sri Lanka Handicraft

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					   Towards a new era
                  The way forward




National Handicrafts Board
20-Nov-10
Laksala - Towards a New Era
The Way Forward

   1. Introduction

In Sri Lanka the handicraft sector has been recognized
 as important in the drive for expansion and
 diversification of the national export base particularly
 the non-traditional exports. Both in the rural and
 suburban economy of Sri Lanka, the sector is a vital
 source of livelihood for the women, youth and
 people with disabilities.

It has been acknowledged that having this sector
 developed for its true potential can mainstream these groups
 into the economy, contribute towards generation of
 employment, enhance rural entrepreneurship and
 above all impact positively on rural poverty
 reduction. It is revealed that the sector has significant
potential for exports. The trends in international
 markets are positive for handicraft products and several countries have been able to
 increase their foreign exchange earnings from these exports.

Laksala, should therefore take the initiative to guide the sector to develop into its true
potential by exploiting the rich cultural heritage and a wide range of unique crafts Sri
Lanka produces. These can undoubtedly make a ‘Mark’ on the international Market. To
 achieve the goals and objectives of this strategy requires coordinated efforts and
 enthusiasm from all stakeholders.

In contemporary Sri Lanka handicrafts have not been accepted as a significant source of
contribution to the economy of the country. Of the challenges facing handicrafts is the
competition from commercially mass produced items. Pottery and earthenware faced
competition from aluminum and metal utensils; plastic baskets and mats threaten the reed and
rush-ware crafts; and traditional jewellery has to compete with comparatively less expensive
costume jewellery. These adverse prospects have led several in the younger generation of
traditional craft families to discontinue practicing the family-craft; since the practice of
apprenticeship to master crafts persons also ceased, there was a distinct threat to the chain of
continuity in craft-practice.

Government intervention in the craft sector has been critical in revival and regeneration of
crafts as economically viable occupations. The Department of Rural Development gives


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institutional support to the artisans. The Sri Lanka Handicrafts Board better known as
“LAKSALA” is a state corporation set up to preserve, develop and enhance the traditional skill
of the craftsmen. The Board is dealing with nearly 3500 leading master
craftsmen/entrepreneurs who are producing handicrafts item at Rural/Cottage industry level.
LAKSALA is the only state owned handicraft marketing organization in Sri Lanka deals with
provision of training to craftsmen and marketing and export promotion of handicrafts. The
board handles 23 sales outlets and 14 provincial purchasing points for the purpose of achieving
its objectives.

    2. Objects of the Board

    As per the National Crafts Council and Allied Institutions Act (No. 35 of
    1982) - Sect 44, the Objects of the Board has been identified as follows:

  i.    To promote the expansion of the production of handicrafts in Sri
        Lanka and the improvement of their quality.
 ii.    To promote the sale and marketing of handicrafts of Sri Lanka both in Sri Lanka
        and abroad; and
 iii.   To do all such acts which in the opinion of the Board are necessary for the attainment of
        the objects specified in paragraphs (i) and (ii).


    3. Proposed Vision & Mission Statements

Based on the objects of the board as per the Act and the other deliverables the government is
expected from Laksala, the following Vision and Mission statements have been developed for
consideration.

                         VISION

                         “Craftsmanship is a noble profession and we envision that the living
                         standards and social acceptance of the craftsmen and crafts trade to
                         be at par with any other profession in the country“



                         MISSION

                         We facilitate in developing craftsmen skills, production and upgrading
                         of quality and finding a market locally and globally for our handicraft
                         products and thereby we assist preserve and enhance the crafts trade
                         and quality of life of the craftsmen in the country.




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       We believe that by protecting, promoting, upgrading and enhancing the skills of
       craftsmen and the crafts trade in a sustainable manner will immensely benefit in the
       preservation and continuity of our proud tradition, culture and national heritage.



   4. Stakeholders of Laksala

                      The present stakeholders of Laksala and the handicraft industry begins
                       from the very craftsmen and their families, the raw material suppliers
                        to craftsmen, the line ministry, the employees of Laksala and of course
                       the buyers of handicrafts.

