Participation to the workshop on SME Development in Emerging Asia: Integration to the Global Value Chain Ms.D.L.Vasanthi Wijeratna Assistant Director – Ministry of Finance – SRI LANKA
The views expressed in this presentation are the views of the author and do not necessarily reflect the views or policies of the Asian Development Bank Institute (ADBI), the Asian Development Bank (ADB), its Board of Directors, or the governments they represent. ADBI does not guarantee the accuracy of the data included in this paper and accepts no responsibility for any consequences of their use. Terminology used may not necessarily be consistent with ADB official terms.
Location: Between 5◦55 & 9◦50 North latitude 79◦42 & 81◦53 East Longitude
World Heritage in Sri Lanka SIGIRIYA • Sigiriya - "Eighth Wonder of World" Enter a time when men tamed the rocks, filled oceans & built cities in the sky
World Heritage in Sri Lanka Lord Buddha
Polonnaruwa District •
Polonnaruwa is the Island's 2nd largest kingdom. Today the ancient city of Polonnaruwa remains one of the best planned Archeological relic sites in the country, standing testimony to the discipline and greatness of the Kingdom's first rulers. Its beauty and serenity was captured in the Duran Duran music video Save a Prayer in 1982. The ancient city of Polonnaruwa has been declared a World Heritage site by UNESCO. The Lankathilaka temple and a colossal statue of the Buddha made from stone is located here
World Heritage in Sri Lanka Surfing Adventures
Ampara District
• Arugambay - "The surfing capital of the world" Adventures from the tops of the mountains to the depths of the oceans
World Heritage in Sri Lanka Ayurvedhic medicine • Sri Lanka Ayurvedha "Rejuvenate with Ayurvedhic medicine" For a mind free of its cankers and a body free of its pains
World Heritage in Sri Lanka Perahera
Kandy district
• Kandy perahera "The grand pageant of Asia" Dive into the colors, sounds and lights of
Key Social Indicators Description
Unit
Base Year
Value
Mid-year population
000
2015
20,966
persons per sq. km.
2015
334
Years
2014
74.9
Crude Birth Rate
per 1000
2015
16
Crude Death Rate
per 1000
2015
6.3
Literacy Rate
%
2014
93.3
Literacy Rate-computer
%
2015
27.1
Access Electricity
%
2015
98.5
Population density Life Expectancy at Birth
Defining SMEs in Sri Lanka Size Sector Criteria
Manufacturing Sector
Service Sector
Medium
Small
Annual Turnover
Rs.Mn. 251-750
Rs.Mn 16-250
No. of Employees
51-300
11-50
Annual Turnover
Rs.Mn. 251-750
Rs.Mn 16-250
No. of Employees
51-200
11-50
Importance of SMEs in the Economy Sri Lanka’s SME sector has been identified as an important strategic sector in the overall policy objectives of the government. and it is seen as a driver of change for inclusive growth Regional development, Employment generation and poverty reduction. SME sector is envisaged to contribute to transform lagging regions into emerging regions of prosperity.
The government recognizes SMEs as the backbone of the economy, as it accounts for; More than 75% of total No. of enterprises Provides 45% of the employment and Contributes to 52% of the Gross domestic Products (GDP)
Importance of SMEs in the Economy The SME sector dominates Agriculture, Plantation, Construction, Manufacturing, Trade & Other services SMEs in the Plantation and Agriculture sectors • Paddy milling • Tea • Rubber • Coconut • Fruits and vegetables • Minor crops • Poultry Industry
SMEs in the Manufacturing sectors • Textile & Apparel industry • Surgical Gauze Industry • Leather & Footwear industry • Gem & Jewellery industry • Edible products, including milk/fish based products • Cont…
SMEs in the Services Sector • • • • • • • • •
Health services Passenger transport Freight transport Banking & Insurance Tourism Sector Telecommunications Construction Business Process Outsourcing (BPO) Beauty Care industry
SMEs Export to Asian Countries Market
2011
2012
2013
2014
2016 (January To August)
2015
Value in Thousands of US Dollars Brunei Darussalam
39.72
6.14
5.57
0.19
Cambodia
20.27
14.5
263.79
357.51
78.01
60.86
China
5,574.54
1,697.48
2,361.92
3,316.79
1,943.35
1,158.94
India
21,839.91
44,772.46
9,397.83
9,220.66
4,936.85
7,754.48
107.13
33.18
165.53
266.69
119.2
172.38
2,112.40
1,217.57
1,686.23
1,941.53
1,000.08
545.05
0.62
13.03
Indonesia Korea South (Korea, Republic of) Lao People's Democratic Republic Malaysia
4.33 16,381.52
Myanmar
521.36
2.87
Philippines
1,639.58
517.29
553.09
163.34
141.2
183.3
119.56
3.31
132.27
67.71
128.65
6.11
93.05
0.68
111,643.94
50,896.69
2,400.16
1,211.01
1,254.74
848.45
Thailand
1,389.45
525.09
1,056.05
1,849.98
521.9
185.57
Viet Nam
1,315.79
550.97
1,402.22
790.46
169.86
356.94
160,564.14
100,303.16
20,648.74
19,661.52
10,790.31
11,263.04
Singapore
Total :
Existing Policies on supporting SMEs Development The major policy intervention areas are identified into eight core areas namely; Enabling environment Modern appropriate technology Entrepreneurial culture and skills development Access to finance Market facilitation Research and development Regional balance Resource efficiency in developing SMEs Source: National Policy Framework for SME Development
What is Global Value Chain Global Value Chains (GVCs) where the different stages of the production process are located across different countries. Globalization motivates companies to restructure their operations internationally through outsourcing and offshoring of activities.
