SME sector:

The backbone of rural economy

Budget speech by Industry and Commerce Minister Rishad Bathiyutheen

Part I appeared yesterday~

Since the Small and Medium Enterprises which accounts for 96 percent of all industrial establishments is the backbone of the rural economy, the Government has identified the SME sector as the key to rural development. Hence, many programs have been implemented islandwide to facilitate the sector. The National Enterprises Development Authority (NEDA) has planned a program to establish entrepreneurial centres in every district to encourage small and medium scale entrepreneurs. The NEDA has also planned to establish a SME University with the support of JICA, for the skill development of entrepreneurs.

With the abolition of the quota system and the recent issues which has arisen with regard to the EU GSP+ scheme, the apparel sector had to face numerous challenges in the competitive global market. Therefore, many programs have been launched by the Government to increase the competitiveness of the local apparel sector, enabling them to overcome their problems. These include programs on productivity improvement in the apparel sector, Apparel sector image building, clothing design degree program conducted by the Moratuwa University and programs to develop the Small and Medium apparel industry. The Government has granted several concessions to develop the handloom industry as well.

Export sector

The export sector of Sri Lanka which experienced a severe setback in 2009 due to the global economic downturn performed satisfactorily during the first five months of this year registering a positive growth rate of 10 percent. This could be attributed to the Government's pragmatic policies, the resilience shown by the private sector in the pace of numerous adversities and the development programs carried out by the Sri Lanka Export Development Board during this period. The EDB initiated several measures to diversify into new markets and to broaden export supply base to suit the new markets. These initiatives contributed towards reducing the impact of the global recession and support the export sector to weather crisis.

In its efforts to promote and develop exports of Sri Lanka, the Export Development Board (EDB) carried out an array of programs pertaining to enhance the supply chain efficiency, promotion of export oriented SMEs, trade facilitation, provision of trade information, e-commerce services and other support services and entrepreneurship and skills development during this period. The main objective was to enhance the competitiveness of the export sector and thereby enabling them to confront the global challenges.

During 2009, Sri Lanka has expanded its foreign trade relations, through the bilateral regional and multilateral trade agreements of which it is a party.

To improve market access for Sri Lankan exports, the Government has taken positive steps to negotiate the Asia Pacific Trade Agreement (APTA) which facilitates Sri Lanka to enhance her market access, particularly to three major markets namely, China, South Korea and India. It is noteworthy to mention that the export growth to China and South Korea under APTA was 53 percent and 99 percent respectively during 2009.

In addition to the above, Sri Lanka is a party to the bilateral trade agreements; India-Sri Lanka Free Trade Agreement (ISFTA), Pakistan-Sri Lanka Free Trade Agreement (PSFTA) and Investment Framework Agreement (TIFA) with USA, which have made a substantial contribution to the export diversification and foreign exchange earning.

Promoting production

Under this Budget, a solid foundation has now been laid to promote a high level of production and investment in our economy. My Ministry and our institutions will also fully participate in the national economic development effort which is being spearheaded by Basil Rajapaksa through his Ministry.

We hope to receive the fullest support and advice of our industrialists, exporters and their chambers for this purpose. We will maintain an active dialogue with these stakeholders to formulate the strategies and plans to achieve the national development targets. With such dedicated efforts, it will be possible to fulfill President Mahinda Rajapaksa's inspired vision to make Sri Lanka the "Wonder of Asia".

Concluded.