(Commonwealth_ Sri Lanka has faced an unprecedented macroeconomic crisis since 2022, primarily due to years of financial mismanagement and exacerbated by the global recession stemming from the COVID-19 pandemic and geopolitical tensions. While signs of economic stabilization are emerging, the country continues to grapple with challenges such as elevated poverty levels, income inequality, and labor market concerns.
To address these issues and foster sustainable growth, the Sri Lankan government must carefully plan monetary and fiscal policies and implement growth-enhancing structural reforms. The goal is to establish a foundation for long-term green, resilient, and inclusive growth that will benefit future generations.
An examination of Sri Lanka’s export income in 2022 reveals significant contributions from various sectors, including goods, services, worker remittances, and tourism. However, services, worker remittances, and tourism were more sensitive to external shocks compared to goods exports. The stability of goods exports during challenging times suggests that focusing on an export-oriented manufacturing economy would provide a sustainable path forward.
The ease of doing business plays a crucial role in shaping economic outcomes. According to the World Bank’s Ease of Doing Business Index 2020, Sri Lanka ranked 99th among 190 economies, highlighting the need for a more favorable regulatory environment. Overcoming these hurdles requires creating a conducive environment for business development, promoting entrepreneurial culture, and emphasizing the national importance of manufacturing.
The Industrial Development Board of Sri Lanka (IDB) identifies several constraints to the growth and development of the industrial sector. These include inadequate availability of land for industries, financial liquidity problems, challenges in business licensing (3Ls: Land, Liquidity, and Licensing), inconsistent national policies, and low entrepreneurial capacity.
To address these challenges, the IDB has set six SMART objectives to be achieved by 2030.
Improve Ease of Doing Business: The goal is to improve Sri Lanka’s rank from 99th to below 50th.
Increase Entrepreneurship: Raise the entrepreneurship ratio from 2.8% to 10%.
Enhance Industrial Land Contribution: Increase land allocation for industrial zones from 0.04% to 1% to accommodate export-oriented establishments.
Boost Manufacturing Share of GDP: Increase the manufacturing sector’s share of GDP from 15% to 25%.
Improve Per Capita Export: Aim to reach up to 50% of the global average.
Reduce GHG Emissions: Achieve a 7% reduction compared to the business-as-usual scenario through resource efficiency and green technology.
The IDB will achieve these objectives through START-UP and SCALE-UP strategies. START-UP focuses on nurturing new enterprises and turning potential business ideas into reality, while SCALE-UP aims to drive existing businesses to expand their operations.
Empowering the entrepreneurial mindset across society is a key aspect of these strategies. Initiatives such as industry entrepreneurial circles in schools, universities, vocational training institutes, and religious schools aim to foster a culture of entrepreneurship. Additionally, reforms in the education sector to incorporate entrepreneurship into curricula and programs like SEDA Start-up and SEDA Scale-up support budding and existing entrepreneurs.
Collaborative efforts with Sri Lankan ambassadors abroad, media, and government institutes will help expand local and global market opportunities for manufacturers. Streamlining and digitizing business licensing processes, as well as addressing issues related to land and financial liquidity, will facilitate business operations.
Achieving these goals requires substantial involvement from all sectors of society, including government officers, religious leaders, and the media. Recognizing the importance of entrepreneurs as the backbone of the economy is essential. By building an entrepreneurial culture rooted in religious and social philosophies, Sri Lanka can create a supportive environment for business development and industrial growth. Through concerted efforts, the country can transition to an affluent economy, providing future generations with opportunities for a comfortable and prosperous life.