Challenges/problems in integrating the SMEs to the global value chain • low-income developing countries (LIDCs) are still hugely under-represented in GVCs • SMEs, while representing the vast majority of firms in the country, typically contribute less than half of exports. • Some SMEs do succeed in participating in GVCs, it is usually indirectly – that is, they supply firms that export, but do not export themselves • Lack of ability of SMEs to swiftly adopt new technologies, • Lack of skilled workforce and less developed human capital, to learn by doing, to innovate. Cotd…
Challenges/problems in integrating the SMEs to the global value chain • optimize SMEs production is constrained by their small scale, limiting their ability to engage with GVCs. • Less help to young SMEs scale up quickly and better integrate in GVCs, it is important to lower barriers to the entry, growth, and exit of firms. • Ensuring a level playing field for new SMEs is particularly important • Less enhancing to SME access to external finance, a critical enabler of their participation in GVCs.
Country’s strategies on SME development and integrating SMEs to the global value chain • Establishment of a Technology Transfer and Development Fund (TTDF) with appropriate incentives to support • Recognize & reward innovative & technology leading SMEs and assist them to participate in foreign trade fairs, exhibitions • Foster University – business linkages and ensure curriculum development of universities and Technical & Vocational Education Training • Building skills, entrepreneurial spirit and culture, improve mindset and institutional capacity
Contd…
• Government will facilitate, support and strengthen the mechanisms for easy and affordable access to finance to SMEs • Special SME desks to facilitate access to credit in banks and financial institutions • Expand the SME re-financing schemes, banking clinics, non collateral based access to credit • Scale-up concessionary bank loan schemes for Women & Youth entrepreneurship development
Cotd..
• Promoting business linkages between large enterprises and SMEs and facilitate buyer seller meetings and buy-back and sub-contracting arrangements • Overseas market information will be made available to SMEs to access international market. • Establish SME website and e-commerce arrangements to enable the SMEs to link with exporters and buyers • Support product development ,quality improvement, ethical practices , packaging ,branding and market networking
Conclusion • we are currently experiencing a slowdown in global trade. If trade – and more specifically, participation in global value chains – is to continue to create opportunities for growth and jobs, we must remove obstacles facing countries and firms that have not yet managed the process of GVC integration.
Conclusion • So what can we do to help those firms, people, and countries to share in the benefits of GVCs in terms of growth, living standards, and jobs? As SMEs are relatively more impacted by the policy “eco-system” than larger companies - they have indeed less capacity to absorb policy deficiencies and shocks – their development requires a very coherent, and carefully crafted, enabling policy environment.
• the need to strengthen and diversify sources of finance for SMEs, including trade finance, to allow SMEs to seize opportunities in global markets.
Recommendations • Open trade and investment policies should be at the center of the policy choices • priority actions must be taken to implement and ratify the WTO Trade Facilitation Agreement, alongside investment in hard and soft infrastructure that would allow goods and services to flow more easily across border • reduce trade costs • rules of origin in G20 countries has to simplified, nuisance tariffs eliminated and aid for trade initiatives direct to SMEs • Contd….
Recommendations • lot that business can do to remove constraints and foster supplier diversity, focusing on efficiency of logistics, services delivery • establishing an action plan for universal ICT and broadband connectivity that would empower SMEs to leverage the digital economy, which can be a lowcost way for firms to engage in trade and to become “micro-multinationals”. • global platforms for sharing best practices and elearning, involving both public and private sectors.
