‘Made in Sri Lanka’ project to generate 100,000 jobs for youth via promotion and setting up of MSMEs

The ‘Made in Sri Lanka’ project while supporting MSMEs will generate 100,000 jobs in the rural sector and give a big boost to agriculture, handicrafts, horticulture, poultry, inland fishing, dairy farming, garment manufacture, IT services, food processing, etc. – Pic by Shehan Gunasekara 

The CMA Sri Lanka COVID 19 SME Development Committee has formulated the ‘Made in Sri Lanka’ project to obtain Government support in Budget 2022 to focus on MSME development in rural areas to produce goods and services using local raw materials and agricultural farming and linking them with the retail markets, big companies, government institutions, export houses, domestic preparers to provide support in marketing, improving quality, productivity, skill development, better education, bringing down the cost of doing business by producing goods, services and agricultural products to the domestic and export markets.    

The ‘Made in Sri Lanka’ project while supporting MSMEs will generate 100,000 jobs in the rural sector and give a big boost to agriculture, handicrafts, horticulture, poultry, inland fishing, dairy farming, garment manufacture, IT services, food processing, etc. 

Budget 2022 will provide incentives such as tax holidays, lower tax rates, other infrastructure facilities and support to promote the MSMEs as well as the specialized institutions that will be set to assist these organisations and contribute to the rural economy and contribute to the Sri Lankan economy.

1. MSME Development Act

A very important and necessary proposal to the Budget 2022 is to formalise the support to MSMEs by Incorporating a MSME Development Act to be enacted with an object of a definition of MSMEs,  promotion, development and enhancing the competitiveness of Micro, Small and Medium Enterprises (MSMEs). This Act, to provide for the establishment of a National Board for Micro, Small and Medium Enterprises, which is a statutory body having high level forum for making policy decisions and programs for development of MSMEs.

2. ‘Made in Sri Lanka’ project 

The MSME sector is the backbone in the economy and is found in all sectors of the economy and accounts for 52% of the GDP and 45% of the total employment, whilst making up more than 75% of the total number of enterprises in the country.

The ‘Made in Sri Lanka’ project will be undertaken throughout the country and will be applicable to all new projects and existing projects expanding their capacities. The products will include all industrial, handicraft, handloom, agricultural and services.

All projects registered under the ‘Made in Sri Lanka’ project will be given a distinctive number to be eligible for the special facilities provided under this project.

All products of these MSMEs under the ‘Made in Sri Lanka’ project will be given the highest priority to market them to the private sector, Government ministries, public sector institutions, State corporations and retail trade and these institutions that purchase these products or services will be granted 50% waiver on the tax on the profits applicable to these items.    

All banks will have a separate Help Desk in all their branches to assist investors, entrepreneurs looking for financial and other assistance under the ‘Made in Sri Lanka’ project.

All chambers of commerce and industry and regional chambers will also be involved in the ‘Made in Sri Lanka’ project and will actively provide the linkages between the large companies and the MSME units. This will enable lower cost of production and enable the improvement of the quality of the products, provide raw materials, etc. and will market and buy back the products from MSMEs, making them sustainable ventures. 

The companies that buy products from MSMEs will be granted a tax exemption or 50% of the normal tax as they are buying ‘Made in Sri Lanka’ products and services from registered MSME projects and playing a major role in the development of the economy of Sri Lanka.  

3. Establishment of SME Credit Guarantee Institution

The proposal for the setting up of the SME Credit Guarantee Institution, a long-felt need of the SME sector, was made by the CMA Sri Lanka COVID 19 SME Development Committee to the Minister of Industries who submitted a Cabinet Paper in 2020 and this was approved by the Cabinet of Ministers in April 2021 after receiving the recommendation from the Ministry of Finance and the support of the Asian Development Bank which will provide funding for the project.

The Government should take steps to expedite the commencement of the of the SME Credit Guarantee Institution which will enable entrepreneurs and startups without collateral to obtain loan facilities from banks by providing guarantees based on their projects. This will accelerate economic growth, improve access to finance and accelerate investments of SME investors who are unable to provide collateral or security to banks and other approved financial institutions to obtain loan funding for their projects. 

4. Proposal to set up export houses for promotion and development of exports of MSME sector

This proposal will envisage the support under the Budget 2022 to set up export houses for the promotion and development of exports of the MSME sector. All institutions selling to export houses will be treated as indirect exporters and will enjoy the same benefits as export houses that do the direct exports. It is expected that with the implementation of the export houses concept the exports of MSMEs will be increased from the current 5% to 25% within a period of three years. The increased exports will bring in the valuable foreign exchange into the country.

All export houses to be granted a five-year tax holiday and the same to apply to indirect exporters who make supplies to export houses.  

5. MSME consumer products preparers

This Budget 2022 proposal is for supporting the ‘Made in Sri Lanka’ project by setting up: MSME Consumer products preparers who supply MSME agricultural/industrial consumer products to retail markets. These MSME agricultural/industrial consumer products preparer will be part of the supply chain which will support SMEs by buying SMEs’ raw products and improve the quality, add value, process as necessary and supply to the retail market and once developed will be able to cater to the export market.

These institutions to be granted a five-year tax holiday and the retail trade buying from these institutions will enjoy 50% of the normal tax on profits derived from such sales. These projects set up at village level will help the growth and development of rural agriculture and cottage industry.   

6. Conclusion

With the thrust given to the MSME sector by the Government in Budget 2022 with the active participation of the MSMEs combined with the private and public sectors the Sri Lankan economy will be given a major boost and will provide a reawakening of the rural sector generating a minimum of 100,000 new jobs with the launch of the ‘Made in Sri Lanka’ project.

(The writer is President – CMA Sri Lanka and Co-ordinator – CMA Sri Lanka COVID-19 SME Development Committee.)