Constraints that impede SME sector growth
by Brian Tissera

Small industries are the engine of growth in Sri Lanka, specially outside Colombo and the Western Province. They are vital to local economic development which creates jobs and reduces poverty.

The International Labour Organisation (ILO), the Swedish International Cooperation Agency (SIDA) and the Ministry of Enterprise Development and Investment Promotions (MEDIP) implemented a project based on extensive consultations with provincial and district stakeholders in the government, private sector, SME and NGO".

The report titled "Enhancing the enterprise culture of Sri Lanka" forms the basis of the article. The project was designed and carried out by Nireka Weeratunga and Karin Reinprecht in four districts in Sri Lanka, Kurunegala, Puttlam, Anuradhapura and Polonnaruwa.

Three youth surveys conducted were consistent in showing low value attributed to the private sector and self-employment in general. Around 53 percent held the view that the private sector discriminated against candidates from low income groups and favoured known groups and individuals. Preferences for employment was crucial on the level of education, with 48 percent of those with primary education increasing to 62 percent of A/Level qualified candidates preferring government employment.

Similarly 40 percent of those with primary education declined to 12 percent of A/Levels for self -employment. Preference for private sector employment increased from 13 percent of primary educated person to 23 percent among those with A/Levels.

The comments made by youth on self-employment and employment in the private sector are noted below:

On self-employment

"Sri Lankan culture is such that it does not view self-employment as employment. It should not be like that. In marriage the male is required to have a stable job in the public or private sector. Self employment does not count very much to people," a youth from Hambantota said.

A youth from Jaffna had this to say: "There is a saying that even if one supervises a poultry farm, it must be a government poultry farm. The attraction of a government job is the pension when one retires. However, I prefer self-employment, but society does to respect educated people who are not employed in the government sector."

On employment in the private sector

A youth from Weligama said: "The state sector jobs are good. There is stability for the employees. Even though the salary is less, the private sector, with better salaries, could throw out employees in six months with paying the dues."

A Colombo youth had this perception: "I prefer the government sector because you get many benefits such as job security and cost of living allowances. The chances of getting fired are much less in the government sector."

It was agreed by all that business organisations had an important role to play in bringing peace to Sri Lanka, and also to be grounded in the social and cultural fabric of Sri Lanka.

Many private sector representatives complained that there was no enabling environment for people to go into business, both in terms of the regulatory framework and socio-cultural attitudes. The widely prevailing notion was that business people were exploitative.

Government officials while acknowledging the shortcomings in the development of the SME sector, such as a coherent policy, highlighted the weakness of entrepreneurs to register business and pay taxes.

Regarding the view on the status and respect received by entrepreneurs, the sentiments expressed were that large entrepreneurs generally have more status than micro and small ones and that respect was dependent on their social class background and connections.

It was also argued that Islam was generally more conducive to business and that Buddhism could be both constraining and enabling to business.

Core notions of success in life were mentioned as a good (well-built with all facilities) house, a good vehicle (car/van/four-wheel drive), modern household goods and good education for children. The core qualities necessary to achieve success were honesty/trust, hard-work/effort/perseverance, good relations/helping others/listening to others/respecting people and the environment.

What school leavers say about livelihoods and social respect

"Villagers respect people like doctors because they earn more money and have status," said a female Sinhala Buddhist A/Level student from the Kurunegala district.

"I think people here respect doctors, government officers, lawyers and teachers because they earn better incomes," commented a female Muslim A/Level student from the Polonnaurwa district.

"I want to enter campus. I want to get a degree. My parents also want me to go to the university. They prefer that I do accountancy. A lot of people here are doing the commerce stream," said a female Sinhala Buddhist, A/Level student from the Anuradhapura district.

School-leavers also had their say on business as a livelihood option

"I have no plans to do business. I have no idea how to do business. I donít like the business field at all," a male Sinhala Buddhist A/Level student from the Anuradhapura district said.

" I do not have any plans to do business. I think I canít give priority to business. I want to get a good education and do a job," was the comment of a female Sinhala Buddhist A/Level student from the Polonnaruwa district.

"I would like to go to Europe, a place where you can earn well. I donít have money to start a business. During the off season for fishing, its difficult to do business here. It takes a lot of time to make money from business. I want to earn fast by going to Italy," a male Sinaha-Catholic O/Level student from the Puttlam district opined..

The general view was that most entrepreneurs subscribe to religious and ethnic traditions which influence business practices. In the case of Sinhala Buddhists, certain trades are considered taboo such as livestock rearing for meat and trading in alcohol and pesticides. Being calm and patient are also important as well as being satisfied with what you get Ė an attitude which could curb high aspirations and business growth.

Many of the entrepreneurs prefer to remain in their "little wells" i.e. their immediate social environment around their home villages. In order to promote micro and small enterprise development, it is necessary to lower the current cultural and social costs of engaging in business.

This could be accomplished by activities such as a social marketing campaign, awareness raising and awards to entrepreneurs and public officials who support enterprise development by linking with appropriate institutions and programmes.


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