Following a decade of substantial growth, the ICT sector in Sri Lanka is ready to participate in the fourth industrial revolution and compete in the digital age. In 2018 it launched a new brand – Island of Ingenuity (IoI) – to promote knowledge services. Created by the Sri Lanka Association for Software and Service Companies (SLASSCOM) and endorsed by the Export Development Board, the Information and Communication Technology Agency and other industry bodies, IoI aims to transform the country into a global centre of excellence in high-end products, engineering, intellectual property creation and knowledge process outsourcing. Its main goals are to achieve $5bn in ICT export revenue by 2022; create 1000 start-ups; and generate 200,000 jobs, thereby using technological innovation to encourage inclusive economic growth across the country.
Competitive Edge
Sri Lanka boasts a number of advantages which could enable it to become a digital hub within South Asia. As a result of its relatively small size, geographical proximity to large economies and regionally competitive rate of digital literacy, the country is a good testbed for new services and firms that wish to enter the Asian market. According to Ruwindhu Peiris, former chairman of SLASSCOM and managing director of management consultancy STAX, Sri Lanka provides foreign companies with the opportunity to experiment and innovate in a small-scale economy, without risking the considerable financial losses it might incur in larger markets. “Companies can leverage pools of knowledge and highly skilled workers before entering larger economies such as India, Pakistan or Bangladesh, which all have bilateral free trade agreements with Sri Lanka,” Peiris told OBG. He noted that while small and medium-sized enterprises (SMEs) might receive limited attention in India due to a saturation of large-scale projects, Sri Lanka was actively promoting SME growth.
One of SLASSCOM’s key initiatives includes identifying SMEs with potential and providing them with incentives to foster growth. To further strengthen competitiveness, SLASSCOM is lobbying the government on the national export strategy, calling for an increase in support for technology companies and infrastructure improvements to promote sector growth. It is also campaigning for the easing of visa restrictions, provision of tax holidays and dismantling of bureaucratic barriers for investors and foreign companies.
Regional Development
Another aim of IoI is to encourage development of the ICT sector outside of the capital Colombo. Jaffna, a city in the north that maintains strong ties with its diaspora and comprises a young, well-educated population, is already on its way to becoming a tech cluster. STAX, in collaboration with the Australia-funded Market Development Facility, recently released a Dual-hub IT Strategy for Jaffna, which envisages developing outsourcing capacity by matching local talent with international demand for business process outsourcing and knowledge process outsourcing services, and fostering a start-up ecosystem to develop expertise in specific areas of innovation.
This two-pronged approach could potentially spur development in the wider northern region and support the creation of a regional skills base capable of boosting national competitiveness in the IT industry. Additionally, by developing expertise in niche areas it could eventually prioritise developing technology in-house rather than importing it from foreign companies.
Challenges
There are, however, a number of obstacles to successfully implementing the IoI vision. Rasika Karunatilake, general manager and vice-president of local software company Sysco Labs, told OBG that the ICT industry lacks international recognition and that promoting Sri Lanka’s skills and expertise in technology to foreign investors was essential. Peiris noted that the domestic workforce was still too small to meet demand, so only a select number of projects can be undertaken. Some industry professionals are advocating for an easier hiring process for foreign workers, which could help resolve talent shortages in the short term.
