Posted on October 27th, 2018

Sarath Wijesinghe – Former Ambassador to UAE and Israel – Solicitor. Attorney –at –Law

SME as an engine of development in Israel and other countries

SME is a powerful engine tested and used worldwide successfully, in underdeveloped, developing and developed world better utilized in Israel with 40% of the GDP, and 70% exports mostly on scientific discoveries, innovations, and agriculture with 94% technology is a major exporter of flowers, vegetables, and fruits to the world with arms trade as another main source of income due to advanced technology and innovations. It is a part of economic strategy using human technology and experience to accelerate the growth to lessen the gap between the rich and poor, eradication of poverty and prosperity of the global population. 600 million jobs are needed in the next 15 years to absorb global workforce and the demands for funds for the humanity is growing every minute at a drastically rapid pace. Impact spreads worldwide with ripple effects on economies in this global cluster sandwiched with modern technology and access to information with a click of a button. No country can live in isolation without the impact of the global realities and it is the duty of the Government Departments on Commerce and Technology, Chambers of Commerce, Universities, Public Private sector to be in the forefront to work hand in hand to meet the future challenges faced by the world more specifically countries with less resources, and less technologically advanced struggling to make ends to meet. OECD Organization for economic development promotes SMEs in EU with Bologan” Charter, and in the UK defines SMEs as businesses less than 250 employees’ while generating 5.2 million to the GDP. EU and few jurisdictions have online strategy. ASEAN has a major base of SMEs and in Singapore contributes 50% towards 70% GDP when Sri Lanka SMEs contributes 52% to the GDP. India has 25 laks of SMEs, and in Australia 97% SMEs make 1/3 of the GDP. SME is a key engine and ideal opportunity to invest, support to widen the gap between rich and poor. It is a moot issue whether the abovementioned stakeholders live up to the expectations on serving the country with their expert knowledge and experience, the country is awaiting for. Country is full of debts, want of developments and investments with utterer uncertainty in the political economic and development culture infested with indiscipline, corruption and inefficiency from top to bottom. It is high time we get together and find a solution or perish together!

Backbone of the economy

It is learnt that steps are taken to set up a SME authority with regulatory powers with a database to help the one million registered SMEs in Sri Lanka providing employments to three million. It is a good idea to encourage SMEs but any state intervention will lead it to another inefficient and ineffective state institution as in any other average government body hardly assisting the ailing economy. Israel is following as a role model in many parts of the world and with the goodwill we maintain with her and experiences of trade missions to and fro we had this is an ideal opportunity to enhance wider friendship. There were proposals by the Sri Lankan Ambassador in Israel on

setting up of centres of excellence” to exchange knowledge and experience on innovations and expert knowledge and it is time to implement the proposals with communities of” Kibitz” model to save land and encourage innovations on commercial basis. Government encourages the SMEs in Israel and more often assist to form companies and sell it to the state or outside Israel waiting for innovations and novel SMEs. SME is the backbone of the economy of a country and critical for job creation and development. It plays a major role in economics of any country. It is estimated that $ 3.4 billion transections take place in small SMEs engaged in big businesses. 90% of the world businesses are by SMEs with great economic impact essential for economic productivity. In USA 63% new jobs are created via SMEs. This situation spreads round the world with changes on economic output population and other factors. SME activism depends on the strategies of the government, private sector and the educational institutions on assisting and promoting the stake holders. Do we look after and make use of the backbone of the country with beauty, human resources, and strategically situated and placed on the main sea route passing through thousands of ships close to the newly constructed international Harbour and international Airport is a moo tissue and a matter needs for consideration by the governance.

