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Lankan microenterprises’ potential untapped, women an underutilised asset: Eran


22 January 2016 05:38 am - 0     - {{hitsCtrl.values.hits}}


Following is the speech delivered by State Enterprise Development Deputy Minister Eran Wickramaratne at the recent Annual General Meeting (AGM) of the National Chamber of Commerce of 
Sri Lanka.
National Chamber of Commerce President Thilak Godamanna, Sujeeve Samaraweera, Asela de Livera and the members of the head table, your excellences, Export Development Board Chairman, past presidents of the chamber, friends, ladies and gentlemen.
First of all, I would like to say congratulations; the chamber has had a long and successful history. Looking at the various people who headed the chamber in the past, their life stories are an inspiration to the people in this country. We have very few biographies written of Sri Lankans and those written are unfortunately mostly 
about politicians. 
I hope that some of the biographies of those mentioned today are written, to inspire the younger generation with stories on entrepreneurship and innovation. We have a history on other subjects but we need to write a history on commerce for others to learn from.
As you know, our government is only about five months old, even though we have a new President, who has just completed a year. As we look ahead and craft government policy, a big issue we face is the relatively unfavourable global economic environment. We have come into government at a time when the world economy has slowed down. If you look at our overseas markets, they are becoming somewhat stagnant. Thus, the challenges 
are great. 
We talked for the last two decades about the rise of Asia, particularly China and India, and we have just passed that point at which the growth curve is slowing down. That situation is not going to change very quickly and we are looking at an adjustment period of another 18 months at least. 
Our government, whilst committed to small and medium enterprises, wants the private sector to drive economic growth. This represents a departure from the last 10 years, where the engine of growth was the public sector and driven through a public sector investment programme equating roughly 6 to 7 percent of gross domestic product (GDP). However, this picture has changed not for dogmatic reasons but partly due to the 
external environment. 
One of the reforms we are undertaking is on land. When we were teenagers, when we talked about land issues and land ownership, we actually meant land reform. That is, taking over land from private owners and transferring it to the state. We have come full circle and across the world land ownership or adding a balance sheet to the household - not just income but a net asset - becomes an engine to drive growth. 
As you know, there are very few who have freehold land ownership in this country. Even if you go to a big city in Sri Lanka, it is only in the metropolitan centre of that city that people actually have freehold land; everyone else is on some kind of permit. We have decided to change that situation through widespread land ownership. 
We will embark on that by giving freehold ownership to those already on government schemes and widen it thereafter. We expect to have 1.5 million new landholders by the end of this programme. Those with small businesses, microenterprises or in self-employment can access finance with not just with an income but with a balance sheet, following this radical move. 
Exports need reforms 

The President of the chamber spoke about exports. There is no question that if we are, as Sri Lankans, to maintain our present living standards and to keep climbing, we will be dependent on our ability to succeed in exports. There are many changes and reforms needed in exports and I’m sure the Export Development Board (EDB) and the relevant ministry are working on some of those ideas.
You have also heard some emphasis on that during the budget speech. I would like to discuss trade agreements. The members of the chamber clearly mentioned concerns with the Comprehensive Economic Partnership Agreement (CEPA) and the new Economic and Technology Coorporation Agreement (ECTA) being contemplated between India and Sri Lanka. I clearly heard what you said, not just now but I have heard concerns over the last decade on free-trade agreements (FTAs) and multilateral agreements. 

Clearly, problems do exist, for example, tariffs and dumping, and I share in your concerns. I am also well-versed in the experiences of our businesses when exporting to the Indian market. We will be working to smoothen those areas, particularly in order to reduce those non-tariff barriers. One suggestion is to have agreements with pre-selected Indian states, rather than treat India as one big country as it is actually a continent. We have some ideas we are working on.
At the same time, I would like to keep it on the table that our future is linked to the future of our neighbours.

When Prime Minister Modi visited Sri Lanka last year, it was the first time an Indian Prime Minister visited Sri Lanka for an official visit in 27 years. If you think about it, we are just a few kilometres away; just some water separates us. We are that close yet that far. Having shared close economic ties for centuries and even closer cultural ties going back centuries, I believe we are really neighbours who share a common future. 

As we begin to look at the future economically, as growth rates slow down, most analysts will tell you that India is poised to be the fastest growing economy over the next 20-25 years. We need to think about how we are going to interact with the economy next door. Are we going to find a way to interact with India and benefit from its growth? These are some of the issues we have to grapple with, not as single businesses or chambers but as a country, in trying to see how we can benefit from their growth. 

Sixty or 70 years ago, we had a per capita income ahead of South Korea. Japan was probably the only economy ahead of us. Sixty years later, we are more or less at the bottom of the Asian league. What is our future going to be over the next 60 to 70 years? I don’t believe in playing the blame game but I think it is clear that the time has come to make serious decisions, promptly. We are at a crossroads and have an opportunity to rethink our strategy. We need to think in a new way about how we will steer our ship. 

Women in Sri Lanka 
What I was really going to talk to you about today were two vital economic issues. Firstly, I would like to discuss women in Sri Lanka and why they are not working. As I look over the audience here, I think it’s a very relevant topic that needs to be addressed. Women are first and foremost an underutilised asset of the country, and secondly, they are inefficiently allocated across the workforce. Women in Sri Lanka are by and large doing three things. 
Firstly, they are working because they are desperately poor or in desperately difficult situations. Many women are employed in the estate or agricultural sectors, which have a high level of poverty. For example, although the percentage of women in the total labour force was a mere 35 percent in 2014, the percentage of those women employed in the rural and estate sector is roughly 86 percent. The bulk of women are employed in the poorest-paid industries. Why are more women working in the poorest parts of the economy?

