Sri Lanka mulls policy shift from big business to small firms
ECONOMYNEXT – Sri Lanka’s government will give more emphasis to support small businesses in preparing economic policies which have tended to favour big business, Eran Wickremeratne, deputy minister of public enterprise development, said.
Microenterprises, with a workforce of up to 5 people, account for over 90 percent of all business entities in Sri Lanka, yet only account for a very small portion of GDP output, he said.
“While it is necessary to have industry associations, we must not have those that benefit only the strong industries,” Wickremeratne told the annual general meeting of the National Chamber of Commerce.
“The purpose of these associations is to spread benefits and therefore the weaker segments must benefit too.”
Wickremeratne said that especially with regard to the way in which policies are lobbied for, “we increasingly see that they benefit the larger and more resilient firms.
“Instead, we must also look at policies that specifically benefit smaller sectors.”
Ultimately, Wickremeratne said, the future success of larger firms will depend on smaller industries, whether in attracting foreign investment or being able to outsource work.
He noted how investors invest in China and Korea because of clusters of microindustries that are able to provide the necessary support services.
“China has developed microenterprise zones, while we are still with our free trade zones of 30-40 years ago,” Wickremeratne said.
He said he believe the way forward for Sri Lanka involves small enterprises being the focus of both government policy and industry associations.
Studies by Verité Research, a think-tank, show Sri Lanka has 3,027 SMEs (small and medium enterprises), firms with a turnover of less than 150 million rupees registered as exporters who collectively contribute to less than 5 percent of Sri Lanka’s exports.
“We are sadly still a plantation export economy in structure,” Wickremeratne told the annual general meeting of the National Chamber of Commerce.
In contrast, China has over 40 percent contribution by SMEs and the average in Asia is 30 percent.
Sri Lankan small firms and craftsmen are not geared to export and not part of company value chains, Wickremeratne said.
“But in other countries, small players are forming the bulk of the exports now; the structure has changed.”
Micro-business start-ups are likely to increase as laid-off workers and returning migrant workers seek to make a living, according to studies by the International Labour Organisation.
“However, in Sri Lanka, their potential is not actually being tapped into,” Wickremeratne.
“Microenterprises should be adequately connected to global logistics and value chains. I want to open up the discussion of how we can connect microenterprises to your businesses,” he told the NCC.
(Colombo/January 19, 2016)