National Policy Framework
for SME Development in Sri Lanka
V.Sivagnanasothy
Secretary
Ministry of Traditional Industries and
Small Enterprise Development
sivagnanasothy@hotmail.com
Road Map
Mahinda Chintana Vision for the Future
 National Policy Framework on SMEs
 Focus of SME Policy
 Intervention and Support Mechanism
 Definition of SME
 Policy Intervention and Strategies

Mahinda Chintana Vision for the Future
Indicator
2013
2016
7.3
8-10%
Per Capita Income (US$)
3,280
4,000
Poverty Head Count Index
6.5%
4.2 %
Unemployment
4.4%
3.2%
Exports (US$ Billion)
10.4
18
Economic Growth
Provincial GDP Contribution
Western
43.4
Central
9.8
Southern
11.5
Northern
4.0
Eastern
6.3
North Western
9.6
North Central
4.7
Uva
4.5
Sabaragamuwa
6.1
Transform
lagging
regions into
emerging
region of
prosperity
Mahinda Chintana Vision for the Future

-
“SMEs are the backbone of the economy”
Accounts for more than 75 % of the total number of
enterprises
Provides 45% of employment and contribute to 52% of
the GDP

Driver of Change for inclusive growth, regional
development , employment generation and poverty
reduction

Transforms lagging regions to emerging regions of
prosperity
SME Policy Framework Matrix
Focus of the SME Policy

With the globalization and liberalization trend, it is
important to have a renewed look of these sectors not as a
mere object of “protection and promotion” but as a driving
force for “growth and development”. Enhancing national and
international competitiveness is fundamentally important for
this sector to face the emerging challenges.
- High potential viable promising sectors
- Promote enterprises with high value addition and use of local raw
material
- Encourage export oriented, demand driven cash-cow enterprises
- Promote flagship sectors with high potential spillover effects
- Promote innovative technology driven enterprises
- Locally and globally competitive : demand driven and market based
(Globalizing world – Integrated and borderless world)
- SMEs which have close cooperation with large enterprises and
export firms to supply parts and components under buy-back, subcontacting arrangements contributing to import substitution.
Focus of the SME Policy
•
Promote relocation of SMEs in the backward
region to reduce urban rural imbalances
•
Transforming the landscape of the SMEs
from mere trade and commerce towards
production and industry
•
Cluster Approach covering the entire value
chain (village development)
•
Women Entrepreneurship
Intervention and Support Mechanism

Strengthen existing enterprises : Foster
micro enterprises to grow into small
enterprises and small enterprises to grow
into medium size enterprises and medium
size enterprises to grow into large
enterprises

Support start-up SMEs :

Extend nursing programme for potentially
viable sick industries
Criteria for Selecting and Supporting SMEs
• High potential, promising sectors
• Picking the Winners
- committed capable interested entrepreneurs with good
-
-
track records
Proven credentials as entrepreneurs – award winners
Fair amount of equity participation
Skills and competencies acquired in the sector or
cluster
Committed to excellence in quality and innovation
Women entrepreneurs
High Potential Promising Sectors
Identification of Key Product Sectors
Current Size
Large
High
Growth
Potential
Low
• Footwear and Leather
• Rubber based products
• Coir and coir based
products
• Food and beverages
• Textiles and handlooms
Small
• Boat Building
• Electrics and
Electronics
• Souvenir , gift items
and life style products
• Kithul & Palmyrah
Definition on SMEs

World-wide the definition on SME is based on
- Employment
- Turn over
- Asset Value

The recent White Paper on National Strategy for small,
medium enterprise development in SL
Employees
Type
5-29
Small
30-149
Medium
> 150
Large
Definition on SMEs

European Union and other countries
Employees
Type
0
Self Employment
2-9
Micro
10-49
Small
50-249
Medium
Definition on SMEs

Proposed National Policy Framework for SME
Development
Type
Employees
Annual Turnover (Rs.Mn)
Micro
1-10
1-15
Small
11-50
16-250
51 - 300
251- 900
Medium

Both Criteria to be considered. Level of employment
should be the deciding factor

Applied to individuals only . A firm which is a part of a
larger grouping may need to include employees or
turnover from the grouping too.
Why definition is important ?





