National Policy Framework forSmall & Medium Enterprise ...

1 National Policy Framework For Small and Medium Enterprises (SMEs) Development ACTION PLAN. Ministry of Industry and Commerce May 2016. Box 570, 73/1, Galle Road, Colombo 03, Sri Lanka Web Tel.:+94 11 2392149 -50 / +94 11 2431670. Consultant -Mr. 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.

2 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, 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. 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.

3 I invite all stakeholders to extend fullest cooperation to make the implementation of this plan a success story. Rishad Bathiudeen ( ). Minister of Industry and Commerce i 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.

4 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.

5 I wish to commend the efforts taken by the Additional Secretary , 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 Rishad Bathiudeen. Secretary Ministry of Industry and Commerce ii 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.

6 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.

7 We also wish to mention the efforts taken by Mr. Gunawardana, Consultant in preparation of this report. The advice given by the Hon. Minister of Industry and Commerce, Mr. Rishad Bathiudeen, the Secretary, Mr. 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. Thajudeen Additional Secretary (SME & Textile Development). Ministry of Industry & Commerce iii 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. Introduction .. 4. An Overall view of the Economic activities .. 6. Chapter 2 - Some Historical Developments in the SME Policy Formulation in Sri Lanka .. 10. White Paper on National Strategy for SME Sector Development.

8 10. Comments & Observations of the Asian Development Bank (ADB) .. 14. Chapter 3 - SME National Policy Framework .. 16. Policy Framework .. 16. Chapter 4 -Action Plan for SME Policy Framework .. 22. Methodology - Action Plan Preparation .. 22. Policy Dissemination & Planning implementation Process .. 23. Inputs for the Action Plan .. 24. 24. Policy implementation Structure .. 24. Action Plan Goals .. 25. Chapter 5 implementation 26. Institutional Arrangements .. 26. 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 7. iv Table 5: Definition of the SMEs .. 18. Figures Figure 1: Policy Intervention Strategies.

9 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. v Acronyms ADB Asian Development Bank BDS Business Development Service CBSL Central Bank of Sri Lanka CEA Central Environmental Authority COSTI Coordinating Secretariat for Science Technology and Innovation CP Cleaner Production DTET Department of Technical Education EDB Export Development Board FCCISL Federation of Chambers of Commerce & Industry Sri Lanka GDP Gross Domestic Product GIZ Deutsche Geschellshaft fur Internationale Zumsamanarbeit IDB Industrial Development Board of Ceylon ITI Industrial Technology Institute MIC Ministry of Industry & Commerce MSM Micro.

10 Small and Medium MSDVT Ministry of Skills Development and Vocational Training NAITA National Apprenticeship & Industrial Training Authority NIBM National Institute of Business Management NIPO National Intellectual Property office NCPC National Cleaner Production Centre NEDA National Enterprise Development Authority NGO Non-Governmental Organization PMEC Policy Monitoring and Evaluation Committee SLGTI Sri Lanka German Training Institute SLITA Sri Lanka Institute of Textile & Apparel SLSI Sri Lanka Standards Institute WTO World Trade Organization SEPI Self-Employment Initiative Loan Scheme SME Small & Medium Enterprises SMEA Small & Medium Enterprises Authority TTDF Technology Transfer Development Fund VTA Vocational Training Authority vi 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.