Abstract:
Local Economic Development (LED) is a participatory development process that
encourages partnership arrangements among the main private and public stakeholders in
a locality. The goal o f LED is to create decent jobs and stimulate economic activities.
LED is mainly focusing on promoting rural entrepreneurship. In Sri Lanka LED has been
introduced in a few districts, but at the moment, it is in the initial stage. The experience o f
countries which have implemented PACA and LED initiatives have revealed that it is a
better approach to solving the constraints faced by small and medium scale entrepreneurs
(SMEs) as well as fo r SME promotion, and for developing economic activities to reduce
poverty especially in rural areas. Therefore, this study mainly focuses on identifying the
constraints for development o f SMEs in rural areas; and reviewing the key actors o f the
market value chain. Finally this study suggests how the participatory development
approach can be activated to bridge the gap between the development constraints and
functions o f the key players in entrepreneurship development and thereby ensure the
sustainable development o f SMEs and to reach competitive advantage at national and
global level. To simplify the findings and recommendations o f the study the Southern
Province was selected as the research site; and the coir sector as the industry type. The
study examines the constraints o f all three categories o f the coir industry including
primary level producers, middlemen level, and exporter level. Attention has been paid to
the nature o f the existing service spectrum o f the public-private sector organizations and
also to international interventions on promoting the sector. Lack o f and low quality o f raw
material; Lack o f knowledge o f better technology and value added products, increasing
cost o f production, poor market links specially with large scale coir producers and export
companies operating at local level, low profitability due to intermediaries and high cost o f
production; lack o f financial assistance for investing in better technology; negative
attitude o f the younger generation to take up the industry, and poor coordination among
the key actors o f the coir sector value chain are the major constraints revealed.