Instrument for targeting of policy measures and
support interventions
National level data
Serve as a basis for directing state support
For economic research
Comparison among countries
Industrial Clusters
Industrial Clusters
1
Machinery and Equipment
2
Electronic and Electrical Appliances
3
Food and Beverages
4
Footwear, Leather and Allied Products
5
Light engineering and Engineering Industries
6
Wood and Wooden Based Products
7
Coir and Fibre Based Products
8
Printing Papers and Paper Pulp Based Products
9
Rubber and Plastic Based Products
10
Building and Building Material Based Products
11
Readymade Garments and Allied Industries
12
Kithul and Palmyrah Based Products
13
Minerals and Chemical Based Industries
14
Self Employment Sector
15
Other Products and Services
Crafts Clusters
Crafts Clusters
Crafts Cluster
1
Clay Work
11 Batiks
2
Fibre, Leaf and Grass Work
12 Lace
3
Dumbara Items
13 Lacquer and Sesath
4
Cane, Bamboo, and Reed Based Items
14 Wood Based Handicrafts
5
Handicrafts Based on Metals
15 Leather Based Products
6
Jewellery
16 Stone Based Handicrafts
7
Masks and Puppets
17 Art and Sculpture
8
Carved Masks
18
9
Musical Instruments
19 Miscellaneous
10 Textile
Coconut, Kithul,Tala, and
Palmyrah Products
Policy Interventions and Strategies

Enabling Environment
Policy Perspective : improve the legislative, regulatory and
institutional framework including simplification and
rationalization of procedures to improve the competitiveness
and provide conducive environment for SME development.
Challenges Addressed : Reduce transaction cost and improve
ease of doing business for SMEs
Key Strategies :





SME friendly laws and regulations
quality and outreach of service delivery, SME friendly desk and one
stop service
Infrastructure facilities – CSCs, Industrial estates, incubation,
clustering (villages)
Industrial associations for collective voice.
Environmental friendly cleaner production technologies and
practices.
Policy Interventions and Strategies

Modern and Appropriate Technology
Policy Perspective : Facilitate acquisition and adoption of
state-of-the-art modern and appropriate clean
technologies to promote knowledge based, technology
intensive industry
Challenges Addressed : Access to appropriate and affordable
modern technology



Key Strategies :
Technology Transfer and Development Fund (TTDF) with
interest subsidy to access affordable technology.
Trilateral Cooperation between SMEs, technology
providers and the Government – technology
demonstration platforms
Technology transfer, training and diffusion programme
Policy Interventions and Strategies

Entrepreneur Culture and Skills Development
Policy Perspective : Entrepreneurship development
through imparting skills and capacity development at
schools, universities and vocational training centres
special focus on Youth and Women.
Challenges Addressed : Building skills, entrepreneurial
culture and sprit with risk taking attitude. Covert
employment seekers to job creators.



Key Strategies :
Demand driven skills development programmes : GYI,
SYB, IYB, EYB foe start-ups, existing enterprises and sick
industry (Nursing programmes and resuscitation fund).
Recognize SME Heroes and disseminate success stories
Extension Services – project preparation, feasibility
reports
Policy Interventions and Strategies

Access to Finance
Policy Perspective : Strengthen the mechanisms for easy
and affordable access to finance to SMEs.
Challenges Addressed : SMEs have Access to Finance to
invest in modernization, expansion and successful
operations.




Key Strategies :
Scale up special lending windows and SME desks in banks
and financial institutions
Promote viability based lending by expanding refinancing
schemes, banking clinics, treasury guarantees and noncollateral based lending
Venture capital and angel funds to inject equity
participation
Concessionary loans for Women and Youth
entrepreneurs
Policy Interventions and Strategies

Market Facilitation
Policy Perspective : Facilitate and support SMEs to access
local and export market through internationalization
Challenges Addressed : Re-positioned SMEs as producers
of up-market products through improved product quality,
packaging and branding to access local and global market.




Key Strategies :
Promote business linkages between large and SME
enterprises through buyer-seller meetings, buy-back and
sub-contracting arrangements
Support SMEs to participate in trade fairs and exhibitions
Technical support on market information and
e-commerce
Procurement preference policy
Policy Interventions and Strategies

Research and Development
Policy Perspective : Facilitate R&D to improve
innovations, market oriented new designs, product
development
, productivity
improvement
and
competitiveness
Challenges Addressed : competitive advantage through
innovations and technological advancement