                    The handicraft buyer categories can be segmented as follows:

 i.    Sri Lankans living in Sri Lanka looking for gift and souvenir items.
ii.    Sri Lankans living abroad as expats and immigrants who visit Sri Lanka for holidays and
       would want to take a gift item or a souvenir back into those countries.
iii.   Foreign tourists and/or businessmen in Sri Lanka on a holiday or a business mission who
       would want to take a gift item or a souvenir back into those countries.
iv.    Sri Lankans living abroad as expats or immigrants who would want to purchase a gift
       item or a souvenir from Sri Lanka.
 v.    Foreigners living in those countries who would want to purchase a gift item or a souvenir
       from Sri Lanka.
   In addition to above stakeholders, Tourism Sri Lanka and the Export Development Board
   should be linked with the handicraft industry in general and with Laksala in particular for the
   mutual benefit of accessing the above mentioned market segments.


   5. SWOT Analysis

   Strengths, Weaknesses, Opportunities & Threats (SWOT) analysis for
   Laksala in particular and the Industry in general are carried out and
   the summary is given below:

         i.   Strengths
                   Recognised, valuable brand Name – Laksala.
                   Government owned – feeling of trust and
                     value for money.
                   Branch and other sales outlet network.
                   Availability of abundant and unique local raw


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              materials.
             Rich and diversified culture producing wide array of handicrafts.
             High potential for empowerment of Women, Youth and people with
               disabilities.
             Showrooms at key locations – Fort - York Street, Thummulla – Colombo 7,
              Airport and other main cities.
             Large supplier network of handicrafts and related products – diverse
              product range.
             Bulk buying of handicrafts and related products.
             Bargaining power over suppliers - dictate terms to supplier (for Laksala).
             Skilled, experienced administrative staff.
             Availability of carpentry and Engineering division.
             Availability of adequate showroom space in Fort main branch, the prime
              business centre in the country.
             Long established method of
              procurement.

ii.    Weaknesses
          Lack of young trained
            and trainable staff.
          Tight cash flows
          Lack of Sales and
            marketing orientation.
          Inconsistent quality.
          Fragmented, unstructured and
             individualized production systems
          Low level equipment application and Low production levels
          Inconsistent product standardization
          Low design and quality and Inadequate design skills
          Inadequate production, vocational and business development training



iii.   Opportunities
           The anticipated tourism boom in post-war Sri Lanka.
           Availability of e-commerce technology to access and promote worldwide
             sales on line.
           Unexploited handicrafts market worldwide.
           Availability of a sizeable Sri Lankan Diaspora with a high earning capacity.
           Government policy – desire to upgrade the quality of life of craftsmen.
           Government policy – allowing Laksala diversify into complimentary areas.

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                     Government policy – recognizing Laksala as a strategic enterprise that
                      needs government encouragement and support.
                     Government policy – ability to provide goods and services to the State
                      Sector without having to go through tender procedure.
                     Availability of a long established crafts trade in the country.
                     Availability of foreign trade and related exhibitions.
                     Availability of a large network of Sri Lankan embassies and missions all
                      over the world.
                     Availability of a government entity – Export Development Board that
                      aggressively pursues export promotion in the country.
                     Availability of a large number of disabled soldiers that can be trained and
                      skilled in the production of handicrafts.
                     Professional trade pacts such as SAPTA, SAARC, etc that allow low cost
                      access to regional markets.

         iv.   Threats
                   Competition locally from other similar private
                      sector outlets (for Laksala).
                   Competition from imports of cheap
                      handicrafts - competing countries like China,
                      Vietnam, Thailand and India producing
                      cheaper and good quality products.
                   Government’s inability to fund Laksala
                      recurrent expenditure.
                   Lack of enthusiasm shown by the new
                      generation towards traditional crafts trade.
                   Escalation of cost of raw material for crafts production.
                   Lack of access to financing for craftsmen. - Nil or minimal access to
                      capital.
                   Limited access to, and inadequate supply system of, raw materials.
                   Insufficient market information and dissemination.


