With recent tax incentive:

Computer market grows at double digit

By Shirajiv Sirimane

Students at a computer class

The Sri Lanka computer market is growing at a double digit rate and the recent tax incentive too would help the industry to grow in a bigger way.

The e-Sri Lanka program launched by President Mahinda Rajapaksa to increase the IT literacy and increase its penetration especially in the rural areas along with the Nanasela initiatives too has contributed for this positive sentiment. Progress is expected over the five-year forecast period, with internet penetration reaching 26%, and broadband penetration 13%.

Though Sri Lanka’s IT market which is less than five percent of India, is estimated to be around Rs. 36 billion and growing in the excess, of Rs. 7 million annually. It is projected that this market would grow in the excess of 20 percent which would make Sri Lanka, one of the fastest-growing markets in the region.

Moves by the government to set up industries in rural areas to breach the regional disparity too would help to swell the local IT market and also bring in new investors. “One of the biggest advantages in Sri Lanka for the IT market is the high literacy rate the country is enjoying, said an IT Expert from a leading multi national company.

In 2010, the consumer PC segment will benefit from lower interest rates and more credit availability, while the Computers for Educational programs will continue to receive government investment in 2010. The decision by the government to reduce import duties on electronic goods by around 3.5% should result in a further reduction of local market PC prices. The move will lead to a reduction in tax on imported CPUs, thus leading to lower prices for locally assembled computers.

In 2010, the government plans to roll out another 1,500 computer labs for Sri Lankan schools. This is in addition to the 3,500 that have already been constructed in both rural and urban areas, with around 6,000 planned in total, a survey by Companiesandmarkets.com had stated.

Sri Lanka’s addressable computer hardware market is estimated at US$233mn in 2010 and is projected to reach around US$467mn in 2014. At least 350,000 computers were sold in Sri Lanka in 2009, despite the economic slowdown. This annual total could increase to more than 650,000 by the end of the forecast period with growing demand for affordable notebooks.

Sri Lankan spending on software remains rather low, with an estimate of the addressable market at US$40mn in 2010. IT services are estimated at around US$62mn in 2010, accounting for about 17% of Sri Lanka’s total spending on IT. The market is dominated by demand from government, finance and telecoms sectors, which account for at least half of total spending.

Greater economic stability in Sri Lanka will enable an expansion of domestic computer production. In May 2010, Sri Lankan manufacturer, Singer launched its new Singer X series of affordable notebooks and netbooks in the domestic market, targeted at rural users. A number of other Sri Lankan PC brands, including Panora, Maya and Kobian, have established a niche in the domestic market.

In 2010 Microsoft Sri Lanka is promoting its cloud-computing solutions, which it believes could be a transformative software delivery model for Sri Lankan enterprises. Hirdaramani Group, one of Sri Lanka’s largest apparel manufacturing companies, recently announced that it was running a cloud computing pilot on Windows Live Initiative.