Key Strategies :
Strong links between industry and R&D institutions
Focus on demand driven applied research including
search to find alternative substitute materials
Quality assurance and certification
Special Funds and incentives for SME focusede R&D
Patents for innovations and commercialization
Policies from Budget Proposals
Development Initiatives on
SME Development by
M / TISED
Divi Neguma – National Programme on Cottage Industry
Implementation Strategy
1
Prioritization
of high
potential key
industrial
sector
products
6
Linking with
Markets &
Financial
Institutions
2
Distrtict
Exhibition :
Technology
Showcase &
Awareness
5
Provision of
Basic Tools
&
Raw
Materials
3
Sensitization
&
Need
Assessment
4
Technical &
Managerial
Training
Establishment of sustainable home based industrial Economic Units
SME Industrial Estates
Poonthoddam,
Vavuniya
Negampaha,
Anuradhapura
Mihindala,
Anuradhapura
Lunuvila, Puttalam
Kaludawela, Matale
Pannala, Kurunegala
Pallekelle, Kandy
Ekala, Gampaha
Galigamuwa, Kegalle
Pannaluwa, Colombo
Kotagala,
Nuwara-Eliya
Horana, Kalutara
Buttala, Moneragala
Wawulugala, Kalutara
Pusella, Ratnapura
Karandeniya, Galle
Baddegama,
Galle
Beliatta, Hambantota
Reactivation of the Atchchuveli I.E
S.N
Details of Industries
Type of Production
Investment (Mn)
1
Sarah Industries
Light Engineering Project
200.00
2
Union Enterprises
PVC pipe & Roofing Sheet
168.00
3
4
5
6
7
8
Nobble Printers
Malba Ropes (pvt) Ltd
Yarl SST Fibre Ltd
Hema Industries
Vesta Industries
Sun Tech Engineering
Total
Waste Paper recycling
Nylon twine making
Fibre class
Food based products
Food based products
Cement based production
150.00
150.00
28.50
14.00
10.00
7.00
727.50
Reactivation of Elephantpass Saltern
Cluster Development Programmes

