Jeevan Gnanam : Interview
What steps can be taken to create a better environment for innovative and digital start-ups beyond the provision of funding?
JEEVAN GNANAM: The government needs to look at regulatory changes that affect the cost of failure for a start-up and its investors. Simply put, it should be easy for a start-up to commence and shut down operations, and investors should not have to take on more liability as investing in a start-up is already considered risky.
For start-ups this means that the costs of starting and closing a business should be a lot less; the costs are higher here than in most countries in the region. For investors this means making it less expensive to bring in capital and allowing capital to flow freely. For example, we haven’t yet established limited liability partnership structures for venture capitalists to set up in Sri Lanka. For fresh capital to come in, they have to circumvent complicated exchange control. On top of all of this, there is inconsistent regulation on capital gains in cases where the investment is successful.
Another way to nurture start-ups locally is to help with access to nearby markets, such as India, Bangladesh and Myanmar. One way to do this is to support them with structures like incubators and accelerators to help start-ups expand regionally.
How would you evaluate Sri Lanka’s ICT infrastructure and technological skill set?
GNANAM: There are a number of gaps in the start-up segment and the broader ICT industry. The most important aspects for start-ups include the ability to accept and send payments online easily, artificial intelligence (AI), having access to proper accelerators and incubators where they can learn skill sets like growth hacking, and being able to enter local and international markets.
For the ICT industry as a whole there are some gaps in smartphone and internet penetration. For example, smartphone penetration is currently at 35%, according to data calculated using International Mobile Equipment Identity numbers. However, the actual number of people using smartphones at their full capability is far lower. Basic ICT infrastructure needs to be more accessible so that Sri Lankans can connect to the global economy.
The biggest concern for me, however, is the skills required for tomorrow’s jobs, which are going to be based around the latest technologies, such as AI, deep learning and the internet of things. I think Sri Lanka as a nation has to make a concentrated effort to prepare for the coming years. The Sri Lanka Association of Software and Service Companies, along with the government, has set out programmes in the near future to do just that.
To what extent can collaboration between the private and public sectors contribute to the growth of Sri Lanka’s digital ecosystem?
GNANAM: I believe the two sectors have to work together to grow the Sri Lankan digital ecosystem. The public sector can enable early market access for start-up companies to address the fundamental economic and social needs of the country. What is most important is the active stewardship of the public sector.
Having said that, public-private partnerships should be balanced, and sometimes over-regulation by the public sector can be an issue. Innovation within the financial technology segment, which has grown at a very slow pace due to regulatory requirements, is one example. In this case, deregulation and suggested policy, such as the creation of a sandbox environment, will help grow budding start-ups, which will in turn contribute actively to the GDP of the country.
We would also suggest special approval for government agencies to use start-ups for product manufacturing. Typically, the request for proposal process takes six to nine months, even for software that can be built within three to six months. There are quite a few solutions that would improve the efficiency of the government and the social lives of citizens, but which have not been implemented due to bureaucratic hurdles.
