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Sunday Nov 24, 2024
Tuesday, 14 October 2014 00:01 - - {{hitsCtrl.values.hits}}
Yesterday a key session discussed the aspect of creating an enabling environment for SMEs and the role of the public sector whilst the thorny issue of access to finance discussion involved several top banks.
Tomorrow the forum will take up the future strategic direction. The forum concludes with a matchmaking session linking up SMEs with large companies.
Supporting the Ceylon Chamber of Commerce initiative are NDB Bank, the lead bank and principal sponsor, Germany’s GIZ as lead strategic partner and SLT and The Asia Foundation as strategic partners. The Supporting banks are Sampath Bank, People’s Bank, HNB and Commercial Bank. The associate partner is IFC whilst matchmaking partners were Hayleys Agriculture, CIC and Keells Super.
Ceylon Chamber Chairman Suresh Shah expressed the hope that the forum would be an integrated approach in facilitating SMEs in Sri Lanka to live up to their full potential.
“We do this in the full knowledge that the Chamber is but a small cog in a much larger wheel; a number of other stakeholders – including policy makers – have a greater role to play and we hope that the forum will be the start of a strong partnership aimed at SME development in Sri Lanka,” he told the ceremonial opening.
He said that SMEs are the lifeblood of a nation’s economy. “Statistics of many countries suggest that SMEs represent almost 99% of all companies and that they have a substantial influence on both GDP and the supply of jobs. It is said, that as much as two thirds of all newly-created jobs, are owed to SMEs. In Sri Lanka, estimates suggest that more than 75% of all enterprises fall into the SME category whilst they account for approximately 45% of the country’s employment,” he said.
He also said SMEs are the fountain of great innovation and SMEs help more equitable distribution of wealth.
To move the process forward let me leave three suggestions for consideration:
“First, a request to big business. Build strong, sustainable supply chain linkages with the SME sector. Do more business with SMEs and also help build capacity and transfer knowledge. Strive for a win-win relationship rather than negotiate for the last rupee.
“Second, a request to policymakers. Tilt the policy framework in favour of the SMEs. This is only fair since many other factors are tilted against them. Let the policy framework facilitate growth of firms both into the SME sector and out of it. Most important, make it easy for SMEs to do business and grow.
“Thirdly, a request to both policymakers and big business. For too long now, the Sri Lankan ethos has worked against private enterprise. A businessperson is treated with suspicion of making a fast buck rather than with the respect deserving of a person who creates employment, pays taxes and meets the needs of consumers. Unless this belief system is changed, our young will prefer safe employment in the public sector rather than contribute to productive economic growth via entrepreneurship and the creation of SMEs. It would require a partnership between Government and big business to drive this change and I do hope we can start on this process sooner rather than later.
“Finally, I would like to leave a thought for those of you in the SME sector as well. Today you operate in a world in which knowledge is increasingly replacing finance as the key ingredient of success. Companies such as Microsoft and Apple are examples of this. These companies had little or no cash at the start, only the ideas and the courage of their founders. Further, the advances in information technology - thanks indeed to companies such as Apple and Microsoft - means that the world has become a smaller, more accessible place. The idea you have may not suit a Sri Lankan consumer but never mind; if it serves the needs of someone in New York or Beijing or anywhere else, you will get to know of it and have the opportunity to meet that need. In short, it’s a world of opportunity and I sincerely hope that the Chamber can play a role in helping you reach your goals.”
The German Embassy’s Deputy Head of Mission, Dr. Michael Dohmen said SMEs have played a key role in boosting Sri Lanka’s economy and sustenance of future growth depends on further encouragement.
He said in Germany there are two million SMEs and they account for 99.3% of all enterprises. “SMEs are also the power behind the large corporations,” he stated.
“Sri Lanka too can and should benefit from the strength of the SMEs. For these improved initiatives to foster, SMEs are important,” added Dr. Dohmen who also cited some of the programs and projects Germany has extended to Sri Lanka in this regard such as the German Tech in Moratuwa and the new unit in Kilinochchi.
Rational empowerment policy
World Bank Asia Region Global Practice Manager Dr. P.S. Srinivas spoke on the role of SMEs in economic development and international experience and perspective, and IFC Senior SME Banking Advisory Service Specialist Andrew McCartney shared the IFC experience in global and regional SME development and its relevance to Sri Lanka whilst GIZ Senior Advisor German Muller spoke on GIZ experience in global and regional SME development and its relevance to Sri Lanka.
The World Bank’s Srinvas listed several reasons why a rational policy is needed to empower SMEs. They included: SMEs represent all but 0.2 % of enterprises, account for nearly 80% of jobs, but for only 37% of GDP and 24% of exports; Most are in low value added activities, and in services, despite SME policies in almost all countries; They are generally less productive than larger companies and most remain small, over time; Only a small portion (1 percentile in most Asian countries) grow and account for the bulk of value added and jobs; Most remain small over time; Rate of informality is high; SMEs face different constraints compared to large firms; Suffer more than large firms from weaknesses in the investment climate, lack of access to finance, and lack of leverage with Government; and constraints vary by stages of development of SMEs.
In that context, the World Bank official said a typical approach to SME programs has been “throwing money at the problem” where well-intentioned governments try to remove constraints but in most cases end up failing.
He also said too many programs, too many implementing agencies, no or inadequate M&E, limited adaptation of programs based on evidence was another issue.
There also has been an excessive focus on incentives, tax breaks, subsidies, reserve sectors as well as fiscal incentives – reduced tax rates, tax holidays, investment tax credits, VAT exemptions, lower import duties.
