Reaching 8%+ growth: Level playing field for SMEs & productive jobs a must, says young economist

A young economist has warned that unless Sri Lanka created a level playing field for small and medium enterprises (SME) more productive jobs, particularly for the youth, achieving a sustainable growth rate of 8 percent or more would not be possible.

"Inclusive growth is not only a good idea from a moral and ethical standpoint - but from a practical perspective too. If you don’t have more people productively employed, it restricts growth. Sri Lanka can’t get to the eight percent plus that we are aspiring to," Anushka Wijesinha, Economist, Institute of Policy Studies (IPS) said.

Addressing a recent forum on ‘National Policy for Social Integration: Access to Economic Activities and Employment’ organised by the Lakshaman Kadirgamar Institute for International Relations and Strategic Studies, Wijesinha said more needs to be done to generate inclusive growth and create opportunities for small and medium enterprises and the youth.

"When I worked in Economic Affairs at the Government Peace Secretariat many years ago, I had the opportunity to witness first hand how these two things come together - national integration and economics. From the Katkovalam Ice Factory in Point Pedro to the Kolanka Handloom factory in Pallakele, I’ve been fortunate to see, in action, how economic opportunities can help people and communities play a stronger part in the national economic growth agenda. And as stated in the Mahinda Chinthana policy document, or in reports by the World Bank or IPS, no longer are we going to be OK with an imbalance of growth and development between the regions of our country," he said.

He noted ‘inclusive growth’ did not mean more distribution, welfare payments, handouts, subsidies. "I mean economic growth through and through. But, in a way that everyone benefits from growth and everyone participates in creating that growth. So, the key in all this is access to productive employment," Wijesinha said.

"We all agree that creating these jobs will really come from the private sector. But within this, I want to put forward the idea of ‘inclusive private sector development’. And the key to making private sector growth inclusive is by focusing on Small and Medium Enterprises - SMEs. SMEs have that wonderful quality of being widespread and making a strong contribution to regional economic development and employment. But consistently, SMEs in Sri Lanka have been struggling. I would submit that if we get the SME sector right, we are more than half way there in this agenda of inclusive growth. Here are a few things we need to think about in this. We need a level playing field for SMEs. I’ve met many small businesses whether in the South or North, who just don’t feel that they have got a chance. A small entrepreneur in Trincomalee lamented that even the smallest of construction contracts in the local area were not going to a local SME, but to an outsider. This breeds discontent. In certain parts of the country, local small enterprises have to compete with military-run businesses which enjoy a completely skewed cost structure. This is alongside the myriad of other constraints that SMEs face - accessing finance, accessing information and markets, technology, mentoring, business development, etc. And these become trickier especially for young entrepreneurs and female entrepreneurs.

"We must also look at how easy it is for these entrepreneurs, especially young entrepreneurs, to do business. Now I know what you’re thinking – ‘ease of doing business’ - we’re doing really well on the rankings right? Yes, that’s very true. Sri Lanka has been steadily improving its ranking on the Doing Business Index, with strong efforts by the Central Bank and other agencies. But one thing we sometimes forget is that the DBI assessment is made in the country’s largest commercial city. So, that would be Colombo. But studies by the Asia Foundation and also IPS have shown that the doing business constraints that SMEs in the regions face, and must navigate around, can be very different and very difficult. We need to capture that and address it.

"Finally, two brief recommendations to consider in the policy formulation process and preparation of the action plan. Firstly, it may be a useful exercise to look at previous programmes that aimed to address both the jobs challenge and the economic disparities issue. Programmes like Gamata Karmantha, the BOI and IDB industrial estates scheme, the Tharuna Aruna scheme from way back in the day. All these may provide some instructive lessons on what to do, and indeed what not to do, this time around. Secondly, it would be important that this National Policy on Social Integration has congruence with other policies – prevalent as well as forthcoming. Particularly relevant to today’s discussion are: the National Policy on Employment and Human Resources Development, the National Policy on Youth (currently in draft), the National Enterprise Policy, and also the forthcoming National SME Policy," Wijesinha said.

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