Secondly, a primary reason women say they aren’t working in the labour force is because they are engaged in housework. Lastly, if they aren’t desperately poor, women opt for jobs outside the country. It is thus clear to me that Sri Lanka’s local industry is not paying women enough to displace or substitute the benefits of working at home unless they are in absolutely desperate straits. Even then, they are most likely to end up in the agricultural sector. We have this hugely underutilised asset yet we talk about labour shortages. Somehow, we have not been able to crack 
the puzzle.

‘‘The bulk of women are employed in the poorest-paid industries

We must learn from the way the female labour force operates if we want to reform our economy. There is evidently a problem of inclusion of women in the work force, and I invite those here today to think hard about how we can change this. What is it about our attitudes or the operational environment that makes working difficult for women? 

One significant factor is that women travelling on the road to work do not have a pleasant time. For that, the government must take responsibility as it is up to us to ensure that public sector transport is accommodating and safe. Today, my staff and I reviewed 450 applications for jobs that I personally received into my hand. We gave 10 women jobs in the sales department. However, out of the 10, only three women accepted, the other seven declined. We know the reason - why it is not conducive for women to go out there and do sales and marketing jobs. 

Just getting to work and back in itself even once a day can be a quite a problem. I know from first-hand experience. Around once a week I take the train from my ministry office in Fort from the World Trade Centre to my political office in Moratuwa. The conditions for a male travelling on our trains are uncomfortable to say the least. There is no breathing space, you can’t talk on the phone, I can’t work on my email while on the train, you’re virtually face-to-face with others if you are lucky enough to get on to the train! 

‘‘The way forward for Sri Lanka involves small enterprises being the focus of both government policy and industry associations

I’m lucky that when I turn up in this outfit, they somehow squeeze me in but others have to travel half hanging out of the train. This is for men, so I can’t imagine how distressing some journeys are for women who have to fear for their dignity on overcrowded transportation. The lives of women must be improved. How can we change this? For example, women and their spouses could benefit from flexi-hours to balance parental obligations and work commitments. 
Moreover, Sri Lanka could move in the direction of helping mothers who can’t afford a nanny, who have to leave their children behind because they need the income. Perhaps in the future they can leave their children at a nursery with where they are collectively looked after during work hours. We, the government and industry of Sri Lanka, must work together in order to provide better opportunities 
for women.

‘‘Our future is linked to the future of our neighbours

I wanted to leave those thoughts with you, because if we want to radically change the economy of our country, we have to start talking about the structural issues. Like you who head businesses, I also come from the same side of the table. Coming from a banking background, we have discussed our issues over the years. Often when we meet, we talk about immediate issues and problems. When we meet in chambers we talk about restrictive issues on taxes or labour laws or some similar issue. However, without bold steps to change the structural issues, we will only limp rather than grow quickly.

Microenterprises and SMEs 
I was so happy to see when I opened your chambers book on the table that your focus is also on the issue of microenterprises and SMEs. Therefore, in closing, I would like to say some words 
on microenterprises.

Microenterprises, defined as constituting a workforce of up to five people, account for over 90 percent of all entities in Sri Lanka, yet they only account for a very small portion of GDP output. Take the export sector for example. According to Verité Research, Sri Lanka has 3,027 small and medium enterprises (SMEs) (firms with a turnover of less than Rs.150 million) 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. In contrast, China for instance has over 40 percent contribution by SMEs and the average in Asia is 30 percent.

I was invited to speak as a chief guest at an art gallery down Green Path recently. There, I saw the most beautiful array of handwork. As I walked around, I thought sadly, exports would not have even entered their minds, as they cannot connect the dots on the value chain. But in other countries, small players are forming the bulk of the exports now; the structure has changed. We still have the export structure of a low-income country even though we have become a middle-income country. This is something we need to change. 

Small players exist in every country. In fact, according to the International Labour Organisation (ILO), micro-business start-ups are likely to increase as laid-off workers and returning migrant workers seek to make a living. However, in Sri Lanka, their potential is not actually being tapped into. Microenterprises should be adequately connected to global logistics and value chain. I want to open up the discussion of how we can connect microenterprises to your businesses.
Moreover, while it is necessary to have industry associations, we must not have those that benefit only the strong industries.

The purpose of these associations is to spread benefits and therefore the weaker segments must benefit too. I have recognized your chamber more than others as one that is attempting to 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, the future success of larger firms will depend on smaller industries, whether in attracting foreign direct investment (FDI) or being able to outsource work. For example, people also invest in China and Korea because of clusters of micro industries 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.

Microenterprise zones are government-designated zones that offer business and tax incentives to all operators situated in the zone. These are situated across the country, for example in Changchun in the northeast of the country. According to a study in 2013 by Welsh et al, when ‘clustered in one strategic zone, Microenterprise Zonescan revive and bring communities together while simultaneously offering a convenient venue that facilitates the efficient delivery of 
government services’. 
Similarly, I believe that the way forward for Sri Lanka involves small enterprises being the focus of both government policy and industry associations. I am confident that it is in forums such as the National Chamber that such strategic visions on Sri Lanka’s trajectory can be fomented. 
I wish you all success. Thank you for inviting me to be here 
this evening. 

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