National Policy Framework for SME Development in Sri Lanka

1. National Policy Framework for SME Development in Sri Lanka V.Sivagnanasothy Secretary Ministry of Traditional Industries and Small Enterprise Development sivagnanasothy@hotmail.com

2. Road Map • Mahinda Chintana Vision for the Future • National Policy Framework on SMEs • Focus of SME Policy • Intervention and Support Mechanism • Definition of SME • Policy Intervention and Strategies

3. Mahinda Chintana Vision for the Future

4. Mahinda Chintana Vision for the Future • “SMEs are the backbone of the economy” • Accounts for more than 75 % of the total number of enterprises • Provides 45% of employment and contribute to 52% of the GDP • Driver of Change for inclusive growth, regional development , employment generation and poverty reduction • Transforms lagging regions to emerging regions of prosperity

5. SME Policy Framework Matrix

6. Focus of the SME Policy • With the globalization and liberalization trend, it is important to have a renewed look of these sectors not as a mere object of “protection and promotion” but as a driving force for “growth and development”.Enhancing national and international competitiveness is fundamentally important for this sector to face the emerging challenges. • High potential viable promising sectors • Promote enterprises with high value addition and use of local raw material • Encourage export oriented, demand driven cash-cow enterprises • Promote flagship sectors with high potential spillover effects • Promote innovative technology driven enterprises • Locally and globally competitive : demand driven and market based (Globalizing world – Integrated and borderless world) • SMEs which have close cooperation with large enterprises and export firms to supply parts and components under buy-back, sub-contacting arrangements contributing to import substitution.

7. Focus of the SME Policy • Promote relocation of SMEs in the backward region to reduce urban rural imbalances • Transforming the landscape of the SMEs from mere trade and commerce towards production and industry • Cluster Approach covering the entire value chain (village development) • Women Entrepreneurship

8. Intervention and Support Mechanism • Strengthen existing enterprises : Foster micro enterprises to grow into small enterprises and small enterprises to grow into medium size enterprises and medium size enterprises to grow into large enterprises • Support start-up SMEs : • Extend nursing programme for potentially viable sick industries

9. Criteria for Selecting and Supporting SMEs • High potential, promising sectors • Picking the Winners - committed capable interested entrepreneurs with good track records • Proven credentials as entrepreneurs – award winners • Fair amount of equity participation • Skills and competencies acquired in the sector or cluster • Committed to excellence in quality and innovation • Women entrepreneurs

10. High Potential Promising Sectors Identification of Key Product Sectors

11. Definition on SMEs • World-wide the definition on SME is based on - Employment - Turn over - Asset Value • The recent White Paper on National Strategy for small, medium enterprise development in SL

12. Definition on SMEs • EuropeanUnion and other countries

13. Definition on SMEs • Proposed National Policy Framework for SME Development • Both Criteria to be considered. Level of employment should be the deciding factor • Applied to individuals only . A firm which is a part of a larger grouping may need to include employees or turnover from the grouping too.

14. Why definition is important ? • Instrument for targeting of policy measures and support interventions • National level data • Serve as a basis for directing state support • For economic research • Comparison among countries

15. Industrial Clusters

16. Crafts Clusters

17. Policy Interventions and Strategies • Enabling Environment Policy Perspective : improve the legislative, regulatory and institutional framework including simplification and rationalization of procedures to improve the competitiveness and provide conducive environment for SME development. Challenges Addressed : Reduce transaction cost and improve ease of doing business for SMEs Key Strategies : • SME friendly laws and regulations • quality and outreach of service delivery, SME friendly desk and one stop service • Infrastructure facilities – CSCs, Industrial estates, incubation, clustering (villages) • Industrial associations for collective voice. • Environmental friendly cleaner production technologies and practices.

18. Policy Interventions and Strategies • Modern and Appropriate Technology Policy Perspective : Facilitate acquisition and adoption of state-of-the-art modern and appropriate clean technologies to promote knowledge based, technology intensive industry Challenges Addressed : Access to appropriate and affordable modern technology Key Strategies : • Technology Transfer and Development Fund (TTDF) with interest subsidy to access affordable technology. • Trilateral Cooperation between SMEs, technology providers and the Government – technology demonstration platforms • Technology transfer, training and diffusion programme

19. Policy Interventions and Strategies • Entrepreneur Culture and Skills Development Policy Perspective : Entrepreneurship development through imparting skills and capacity development at schools, universities and vocational training centres special focus on Youth and Women. Challenges Addressed : Building skills, entrepreneurial culture and sprit with risk taking attitude. Covert employment seekers to job creators. Key Strategies : • Demand driven skills development programmes : GYI, SYB, IYB, EYB foe start-ups, existing enterprises and sick industry (Nursing programmes and resuscitation fund). • Recognize SME Heroes and disseminate success stories • Extension Services – project preparation, feasibility reports

20. Policy Interventions and Strategies • Access to Finance Policy Perspective : Strengthen the mechanisms for easy and affordable access to finance to SMEs. Challenges Addressed : SMEs have Access to Finance to invest in modernization, expansion and successful operations. Key Strategies : • Scale up special lending windows and SME desks in banks and financial institutions • Promote viability based lending by expanding refinancing schemes, banking clinics, treasury guarantees and non-collateral based lending • Venture capital and angel funds to inject equity participation • Concessionary loans for Women and Youth entrepreneurs

