Tilt policies to favour SMEs - CCC chairman

SMEs do not need the incentive of a triple tax deduction to be innovative. This is different with big corporates. The bigger the company, the more rigid its systems, the further away are the decision makers from customers and the longer it takes to make decisions, Ceylon Chamber of Commerce (CCC), Chairman Suresh Shah told the CCC SME Forum recently.

Excerpts from the speech.

"Today we take a first step in what we hope is an integrated approach in facilitating SMEs in Sri Lanka live up to their full potential. We do this in the full knowledge that the Chamber is but a small cog in a much larger wheel.

A number of other stakeholders, including policy makers, have a greater role to play and we hope that today's forum will be the start of a strong partnership to develop SMEs. SMEs are the life blood of a Nation's economy.

Dynamic sector

Statistics of many countries suggest that SMEs represent almost 99% of all companies and that they have a substantial influence on GDP and the supply of jobs.

Two-thirds of all newly created jobs, are owed to SMEs. In Sri Lanka, estimates suggest that more than 75% of all enterprises fall into the SME category while they account for approximately 45% of the employment opportunities.

The foundation of Taiwan's economic development is its dynamic SME sector. The same applies to Japan as well.

First, SMEs are the fountain of great innovation. With its entrepreneurial culture, close proximity to customers and fast decision-making ability, SMEs have the dexterity and hunger so important to the process of innovation.

It does not need the incentive of a triple tax deduction to be innovative. This is very different with big corporates.

The bigger the company, the more rigid its systems, the further away are the decision makers from customers and the longer it takes to make decisions.

Even triple tax deductions have not been incentive enough for big businesses to innovate. Indeed a strong and deep entrepreneurial culture in a country is a result of a strong and vibrant SME sector.

Many important entrepreneurs and firms of the future started as SMEs. Let's not forget that global leaders such as Microsoft, Apple and Sony started life as SMEs.

Second, SMEs help more equitable distribution of wealth.

A few weeks ago, at the Sri Lanka Economic Summit, we discussed the country's progress towards becoming a US $ 7,000 per capita income nation.

The wealth created by this process should reach not just a select few but extend across the country and must meaningfully touch the lives of all the people.

A strong and vibrant SME sector will help do this.

Resources

Thus, it is clear that the importance of the SME sector cannot be overstated. Yet a number of factors weigh against the SME sector. Access to resources be it funding or talent, economies of scale, supply chain links and infrastructure are some of the limiting factors faced by this sector.

A primary role of the National Forum on SMEs is to highlight the factors that hinder growth and seek solutions by bringing together stakeholders who have the power to make a difference.

To move the process forward let me give three suggestions for consideration.

First, a call to big business. Build strong, sustainable supply chain links with the SME sector. Do more business with SMEs and also help build capacity and transfer knowledge. Strive for a win-win relationship rather than negotiate for the last rupee.

Second, a call to policy makers. Tilt the policy framework in favour of SMEs. This is only fair since many other factors are tilted against it. Let the policy framework facilitate growth of firms into the SME sector and out of it.

Most important, make it easy for SMEs to do business and grow.

Third, a call to policy makers and big business. For too long now, the Sri Lankan ethos has worked against private enterprise. A business person is treated with suspicion of making a fast buck rather than with the respect deserving of a person who creates employment opportunities, pays taxes and meets the needs of consumers.

Change

Unless this belief system is changed, our young will prefer safe employment in the public sector rather than contribute to productive economic growth via entrepreneurship and the creation of SMEs.

It would need a partnership between government and big business to drive this change and I hope we can start on this process soon.

Finally, I would like to leave a thought for those of you in the SME sector as well. Today you operate in a world in which knowledge is increasingly replacing finance as the key ingredient of success.

Companies such as Microsoft and Apple are examples of this. These companies had little or no cash at the start, only the ideas and the courage of their founders.

The advances in information technology, thanks to companies such as Apple and Microsoft, means that the world has become a smaller, more accessible place. The idea you have may not suit a Sri Lankan consumer but never mind.

If it serves the needs of someone in New York or Beijing or anywhere else, you will get to know of it and have the opportunity to meet that need.

In short, it's a world of opportunity and I hope that the Chamber can play a role in helping you reach your goals."