Entrepreneurs and exports

Cabinet this week gave approval for the Trade Ministry to re-start Export Production Villages under a national program. The plan is to gather together villages in the same area and train them to produce goods for exports and link them with a company. Unfortunately, similar programs have existed in Sri Lanka since the 1980s but have done little to diversify or boost exports and may be outdated in the tech-focused, high-value markets of the world.

Something similar was attempted by the former Government with their 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 current Government will no doubt argue its plan is different and it would certainly need to be to achieve success.

While some 75% of all Sri Lankan enterprises are categorised as SMEs according to the Ministry of Industry and Commerce, the country still lags behind in relation to its regional neighbours when it comes to entrepreneurship.

In Vietnam, 19.6% of the working population are business owners or employers, while in Thailand, this number is even higher, at 27.5%. Countries with higher populations such as Bangladesh and China report 11.6% and 7.5% respectively, which correlates to a fairly large number in totality.

In countries with populations equal to Sri Lanka, the rate remains at a steady 10%. Sri Lanka by comparison has approximately 230,000 employers or business owners. As such it’s clear that the country dearly needs to increase the number of entrepreneurs in the country to realistically compete in the global economy and achieve its touted growth targets.

Producing goods as import substitution, however, has limited benefits. Instead they must be competitive export-oriented goods and this is extremely hard to achieve unless there are larger links built to connect to global value chains

Small enterprises and start-ups need adequate mentoring and networks linking them to international 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. Though 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 successive Governments have 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.

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. Simply designating villages will not work unless an entire support system is established to deal with the challenge of finding markets. This is the biggest challenge and so far one Sri Lanka has had little success with.