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The Task Force (TF) appointed by the Government to formulate a ‘National Strategy for Small and Medium Enterprise (SME) Sector Development in Sri Lanka’ has recommended the setting-up of an SME Authority (SMEA) as a ‘one stop shop’ for SMEs.

The TF which was headed by the Executive Director Institute of Policy Studies (IPS) Dr Saman Kelegama has defined a medium scale enterprise as an enterprise with asset values not exceeding Rs 50 million per enterprise, excluding land and buildings. It has defined a small scale enterprise as an enterprise whose asset values do not exceed Rs 20 million, excluding land and buildings.

The report says SMEs encompass agriculture, manufacturing and service sector establishments. However, reliable data is available only for the manufacturing sector. Within the manufacturing sector, small and medium scale industries (SMIs) account for 96% of industrial units, 36% of industrial employment and 20% of value added.

It also says that the growth and expansion of SME’s are constrained by problems relating to products and markets. Lack of institutional support and policy inertia have further reduced the potential contribution of SMEs to the national economy.

For SMEs to be globally competitive through an entrepreneurial culture committed to sustainable growth, requires the SME sector to be dynamic, robust, innovative and technologically driven, the report says.

Meanwhile, the TF further says that the SMEA should be a powerful single-point administrative structure which could cut across administrative and financial barriers and ‘fully implement the recommendations of this white paper.’

It should also have powers to formulate policy, expedite approvals from other government agencies and resolve issues encountered during project implementation. It should be an independent body which could coordinate and facilitate licencing, registration and information delivery to SMEs.

The SMEA should function under the Enterprise Development, Industrial Policy and Investment Promotion Ministry (EDIPIPM) and shall consist of a Chairman and Governing Council comprising representatives from both the public and private sectors and appointed by the President in consultation with the Minister.

The SMEA should be the focal point for institutional support and be mainly responsible for the implementation of short-term, medium term and long term strategies for SME development.

It should have an initial capital of Rs 100 million paid by the Consolidated Fund. For purpose of meeting recurrent expenditure the Fund shall receive money as may be voted from time to time by Parliament for the use of the SMEA, all sums of money as may be received by the SMEA by way of loans, donations, gifts or grants and money that may be received by the SMEA as service fees.

It further says that the most important objective of the national strategy is to create an enabling business environment for SMEs in Sri Lanka. Other recommendations made in this report are reform of existing institutions, inter-institutional coordination and developing staff and institutional capacity. It further says that the Government should adopt a vision in order to provide policy direction for future overall strategy and plans for implementation.

Establish a high powered SME Policy Unit (SMEPU) at the EDIPIPM. Facilitate on going restructuring activities of the IDB with necessary funding and administrative support, improve and consolidate financial assistance available for SMEs, implement low cost credit negotiation and project monitoring activities initiated by the IDB, encourage active participation of venture capital companies and leasing companies to provide credit support for SMEs.

Disburse loans and allied facilities with the assistance of Business Development Services (BDS) providers, amend the Loan Recoveries Act and provide opportunities for sick industries to reconstruct, install financial discipline in SMEs, establish ‘Technical Service Centres’ at district level, establish a ‘Technical Development Fund,’ assist SMEs to engage in research and development (R&D) work.

Create an SME web site, initiate low cost advertising and sales promotion programmes for SMEs, commission an annual survey and a magazine on SMEs, maintain a comprehensive and up-to-date BDS data base, introduce a voucher scheme for SMEs to use BDS, introduce a simplified tax system for SMEs, obtain WTO concessions for SME development, organise productivity enhancement programmes for SMEs, creation of industrial parks for SMEs in rural areas.

Form industry clusters on sub-sector basis, promote sub-contracting with proper targeting for improving the technological capabilities of SMEs, launch awareness programmes on cleaner production (CP) targeted at SMEs focusing on cost savings and efficiency benefits of CP and enhance the capability of government and private BDS to assist SMEs in CP and environmental management.

Download the white paper on National Strategy for Small and Medium Enterprise Sector Development in
Sri Lanka (PDF format 689 KB)

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