   6. Proposed Way Forward

The primary function of Lanka Handicrafts Board, Laksala, is to act as the Sales and Marketing
arm to the Handicraft industry in Sri Lanka. To act as an effective marketing arm, it is necessary
educate the craftsmen at the production level the needs of the market and the quality and
design expectations. Today there are two other state institutions – National Design Centre and
National Crafts Council that will look into the research, consultation, design, production and
quality aspects of the handicrafts industry.


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It may be necessary that these 3 state institutions merge into one single organization, with one
head to bring about synergies and serve best to the handicrafts industry. This is the best way to
preserve, protect and develop the arts and crafts industry for the future generations and the
head of this institution shall play a key role in achieving these objectives in strengthening
Laksala to be an integral part of national, socio-economic architecture of the country.

           a. Capacity building:

While focusing on continuing the age old traditional and proud legacy of craftsmanship in the
country, all efforts must be made to develop the handicraft sector in Sri Lanka as a
 substantial foreign exchange earner. In order to achieve this it is necessary to build the
 capacity of handicraft producers and of Laksala to meet international standards and
penetrate into international markets.

Laksala should seek to provide a framework for guiding action to promote the growth of
 exports in the handicraft sector as a pro-poor trade related strategy, in keeping with
‘Mahinda Chinthanaya’ to enhance
 poverty reduction and contribution to
 foreign exchange earnings.

Priority in the development strategy is
to be placed on the following initiatives
and actions to address medium and
long term development needs of the
sector that will bring momentum in
enhancing the capacity of the sector in
terms of: -


  i.    Organization of producers into identifiable village groups to enable outreach
        services and input supplies.
 ii.    Reorganisation and strengthening of umbrella organizations, such as raw material
        supplier groups, marketing and distribution arms, etc, for the sector.
 iii.   Producing required export quantities in terms of quality, design and standards for
        international markets based on regional/district specialisation determined by raw
        material availability and other competitive and enabling factors, keeping the end
        user requirements in mind.
 iv.    Introduce a product certification mechanism that will guide, encourage and obtain the
        desired quality that is acceptable to the international markets.
  v.    Integrated enterprise development support through local centres for skill training,
         product adaptation, vocational training, entrepreneurship development.


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 vi.    Provision of micro-credit facilities for producers and export financing for exporters
        and indentify suitable micro-finance institutes and mechanisms.
vii.    Support for exporters in promotion and market identification, entry and
         sustainability, through participation in marketing programmes such as trade fairs,
         exhibitions, contact promotion programmes among others.
viii.   Organisation of District, Regional and National Handicrafts exhibitions to facilitate
        District or Regional specialisation and establishment of production centres and
        providing national and regional awards on established criteria to motivate and
        encourage craftsmen.
 ix.    Upgrade infrastructure in production centres to facilitate timely production and
        deliveries.
  x.    Facilitate cooperation and programme coordination among handicraft business
        organisations.


In order to engage in the above, it may be prudent to take on in a needs assessment
consultancy assignment. Laksala, being a government entity and its services are basically
catering to the rural poor, mostly women and people with disabilities and its cause being
poverty alleviation and helping to maintain and improve age old crafts trade, there may be a
number of grants for such studies by multilateral and other donor agencies and others that
needs to be aggressively sought after.


                               b. Build Awareness on Non-Tariff barriers
                  Particularly for export purposes, Laksala should take the initiative in
                  building awareness among the craftsmen about the most persistent
                   market access barriers in the form of non-tariff barriers, mainly in
                   the form of Health and Environmental Regulations. There is a rising
                  concern on environment protection with consumers demanding
environmentally sound products. EU and USA have banned the use of toxic substances
in the production processes due to health reasons. Exporters are required to be aware
of Compliance and Conformity regulations.

Eco-labeling schemes are being introduced in the EU for specific products to satisfy
environmental soundness requirements.

Social Accountability & Fair Trade - The issue of child labour is being pursued
aggressively by importing countries. There is concern also about the living conditions of
workers who produce export products.




