Growth plan for Sri Lanka

Walking into a creditor meeting without an actionable growth plan is like diving into a quagmire. Sri Lanka needs a plan and a drastic one that can jump-start the economy. If you go to Israel, now the leading innovation hub, everybody has a deck. Just to explain, a “deck” is a business plan presentation.

Government action plan on growth

Does the Sri Lankan Government have a growth plan based on startups and innovations? If you look at the US, Silicon Valley pretty much generated most of the growth area and they were not backed by the Government. They were backed by venture capitalists. But the corporate law in Delaware gave Silicon Valley the legal structure to invest and build startups that can scale. And the Obama administration fuelled VC investment with the JOBS Act in 2012 which empowered individuals to invest in startups.

The Sri Lanka Government should have a plan for start-ups and small and medium businesses. As of now, we don’t see a cohesive plan to spur growth in these two segments. The 2017 and 2018 national budgets had some early inroads to cultivate an entrepreneurial mindset backed by capital and debt allocations. However, it was short-lived just like many other initiatives in the past. The new tax regime is necessary for the larger picture of the macroeconomy but not conducive for a budding entrepreneur to jump-start a business. A national policy for start-ups is a dire need to attract capital from venture capital and private equity investors. 

This is what Israel did under Ben Gurion’s leadership. The start-up nation was born even without having access to proper capital and it was largely banked on the human capital of Israel. Sri Lankans have the brain capacity just as much as Israelis to do business. The Sri Lankan diaspora is a true testament to this fact and many local ventures have taken the centre stage in the global business by participating in the supply chain. All that we need is a vision and an action plan, and the world will follow us.

Industries to nurture innovation

Washington State has worked with the local marine industry to create incubation to foster global innovation in the maritime industry. Japanese agriculture co-op, JA now runs a startup incubator. It used to be just the IT sector which had these initiatives. Now, all industries around the world are supporting startups to add growth to their industry.

What does Sri Lanka’s industry sector do? Good question. Most entrepreneurs feel that they are doing the utmost given the dire conditions in the country. Given the small market size, local entrepreneurs seem to be focussing on serving the 22 million people and some are happy being big fish in a small pond. There are many reasons for contentment but nowadays businesses should look to expand at least regionally if not globally and build scale. This will get the eyeballs of VC firms. A few conglomerates have started up incubators to support start-ups and a few started up co-working places to cash into the start-up boom post-2010. However, the results are not up to the mark of what was expected.

The Government has many priorities and rightly so the private sector has joined the bandwagon without waiting for the Government to act on these initiatives. As a country, we need a Silicon Valley type of ecosystem, if we are to succeed in this race. A classic example is neighbouring India. There is enough capital to take because the ecosystem keeps growing day by day. The world’s best VC firms are now operating local offices in India to spur growth and there are many examples of entrepreneurship and innovation in India. Sri Lanka doesn’t have to look that far for inspiration, India would do. 

Educational institutions should incubate startups

If you look at the movie “The Social Network”, there is a scene, earlier on, where Mark Zuckerberg goes to see a speech given by Microsoft’s founder Bill Gates where he explains how he started his business from a Harvard dorm room. Now, every college and university in the US has incubators and startup programs. The University of Washington has four locations providing not only student startups but also local startups as well.

How shall universities in Sri Lanka contribute to the start-up growth? A few universities including Moratuwa University have started producing entrepreneurs. However, they are facing serious issues unlike in other countries which are more conducive to start-ups. The country should have at least 10 universities building an ecosystem for students to get into start-ups. Mere ideation would not suffice to be an entrepreneur. We must provide capital, mentorship and a healthy environment for them to grow. 

Stanford and MIT are two universities which have carved out a niche to encourage students to start up. Many students who are aspiring to be entrepreneurs specifically choose universities which have better entrepreneurial DNA in universities. We must understand the fact Sri Lankan universities are running on shoestring budgets and therefore sometimes lack innovative thinking. This is where a proper ecosystem could play a role. We need to learn the good from the world and adapt here, otherwise we might lose out our best brains to other developed or developing countries with the desire to attract the best talent.  

Summary

Let’s say all of the industry sectors had innovation programs and all of the universities and colleges have startup incubation programs and all of the local governments had startup support systems in place. How many people would be embracing innovation? And what does it translate into real growth for the nation?

Every government agency, every local government, every industry sector and every educational institution should have an innovation program to give a chance to every citizen of Sri Lanka. 

(Writers, serial entrepreneurs, Tom Sato and Saliya Weerakoon possess over 60 years of combined experience in managing large businesses and start-ups, currently playing a pivotal role in supporting entrepreneurs to access capital and mentorship. Saliya can be reached on [email protected].)