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Developing
SMEs through business incubation An analysis
of the Sri Lankan industries reveal that 90 percent of all business
establishments, 70 percent of employees and 55 percent of the gross
value added in the industrial sector is contributed by the small
and medium enterprises. Thus it is the responsibility of the contributors
to national development to identify the importance of the SMEs for
the socio-economic development of the country and to strategize
its development. In this new
economy, business incubators are considered to be an effective tool
in promoting business start-ups and SMEs. The consolidation of services
provided by the business incubators helps the business establishments
to grow fast and sustain themselves under open market conditions.
The multitude
of services provided by the business incubators are physical space
for business operations on a subsidised rate, shared services in
legal, accounting and secretarial and human resource activities
such as recruiting, shared resources such as the common fax machine,
common photocopiers, computer labs, auditoriums, etc, funding arrangement
for both initial capital and working capital, either through the
incubator or through other financial institutions, continuous business
development services, mentoring and access to the expert network
of the incubator Of the several
stakeholders of business incubators, under the present socio-economic
context, the government has a core role to play. The government
in this context should necessarily be a facilitator in promoting
business incubators. Whilst maintaining the policy of successive
governments considering the private sector as the engine of growth,
it has a greater responsibility in providing a conducive environment
for the development of business incubation in Sri Lanka. But, in the
context of a developing country the government has an extended role
to provide a stable macro-economic environment, relatively open
market conditions, supportive policies for the development of entrepreneurs
and SMEs, and state-of-the-art infrastructure for the business to
be competitive in the global market. The present
government, making positive moves towards the development of SMEs
and the incubation industry. has launched a massive SME development
programme. The proposed SME white paper setting out the vision and
strategy for the SME sector is a positive action directly aimed
at the development of SMEs and indirectly the business incubation
industry. The following
factors are discussed with the objective of utilising the potential
of business incubators for national economic development and the
task ahead of the government to initiate the development of SMEs
through business incubation: National
level steering committee It will also
recommend improvements for the development of the industry and gear
the industry in line with the global trends. Acting as the connecting
hub of the different stakeholders of the incubation industry it
can promote dialogue between the stakeholders in order to reap the
maximum benefits of the network of the incubation industry and SMEs. Standard
definitions Stable policy
orientation Infrastructure
facilities One of the
most needed improvement in this regard is further liberalisation
of the telecommunication sector, facilitating new gateways to the
country and strengthening the regulatory aspects to promote healthy
competition in the market and to curb unlawful activities. Other infrastructure
facilities such as the road and railroad transportation, ports and
airports have to get continuous attention for possible development
potential. Uninterrupted power supply to the business sector is
of grave importance for the development of the sector. Improvements
made to coordination among the responsible institutions in promoting
and implementing general infrastructure projects would make the
infrastructure development complementary. The relevant ministries
should promote infrastructure development assistance programmes
through donor agencies. National
level database It is evident
that there is a dearth of information with regard to the SME sector
in Sri Lanka. The government should establish a comprehensive national
level database and develop an effective mechanism for data collection
at central, provincial and district level. Funding Governance It should also
promote a flexible and user-friendly attitude on the part of the
public administration particularly, in the interactions with the
business community and the public in general. New net-driven
governance structures should be introduced to the public sector
organisations in order to facilitate Internet-based co-operation
using B2B (Business to Business), B2C (Business to Consumer), B2G
(Business to Government) and G2C (Government to Consumer) type of
web communication. It is necessary to simultaneously develop a legal
framework, which recognises the legality of the transactions carried
out using the Internet. Another aspect
to be looked into is the Intellectual Property Laws of the country.
The government should take the necessary steps to strengthen the
intellectual property laws and to conduct awareness programmes on
protection of intellectual property rights. Public-private
partnerships Regional
cooperation For example,
the South Asian Association for Regional Co-operation (SAARC), the
Indo-Lanka Free Trade Agreement (ILFTA), BIMSTEC and the Bangkok
Agreement in which Sri Lanka has membership, offer opportunities
that could be exploited to promote "knowledge spillovers"
through high technology based Foreign Direct Investments (FDI).
This intra-regional collaboration could subsequently be extended
into inter-regional collaboration. For example,
India, which has a comparatively mature IT sector and incubation
industry, could be utilised for mutually beneficial bilateral support
programmes. It is evident that India has identified the growth potential
in this sector thus resolving to develop technology business incubation
in their "Bangalore Declaration". The Sri Lankan government
should take India and other successful countries into consideration
while formulating national strategies. Conclusion Strategies,
forecasts favour growth in key Sri Lankan industries The chairmen
of three of the 16 Industry Task Forces set up under the Ministry
of Enterprise Development, Industrial Policy and Investment Promotion
revealed plans at a workshop last week on "Strategies for growth,
how will the industry compete?" This was the
culmination of a dialogue between the ministry and the private sector,
in order to enhance and create a culture of competitiveness, which
in turn will create value in industries that will lead to sustainable
increases in productivity, a statement from the ministry said. Minister Prof.
