Malik holds strategic brainstorming on innovation and entrepreneurship

A workshop was held at the Ministry of Development Strategies and International Trade to discuss strategic aspects for developing a national system which supports innovation and entrepreneurship in Sri Lanka. 

Development Strategies and International Trade Minister Malik Samarawickrama spoke on the vision for Sri Lanka’s economy as it liberalises to trade with regional partners. Minister of Science, Technology and Research Susil Premajayantha and State Minister for International Trade Sujeewa Senasinghe were also present at the event. The other participants at the workshop were senior Government officials, representatives from the research sector, private sector leaders, investors, members of the startup community and World Bank experts. 

The following are Minister Samarawickrama’s opening remarks. 

I would like to thank all of you for allocating time from your busy schedules to discuss and contribute to this extremely important and indeed timely topic on how enhancing innovation and entrepreneurship could be a vehicle to improve the export competitiveness of Sri Lankan enterprises. 

It is well understood that one of the key factors in establishing competitive advantage in competitive markets is through the development and commercialisation of high value products and services. To deliver on such products, it’s imperative that the country emphasise innovation and entrepreneurship.   Successful innovation and entrepreneurship rely on high value research outcomes, be they publicly or privately funded.

The Government of Sri Lanka’s National Economic Development Plan (Balagathu Sri Lankawak) was unveiled in January 2017. This plan identifies that in order to create long-term employment and improve income we should move towards an export economy. Furthermore, it identifies facilitating business initiation and improvements, becoming a member of the global product chains, the creation of a powerful and modern digital economy as key aspects that need to be looked at in conjunction to achieve this goal. 

In my opinion, innovation and entrepreneurship stands at the center of all these components providing the basis to achieve our goal of creating a positive investment climate and a trade regime that will generate more and better jobs for the youth of our country. Our plan to create development corridors that will be set up for investment in the public and private sectors with the role of the private sector being duly recognised to offer additional exposure and opportunities for entrepreneurs and professionals with the focus on digital economy, tourism, commercial agriculture as well as accelerating the process of industrialisation, is a key highlight that shows the Government has identified innovation as a key driver for progress. 

However, given the size of the small market of 21 million people in the country, we understand that the growth potential of Sri Lanka inevitably lies in global integration. To benefit from opening itself up for trade, Sri Lankan products and services will need to be able to successfully compete domestically, but also in the highly competitive international markets.  

A select few Sri Lankan enterprises have shown rapid growth in export-oriented products. For example, the apparel industry has moved from a commodity export model to targeting niche markets for higher-value added production. There is also a nascent but growing digital industry reflecting greater export potential. 

However, these islands of success are few in number. Compared to countries like Thailand, Malaysia, and Vietnam, the export product mix in Sri Lanka has not changed much since the 90s. In fact, exports as a percentage of GDP have declined significantly in recent years.  The slow growth of exports is due to very little diversification. When Vietnam added 48 new products/line items and Thailand added 70 items into their export baskets, Sri Lanka has added only seven new businesses to our export basket during 2000-2015. Further, Sri Lankan exports tend to be commodity products rather than higher value products and services.

We are very ambitious that the GSP+ preferences will make a significant contribution to Sri Lanka’s economy through increasing exports to the EU market beyond the traditional exports. After signing the three FTAs with India and China we will have access to a market of three billion. These are the avenues for new businesses and quality products.  

But at the same time, we need to identify what are our challenges, what will prevent our small businesses gaining new opportunities from such avenues. The following are few findings that came up in the rapid assessment the World Bank team conducted on the request of the Government on Sri Lanka’s innovative and entrepreneurial environment. 

There are a number of factors that inhibit the formation and development of innovative startup companies which are often the source of innovative business models, products and services that can have a transformative economic impact. These detrimental factors include a variety of policy, regulatory and tax issues, the lack of a robust innovative technology pipeline and a very nascent early stage venture capital and angel-funding network in Sri Lanka.

SMEs in Sri Lanka generally lack the knowledge and experience required to adopt and adapt new technologies and thereby develop newer/higher value products and services to address domestic and international market opportunities. It’s also the case that SMEs in Sri Lanka are removed from and unable to access global value chains which may offer them the opportunity to sell their products and services in international markets.

The focus of the R&D that is being undertaken would benefit from a less traditional, academic focus to one that focuses on creating economic value for Sri Lanka. As a middle-income country aspiring to embark on a knowledge-based growth trajectory, Sri Lanka’s expenditures on R&D at 0.16% of GDP could be a lot higher.  

Over several years, the ministries make their efforts to address these issues. It is evident that we cannot tackle all these challenges in isolation, but instead we need to come onto one platform where we can have a holistic approach. I believe today’s discussion will be the first step towards this path.  

We welcome the opportunity to work in close partnership with the World Bank and other organisations to help Sri Lanka become a highly competitive economy and fast track to an upper middle income country.