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           c. Employees Upliftment & Welfare
Employees of Laksala are an integrated part of the development plan, without which none of
the actions will be ineffective and unrealistic.
In order to get the best contribution from employees they should be one of the most sought
after groups among all stakeholders.
Without having a plan, to meaningfully upgrade living standards of employees by way of
building their capacity, thereby deriving better contribution; no good plan will be of any great
use.
It is in this context, that it is suggested to not only merely motivate them, but also to effectively
seek their advocacy by allowing them to share the marginal increase of profits of Laksala.
Proposed methodology, inter-alia includes –
   a) To declare a specific percentage from the marginal increment of profits to employees
       towards this activity;
   b) To identify a mechanism to observe employee contribution to marginal profitability;
   c) To avail such funds in reserves to provide additional training, scholarships (local &
       foreign) to employee family members to obtain additional qualifications in their fields of
       interest and expertise i.e., computer/English etc. comprehensive family insurance
                           schemes, emergency interest, free long-term loans and alike;
                                d) To provide private transport services up to door step on
                           selected main roads;
                                e) To declare bonus during seasonal festivals, including Sinhala
                           New Year.

                           .
                                       d. Linkages with Sri Lanka Tourism and other institutes


                           Tourism and handicraft trade go hand in hand and Handicraft
                           sector development in Sri Lanka should thus be seen as
                           complementary to the Tourism industry. Sri Lanka’s tourism
                           potential is phenomenal in the present post-war era.

                           LAKSALA should aggressively pursue and coordinate efforts to
                            increase the participation of Craftsmen in marketing and training
                           programmes such as trade fairs and exhibitions and Contact

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 Promotion programmes and initiate partnerships with the Ministry of Tourism to enhance
sales and to support export promotion programmes through Export Development Board and
Sri Lanka Missions abroad.

As a first step Laksala can open up handicraft sales outlets, on a benefit sharing basis, in places
of major tourist attractions such as the Colombo Museum, Peradeniya and Haggala Botanical
gardens, Pinnawela elephant orphanage, Dehiwela zoo and main tourist destinations in Jaffna,
Trincomalle, Batticallo, Anuradhapura, Polonnaruwa, Bentota, etc.

In addition to above, Culture Tourism – where tourists are given an opportunity to experience
and even to be a part of the production process of handicrafts manufacturing as part of their
tour package in Sri Lanka, is an area that can be jointly exploited with Tourism Sri Lanka for
mutual benefit.


           e. Innovative Marketing and Sales strategies:


                    i. Tell ‘the story’ behind the product

All handicrafts are made out of traditional
craftsmanship passed down from
generations. It has a rich heritage value
and unique stories around the product.
EACH product needs to divulge and
expose its rich heritage in a very brief
well written note and should carry it
with the product. The brief can
include the names of craftsmen
involved in the production, the area
in which it was produced, the historical
development, the beginnings and from which time
periods and on what reasons these products were originated and its
first users – the kings and the aristocratic of yesteryear and its evolution to its
present status. Each product will have its own story to tell.

The above stories written and tagged along with the product will immediately create a very high
value in the buyers mind and he will become less price-sensitive and will attach the product
with a heritage value that becomes a unique souvenir of the country he has visited.

It adds further value, if these notes are written on eco-friendly, locally produced hand-made
paper, depicting its own story as well.


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                  ii. Laksala 24/7 Centre

Laksala Centre at Thummulla at Baudhaloka Mawatha is strategically positioned in a central
location in Colombo with very convenient access from all sides, is an ideal place to have a 24-
                                      hour souvenir shop along with other facilities. The
                                      objective is to fill the void that is there without having a
                                      place to shop urgent and essential traveler
                                      requirements late night for the busy traveler. It should
                                      contain the following facilities around the clock - 24
                                      hours-7 days a week:

                                              ‘Last minute’ Traveler centre.
                                        The busy, last minute traveler is in need of a place to
                                        fulfill his last minute travel requirements pertaining to
                                        clothes, gifts & souvenir, internet, email,
                                        communication and other peripheral needs. This centre
       needs to be very vibrant, active and a colourful place that can generate traffic in the late
       night.
           o Clothes shop catering particularly to the traveler.
           o Business Centre with Wi-Fi Zone & mobile phone charging facility.
           o Rest room & foot massage service.
           o Bank-Window for traveler
              The busy traveler, perhaps late in the night would want to do last minute foreign
              exchange transactions where this centre can cater to.

