Sri Lanka has become dysfunctional. Over the past few months, including the period of the recent local government elections, some key state institutions have ground to a halt like the Securities and Exchange Commission (SEC) where the terms of office of the commissioners including the chairman ended (and no replacements have been made so far). [...]

Business Times

Killing the spirit of entrepreneurship


Sri Lanka has become dysfunctional. Over the past few months, including the period of the recent local government elections, some key state institutions have ground to a halt like the Securities and Exchange Commission (SEC) where the terms of office of the commissioners including the chairman ended (and no replacements have been made so far).

Then there is a tussle between the Prime Minister and the President over the scrapping of the PM-led Cabinet Committee on Economic Management (CCEM). What about the no-confidence motion against the PM and its fall-out, whichever way the wind blows? Pump-and-dump wheeler dealers in the stock market are on the prowl again amidst accusing fingers at the SEC for its lackadaisical approach towards bring the crooks to book.

There are many other areas where matters run by the state are not smooth and have become big issues given the dysfunctional state of the public institutions. These thoughts crossed my mind when listening to what Kussi Amma Sera had to say on this Thursday morning.“Balanna Mahattaya, apey lamai-ta vechcha-de (see what has happened to our children),” she says while reading the newspaper in the verandah.

“Aei?” I ask. She then goes on to read about the closure of universities due to an ongoing strike by non-academic staff, adding “apey gamwala, vishva vidyalawalata yana lamaita hemadama gatelu” (university students from our villages are always having issues). Interestingly, searching the Internet, I came across an ongoing strike at more than 60 universities in the UK over a pensions’ dispute. So while one may argue that problems at universities are not only in Sri Lanka, unrest at local universities have continued for a while disrupting lectures and delaying examinations. In most cases, students are compelled to spend an extra year in completing their university courses.

Adding fuel to this troubled university environment is a passage in the new Inland Revenue Act (IRD) on imposing taxes on companies that are collaborating with universities on innovation and creativity in transforming ideas to commercial products for the benefit of society.“Taxing companies who are helping students to think and breed ideas that transform into products for society is killing the spirit of entrepreneurship which the government has professed to encourage,” said one company executive.

Many universities including Moratuwa, Colombo and Uva-Wellassa have been involved in private sector-funded research on various initiatives. Not only have some of these projects yielded products that would cost five to 10 times more to import but allow students to dabble in creative thought and ideas with some financial reward rather than be distracted by university problems. It also keeps them occupied productively. For the companies there is risk involved, research works both ways. It can be successful; it can fail.

The crux of the problem is that under the new tax laws there is no incentive for innovation. The generous (up to 300 per cent) tax exemption from profits of companies that are collaborating with universities on research and development has been removed in the April 1 tax regime. From today, no exemptions would be granted to companies involved in R&D, which is not only a disincentive but goes against the grain of government thinking and promises in the past two budgets.
For example, budget 2018 spoke of “… building an innovation driven social market economy, accelerating economic growth in a fair and equitable manner”. It also said a National Science Technology & Innovation Coordinating Authority will be set up to convert research into commercial ventures; the Centre for Robotics will be further strengthened and a Hi-Tech Innovation Park is to be established in Homagama.

Budget 2017 spoke of an “Innovation Based Economy” through progressive reforms, an Innovation Accelerator Fund, aimed at supporting commercialisation and particularly last stage financing and of converting “Research into Rupees”. “The speed with which new ideas could proliferate with digitalisation will facilitate innovations and productivity improvement thereby creating a competitive environment,” it was stated, adding: “Job creation, investment in fixed assets in designated zones, clean energy and the innovation will be the sole grounds for incentives.”

Almost every other week, the Business Times has been profiling young Sri Lankans and their creations – with a little funding help for instance from the National Science Foundation – like the recent remote-controlled underwater camera developed by two university students which cost them Rs. 100,000 compared to Rs. 10 million to buy one from overseas.

Sri Lanka’s start-up community is a reservoir of ideas with most of their products based on a personal experience, a problem encountered and a solution found. They don’t go running behind banks like in the traditional growth of small and medium scale enterprises but carve out a niche for themselves and attract funding from (what are called) angel investors. There are privately-funded competitions to select the best start-ups that would receive funding.

There are former Sri Lankan executives in Silicon Valley, home of the world’s biggest start-ups and tech firm, who are running their own start-ups in Sri Lanka. There are others who are helping universities to thrive in transforming a fountain of great ideas into products. Robotics development at the Moratuwa University is pushing the boundaries of creation and raising the bar to international standards and levels of achievement.

It was only last week the Sri Lanka Association of Software and Service Companies in partnership with Virtusa and Virtusa xLabs organised a competition designed to encourage innovation and entrepreneurship among Sri Lankans and “help start-ups in the country embrace the 4th Industrial Revolution”, according to the organisers. And, the 500,000-rupee-prize winner — Faculty of Computer Science and Engineering at Moratuwa University — had invented a wearable which uses IoT (Internet of Things) and machine learning technology to track and compile foot pressure data to predict symptoms related to diabetes. Ten years ago this would not only have been unthinkable but an unbelievable creation by Sri Lankans.

These innovations are just the tip of the iceberg; new ones are either being created as we speak or discussed on the drawing board. The ecosystem of ideas and platforms to take them forward is growing. Unfortunately, only a few ministers in the government understand these developments which form a crucial part of the 4th Industrial Revolution which is building digital space and technology that will drive industry in the future. Traditional jobs will be lost to technology and if Sri Lanka doesn’t keep pace with these changes, even our politicians won’t have jobs (how can they dole out jobs to others when technology and machines would do many of the jobs handled by humans?).

Taxing ideas is not the way to go and is contrary to stated government policy as clearly illustrated in the recent 2017/2018 budget proposals.
Often there are complaints that not enough budgetary allocation is given to R&D compared to other countries. Thus where the state is unable to, the private sector has filled this void. While companies are likely to pull out of their collaborations due to the risks involved and on top of that taxes, others are hoping to continue even at a loss, as a social enterprise to help students and committed academics, driving these programmes. Within the chaos in Sri Lanka, there are many positive developments like these private sector-university collaborations. These must be encouraged, not discouraged.

Share This Post


Advertising Rates

Please contact the advertising office on 011 - 2479521 for the advertising rates.