Challenging prospects for IT/BPO sector amidst brain drain

Last week, Sri Lanka Association of Software and Services Companies (SLASSCOM) Chairman Jehan Perinpanayagam rang an alarm bell when he remarked that the IT/BPO sector has experienced significant brain drain in the recent past, particularly among middle management employees, at a press conference organised by the National Chamber of Exporters of Sri Lanka (NCE). Undoubtedly, this is a worrying sign for the economy as the policymakers had placed high hopes about the IT/BPO sector in terms of substantially raising the nation’s foreign exchange income as well as transforming the export dimension of the island.

The IT/BPO sector was considered as the main pathway through which the export earnings could be diversified into high-value sectors in order to overcome Sri Lanka’s dependence on low-value commodities such as tea, rubber, spices, and apparel. Also, the industry was considered as a thrust/focus sector by successive administrations because of its high potential. As the country does not possess commercially valuable mineral resources, IT and logistics are few of the avenues that offer hope and promise to drive the economic transformation the nation desperately requires. The industry’s growth was propelled by the highly educated workforce in the country though limited in size compared to regional competitors such as India and the Philippines. 

According to SLASSCOM, the ICT/BPO industry was the third highest export revenue earner during 2022, providing employment opportunities to over 150,000 employees. The industry is held in high esteem for offering high-paying jobs to the country’s youth apart from generating valuable foreign exchange income to the country. Foreign investments were attracted to the sector owing to the skilled workforce, competitive operational cost structure, and English language proficiency. The Sri Lankan software companies serve a range of services like telecommunications, banking, financial services, insurance, and capital markets, primarily targeting clients in the US and European countries.  bOver the last two years, the export income from the IT/BPO services has demonstrated a considerable decline. Even during the years of the COVID-19 pandemic, the inflows from computer services increased notably, perhaps due to the heightened importance of the digital technology on account of the travel restrictions and work-from-home arrangements that were enforced by the governments across the globe. During 2022, inflows from the IT/BPO sector declined to $ 1,066 million from $ 1,168 million in 2021. Last year, the earnings from the sector further decreased to $ 795 million as per the latest Central Bank Annual Report. 

According to the Central Bank, the economic instability that prevailed within the country in 2022 had prompted many professionals in the IT sector to explore better opportunities beyond the country, resulting in a significant dearth of experienced professionals in the industry. Further, the mandatory conversion of proceeds of exports of services, which was in force for a short period during 2022, forced several IT companies to close down their operations in the island and move their operations elsewhere. SLASSCOM had a target of achieving $ 5 billion worth of export income from the industry by 2022 but reaching that milestone has been postponed to 2030.

A large number of IT professionals left the country with the onset of the economic crisis and it is unlikely that trend would reverse in the foreseeable future. The exodus of middle-management IT professionals would be a huge loss for the industry and all the lofty aspirations the country had about the industry would have to be abandoned. The void left by the departure of such highly skilled employees cannot be easily replaced. The SLASSCOM Chief had urged the Government to grant permission to IT/software companies to hire foreign talent. Nevertheless, one might express scepticism about the feasibility of attracting foreigners to a country where its native citizens too are yearning to leave.