Sri Lanka is experiencing a political transition but the economic challenges remain much the same. One antidote to sluggish growth that has been proposed numerous times is encouraging entrepreneurship, which also has the capacity to promote sustainable growth by providing jobs outside the Western Province.
The previous administration headed by former Prime Minister Ranil Wickremesinghe introduced the Enterprise Sri Lanka program, which allocated an estimated Rs. 60 billion to support thousands of potential entrepreneurs. The target was to create 100,000 entrepreneurs by 2020, and this policy was largely supported by the point that Sri Lanka has less than 2% of entrepreneurs. The new Cabinet is now revising loans schemes with preferential interest rates.
Enterprises create jobs and wealth. Without the dynamism they bring to the economy, the challenges of globalisation and structural change would be all but insurmountable. Fostering entrepreneurship means channelling entrepreneurial drive into a dynamic process which takes advantage of all the opportunities the economy can provide. To flourish, entrepreneurship requires efficient financial markets, a flexible labour market, a simpler and more transparent corporate taxation system and bankruptcy rules better adapted to the realities of the business world. Clearly, the right balance between these factors is not easy to strike. But strike it Sri Lanka must, because fostering entrepreneurship is not only a major economic imperative but also an urgent challenge that must be met to reconcile the goals of economic growth and social cohesion. In Sri Lanka, the situation is somewhat complex. On one hand, there are large corporations, mostly based in Colombo, that employ thousands of people and are the backbone of the private sector; on the other are hundreds of thousands of small enterprises that employ up to a few dozen people and are mostly based in rural areas. The middle is conspicuously empty, and while brave new innovation-focused start-ups have attempted to colonise this space, they remain largely scattered.
One of the main issues that start-ups and entrepreneurs in Sri Lanka have is funding. The other is adequate mentoring and networks linking them to the market. Enterprise Sri Lanka provides the answers to one of these issues but does little to meet the other needs to mentoring and markets. For decades, the Government has rolled out numerous programs to foster entrepreneurship in Sri Lanka but many of these have become import substitution efforts rather than export-focused ventures.
In today’s highly competitive world, companies need to be ‘born global’ so they are able to link to global value chains and grow into competitive industries.
However, the process for supporting companies, linking them to potential investors, and targeting export opportunities is extremely difficult. This process is also closely linked to improving Sri Lanka’s overall ease of doing business environment, where the Government has failed to make a significant mark. As the overall structural changes needed to make Sri Lanka’s economy more competitive lags behind, finding markets and supporting entrepreneurs becomes ever harder.
Not all entrepreneurs are successful. In fact many of them struggle, and even from the successful ones, still fewer become exporters. Entrepreneurship is the golden promise that all countries run after and few achieve. Keeping that in mind, the Government has to be more careful of how it spends public funds and aim to genuinely make, at least some of it, count.