Strengthen existing SMEs’ competitiveness is a corner stone of creating our workforce future ready.

  Existing SMEs trend in Sri Lanka

Small and Medium Enterprises (SMEs) are regarded as one of the main driving forces of economic development of all economies because they generate new employments, introduce new business methods and products, reduce poverty, inflation and income inequality and solve the balance of payment problem (Prasad, Tata and Guo, 2012; Singh, Garg and Deshmukh, 2010; Tambunan, 2008; Zeinalnezhad, Mukhtar and Sahran, 2011). Therefore, SMEs are cnsidered as the backbone of economic development of a country.

Competitiveness is considered by all countries to be a prerequisite for maintaining high levels of income and employment. Greater competitiveness allows developing countries to diversify away from dependence on a few primary-commodity exports and move up the skills and technology ladder, this being essential in order to sustain rising wages and permit greater economies of scale and scope in production (UNCTAD, World Investment Report, 2002, p. 117).

The source said that 98% of small enterprises account for 48.6% of total employment and 31.1% of value added (Central Bank of Sri Lanka, 1998; Vijayakumar, 2013; Wickremasinghe, 2011). In 2008, 91.6% of small enterprises account for 29.6% total employment and 20.3% of value added (Department of Census and Statistics, 2009; Vijayakumar, 2013; Wickremasinghe, 2011). So these data shows the decreasing trends of SMEs in Sri Lanka. In contrast, considering the large scale industries in 1983, 2% of large enterprises accounts for 51.4% total employment and 68.9% of value added (Central Bank of Sri Lanka, 1998; Vijayakumar, 2013; Wickremasinghe, 2011). However, in 2008, 8.4% of large enterprises account for 70.4% of total employment and 79.4% of value added showing increasing trend (Department of Census and Statistics, 2009; Wickremasinghe, 2011).

Contribution of SMEs to the economic

The SMEs cover broad areas of economic activity in Sri Lanka such as agriculture, mining, manufacturing, construction and service sector industries. Although SMEs encompass agriculture, manufacturing and service sector establishments, reliable data are available only for the manufacturing sector. Within the manufacturing sector, small and medium scale industries (SMI) account for about 96 per cent of industrial units, 36 per cent of industrial employment and 20 per cent of value added. However, the total contribution of SMEs to the national economy cannot be estimated due to paucity of information.

While it is generally accepted that SMEs are important contributors to the domestic economy, not many governments have framed policies to enhance their contribution or increase their competitiveness. Most governments do not even have reliable statistics on SMEs. The statistics on SMEs are poor for a number of well-known reasons: lack of a uniform definition, high cost of an industrial census, and the fact that many SMEs do not register and remain outside the formal economy.

This SMEs sector play an important role in economic development through: creating employment opportunities; mobilizing domestic saving; poverty alleviation; income distribution; regional development, training of workers and entrepreneurs; creating an environment in which large firms flourish, contributing to export earnings.

Its contribution to the total Gross Domestic Product of the country has increased to 52% in 2011 from 40% in 2010. More than 70% of the country fall within the SME sector, it is 26% in our total population. Base on the information our country has a SME economy: 70% of plantation sector; 85% of rubber; 100% of paddy; and 90% coconut are of small holders.

Promoting Competency for SME holders

Lack of competency in SMEs sector make failure to produce quality products and to find suitable markets. So this promotion programme targeted to develop the competency among the SMEs holders through using various tools to conduct this programme. The following areas develop under the SMEs empowerment to increase the competency of them.

(1) Ability: Being able to perform. While it may be possible to develop abilities, they cannot be created.

(2) Attitudes: A mindset that affects the way a person feels, thinks and acts.

(3) Behavior: A way a person feels thinks and acts.

(4) Competent: Qualified to perform to standards and requirements of the job.

(5) Skill: Demonstrated competency to meet the required performance standards of a process activity.

The constrains face by SMEs

Among the many challenges faced by SMEs, a large part of the literature points to access to finance and lack of skills empowerment as one of the main issues faced by this sector. A study conducted by the International Financial Corporation (IFC) found that 77 per cent of Sri Lankan SMEs that were included in the study had a requirement for medium term and long term financing.

An supportive policy environment is also considered to be another key constraint to SME development in Sri Lanka. In addition, there are some more constrains identified among SMEs respectively; lack of appropriate government policies for SME finance; information gaps between suppliers of finance and the SMEs sector; creditworthiness of SMEs; reluctance of banks to service SMEs because of perceived high risks; lack of financial and fiscal incentives for loans and equity capital; facing difficulties find the markets to marketing their products and difficult to access information and low level of technology.

