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MSME sector development vital for achieving sustainable development

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Insights during Covid-19 situation

By Dr. Tissa Ravinda Perera

Faculty of Management & Finance

University of Colombo

Email: ravinda@mos.cmb.ac.lk

Nature and Structure of Sri Lankan MSME Sector

The MSME sector is the backbone of any country. It is not because of the number of people employed therein or the value addition to the national economy; it is because this sector helps solve numerous issues. Therefore, any country tries its best to promote and protect its MSMEs through deferent strategic and policy initiatives. Enterprise Sri Lanka was one of them, recently developed and launched by the previous government, which expected to develop 100,000 SMEs under this programme by mainly providing loans to prospective entrepreneurs. Successive governments have had similar programmes. However, they did not yield the desired results due to numerous reasons.

However, the present government has not yet launched a new programme to develop the country’s MSME sector. It can be expected to have a national programmes to develop MSMEs.

According to the Department of Census and Statistics (2013/2014) there are about 1,019,681 businesses in Sri Lanka. Out of them 99.2% are MSMEs. The micro, small and medium businesses account for 91.8%, 7.0% and 1% respectively of the total establishments in Sri Lanka. The employment generation of the MSME sector, in Sri Lanka is 44.6%, 17.6% and 12.9% respectively. The statistics of the Department of Census and Statistics Sri Lanka clearly shows that the contribution of the SME sector to the national economy is around 31.8% when compared to the large-scale business sector in the country. This sector is as important to Sri Lankan economy as the large-scale businesses.

There are important characteristics of this sector. Out of the 1,019,681 business units, many of them are located in the Western Province, and the Gampaha District has the highest number of industrial establishments in this province. According to the census of industries 2003/2004, conducted by the Department of Census and Statistics, Kurunegala, Gampaha, Colombo, Kandy, Kegalle and Katutara, respectively, have the highest number of industrial establishments in the country. Therefore, it clearly shows that there is a disparity in the distribution of MSMEs in the country.

Policymakers must look into this matter when promoting and developing the SME sector in the country.

 

Current Issues and Challenges Faced by the MSME Sector in Sri Lanka

There is no apex body to coordinate the activities of the MSME Sector in Sri Lanka right now. It is really a major issue when it comes to policy decisions related to this sector. Therefore, it could be noticed that there is a tug-of-war over policymaking and policy implementation. The Industrial Development Board and the Samurdhi Movement play a role in coordinating the activities in entrepreneurship development and MSME development. However, their involvement is not that effective and enough, due to the outdated mode of operation and approach. There is no proper data base in Sri Lanka, related to MSMEs and their activities. Sometimes, the data and the data bases available are not up-to-date or reliable. The Department of Census and Statistics of Sri Lanka has some data and data bases. However, they are also not clear and up-to-date to help understand this sector, which is in a pathetic situation today due to the uncoordinated polices. Such policies change from government to government and Minister to Minister. One can’t see any justifiable reason to change such policies as are related to the MSME sector. The previous government implemented the Enterprise Sri Lanka project. Sometime ago, the Divineguma Programme” and the “Wasanthaya Programme” were introduced. What happened to them? Today, they are no more. What has happened to the enterprise Sri Lanka programme? What has happened to the previous programmes? The uncoordinated polices and lack of national policies are the main issues in the Sri Lankan MSME sector. In any country, protection and promotion of MSMEs are the primary responsibility and task of the government. However, in Sri Lanka, it does not seem to be the case. The government tries to apply taxes to MSMEs in the similar way they are been applied to large scale businesses. It is very difficult for an MSME to get a loan even from public banks, which ask for collaterals, etc. Can Sri Lanka encourage MSMEs in this manner? There are many

procedurals to be followed when starting and running a business. Sometimes, the English language is a barrier for the MSME owners. They have to fill documents in English when applying for a loan or completion. They also have to fill many documents when registering their businesses and opening tax files. This type of procedural barriers affect the MSME performance in the country. Unnecessary laws and environmental protections have a high negative impact on the MSMEs, which do not have enough knowledge and funds to meet some legal requirements. During the previous government Sri Lanka was talking about Singapore-Sri Lanka Trade Agreement and the ETCA Agreement between the Sri Lanka and India. There are many other agreements like this. Do they affect the MSME sector in the country? How is the government going to protect them? There are many low-cost imports to the country, mainly from China. Therefore, how is the government going protect our SMEs from the products and services coming to the country under trade agreements and products and services coming to the country as direct imports.

