Eastern Province attracts best names in business

Rohantha ATHUKORALA

"The latest World Bank Survey reveals some interesting insight to obstacles faced by enterprises in Sri Lanka. Even though they are only perceptions there are many policy interventions that can be auctioned with this data"

In the recent past we have seen many success stories reported from the Eastern Province, be it the new hotels that has been built, the staging of the world championships in surfing in Arugambay, new infrastructure that is sprucing up strong economic growth. I guess the GDP growth of almost twenty percent registered in 2011 is a testimony to the fact of this positive stories emanating from the Eastern Province. This also is reflective of the peace devidence at place post May 2009 that the global community must accept.

In the back drop of this stella performance an interesting study has been done by the World Bank that has cut across a cross section of 227 businesses in the country to find out what are the key obstacles faced by enterprises in their business activities. The sample researched covered businesses from the Food, Beverage, Tobacco, Textiles, Garments, Furniture companies, Plastic, rubber and chemical companies, non metallic, mineral product organizations, hotels and restaurants. The study also included motor cycle and services companies which are essentially the SME sector that gives a good string sense to a policy maker.

The study uncovered the perceptions on the obstacles faced in domestic investment. Some can argue that the study was a perception survey but as the great social scientist Shiffman and Kanuk said Perception is reality. On this perspective the study illuminates the areas that require policy intervention and further fact finding is my view of looking at this data in a meaningful manner. Let me capture the essence of the survey focused to the Eastern province.

The Eastern province has attracted the best names in business in the Leisure industry and staged the world Surfing championships

The survey reveals that the key obstacle facing businesses in the Eastern Province in the Manufacturing and the Service sectors is the Access to Finance. This is strange given that the reported number of bank branches opened in the North-Eastern provinces exceeds two hundred. In my work in the Eastern province the points raised by the SME sector in particular was the collateral required. The banking sector commented that the proposals received from the SME was weak on the documentation side due to the depth of the proposal and in some instances the required back up support was lacking.

May be the regional offices of the Ministry of Traditional Industries and Small enterprise development or even the offices of the Ministry of Trade and Commerce can support the SME's on this area given that the number of people up against this obstacle is sizable. A point to note is that the overall country average is 18.5% for the Manufacturing sector whilst in the Service sector it is 9.2% which means that this issue is particularly a burning issue in the Eastern province and hence focused attention is required.

A separate point to note is that in 2011 the overall credit to the private sector increased by a staggering thirty percent plus to reach a dizzy height of 515 billion rupees. It's worth analyzing the SME consumption of this value and in particular in the Eastern province.

1) Senior Management time spent on GOSL procedures

Even though the sample is small, a key highlight from the survey reveal that the Eastern Province the Senior Management time spent in dealing with requirements of the government regulation is extremely high. May be its worth analyzing why is it high especially against other regions of the country.

Maybe its worth understanding the details if this indicator not been positive is because of the significant investment in the tourism industry which in turn demands almost a twenty odd approvals from different government organizations. If that is so may be a regional one-stop shop be set up is worth pursuing.

(Source: World Bank 2011)

2) Innovation, Research and Development

On a more positive note the perception on the attribute innovation in new products, processors and R/D, the eastern province recording a high number is very interesting. Could this be due to the significant new investment coming in the tourism industry and may be also reflective of the buoyant agricultural sector.

May the Ministry of Science and Technology must do an investigation and supplement it with aspects like technology transfer and cross check it against the impact to economic growth. There might be best practice that can emerge.

(Source: World Bank 2011)

3) Corruption a major issue

A very demotivating factor was the perception score on corruption in the Eastern province was very high. Some can argue that corruption and development compliment each other but sometimes it worth analyzing the details as it can be counter productive for attracting investment from overseas.

A point to note however is that Sri Lanka overall corruption average is very low in comparison to the South Asian average and the global average as per the world bank study of 2011. Whist being upbeat on this insight I guess we must continue to work on this attribute as a low score on this attribute can help the country on many other fronts is my view.

(Source: World Bank 2011)

Next Steps

1) Whilst the above study is on the perceptions of people and the sample size may not be truly reflective, the fact of the matter is that it illuminates the issues that need to be further researched and addressed by policy makers. Hence rather than being on the defensive mode lets address them in the district development meetings and then iron down the areas that need correction.

2) The support required to correct the access to finance issue must be addressed. Whilst many reports have revealed the causes and probable remedial action the fact of the matter is that the common people yet find this being the key issue for business growth. Lets focus on this and correct this one as it can have positive impact on the peace and reconciliation process is my view.

3) Whilst the above issues can be corrected lets link the Industrial estates of different line ministries to the SME development agenda and not only help in the supply chain development agenda but also in gaining market access out of the country.

Which means that the EDB must be linked to the system. Why not stage Regional Expos in the next year and the best performers can be show-cased at Expo 2014.

4) Given the construction projects that are in progress in the Eastern Province and also the planned housing programmes that are to be launched in the near future there can be an acute problem on the labour and skills front is my view. The current unemployment index of 4.2% as reported in the Central Bank report of 2011 does not augur well for Sri Lanka. We have to address this key issue.