Key factors affecting to the shortage of skills workers in the labor market of Sri Lanka.

Labor itself is the basic input but most complex factor in any of the production process. It is basic since at least a minimum level of labor is at the foundation of economic growth of a country. It is complex because unlike other factors of production, it responds to changes in the surrounding working environment. Therefore studding the labor market situation is very important for the economic growth of a country. The quality of human capital to suit the new technology is a vital factor in the labor market.

When considering the employability and employment of Sri Lankan youth, it is apparent that majority of youth is struggling to maintain their livelihood. A few of the underline courses are unemployment, poverty, lack of education qualifications, lack of employments suitable for education and lack of training suitable for employment.

However, the gap between the demand and supply of skilled labor to the international and local human resource markets is quite wide. Sri Lanka has not been able to supply the number of workers in mid-professional, skilled and semi-skilled job categories to international and local human resources demands

 In addition women represent approximately 57 percent of the total estimated population of 21 million in the Indian Ocean Island, but only 33.4 percent, contributes to the national economy from 8.5 million of economically active population in the county, data showed. Thus, almost 70 percent of the labour force constitutes economically inactive women.

This is in spite of the fact that in most university courses, including management, law and liberal arts, the numbers of women outnumber men and large proportions of women attend management and accounts training programmes offered by private educational institutes. They have lack of skills to fill the requirement of employers.

As the causes for this problem, we can identify that absence of national skills development policy, Lack of career guidance inadequate number of training facilities in the job market and mismatch between technologies used in institution and in the industries influenced it. 

There are effects which are influence to overcome with this problem such as youth unemployment, less opportunities in the job market, less salary shortage of relevant skilled labors. Furthermore poverty level and the crime rate are increasing and with poor salary employees get dissatisfaction as well as the low productivity. Due to these effects, impact is difficulty to find suitable job opportunities. 

Important statistics to incorporate: 1 US nurse = 25 domestic aids, 45% of foreign labor go to domestic aid work, now there is an insistence on NVQ3 training to go as domestic aid. The contractor must refer all relevant previous government document that involve projection of labor trends, employment and training to fill these demands (e.g. National Labor Migration Policy stating women with children less than 3 cannot work abroad.)

 By learning the job opportunities and employment trends across the world, new government aims to facilitate the employment of Sri Lanka’s youth abroad and locally. As skills and knowledge is a key strength within the Sri Lankan workforce, this government has a vision to maintain Sri Lanka as a knowledge-based economy by facilitating skills-based employment abroad. The government plans to develop policies for skill development and education to satisfy the current and future employment demands by sector across the globe. With a closing gap between economies of emerging nations and developed nations, it has become important for individuals to be compatible to fit in either economy and its’ workforce. Not only is the gap closing between traditional Western economies and Sri Lanka’s own, the gap between Asian economies themselves have also reduced resulting in increased reciprocal demand for intra-Asian employees. Thus the need of the day is a transnational work force.

 Greater engagement in the foreign labor markets and the development of diverse local markets conforms to the International Labor Organization’s (ILO) recommendations of reducing (1) the engagement in the volatile, low paid and low productive agricultural sector, (2) informal employment and vulnerable employment such as own-account workers and family work, (3) those living in working poverty, (4) the number of women living in poverty, and (5) unemployed youth.

Working poverty are those working full time but only earn less than $2 per day (poverty line). Those in working poverty and vulnerably employed are both bias toward being women. Globally, youth unemployment, the population segment most prone to unemployment, has risen to 12.5%. Youth employment results in lower youth unrest, timely career development, better quality work, better earnings, lower probability of future unemployment, better mental, physical, and behavioral health outcomes, healthy social development, lower precautious development, and experiencing normal developmental trajectories.

The government now has understood in greater depth the current and future employment opportunities locally and abroad and the ways that the Sri Lankan workforce can best prepare to attain them.  

 Recommendations

Giving better skill for women in areas like IT, nursing and the hospitality industry should be looked at too.  Public sector must be ensured that, institutional and financial arrangements must build solid bridges between the world of learning and the world of work. Bringing together business and labour, government and training providers, at the local, industry and national levels, is an effective means of securing the relevance of training to the changing needs of enterprises and labour markets.

Overall, future focus on labour demand must be growing for non-routine analytical skills involving creativity, problem-solving, communication, teamwork and entrepreneurship – all skills that help workers to maintain their employability and enterprises their resilience in the face of change.

Relevant ministry have to form Expert Group on Future Skill Needs analyses future skill needs, and develops proposals for how to meet them, through a broad membership including business representatives, educationalists, trade unionists and policy-makers.