In 1977, Sri Lanka opened up her economy. Many large scale foreign and local businesses came into being. Therefore, value addition especially from small industries, went down since the contribution from large industries went up exponentially. Hence, the emergence of large-scale businesses is a serious challenge for MSMEs in the country in competing with them. The Sri Lankan manufacturing MSMEs are in trouble since many people like to start service industries than manufacturing industries. Many people do not like to take a high risk of staring a manufacturing MSME in Sri Lanka. What can the government do about this? What can the public sector and private sector organisation do? What can the general public do? There are important questions to be raised here.

Globalisation is a great challenge faced by the Sri Lankan MSMEs. The technological advancement, innovations, telecommunication and transportation development are major components thereof. Thus, the MSME sector in Sri Lanka, has to face this phenomenon. The socio-cultural changes in the world and Sri Lanka drastically, can affect the customer preferences as well. These customer preferences affect businesses, mainly the MSMEs in Sri Lanka. Therefore, social cultural changes are also a major challenge for the MSME sector in Sri Lanka. (To be continued)



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Acid test emerges for US-EU ties

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European Commission President Ursula von der Leyen

European Commission President Ursula von der Leyen addressing the World Economic Forum in Davos, Switzerland on Tuesday put forward the EU’s viewpoint on current questions in international politics with a clarity, coherence and eloquence that was noteworthy. Essentially, she aimed to leave no one in doubt that a ‘new form of European independence’ had emerged and that European solidarity was at a peak.

These comments emerge against the backdrop of speculation in some international quarters that the Post-World War Two global political and economic order is unraveling. For example, if there was a general tacit presumption that US- Western European ties in particular were more or less rock-solid, that proposition apparently could no longer be taken for granted.

For instance, while US President Donald Trump is on record that he would bring Greenland under US administrative control even by using force against any opposition, if necessary, the EU Commission President was forthright that the EU stood for Greenland’s continued sovereignty and independence.

In fact at the time of writing, small military contingents from France, Germany, Sweden, Norway and the Netherlands are reportedly already in Greenland’s capital of Nook for what are described as limited reconnaissance operations. Such moves acquire added importance in view of a further comment by von der Leyen to the effect that the EU would be acting ‘in full solidarity with Greenland and Denmark’; the latter being the current governing entity of Greenland.

It is also of note that the EU Commission President went on to say that the ‘EU has an unwavering commitment to UK’s independence.’ The immediate backdrop to this observation was a UK decision to hand over administrative control over the strategically important Indian Ocean island of Diego Garcia to Mauritius in the face of opposition by the Trump administration. That is, European unity in the face of present controversial moves by the US with regard to Greenland and other matters of contention is an unshakable ‘given’.

It is probably the fact that some prominent EU members, who also hold membership of NATO, are firmly behind the EU in its current stand-offs with the US that is prompting the view that the Post-World War Two order is beginning to unravel. This is, however, a matter for the future. It will be in the interests of the contending quarters concerned and probably the world to ensure that the present tensions do not degenerate into an armed confrontation which would have implications for world peace.

However, it is quite some time since the Post-World War Two order began to face challenges. Observers need to take their minds back to the Balkan crisis and the subsequent US invasions of Afghanistan and Iraq in the immediate Post-Cold War years, for example, to trace the basic historic contours of how the challenges emerged. In the above developments the seeds of global ‘disorder’ were sown.

Such ‘disorder’ was further aggravated by the Russian invasion of Ukraine four years ago. Now it may seem that the world is reaping the proverbial whirlwind. It is relevant to also note that the EU Commission President was on record as pledging to extend material and financial support to Ukraine in its travails.

Currently, the international law and order situation is such that sections of the world cannot be faulted for seeing the Post World War Two international order as relentlessly unraveling, as it were. It will be in the interests of all concerned for negotiated solutions to be found to these global tangles. In fact von der Leyen has committed the EU to finding diplomatic solutions to the issues at hand, including the US-inspired tariff-related squabbles.

Given the apparent helplessness of the UN system, a pre-World War Two situation seems to be unfolding, with those states wielding the most armed might trying to mould international power relations in their favour. In the lead-up to the Second World War, the Hitlerian regime in Germany invaded unopposed one Eastern European country after another as the League of Nations stood idly by. World War Two was the result of the Allied Powers finally jerking themselves out of their complacency and taking on Germany and its allies in a full-blown world war.

However, unlike in the late thirties of the last century, the seeming number one aggressor, which is the US this time around, is not going unchallenged. The EU which has within its fold the foremost of Western democracies has done well to indicate to the US that its power games in Europe are not going unmonitored and unchecked. If the US’ designs to take control of Greenland and Denmark, for instance, are not defeated the world could very well be having on its hands, sooner rather than later, a pre-World War Two type situation.

Ironically, it is the ‘World’s Mightiest Democracy’ which is today allowing itself to be seen as the prime aggressor in the present round of global tensions. In the current confrontations, democratic opinion the world over is obliged to back the EU, since it has emerged as the principal opponent of the US, which is allowing itself to be seen as a fascist power.