21. Policy Interventions and Strategies • Market Facilitation Policy Perspective : Facilitate and support SMEs to access local and export market through internationalization Challenges Addressed : Re-positioned SMEs as producers of up-market productsthrough improved product quality, packaging and branding to access local and global market. Key Strategies : • Promote business linkages between large and SME enterprises through buyer-seller meetings, buy-back and sub-contracting arrangements • Support SMEs to participate in trade fairs and exhibitions • Technical support on market information and e-commerce • Procurement preference policy

22. Policy Interventions and Strategies • Research and Development Policy Perspective : Facilitate R&D to improve innovations, market oriented new designs, product development , productivity improvement and competitiveness Challenges Addressed : competitive advantage through innovations and technological advancement Key Strategies : • Strong links between industry and R&D institutions • Focus on demand driven applied research including search to find alternative substitute materials • Quality assurance and certification • Special Funds and incentives for SME focusede R&D • Patents for innovations and commercialization

23. Policies from Budget Proposals Development Initiatives on SME Development by M / TISED

24. DiviNeguma – National Programme on Cottage IndustryImplementation Strategy Establishment of sustainable home based industrial Economic Units

25. SME Industrial Estates Poonthoddam, Vavuniya Negampaha,Anuradhapura Mihindala, Anuradhapura Lunuvila, Puttalam Kaludawela,Matale Pannala,Kurunegala Pallekelle,Kandy Ekala,Gampaha Galigamuwa,Kegalle Pannaluwa,Colombo Kotagala, Nuwara-Eliya Horana,Kalutara Buttala,Moneragala Wawulugala,Kalutara Pusella, Ratnapura Karandeniya,Galle Baddegama, Galle Beliatta,Hambantota

26. Reactivation of the Atchchuveli I.E

27. Reactivation of ElephantpassSaltern

28. Cluster Development Programmes • Budget Proposals • Industrial Production Villages – One product; One village Clay, Cane, Coir, Leather, Blacksmith • Enterprise villages and Women Entrepreneurship • Pottery villages • Handicraft Villages • Interventions • Provision of infrastructure – roads, electricity • Technology transfer, training and CSC facilities • Market oriented new designs - gift items and souvenirs • Skills and capacity development • Raw materials ,basic tools and equipment • Quality improvement and packing • Market facilitation – buy-back and sub-contracting , buyer-seller meetings, exhibitions and Trade Fairs • Banking clinics

29. Development of Enterprise Villages and Women Entrepreneurship - 2014 Budget for 2014 = Rs. 30 Mn Expenditure = Rs. 7.6 Mn Toddilay/Chankanai (Jaffna) Jaffna Kilinochchi Vannankulam (Kilinochchi) Selvapuram (Mulaitivu) Mullaitivu Mankulam (Mulaitivu) Vavuniya Mannar Trincomalee Anuradhapura Mahanelubewa (Anuradhapura) Puttalam Polonnaruwa Batticaloa Wanathawilluwa (Puttalam) Kurunegala Matale Maussagolla (Matale) Nugawela (Kurunegala) Gampaha Badulla Ampara Kegalle NuwaraEliya Colombo Monaragala Kalutara Ratnapura Ginigathhena (Nuwara-Eliya) Galle Hambantota 13 Matara Welladdaragoda (Galle) Medamulana (Hambantota)

30. Traditional Handicraft Villages developed in 2013

31. Development of Traditional Handicraft Villages - 2014 Budget for 2014 = Rs. 35 Mn Expenditure = Rs. 10 Mn Jaffna Allarai (Jaffna) Sarasalai (Jaffna) Kilinochchi Mullaitivu Kiranchchi (Kilinochchi) Vavuniya Mannar Trincomalee Paththinipuram (Trincomalee) Anuradhapura Manampitiya (Polonnaruwa) Puttalam Polonnaruwa Batticaloa MundalamaHinguregama (Puttalam) Mailambaveli (Batticaloa) Kurunegala Matale Galatharaya (Kurunegala) Thalagune (Kandy) Kandy Alawala (Gamapaha) Badulla Gampaha Ampara Navithanveli (Amapara) Kegalle NuwaraEliya Colombo Kalasirigama (Kandy) Monaragala Kalutara Ratnapura Remunagoda/ Imbulgoda (Kalutara) Hambantota Galle Kiyaduwa (Matara) Matara 9 Gandara/ Devinuwara / Talalla (Matara) Angulmaduwa (Hambantota)

32. Jaffna Development of Pottery Villages - 2014 Budget for 2014 = Rs. 40 Mn Expenditure = Rs. 5.12 Mn Chankanai (Jaffna) Kilinochchi Mullaitivu Vavuniya Mannar Trincomalee Elappankulama (Anuradhapura) Kudakelagama (Anuradhapura) Anuradhapura Puttalam Polonnaruwa Batticaloa Halambawatawana (Puttalam) Dodamattawala (Matale) Eravur (Batticaloa) Kurunegala Matale Madawalagaraya (Kurunegala) Kandy Webadamulla (Gamapaha) Gampaha Badulla Ampara Polwatta (Gamapaha) Kegalle Puranagama (Nuwara-Eliya) NuwaraEliya Colombo Monaragala Ranala (Colombo) Kalutara Ratnapura Galle Hambantota Matara 15 Kumbalgama (Matara) Melpura (Matara)

33. 5 Year Strategic Plan of the Ministry www.tisedmin.gov.lk- Reports

34. THANK YOU