      Gift and souvenir Shop - The Ultimate Destination for Gift & Souvenir for busy traveler.
           o Handicrafts, Gifts and Souvenir items.
           o Gems & Jewellery.
           o Local Fabrics – Batiks, Handloom clothes.
           o Local Pots & Decorative items
           o Local pickles, traditional snacks (Kevun, Kokos, etc.,),
           o Handicraft Demo Centre – experience the manufacturing of crafts by traditional
               craftsmen at the centre.
      Coffee shop and Juice bar
      Tourist information centre


           f. Web-based marketing and on-line sales
There is a substantial demand for Sri Lankan handicrafts by Sri Lankan immigrants living in, and
Sri Lankan expatriates working in, other countries. Modern, state of the art, user-friendly, all
encompassing web site where the buyer is in a position to take a well informed buying decision

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looking into all aspects of the product both visually and informatively and act on line making a
payment in purchasing a product using a secure payment gateway, can facilitate the above
need that will open up to a sizeable high income market segment worldwide.

In addition to the web site development and maintenance, it needs to be well marketed
through other marketing channels to increase the awareness to reach the desired the Sri
Lankan expat and foreign buyer market segments.

The web site must be designed selecting a well experienced, reputed web site developer of
similar performance after calling for expression-of-interest on a competitive basis, as this is
extremely important in delivering the result that is required of it.
To tap the same market segment, the possibility of appointing worldwide sales agents too can
be looked into.


           g. Sales Catalogue
                                                      Laksala, while engaging in the above web-
                                                     based sales, a comprehensive and very
                                                      informative Sales-Catalogue with details of
                                                       ALL handicraft products in Sri Lanka with
                                                       photographs, information, pricing and
                                                       delivery details also should be made and
                                                       be available at all Laksala sales outlets,
                                                       major tourist hotels and tourists ‘hot-
                                            spots’ in the country.


                                                                 h. Engineering Division
The Engineering Division was formed in October 2009 to cater to the interior and construction
needs of the Public sector market.

The main objective is to provide “total interior solutions” together with design and build
capabilities. Other objectives are higher quality standards, timely delivery whilst upholding Sri
Lanka Handicrafts Board’s name in the interior and construction industry.

A total interior work will include expertise in Civil, Mechanical and Electrical works, Wood work,
etc. Sri Lanka Handicrafts Board owns and manages four factories and two of them are placed
directly under the engineering division, which function as follows

        Katubedda Carpentry Workshop
                Conduct One year course in carpentry work
                Awarding Higher education certificate in carpentry work
                Manufacturing & supplying of furniture & all other carpentry work


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        Keselwattha Light Engineering Workshop
                Conduct Two years course in Light Engineering work
                Awarding Higher education certificate in Light Engineering work
                Manufacturing & installation of all kinds of Iron work

The Engineering division, comprising of a very experienced and skilled technical staff along with
its own Architectural unit, Accounts and Admin unit and Marketing unit should be aggressively
promoted and developed with a view to increase revenue for Laksala. This will cross-subsidize
the Laksala operations where the annual treasury allocation is not sufficient at present and also
it complements with the government’s thinking of making government corporations financially
independent entities.

Laksala is given the benefit of obtaining government tenders without a competitive tender
procedure should be profitably made use of. Laksala has shown encouraging progress in the
last one year with this unit obtaining a sizeable number of government businesses.

In addition, this unit can also engage in comprehensive building maintenance services, where
there is a need by most of the government entities.


           i. Colombo, Fort Showroom and Building
One of the most valuable key assets of
Laksala is its showroom building in
Colombo Fort. It is ideally located in
the heart of Fort, the hub of country’s
business and now, after the war,
Colombo Fort is realizing back its
magnificent status of the financial and
business centre of Sri Lanka. Within
easy walking distance to Laksala
premises,    there     over    500,000
employees travel daily to different
working places in Fort area this is a
sizeable market segment that any
business entity would eagerly want to
tap into.

The cash trapped Laksala, this provides an excellent opportunity to engage in a joint venture
with a suitable business partner (e.g.: reputed clothes retailer, State Trading Corporation, etc.)
to unitize this space in the building profitably exploiting this market.




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