Hopefully sane counsel would prevail among the chief antagonists in the present standoff growing, once again, out of uncontainable territorial ambitions. The EU is obliged to lead from the front in resolving the current crisis by diplomatic means since a region-wide armed conflict, for instance, could lead to unbearable ill-consequences for the world.

It does not follow that the UN has no role to play currently. Given the existing power realities within the UN Security Council, the UN cannot be faulted for coming to be seen as helpless in the face of the present tensions. However, it will need to continue with and build on its worldwide development activities since the global South in particular needs them very badly.

The UN needs to strive in the latter directions more than ever before since multi-billionaires are now in the seats of power in the principle state of the global North, the US. As the charity Oxfam has pointed out, such financially all-powerful persons and allied institutions are multiplying virtually incalculably. It follows from these realities that the poor of the world would suffer continuous neglect. The UN would need to redouble its efforts to help these needy sections before widespread poverty leads to hemispheric discontent.

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Features

Brighten up your skin …

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Hi! This week I’ve come up with tips to brighten up your skin.

* Turmeric and Yoghurt Face Pack:

You will need 01 teaspoon of turmeric powder and 02 tablespoons of fresh yoghurt.

Mix the turmeric and yoghurt into a smooth paste and apply evenly on clean skin. Leave it for 15–20 minutes and then rinse with lukewarm water

Benefits:

Reduces pigmentation, brightens dull skin and fights acne-causing bacteria.

* Lemon and Honey Glow Pack:

Mix 01teaspoon lemon juice and 01 tablespoon honey and apply it gently to the face. Leave for 10–15 minutes and then wash off with cool water.

Benefits:

Lightens dark spots, improves skin tone and deeply moisturises. By the way, use only 01–02 times a week and avoid sun exposure after use.

* Aloe Vera Gel Treatment:

All you need is fresh aloe vera gel which you can extract from an aloe leaf. Apply a thin layer, before bedtime, leave it overnight, and then wash face in the morning.

Benefits:

Repairs damaged skin, lightens pigmentation and adds natural glow.

* Rice Flour and Milk Scrub:

You will need 01 tablespoon rice flour and 02 tablespoons fresh milk.

Mix the rice flour and milk into a thick paste and then massage gently in circular motions. Leave for 10 minutes and then rinse with water.

Benefits:

Removes dead skin cells, improves complexion, and smoothens skin.

* Tomato Pulp Mask:

Apply the tomato pulp directly, leave for 15 minutes, and then rinse with cool water

Benefits:

Controls excess oil, reduces tan, and brightens skin naturally.

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Features

Shooting for the stars …

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That’s precisely what 25-year-old Hansana Balasuriya has in mind – shooting for the stars – when she was selected to represent Sri Lanka on the international stage at Miss Intercontinental 2025, in Sahl Hasheesh, Egypt.

The grand finale is next Thursday, 29th January, and Hansana is all geared up to make her presence felt in a big way.

Her journey is a testament to her fearless spirit and multifaceted talents … yes, her life is a whirlwind of passion, purpose, and pageantry.

Raised in a family of water babies (Director of The Deep End and Glory Swim Shop), Hansana’s love affair with swimming began in childhood and then she branched out to master the “art of 8 limbs” as a Muay Thai fighter, nailed Karate and Kickboxing (3-time black belt holder), and even threw herself into athletics (literally!), especially throwing events, and netball, as well.

A proud Bishop’s College alumna, Hansana’s leadership skills also shone bright as Senior Choir Leader.

She earned a BA (Hons) in Business Administration from Esoft Metropolitan University, and then the world became her playground.

Before long, modelling and pageantry also came into her scene.

She says she took to part-time modelling, as a hobby, and that led to pageants, grabbing 2nd Runner-up titles at Miss Nature Queen and Miss World Sri Lanka 2025.

When she’s not ruling the stage, or pool, Hansana’s belting tunes with Soul Sounds, Sri Lanka’s largest female ensemble.

What’s more, her artistry extends to drawing, and she loves hitting the open road for long drives, she says.

This water warrior is also on a mission – as Founder of Wave of Safety,

Hansana happens to be the youngest Executive Committee Member of the Sri Lanka Aquatic Sports Union (SLASU) and, as founder of Wave of Safety, she’s spreading water safety awareness and saving lives.

Today is Hansana’s ninth day in Egypt and the itinerary for today, says National Director for Sri Lanka, Brian Kerkoven, is ‘Jeep Safari and Sunset at the Desert.’

And … the all-important day at Miss Intercontinental 2025 is next Thursday, 29th January.

Well, good luck to Hansana.

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