Efforts to graduate SL to upper middle-income country

4 March 2017 12:00 am - 0     - {{hitsCtrl.values.hits}}

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A workshop to discuss strategic aspects for developing a national system that supports innovation and entrepreneurship was held at the Development Strategies and International Trade Ministry recently.    


Several distinguished personalities including government officials, representatives from the research and private sectors, investors, members of the startup community and World Bank experts marked their presence at the workshop. Among them were Science, Technology and Research Minister Susil Premajayantha and State Minister of International Trade Sujeewa Senasinghe. 


Subject Minister Malik Samarawickrama addressed the gathering on the vision of the national economy as it liberalised trade with regional partners. Excerpts of the minister’s speech:  
It is well-understood that one of the key factors in establishing competitive advantage in aggressive markets is through the development and commercialisation of high-end products and services. To deliver such expectations, it is imperative that the country emphasises innovation and entrepreneurship. The successes of these two elements rely on research outcomes, be they funded publicly or privately. 


The Sri Lankan Government’s National Economic Development Plan (Balagathu Sri Lankawak) was unveiled in January this year, and it identifies that in order to create long-term employment and to improve income, we should move towards an export economy. Furthermore, it recognises the facilitating of business initiation and improvements, becoming a member of the global product chains and creating a powerful and modern digital economy as key aspects that need to be looked at in conjunction to achieve this objective. 


In my opinion, innovation and entrepreneurship stand at the centre of all these components, thereby providing the basis to achieve our goal of creating a positive investment climate and trade regime which will generate more and better jobs for the country’s youth. Our plan to create development corridors that will be set up for investment in public and private sectors with the role of the private sector being duly recognised to offer additional exposure and opportunities for entrepreneurs and professionals with the focus on digital economy, tourism, commercial agriculture as well as accelerating the process of industrialisation, is a highlight that shows the government has identified innovation as a key driver for progress. 


However, given the size of the small market of a mere 21 million people, we understand that the growth potential of Sri  Lanka inevitably lies in global integration. To benefit from opening itself for trade, local products and services should be able to compete in the international markets. 


A handful of Sri Lankan enterprises have been selected as they have shown rapid growth in export-oriented products. For example, the apparel industry has moved from a commodity-export model in targeting niche markets to higher value-added production. There is also an emerging but growing digital industry reflecting greater export potential. However, these islands of success are few in number. Compared to countries like Thailand, Malaysia and Vietnam, the export product mix in Sri Lanka has not seen a drastic change since the 90s. In fact, exports, as a percentage of GDP, have declined significantly in the recent years. The sluggish growth of exports is due to very little diversification. When Vietnam added 48 new products/line items and Thailand added 70 to their export baskets, Sri Lanka has added only seven new businesses during 2000-2015. Further, Sri Lankan exports tend to be commodity products rather than higher-value products and services. 
We are very ambitious that the GSP+ preferences will make a significant contribution to the local economy through increasing exports to the EU market beyond traditional exports. After signing the three FTAs with India and China, we will have access to a market of Rs. 3 billion. These are the avenues for new businesses and quality products. 


At the same time, we need to identify our challenges, what forces might prevent our small businesses gaining new opportunities from such avenues. The following are a few findings that came up in the rapid assessment the World Bank team conducted on the request of the government on Sri  Lanka’s innovative and entrepreneurial environment. 

 

  •     There are a number of factors that inhibit the formation and development of innovative startup companies which are often the source of innovative business models, products and services that can have a transformative economic impact. These detrimental factors include a variety of policy, regulatory and tax issues, the lack of a robust innovative technology pipeline and a very nascent early stage venture capital and angel-funding network in Sri  Lanka. 
  •     SMEs in Sri Lanka generally lack the knowledge and experience required to adopt and adapt new technologies and thereby develop newer/higher value products and services to address domestic and international market opportunities. It is also the case that these SMEs are removed from and unable to access global value chains which may offer them the opportunity to sell their products and services in international markets. 
  •     The focus of the R&D that is being undertaken would benefit from a less traditional, academic focus to one that focusses on creating economic value for Sri Lanka. As a middle-income country aspiring to embark on a knowledge-based growth trajectory, Sri Lanka’s expenditures on R&D at 0.16 per cent of GDP could be a lot higher. 

 

Over several years, the ministries made efforts to address these issues. It is evident that we cannot tackle all these challenges in isolation, but instead we need to come into one platform where we could have a holistic approach. I believe today’s discussion will be the first step towards this path. 


We welcome the opportunity to work in close partnership with the World Bank and other organisations to help Sri Lanka become a highly-competitive economy and fast track to an upper middle-income country.   

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