Business Chambers call upon Govt to support SME sector

by Lalin FERNANDOPULLE

Business chambers have reiterated the need to support the SME sector which is the backbone of the country’s economy.

The chambers have called upon the government to focus more on SME development in the 2012 Budget.

Sri Lanka Chamber of Small Industries (SLCSI) President, Aloy Jayawardene said the role of the small and medium scale entrepreneurs cannot be undermined as they make a salient contribution to the economy.

“SLCSI is of the view that the $ 500m SME credit line offered by the World Bank will be absorbed by larger enterprises using the new SME definition adopted for the facility”, Jayawardene said.

The definition adopted by the larger enterprises is different from the one adopted by the Task Force “National Strategy for Small and Medium Enterprise Sector Development in Sri Lanka” -White Paper 2002 which states assets value not exceeding Rs. 20m- excluding land and buildings for small enterprises and for medium enterprises not exceeding Rs. 50m excluding land and buildings.

As the report states the value to be adjusted for inflation once in five years the chamber may consider small enterprises with an asset value of Rs. 50m excluding land and buildings. “There should be limitations in obtaining large loans to ensure more SMEs benefit from the World Bank credit line facility”, Jayawardene said.

The SME sector is the engine of growth and it is the largest job creator in the country. SMEs promote local and regional development vital to reduce rural poverty.

According to experts allocation of funds for SME growth has been inadequate and as a result many entrepreneurs are unable to scale up and be recognised in the global market.

Handicraft, garments, soft toys, cut-flower, ornamental fish, confectionery and agri-based products are some of the SME sector enterprises in the country.

Immediate Past President of the Federation of Chambers of Commerce and Industries of Sri Lanka (FCCISL), Nawaz Rajabdeen said that the 2012 Budget should focus on developing the SME sector which is the backbone of the economy.

“The government should promote regional industrial development by offering a special package for start-up industries in backward areas of the North and the East”, he said.

“Regional development banks should play a leading role in supporting SME development through grassroots level micro-finance programs to promote self-employment”, Rajabdeen said.

Chamber of Construction Industry (CCI) President Surath Wickremasinghe said the construction industry is on the threshold of a major boom which will result in completed projects from the different economic sectors bringing revenue to the Government.

He said that at present around Rs. 200 b per annum worth of work is handled by local and foreign consultants and contracting organisations. Of this amount 65 percent is handled by overseas companies.

The anticipated growth of the construction industry over the next four years will exceed Rs. 400 b per annum. This will reflect an economic growth of over 10 percent and the per capita income of $4,000 can be achieved if the projects are completed on time.

Wickremasinghe said that several impediments have to be overcome to achieve this target and added that human capital and local materials will be in demand.

“Even now there are shortages due to restrictive practices which includes sand mining, metal quarrying and supply of earth. With the increase in the demand imports of building materials such as cement and steel will increase where quality of these materials will be an issue while procurement procedures and processes need to be addressed simultaneously”, he said.

Wickremasinghe said that the challenge facing the construction industry is to source skilled craftsmen and unless these issues are addressed we foresee time and cost overruns while the quality of the end-product will be affected.

CCI anticipate that the demand for different skills will increase by at least 20 percent or 30,000 people per annum.CCI has proposed that the procedure be streamlined to ensure equitable distribution of public sector work or projects among key stakeholders in the construction industry.

The Government should make it mandatory that all foreign consultants and contractors on donor funded projects have collaborative arrangements with a local counterpart.

He said when a total solution is sought by the Government for infrastructure projects on a Turnkey Design/Build with Funding either unsolicited or on a Donor/Private Funded basis equal opportunities for foreign and local investors or developers to participate should be permitted.

To fast track mega projects the Government should set up land banks in prime locations in the city and the land should be unencumbered. Recognising local consortia consisting of consultants and contractors for them to obtain pre-qualification and resources to undertake mega projects is also necessary.

The government should continue to provide Treasury guarantees for projects already identified by the line ministries requiring funding to be provided by the domestic banking system utilising the local construction industry for its implementation.

The National Chamber of Commerce of Sri Lanka (NCCSL) Secretary Sujeiva Samaraweera said that the chamber has called upon the government to continue the fertilizer subsidy for the coconut industry and introduce a mechanism to stabilise the price of a nut with a minimum farm gate price.

Large number of people are directly and indirectly employed in the coconut industry. The industry is faced with a supply shortage due to low production caused by land fragmentation.

“Special incentives should be introduced to bring back abandoned land in the North and the East into full production. More agri based raw materials are needed for export processing”, Samaraweera said.

NCCSL said that there should be a mechanism to release state land to the private sector on long term lease for commercial cultivation.

The chamber said that a land bank should be set-up for the private sector to obtain land on lease and added that land should be allocated by a central authority.

The government should encourage the use of organic fertilizer to promote organic agriculture. Excessive and careless utilization of agro chemicals and chemical fertilizer contribute to environmental pollution.

NCCSL has called upon the government to import high yielding and decease resistant planting materials. Importing high yielding planting material has been difficult due to cumbersome quarantine procedures imposed by the Quarantine Authorities.

Sri Lanka’s post harvest losses on fruits and vegetables are comparatively high due to the absence of proper value-addition methods and the stagnant food development technology.

Of the post-harvest waste, about 25% is due to improper packaging and transportation of the crops.

“Special incentives should be provided to encourage development and deployment of value addition methods and food development technology”, Samaraweera said.

Business Organisations need to work with several government agencies such as Customs, IRD, Exchange Control Department and Import controller in their day-to-day import/export related functions with cumbersome procedures.

The NCCSL proposes to set up a one-stop shop with required powers and less bureaucracy to facilitate the private sector in their business.

Operational delays and cargo mishandling still continues with very slow improvement. We propose to have a solid plan for improvement such as dry port facilities and granting permission for private bonds to operate to support the industry.