National Policy Framework forSmall & Medium Enterprise ...

[Pages:83]National Policy Framework For

Small and Medium Enterprises (SMEs) Development

ACTION PLAN

Ministry of Industry and Commerce May 2016

P.O. Box 570, 73/1, Galle Road,

Colombo 03, Sri Lanka

Web :.lk Tel.:+94 11 2392149 -50 / +94 11 2431670 Consultant -Mr. D.P.Gunawardana

Message from Hon. Rishad Bathiudeen Minister of Industry and Commerce

It is with great pleasure that I send this message on presenting the Action Plan for the SME Policy Framework for implementation. The economic policy of the government has assigned high priority to the development and strengthening of SME sector to be efficient and competitive for its' products and services to penetrate into global market. In order to achieve this goal, policy framework, road map, action plan and assigning responsibilities are prerequisites. I am especially happy that my Ministry has been able to provide those essentials with the support of all stakeholders of MSMEs sector within a short period of time.

This action plan has been prepared based on six policy intervention strategies articulated in the policy framework. Each strategy has been defined in well balanced and practical approach with achievable targets. Proposed implementing mechanism consists of a high powered Advisory Council, Inter-ministerial Coordination body, SME Authority and a Monitoring and Evaluation Committee providing all elements of planning, implementation and path correction for the sector. Most important aspect is the involvement of all stakeholders in all parts of the country at all stages and public consultation.

I wish to thank Secretary of the Ministry, Mr.T.M.K.B.Tennekoon for his guidance in preparation of this action plan. I also wish to thank all stakeholders and other Ministries that contributed to successful completion of this plan. Last but not least my special thanks go to Mr. M.A. Thajudeen, Additional Secretary of this Ministry whose untiring efforts and capacity to get the cooperation of all stakeholders and leading the team to complete the task fulfilling all the requirements in time with the assistance of his able staff.

I invite all stakeholders to extend fullest cooperation to make the implementation of this plan a success story.

Rishad Bathiudeen (M.P.) Minister of Industry and Commerce

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Foreword

Striving towards the growth of the Small and Medium Enterprises has become imperative in the present context of the march towards a higher economic growth. The fact that the SMEs represent over 90% of the establishments in the country with an engagement of around three million peopleshows the importance of this sector. The SMEs play a major role in the economy and employment in any country. In the move towards an accelerated economic growth,the SMEs need to be strengthened to beglobally competitive.

A Policy Frame Work for the development of SMEs is quite opportune at this moment creating an SME friendly business environment, facilitating acquisition of modern and appropriate technology and inculcating an entrepreneurial culture. The Ministry of Industry with the cooperation of other stake holders has prepared the National Policy Framework for the Small and Medium Enterprises with clearly spelt out intervention strategies. A long felt need of a proper definition of the SMEs also has been addressed in this document.

The action plan prepared for the implementation of the Policy Frame Work to achieve the defined objectives was also done using a participative approach involving all the stake holders. The views and opinions of the Chambers, Trade Associations and individual SMEs have been taken in to consideration in preparation of the document. A policy dissemination process to grass root levels also has been implemented through the central and provincial administration channels and trade associations. It is now the duty of the responsible entities to ensure that the activities of the plan are implemented effectively and efficiently within the time frames defined in the interest of the country.

I wish to commend the efforts taken by the Additional Secretary Mr.M.A.Thajudeen, who took the challenge of preparing the Action Plan within a short period of around four months. This plan would not have been successful without the unstinted support extended by the Hon.Minister Rishad Bathiudeen.

T.M.K.B.Tennekoon Secretary Ministry of Industry and Commerce

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Acknowledgement

Ministry of Industry & Commerce wishes to acknowledge the valuable contribution and the guidance given by the Ministry of Finance and the cooperation extended in preparation of this action plan by the Ministry of Science, Technology& Research, Ministry of Skills Development and Vocational Training, Central Bank of Sri Lanka, National Chamber of Commerce, Federation of Chambers of Commerce and Industry of Sri Lanka (FCCISL) and Regional Chambers. The assistance and the active role played by the Deutsche Geschellshaft fur InternationaleZumsamanarbeit (GIZ) in bringing this plan to surface should be mentioned with special appreciation.

The Ministry also wishes to extend its gratitude to the District Secretaries for taking a lead role and facilitating regional workshops and attending to the sessions. It is with great pleasure to mention the support extended by the National Enterprise Development Authority, Industrial Development Board, and the institutions coming under the Ministry of Science & Technology, Department of Census & Statistics and Registrar of Companies. We also wish to thank the State and Commercial Banks, for participating in discussions and regional workshops for their valuable input.

The Ministry also wishes to thank the World Bank representatives who attended the meetings and for the cooperation extended in this regard.

The contributions, comments and suggestions made by other stake holders, associations, individual entrepreneurs who helped to improve the plan, are also greatly valued. In addition, the immense support extended by the staff attached to the Ministry who helped in organizing meetings and workshops, is highly appreciated. We also wish to mention the efforts taken by Mr. D.P. Gunawardana, Consultant in preparation of this report.

The advice given by the Hon. Minister of Industry and Commerce, Mr. Rishad Bathiudeen, the Secretary, Mr. T.M.K.B.Tennnekoon and the guidance and the keen interest shown by the Senior Advisor to the Prime Minister Mr. Charitha Ratwatte in preparation of this action plan are highly appreciated.