Another approach is SME-specific bank branches, SME bank lending targets, interest rate subsidies, credit-guarantee schemes whilst Srinvas said, adding input subsidies were typically in agriculture.
“Are these being done because they are the right things? Or because these are relatively easy to implement – effective or not?” the World Bank official questioned during his presentation.
Srinivas shared an alternate approach at the SME Forum.
He emphasised that the need to take a strategic, comprehensive, demand-driven approach whereby Governments and private sector can be ready to change and adapt.
It was suggested that focus on addressing market imperfections, market failures and information asymmetries – will help create markets, avoid having “permanent” programs. This will also reduce fiscal burden caused by ineffective programs.
The importance of SME strategy facilitating entrepreneurship and enabling small firms to grow was stressed with Srinivas saying strategy should be evidence-based and flexible as realities change and outcomes are evaluated.
World Bank official said effective SME development revolves around shared responsibility, and public-private partnerships will be important with the Government acting as a facilitator and catalyst.
The IFC’s McCartney in his presentation emphasised that SMEs are crucial for the creation of jobs, to reduce poverty and increase the shared prosperity.
He said the environment has improved for SMEs globally, but access to finance remains a key constraint for their growth, with a $ 1 trillion credit gap remaining globally.
Since helping SMEs is the topmost strategic priority, IFC is working with the G20 and has identified a number of areas that policymakers need to consider in further supporting SMEs. “These recommendations have also driven IFC’s own strategy to support the financing of 10 million SMEs by 2020,” McCartney added.
Sri Lankan SMEs
Focusing on Sri Lanka, the IFC official said SMEs are a key segment in Sri Lanka representing some 50%+ of GDP, but access to finance remains a constraint.
“Our strategy for Sri Lanka is focusing upon addressing key areas, including informality, gender, furthering a financial institution’s outreach with a focus on post-conflict and lagging regions, as well as targeting specific growth sectors such as agriculture and tourism.
“IFC, as a market leader in this space, has the investment and advisory products and services needed to further support SME growth in Sri Lanka,” McCartney added.
GIZ’s Muller in his presentation narrated a typical experience of a startup entrepreneur encountering various barriers and delays in the process. He said SMEs can only be empowered by addressing the various bottlenecks effectively and efficiently. The need for a cohesive approach by all stakeholders was also stressed.
Following the inaugural session, the SME Forum, the first plenary session focused on creating an enabling environment for SMEs and the role of the public sector. The Institute of Policy Studies Executive Director Dr. Saman Kelegama was the presenter and moderator with Traditional Industries and Small Enterprise Development Ministry Secretary V. Sivagnanasothy, National Enterprise Development Authority Chairman N.M. Shaheid, Technology and Research Ministry Additional Secretary Madhawa Waidyaratne, Industry and Commerce Ministry Additional Secretary Asitha Seneviratne and Hambantota District Chamber Past President Azmi Thassim as panellists.
The plenary session titled ‘Capacity building through technology and knowledge transfer’ was dealt with by a panel comprising Hotel Management and Human Resources Specialist Sunil Dissanayake (capacity building for SME management), Moratuwa University Deputy Vice Chancellor Prof. R.A. Attage (role of technology and innovation), Industrial Technology Institute Chairman Prof. W. Abeywickreme (Upgrading SME capacity through technology and knowledge transfer), Hayleys Agriculture Holdings Managing Director Rizvi Zaheed (diversification, commercialisation and scaling up of SMEs) and Association of Small and Medium Enterprises in Tourism Immediate Past President Suresh De Mel (access to services). It was moderated by GIZ Advisor SME Policy and Technology Transfer Hasitha Wijesundera.
The session on access to finance focusing on making financial services accessible, available and affordable featured NDB CEO R. Theagarajah, Sampath Bank CEO Aravinda Perera, HNB CEO Jonathan Alles providing a commercial bank perspective. CA Sri Lanka President Arjuna Herath spoke on financial reporting and Sabaragamuwa Province Chamber of Commerce and Industry Past President Chamlee Gunaseela shared the SME sector perspective.
Today the SME Forum will kick off with a focus on marketing and positioning of SME products and services with CIC Holdings Managing Director Samantha Ranathunga as the moderator. The panellists will be Samson Group GM Sales and Marketing Rohan Somawansa (creating markets for SMes), SLSI Director System Certification Samanthi Narangoda (Products and Services standardization), Norway Advance Business Partners Senior Business Partner Tom Albrigsten and Business Partner Cornelia Bjaaen (aligning product with market need); SLT Manager SME Daya Shantha Mapa (ICtT for market consolidation), Lucky Lanka Milk Processing Chairman Lal K Gunawardana (challenges faced by SMEs in marketing their products and services) and CIC Holdings MD Samantha Ranatunga (supply and value chain linkages).
There will be a session on entrepreneurship, green growth and resource efficiency prior to lunch with PIM Senior Consultant and Board of Study Member Dr. Travis Perera as the moderator and the panellists being Eswaran Brothers Deputy Chairman S. Essuwaren (concept of green growth in SME development) and moderator Perera and Oceanpick Director/Founder Ifran Thassim speaking on entrepreneurship.
The SME Forum will conclude with a session on the future strategic director focusing on the big picture for SMEs in Sri Lanka. It will be moderated by CCC Solutions MD Chandula Abeywickrema. The panellists will be Central Bank Deputy Governor Ananda Silva (enabling mechanisms to facilitate greater access to finance for SMEs), Deputy Secretary to the Treasury Dr. B.M.S. Batagoda (Institutional support to create thriving SMEs) and Traditional Industries and Small Enterprise Development Ministry Secretary V. Sivagnanasothy (National policy framework for SME development).
Pix by Lasantha Kumara