-

-
-
Budget Proposals
Industrial Production Villages – One product; One village
Clay, Cane, Coir, Leather, Blacksmith
Enterprise villages and Women Entrepreneurship
Pottery villages
Handicraft Villages
Interventions
Provision of infrastructure – roads, electricity
Technology transfer, training and CSC facilities
Market oriented new designs - gift items and souvenirs
Skills and capacity development
Raw materials ,basic tools and equipment
Quality improvement and packing
Market facilitation – buy-back and sub-contracting , buyer-seller
meetings, exhibitions and Trade Fairs
Banking clinics
District
Kilinochchi
Vannankulam
(Kilinochchi)
Development of Enterprise Villages and
Women Entrepreneurship - 2014
Toddilay/Chankanai
(Jaffna)
Jaffna
Village
Selvapuram
(Mulaitivu)
Mullaitivu
No. of
Benefici
aries
Sector
Mankulam
(Mulaitivu)
Vavuniya
Kurunegala
Mannar
Trincomalee
Mahanelubewa
(Anuradhapura)
Anuradhapura
Puttalam
Polonnaruwa
Batticaloa
Nugawela
Nugawela
(Kurunegala)
Kurunegala
Maussagolla
(Matale)
Matale
Gampaha
Badulla
39
Matale
15
Lacquer
4.4
Hambanthota Medamulana
48
Coir
2.1
Galle
Welladdaragoda
100
Coir Yarn
1.9
Puttalam
Mahanelubewa
15
Leather
1.1
100
Cashew
1.1
40
Batik
1.1
Maussagolla
Jaffna
Toddilay/
Chankanai
Jaffna
Selvapuram
100
Jaffna
Vannankulam
75
Mullaitivu
Mankulam
Ampara
Kegalle
Colombo
Nuwara Eliya
Monaragala
Ginigathhena
(Nuwara-Eliya)
Kalutara
13
Galle
Welladdaragoda
(Galle)
Ratnapura
Matara
Hambantota
Medamulana
(Hambantota)
Thalakola
Lace,Jewelery,
Ornaments
Nuwara Eliya Ginigathhena
Anuradhapura Wanathawilluva
Wanathawilluwa
(Puttalam)
60
Total
Cost
Estim
ate
(Rs.
Mn.)
2.1
Budget for 2014
Expenditure
Palmyrah Based
Food &
Handicrafts
products
Palmyrah Based
Fiber
Production
Establishment
of Handicrafts
Experience &
Sales Centre
= Rs. 30 Mn
= Rs. 7.6 Mn
4.6
4.6
3.1
2.0
Traditional Handicraft Villages developed in 2013
Development of Traditional
Handicraft Villages - 2014
Allarai
(Jaffna)
Jaffna
Sarasalai
(Jaffna)
Kilinochchi
District
Mullaitivu
Kiranchchi
(Kilinochchi)
Vavuniya
Mannar
Trincomalee
Anuradhapura
Puttalam
Paththinipuram
(Trincomalee)
Manampitiya
(Polonnaruwa)
Polonnaruwa
Batticaloa
Mailambaveli
(Batticaloa)
Mundalama
Hinguregama
(Puttalam)
Galatharaya
(Kurunegala)
Alawala
(Gamapaha)
Kurunegala
Matale
Thalagune
(Kandy)
Colombo
Badulla
Navithanveli
Ampara
Kegalle
(Amapara)
Nuwara Eliya
Kalasirigama
(Kandy)
Monaragala
Kalutara
Remunagoda/
Imbulgoda
(Kalutara)
Galle
9
Gandara/ Devinuwara /
Talalla
(Matara)
Ratnapura
Hambantota
Matara
Kiyaduwa
(Matara)
Angulmaduwa
Sector
Allocatio
n
2014
(Rs.Mn.)
Puttalum
Mundalama
Higuregama
30
Thalakola
1.60
Kandy
Kalasirigama
30
Hana (Jute)
7.40
Gampaha
Alawala
30
Musical Instrument
2.93
Jaffna
Sarasalai
30
Palmyrah Leaf
Handicrafts
2.90
Hambanthota
Angulmaduwa
40
Laquer
2.00
Jaffna
Allarai
30
Coir
1.29
Matara
Kiyaduwa
20
Bamboo
1.00
Kandy
Thalagune
25
Dumbara Rata
0.88
Polonnaruwa
Manampitiya
40
cane
1.46
Kurunagala
Galatharaya
30
Thalakola
0.80
Kalutara
Remunagoda/
Imbulgoda
30
Rush & Reed
1.12
Matara
Gandara/
Devinuwara/
Thalalla
75
Bobbin Lace
1.13
Trincomalee
Paththinipuram
50
Ampara
Navithanveli
100
Batticaloa
Mailambaveli
175
Killinochchi
Kiranchchi
75
Kandy
Gampaha
Village
No.of
benefic
iaries
Palmyrah Leaf
Handicrafts
Palmyrah Leaf
Handicrafts
Palmyrah Leaf
Handicrafts
Palmyrah Leaf
Handicrafts
Budget for 2014 =
Expenditure
=
0.63
2.80
1.40
1.00
Rs. 35 Mn
Rs. 10 Mn
Jaffna
Development of Pottery Villages - 2014
Chankanai
(Jaffna)
District
Kilinochchi
Village
No. of
Families
Total
Estimate
Cost (Rs.
Mn.)
Mullaitivu
Vavuniya
Anuradhapura
Elappankulama
43
3.62
Kurunagala
Madawalagaraya
60
4.68
Gampaha
Polwatta
470
3.65
Matale
Dodamattawala
25
3.30
Nuwara Eliya
Puranagama
40
1.53
Matara
Kumbalgama
60
1.74
Batticoloa
Eravur
250
3.82
Colombo
Ranala
40
3.12
Jaffna
Chankanai
50
4.10
Gampaha
Webadamulla
25
0.17
Puttalam
Halabawatawana
51
2.54
Matara
Melpura
40
2.53
Anuradhapura
Kudakelagama
40
1.95
Mannar
Trincomalee
Elappankulama
(Anuradhapura)
Kudakelagama
(Anuradhapura)
Anuradhapura
Puttalam
Polonnaruwa
Batticaloa
Halambawatawana
(Puttalam)
Dodamattawala
(Matale)
Kurunegala
Matale
Madawalagaraya
(Kurunegala)
Polwatta
(Gamapaha)
Eravur
(Batticaloa)
Kandy
Gampaha
Webadamulla
(Gamapaha)
Badulla
Kegalle
Colombo
Kalutara
Ranala
(Colombo)
Galle
15
Kumbalgama
(Matara)
Nuwara Eliya
Puranagama
(Nuwara-Eliya)
Monaragala
Ratnapura
Matara
Ampara
Budget for 2014 = Rs. 40 Mn
Expenditure
= Rs. 5.12 Mn
Hambantota
Melpura
(Matara)
5 Year Strategic Plan of the Ministry
www.tisedmin.gov.lk - Reports