G.L. Peiris delivering the keynote address, emphasised that for
Sri Lanka to generate national wealth and a rising GDP, industries
must become more competitive in the global market place. "The
complexities of globalisation and dependence on external economies,
prompts us to rethink our strategies and approaches. With innovation,
creativity, technology, HRD, flexibility and an open and transparent
government, higher value products and services can be created, if
industries work together as a team, appreciating each other's perspectives
and needs, arriving at a consensus on strategies and policies to
drive the industry forward." Ceramics Outlining the
constraints and problems in the industry at present, Wijesinghe
says that there is very little R&D within the industry which
hinders technical capabilities and growth. "Supply chain management
is lacking and the supply of raw materials, though of excellent
quality locally, is inconsistent. Internal supplies of support materials
are scattered and ineffective, and communication among the industry
is fragmented." The Ceramics
Task Force has identified three strategic initiatives to help the
industry address these constraints and become a leading supplier
of ceramic products in the areas of design and marketing excellence,
supply chain management and the creation of centres of technical
excellence. "We aim to create a 'Ceylon Quality' umbrella for
worldwide recognition initiated through branding, publicity and
face to face meetings with buyers. We also want to have energy cost
and internal supply chain management, process control and productivity
improvement. There will also be an initiative to upgrade the technical
workforce and leadership in new technologies and industries for
advanced technology training, creating a certification agency, establishing
linkages with international universities and upgrading technical
facilities and equipment," Wijesinghe said. With a gradual
shift in global shoe manufacture from developed to developing market
economies, the main benefactor in the process has been Asia, increasing
its production share from 40 percent to 70 percent in the last two
decades. "Although the footwear industry in Sri Lanka grew
from $27 million to $70 million from 1993 to 97, over the last few
years it decreased to just $33 million in 2001," explained
D.C. Nathaniel, Chairman of the Footwear Industry Task Force. Cheap imports However, the
industry has immense potential and currently employs around 30,000
people and could, given the correct input, easily absorb any unemployment
resulting from the phasing out of the Multi-Fibre Agreement."
The availability of trained stitching operators is one of Sri Lanka's
major assets and could greatly facilitate the development of an
upper stitching base in Sri Lanka, which in view of its highly labour
intensive operation could pave the way for significant levels of
employment. "There
are also opportunities to develop support industries, shift consumer
interest to natural rubber-based products as opposed to PVC which
is banned in several countries and save foreign exchange through
import substitution." The Task Force
proposals include enhanced financing facilities to enterprises,
introduction of investor friendly labour regulations, amendment
of holiday patterns, inclusion of footwear in the proposed FTA with
the US, seeking duty free access to Europe through current trade
negotiations, imposition of a floor price of $5 per pair on imports
of all footwear and the duty free import of leather until the Hambantota
Bata-Atha complex becomes operational, while strengthening and developing
facilities available at the complex for the development of the industry. The leather
sector covers the entire spectrum of raw hides and skins to production
and exports of a wide range of leather products. The aggregate earnings
of developing countries rose from $2,700 million in 1980 to over
$18,000 million in 1995, due to the relocation of the global leather
industry to developing countries in South East Asia and South America.
"Unfortunately,
Sri Lanka has been unable to cash in on the good fortune of our
neighbouring countries, due to not much attention being paid to
problems that were faced by the industry," said Nimal Samarakkody,
Chairman of the Leather Industry Task Force. "There
seems to be a change though with the launching of the Bata-Atha
project, the National Leather Industry Development Programme and
this Task Force." This highly labour intensive industry, with
many craft processes has in the past three years, seen development
in the level of mechanisation processes and scientific and technological
advancement. "We have lost about $7 million due to poor quality
and improper collection of raw material," says Samarakkody.
"In addition, the short term cost of relocation/modernisation
of the tanning industry is high, trendy accessories for leather
goods manufacture are not easily available, limited HRD, lack of
marketing support facilities, high cost of finance and limited practical
technical skills add to our problems." Incentives Ranjith Fernando,
Secretary to the Ministry in his closing remarks said that there
are 16 industries headed by Task Forces, which will spearhead and
initiate improvement and development of those industries, to enable
Sri Lanka to compete successfully within the region. "This
public and private sector partnership is vital in our march forward,"
he said. "The paradigm has to be established now so that we
can reap the benefits for the entire country very soon." |
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