Govt. support for the IT sector
Sri Lanka has faced a turbulent economic environment in recent years, characterised by rising inflation, foreign exchange shortages, and a challenging fiscal situation. While Sri Lanka is now on a path to recovery, the economy remains fragile, with a heavy dependence on foreign loans and international assistance.
One sector that remains resilient despite the national challenges is Sri Lanka’s IT industry. The country’s IT sector is a key player in Sri Lanka’s economy, contributing significantly to its gross domestic product (GDP). In fact, it is one of the top 5 income-generating sectors, alongside traditional industries such as tea, textiles, and tourism.
However, despite its importance, the IT sector has not received the level of attention and support it deserves from the government. There are several factors contributing to this neglect, including the lack of a coherent long-term strategy, limited investment in infrastructure, and the insufficient development of human capital in technology fields. In addition, Sri Lanka’s focus on more traditional sectors has overshadowed the potential of IT to drive economic growth, innovation, and export revenues.
Addressing systemic challenges in the IT Sector
The IT sector often faces systemic challenges that hinder its growth and contribution to the national economy. One such issue is the lack of recognition and support for companies driving foreign exchange into the country. Over the last 12 years, many businesses, including ours, have worked tirelessly to bring USD into Sri Lanka through software exports and global partnerships. However, there has been little to no acknowledgment from officials or initiatives aimed at celebrating or supporting these efforts.
This lack of recognition is symptomatic of a broader problem: businesses in the IT sector often find it difficult to navigate the system unless they have personal connections or influence with government officials. This creates an uneven playing field, making it challenging for companies without such ties to contribute meaningfully to research and development or to expand their operations. Addressing this requires establishing transparent and merit-based programmes to recognise and support contributions from all businesses in the sector, irrespective of their connections.
Another critical issue is the lack of accessible and unbiased information about industry standards, particularly salary scales. Organisations like the Sri Lanka Association for Software Services Companies (SLASSCOM) do produce salary benchmarks, but these are often available only to paying members, creating barriers for smaller companies and start-ups. Furthermore, many of these organisations are led by CEOs and founders of established IT companies, which can introduce natural biases. This structure risks favouring established players while marginalising new entrants and independent voices.
To create a truly unbiased and inclusive environment for the IT sector, Sri Lanka needs an independent body tasked with developing industry standards, such as salary scales, career progression benchmarks, and R&D funding opportunities. This organisation should operate free from the influence of individual companies or stakeholders to ensure a fair and transparent ecosystem. Such a body could also focus on promoting skills and technical expertise rather than emphasising connections or affiliations.
Challenges faced by the IT Sector
The IT sector in Sri Lanka faces numerous challenges that hinder its growth:
1. Lack of Policy Support: The absence of a clear, consistent government policy focused on the IT sector has resulted in a lack of incentives for businesses to invest in technology-driven industries. There have been few measures to promote IT start-ups, and regulations have not kept pace with the rapid changes in the tech world.
2. Limited Investment in Infrastructure: While the country has made strides in improving Internet connectivity, there is still a lack of reliable infrastructure in many areas. Issues like power outages, limited access to high-speed Internet, and inadequate technological infrastructure in rural regions remain significant barriers to growth.
3. Skill Shortages: Sri Lanka’s education system has not yet evolved to meet the demands of the IT industry. Although there are many talented young professionals entering the workforce, the lack of advanced training and specialised courses in emerging technologies such as artificial intelligence, cloud computing, and data analytics means that the country cannot fully capitalise on its human capital.
4. Global Competitiveness: Sri Lanka faces stiff competition from neighbouring countries like India, the Philippines, and Bangladesh, which have well-established IT sectors. These countries not only offer lower labour costs but also have a more developed infrastructure and supportive government policies, making it challenging for Sri Lankan companies to compete in global markets.
The newly elected government in Sri Lanka has the opportunity to turn the IT sector into a major driver of economic growth. By focusing on several key areas, the government can help nurture and accelerate the development of the IT industry.
1. Policy Reform and Incentives for IT Businesses: The government needs to establish a clear policy framework that supports the IT sector. This could include tax breaks, grants, and other incentives to encourage businesses to invest in technology. The government should also introduce measures to attract foreign direct investment (FDI) in the IT sector, creating a favourable environment for global tech companies to establish operations in Sri Lanka.
2. Investment in Infrastructure: To support the growth of the IT sector, the government must invest in critical infrastructure such as high-speed broadband networks, data centres, and reliable power supply. Additionally, rural areas must be included in these efforts to bridge the digital divide. Enhanced connectivity will enable IT companies to function more effectively and create new opportunities in remote areas, boosting employment and economic activity across the country.
3. Education and Skills Development: The government should collaborate with universities, technical colleges, and private-sector players to develop specialised courses in emerging technologies. Public-private partnerships can play a significant role in providing the necessary training and internships to equip young professionals with the skills required by the global IT market. Programmes to upskill existing workers in the IT industry should also be a priority.
4. Creating a Start-up Ecosystem: The government can create a start-up-friendly environment by offering financial incentives, mentorship programmes, and business incubators. By encouraging entrepreneurship, Sri Lanka can cultivate a thriving ecosystem of innovative tech start-ups that can compete globally. Additionally, tax incentives for start-ups can help them scale up quickly and create high-value jobs in the economy.
5. Promoting Sri Lanka as a Global IT Hub: Sri Lanka needs to increase its visibility on the global stage as a destination for IT outsourcing and software development. This can be achieved through international marketing campaigns, trade missions, and partnerships with global tech giants. Highlighting the country’s strengths—such as its’ highly educated, English-speaking workforce, and relatively low cost of living—could attract international businesses looking for high-quality IT services at competitive prices.
6. Supporting R&D and Innovation: The government can foster R&D in emerging fields such as artificial intelligence, blockchain, and fintech. By funding R&D initiatives and providing grants for innovation, Sri Lanka can position itself as a leader in next-generation technologies. Collaboration between universities, research institutes, and the private sector will be key to developing cutting-edge solutions that drive long-term growth.
7. Independent Governance: Create an independent, unbiased body to oversee the development of industry standards, salary scales, and R&D funding, free from the influence of individual stakeholders.
Conclusion
By addressing these challenges head-on, Sri Lanka can unlock the true potential of its IT industry and position itself as a global leader in technology and innovation. The IT sector has the potential to be a cornerstone of the country’s economic recovery and growth, but it has been neglected for far too long. The newly elected government has a unique opportunity to reverse this trend by implementing targeted policy reforms, investing in infrastructure, and fostering a thriving, unbiased tech ecosystem.
(The writer is CEO of US-based ChampSoft)
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