Definition and categorization

SMEs in the world are categorized on the number in employment, output, financial strength and many other factors. It is meant to promote intellectual property, develop strategies, capacity building, civil society activism, comprehensive information, and the strength of the job creation engine of the country and the institution. World Bank (300) MIF (100) UNDP (200) are the basis of the computation on defining and categorizing the SMEs as a fundamental part of the economic fabric in developing countries. OACD is the international organization on promoting the SMEs in developing countries. All the countries in the world have realized the need and different strategies are used in using and adopting the concept on the economic engine and job creation and development strategies and it is a sorry state Sri Lanka and private sector appear not to have realised the value and impact of the SMEs. We have some of the oldest and traditional Chambers of Commerce, world reputed Universities producing thousands of Arts Graduates with no competency on foreign languages and IT skills to be used in business and trade, and it is sad that the Ministry of Commerce engaged on many other political issues and matters other than trade, commerce and promotion of international and local trade including SMEsm in Sri Lanka.

Israel as a role model

Israel is a developed country utilizing SMEs to the maximum capacity with strong goodwill with the world. With the goodwill of the Europe Union, Israel is granted $93 million grant being one of the main exporters of technology to the Europe Union and USA, China, India, USSR, Turkey, Japan, and many other countries. It is an advanced country with food security self-sufficient on food which is 40% of GDP exporting electronics, Technology, with 70% GDP from exports with the products of SMEs groomed and assisted by the Government as the backbone of the Israel economy. Innovators are groomed by the Universities and Institutions who then start-up companies with the blessings of the government and the chambers of commerce. Failures are less and invariable either the government or USA companies buy the inventor and inventions over if the SME does not wish to go forward further. Seeds of new Israel grew from the imagination of exiled people with creativity outpouring scientific discovery based on innovation and entrepreneurship. Many countries use Israel as a role model in SME application and entrepreneurship in industry and technology. Israel and Sri Lanka has had number of Trade Mission exchanges and technology transfer applications on water, agriculture and technology and she is an ideal partner to work with to improve our SMEs to the maximum productivity. It is time Sri Lanka makes use of the friendship and the goodwill created with Israel on trade, commerce, and defence.

Small and Medium Businesses in Sri Lanka

In Sri Lanka SMEs are made up of 80% business service sector, and 35% from employment sector. It is noted that the knowledge on the management sector is not satisfactory productivity and efficiency is grossly unsatisfactory, Incentives and liveliness is minimal, Service sector is unproductive with inefficiency and inactivity, 1.8 million Of the population is on employment in Middle East on unproductive jobs with majority young females needed in the country for the future investments, 51% of the population depend on Samudri” assistance, productive innovators are less or no as many opt to be trishaw drivers, brokers, engaged in land sales, government servants 10% who are lazy and unproductive demanding more salaries and perks, Army and retired army personal and many employed in the security field with no productivity, and many underemployed expecting white collar jobs consist of our potential service sector expecting to be innovators and future SMEs. Ministry of Commerce and other departments, Chambers, and universities are inactive and unconcerned on promotion of SMEs and businesses in the current competitive and challenging world. This indicates that Sri Lanka needs a complete overhaul of the system to keep pace with the developments in the competitive world. Situation is gloomy and pathetic, but it is our country and there is no way out other than finding solutions and strategies to correct the situation.

Way forward

Small and medium Businesses are a basic requirement as an engine for the growth, development, income and employment generation with innovations and advancement on technology with the cooperation assistance and encouragement of the government, Chambers of Commerce, Universities and the Business Community. It appears that it has become no body’s business and the SME concept in Sri Lanka is still in the formative stages with only few existing companies limping around in a sick and feeble pace. In the open economy this cannot go through, and unless immediate and drastic changes are taken the day country become an ineffective nation is not too long. No new innovations, no new SMEs, and no programme or vision is forthcoming from any of the abovementioned institutions. It is to the credit to the Federation on Chambers to have initiated a project which has not perused and continued. University Grant Commission has initiated a seminar with a German University which is only an academic exercise. Israel is a tiny but powerful nation of 1/1000th the size of the globe advising and guiding the world powers with innovations and SME’sm. Even oil rich United Arab Emirates is much more advanced in promoting and utilizing these concepts in mobilizing the community and to manage the oil money in long a term and productive investment on job promotion and development strategies. It is time we learn from Israel – the tiny great Nation and UAE – oil rich but full of innovative concepts being applied and utilized. Many other countries in the globe has actively followed and the successfully tested this process and strategy on the generation of employment, progress and development except us!.


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