Technology for Change: Driving Structural Growth through Digitalisation in Sri Lanka

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“Sri Lanka is still in a cyclical growth recovery, driven by a rebound in consumer spending and investment, achieved through macro stabilisation policies. Continued growth is needed to bridge output losses incurred during the crisis. For this, structural factors such as technology infusion, infrastructure improvements, or regulatory reforms are needed.”

Against this backdrop, the launch of the IPS’ annual flagship publication, Sri Lanka: State of the Economy 2025, focused on ‘Technology for Change: Driving the Digital Economy’, explores how digital integration can be leveraged to facilitate structural reforms and sustain long-term economic growth in Sri Lanka. As highlighted by Dr Nisha Arunatilake, Director of Research at IPS, in her summary of the report findings, digitalisation can boost growth through multiple means, including improving the competitiveness of trade, incentivising entrepreneurship, facilitating infrastructure, strengthening human capital, and enhancing resilience to shocks. She explained how paths to a functional digital economy require technology enablers that enhance digital infrastructure to reduce disparities in access and affordability, policy enablers that build trust and facilitate increased data security and transparency, and people enablers that empower people to increase the use of digital facilities

Super ROI through Digital Transformation

Dr Hans Wijayasuriya, the Chief Advisor to the President on Digital Economy, served as the keynote speaker at the event. Dr Wijayasuriya explained how digitalisation can drive growth with relatively low levels of investment in an economy that has limited fiscal space for growth, delivering what he described as a “Super ROI” (Super Return on Investment).

He noted that a Super ROI can be achieved through several approaches that leverage digitalisation. First, digitalisation can unlock latent pools of value within the economy. Second, it functions as a multiplier, both an inclusion multiplier and what he termed an X–Y–Z multiplier.

The inclusion multiplier uses technology to reach larger segments of the population, mobilising more people, businesses, and energy across the entire ecosystem to generate broader economic effects. The X–Y–Z multiplier, in turn, describes a process in which a service provided to one party is expanded and enhanced by subsequent parties, creating a chain of compounded value.

Digitalisation would also enhance a country’s competitive advantage by attracting greater foreign investments and increasing export potential, particularly digital exports, while establishing cross-border trust. At the citizen level, digital transformation would improve individual citizen outcomes and overall experiences, while at the business level, it enables smoother interactions with the government and the wider economy, enhancing ease of doing business, improving competitiveness and global positioning.

To illustrate how technology can improve the economy, Dr Wijayasuriya used the example of the trishaw industry. Twenty-five years ago, customers had to wait on the road to hail a trishaw. Later, mobile phones allowed customers to call and contact a few known trishaw drivers directly. More recently, mobile apps such as Uber and PickMe enable drivers to choose rides freely and participate more equally in the economy. As a result, their earnings and household finances have improved, showing how digital platforms have the capacity to boost economic growth.

Horizontalisation of Technological Infusion

By serving as a platform to unlock latent value, create multipliers, and improve competitiveness and overall experiences, digital transformation could facilitate the shift from vertical siloed digital excellence to integrated cross-sectoral horizontal platforms, as highlighted by Dr Wijayasuriya.

Although vertical applications are important, digital systems can become inefficient if they are built solely for specific vertical applications. In Sri Lanka, over the past years, technological advancement has mostly progressed in vertical silos, where different sectors and institutions have varying levels of technological infusion in their operations. As explained by Dr Wijayasuriya, individual technological infusions within these vertical silos have to be shared and integrated horizontally across sectors and organisations to ensure uniformity in the digital transformation of Sri Lanka.

Importance of “Analogue Complements”

The event was followed by a discussion which brought together experts from the government sector, the private sector, academia, civil society actors, and donor agencies. Professor Rohan Samarajiva, former chairman at ICTA, highlighted the importance of “analogue complements,” the idea that for any advancement on the digital front, there must be corresponding changes in laws, policies, and practices to make it effective. For instance, he noted that in his experience, a development obstacle faced by SMEs servicing government agencies is overdue payments. Digital transformations alone cannot address such barriers. Complementary measures to ensure timely payments are needed.

As a good example of analogue complements, Professor Samarajiva pointed to India’s government e-marketplace, which blacklists government agencies that delay payments to suppliers while also linking successful government contracts to credit schemes that allow suppliers to access loans more easily.

Where Should Digital Investments Go?

During the question-and-answer session, Ms. Teona Aslanishvili, Chief of Child Protection at UNICEF Sri Lanka, inquired about the areas where investments can most effectively boost economic growth, given the existing digital divide and low levels of digital literacy in the country. In response, Dr Wijayasuriya emphasised that, considering these challenges, it is crucial to prioritise the development of DPIs (Digital Public Infrastructure) such as digital ID systems, digital payment systems, and data exchange systems in the short to medium term. For example, on the business front, sectors such as trade, tourism, and logistics (including ports and airports) should be prioritised, while on the citizen front, attention should be given to local authorities. This requires examining citizen journeys and user experiences at the local, provincial, and national levels, all of which are equally important, as an average citizen interacts most frequently with local authorities, as highlighted by Dr Wijayasuriya.

Furthermore, as AI begins to take over more service-oriented tasks, businesses need to retrain their employees to use AI as a tool rather than being replaced by it. Making the country’s main digital systems more open and connected (DPIs) is important to enable IT companies to develop digital solutions and services for both the public and private sectors. To facilitate this, barriers in government procurement should be reduced, along with proper “analogue supplements” such as policies and laws.

Amidst the benefits of digitalisation, Ms. Samadanie Kiriwandeniya of SANASA International emphasised the importance of ensuring that community interactions and physical relationships are not lost in the process.

Conclusion

Sri Lanka’s path towards sustained and inclusive growth requires structural transformations that move beyond short-term cyclical recovery. Technology infusion can play a key role in driving this transformation as it has the ability to unlock latent value, improve competitiveness and overall citizen experiences, with relatively low levels of investment. By prioritising digital public infrastructure that fosters collaboration across sectors, digitalisation has the potential to drive sustained economic growth.