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The word 'industry' conjures an image of giant factories churning out various goods round the clock. This is true to some extent, but large-scale industries are just one component of the industrial landscape.

Small and Medium Industries, widely known as SMIs, are essential cogs in the economic wheel. They are particular well suited for developing countries like ours, being less costly to run and labour intensive. They generate employment at village level and contribute in no small measure to the country's well-being.

Now the government has announced plans to establish 20,000 SMIs islandwide within the next five years. This program will not only focus on SMIs per se, but also encompass infrastructure development essential for their smooth functioning. Modalities on financial assistance and policy development will also be part of the program.

This ambitious project will benefit the economy immensely in the long term by generating employment and raising living standards. Most of the products will be targeted for export, thereby raising more foreign exchange. Many of the goods turned out by the SMIs are likely to have a unique Sri Lankan identity that will appeal to foreign buyers.

It is heartening to note that the project will be implemented throughout Sri Lanka, instead of being confined to one particular region. Special attention should be given to the North-East in this regard, as the region needs more industries to revive its economy after a destructive war.

Government agencies such as the Industrial Development Ministry, the Industrial Development Board and the Export Development Board should work together to identify projects that make the maximum use of resources in each region. Some regions already have industries that are found nowhere else in the country, or for that matter, in the region. They should also seek new markets for our SMI goods instead of depending on a few traditional markets.

The program also envisages the granting of loans ranging from Rs.100,000 for the SMIs. Needless to say, the loans should be granted after careful scrutiny of the projects and their potential to create goods that sell well here or abroad. There have been numerous examples of loans being granted for non-viable or worse, non-existent projects. Low interest loans with long repayment periods will enable the SMI entrepreneurs to pay as they earn.

Infrastructure development is also vital for the SMI sector. Establishing SMI projects all over the island will be meaningless if there are no good roads to transport the finished products or if the electricity supply is inadequate to power the machinery. Special incentives should be given to SMIs that use their own power or other forms of infrastructure. The authorities should also look at attracting foreign partners for the SMI sector, in the form of joint ventures or outright ownership. This will create a readymade market for their goods in the relevant markets.

We understand that the authorities are also contemplating tax exemptions and concessions for SMIs that produce goods for export. Such concessions used to be applicable only to large-scale industries. Now the small-timers too will be able to reap nearly the same tax benefits.

Sri Lanka's economy has woken from a deep slumber. Moderate growth has been recorded and the Central Bank predicts faster growth within the next few years if peace dawns. As the Bank points out, the next few years will be crucial for the country's economic fortunes. An islandwide network of more than 20,000 SMI projects will be a major fillip for economic success.

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