M.A. Thajudeen Additional Secretary (SME & Textile Development) Ministry of Industry & Commerce

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National Policy Framework for Small & Medium Enterprise (SME) Development- Action Plan

Table of Contents

Acronyms ................................................................................................................................ vi Executive summary .................................................................................................................. 1 Chapter 1 - Background & Overview of the SME Sector in Sri Lanka .................................... 4

1.1 Introduction .................................................................................................................... 4 1.2 An Overall view of the Economic activities .................................................................... 6 Chapter 2 - Some Historical Developments in the SME Policy Formulation in Sri Lanka ... 10 2.1 White Paper on National Strategy for SME Sector Development ................................. 10 2.2 Comments & Observations of the Asian Development Bank (ADB) ............................. 14 Chapter 3 - SME National Policy Framework ....................................................................... 16 3.1 Policy Framework........................................................................................................... 16 Chapter 4 -Action Plan for SME Policy Framework.............................................................. 22 4.1 Methodology - Action Plan Preparation ....................................................................... 22 4.2 Policy Dissemination & Planning Implementation Process .......................................... 23 4.3 Inputs for the Action Plan ............................................................................................. 24 4.4 Validation....................................................................................................................... 24 4.5 Policy Implementation Structure ................................................................................. 24 4.6 Action Plan Goals ........................................................................................................... 25 Chapter 5 ? Implementation Plan.........................................................................................26 5.1 Institutional Arrangements ............................................................................................ 26 5.2 Implementation Strategies & Activities ........................................................................27 Summery and Conclusion ..................................................................................................... 70

Tables Table 1: Number of Establishments and percentage distribution economic sector wise ..... 6 Table 2: Number of persons and percentage distribution economic sector wise ................. 6 Table 3: Distribution of establishments by Sector by scale ................................................... 7 Table 4: Distribution of MSM and the persons engaged........................................................ 7

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Table 5: Definition of the SMEs ............................................................................................ 18 Figures Figure 1: Policy Intervention Strategies .............................................................................. 18 Figure 2: Key Stakeholders ? The Driving Force behind the SME Development ................ 21 Figure 3: Action Plan Preparation Process ......................................................................... 22 Figure 4: Policy Dissemination Process............................................................................... 23 Figure 5: Policy Implementation Structure......................................................................... 24 Figure 6: SME policy goal achievement process ................................................................. 25 Annexes

I. Advisory Team II. Working Group Members III. Comparison SME Classification Policy Frame work and DCS

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Acronyms ADB BDS CBSL CEA COSTI CP DTET EDB FCCISL GDP GIZ IDB ITI MIC MSM MSDVT NAITA NIBM NIPO NCPC NEDA NGO PMEC SLGTI SLITA SLSI WTO SEPI SME SMEA TTDF VTA

Asian Development Bank Business Development Service Central Bank of Sri Lanka Central Environmental Authority Coordinating Secretariat for Science Technology and Innovation Cleaner Production Department of Technical Education Export Development Board Federation of Chambers of Commerce & Industry Sri Lanka Gross Domestic Product Deutsche Geschellshaft fur Internationale Zumsamanarbeit Industrial Development Board of Ceylon Industrial Technology Institute Ministry of Industry & Commerce Micro, Small and Medium Ministry of Skills Development and Vocational Training National Apprenticeship & Industrial Training Authority National Institute of Business Management National Intellectual Property office National Cleaner Production Centre National Enterprise Development Authority Non-Governmental Organization Policy Monitoring and Evaluation Committee Sri Lanka German Training Institute Sri Lanka Institute of Textile & Apparel Sri Lanka Standards Institute World Trade Organization Self-Employment Initiative Loan Scheme Small & Medium Enterprises Small & Medium Enterprises Authority Technology Transfer Development Fund Vocational Training Authority

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Executive Summary

The SME sector has been identified as a vital sector in the economy of the country, as more than 90% of the establishments fall under the SME category. It is estimated that this sector provides 45% of the employment in the country. The SME sector includes Micro, Small and Medium scale industries and consists of around one million establishments providing employment to around 2.25 million people in the country. Considering the above facts, a National Policy Framework for SME development formulated by the Ministry of Industry and Commerce taking a lead role and the policy framework has been approved by the Cabinet Subcommittee on Economic Affairs.

This report is the action plan for implementing the Policies prepared in collaboration with all stake holders. A working committee was formed consisting of nominated representatives from Key stake holder Ministries, Central Bank of Sri Lanka and other service delivery Institutions, Government Departments and National and Regional Level Chambers. The Deutsche Geshellshaft Fur InternationaleZusamanarbit (GIZ)played a significant role in this regard

The action plan was prepared based on six policy intervention strategies spelt out in the Policy Framework. The overall process of the preparation of the action plan was laid down by the working committee and meetings for each intervention strategy was organized by the relevant ministries, while the access to finance section was handled by the Central Bank of Sri Lanka. The action plan was prepared using the inputs received at the meetings and workshops held with the subcommittees appointed for each intervention strategy and data gathered in the public hearing process. Workshops in the regions were held in collaboration with the Government Agent and Regional Chambers with the objective of dissemination of the policy initiatives to the grass root level and obtaining suggestions and views on the policy frame work and the activities for implementation.

The implementation structure of the policy consists of a high powered SME Advisory Council, Inter Ministerial Coordinating Body and a SME Authority which will be responsible for implementation of the policy. A SME cluster committee, Policy Monitoring and Evaluation Committee and all stake holders are included in the implementation process.

The main activities in creation of an Enabling Environment involve recommendations to amend the present laws relating to SMEs, addressing the problems faced presently and creation of more SME friendly set of laws. Providing SME windows in relevant Ministries and Institutions,

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