Does Government Policy Have a Role in Creating an Entrepreneurship Climate in Sri Lanka?

image courtesy DailyFT www.ft.lk

image courtesy DailyFT http://www.ft.lk

I was recently invited to speak at the launch of the Junior World Entrepreneurship Forum (JWEF) Sri Lanka Chapter (31st July 2014, LKI Auditorium). I was a panelist in the 2nd session on ‘The Entrepreneurship Eco-system’ and chaired the 3rd session that featured several young entrepreneurs. In the first session, I was asked to focus on policy imperatives for creating a climate for entrepreneurship and given the limited time allocated to each speaker (just 5 minutes!) I wanted to set out some broad ideas when it comes to thinking about the role of government policy for entrepreneurship.

My overarching argument was that when it comes to government policies or interventions to support entrepreneurship, there are two aspects to it. The first is knowing when to get out of the way, and the second is knowing when and how to create a smoother way.

Here’s a recap of the thoughts I shared in the session on the entrepreneurship eco-system.

The Sri Lankan economy is now in a unique place. As we transition to middle income, we are getting squeezed from two sides – we cannot compete with low cost inputs like labour – Bangladesh, Vietnam, Cambodia and others are beating us. We cannot compete fully in huge higher-value and innovation-driven segment either, as we haven’t reached levels of Malaysia, Korea, etc. The other shift we are seeing is that the attitudes and aspirations of young people towards the type of work they seek are shifting and shifting fast. It’s almost outpacing the structure of the economy. They no longer aspire to jobs in industries – they want higher paying white collar jobs in comfortable spaces, not in factories. They want to chart their own futures, not work in long factory lines. But the job creation in this area has been slow. To cater to these shifting aspirations, fostering entrepreneurship can go a long way.

 

Yes, entrepreneurship is about the individual, but government policy can help

It’s true that entrepreneurship is very much individual, and that your own ideas and initiative is a key part of the story. But for anyone who believes that there is NO room for policy in fostering entrepreneurship, I don’t agree.

There are two aspects to govt policies when it comes to this. The first is getting out of the way. The second is creating a smoother way. What do I mean by this?

Government policies can sometimes hurt and sometimes help entrepreneurs. We need to look at what are the regulations, rules, government procedures, regulatory provisions, policy bottlenecks that get in the way of entrepreneurship and innovation. For instance:

  • Are the rules around starting up and running a business conducive for young entrepreneurs
  • Are government institutions geared to understand the needs of a new breed of young entrepreneurs?
  • Are the fiscal and financial frameworks in place to support them?

Then we must also look at what specific initiatives that must be in place to create a smoother path for entrepreneurs.

  • Can there be initiatives to encourage the setting up of affordable working spaces for new start-ups?
  • What can be done to increase the broadband infrastructure?
  • Are rules around land use and property development – the taxes and ownership rules for example – helping or hurting investment?
  • Is the visa regime in place to attract good talent from abroad and cross-fertilize here in Sri Lanka? To bring in mentorship and networks among Sri Lankans and others abroad?

A good SME Policy can help all entrepreneurs

Now I’m a firm believer that any policy framework that focuses on the overall area of small and medium enterprise sector – so an SME policy – will help all entrepreneurs – whether in the digital space, social, industrial or others. While we sit here in Colombo, with the narrative often dominated by tech entrepreneurship, we must remember that SMEs form around 90% of the Sri Lankan private sector! All across the country. But it’s unfortunate that 12 years since Sri Lanka developed an SME White Paper, we are yet to see that become a policy document.

image courtesy ReadMe.lk

image courtesy ReadMe.lk

Why is such a policy framework important and what can it achieve? Because it gives the push for all government agencies relevant to this area to gear their work towards supporting entrepreneurship. To focus their efforts and make them coherent. When it’s a national policy, the push comes at a national level – not just in one ministry or one department. It brings a clear focus on what the government should do and should not do. It also helps those outside of government – private sector, chambers, development agencies, universities – orient their work towards supporting this agenda. Overall, it gives the policy push from the highest level. From the most local schools to the highest government agencies.

It’s not that there is no commitment in government to do this. There is. The good news is that the SME policy effort is now back and we are working on getting it through. But it is fragmented. Different institutions are responsible, and it is causing frictions and delays. We need to flatten this, and the push must come at the highest levels to get it done.

We need to get regulations and administrative procedures geared towards fostering entrepreneurship and innovation. We need tight rules for the right reasons, not long rules for the wrong reasons. Let’s look at the policies that are holding entrepreneurship back, and improve them; and let’s look at the policies and programmes that can help entrepreneurship and fine tune them and scale them up. Everyone can and should influence that process.

London Tech City – an example of sheer policy focus and determination

Finally, I want to cite the example of the UK, London specifically. Now I know you’ll say that we can’t expect to emulate a global industrialized-world example like that, but hear me out.

The UK was hardly known for high-tech start up activity. That was all Silicon Valley. The UK, by and large, depended almost exclusively on its financial sector, other services, and a dwindling industry sector. But the recession messed up that model. Yet, a strong and focused push by the UK government has helped London emerge as a top tech destination and a hot spot for new start ups. Google has opened a campus in the new Tech City, and Facebook is reported to be opening it’s first non-US engineering operation there too. If you speak to Rohan Silva, a British Sri Lankan who is a key adviser to the UK Prime Minister on developing the new Tech City in East London, he’ll highlight some of the key ingredients to their success:

  • Setting up a high level group that led the initiative and a specialised agency (the Tech City Investment Organisation)
  • Finding recognized private sector leaders and progressive public sector officials from various departments to join and support the new initiative
  • Understanding what entrepreneurs really need to grow – some of these cannot and indeed should not be provided by government, and so not looking at those. But looking at things that government can do, and quickly providing those.
  • Getting the incentives framework right, by targeting tax breaks and finance schemes in impactful ways, not just blanket schemes
  • Working with universities and technology providers to help start ups access new knowledge and mentoring

In just 3 years London’s digital economy grew by nearly 20%. 27% of all new job growth in London now comes from technology and digital sector.

This might be a UK story, but it can quite easily be a Sri Lanka story too, even in a smaller way and not necessarily exclusively in the tech sector.

The UK vision at the outset of this plan was to “make the country the best place in the world to start and grow a company”. It’s time Sri Lanka too adopted such a vision. And all of you can and must influence that agenda. You must lobby to shape the entrepreneurship climate that helps you.

 

For more details of the #JWEFsrilanka launch, see news coverage in the Sunday Times, DailyFT, and Daily News.

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