Wayamba Journal of Management 3 (2) 44 Creating a Conducive Environment for SMEs in Sri Lanka PRETHEEBA, P. Department of Business and Management Studies Eastern University of Sri Lanka SRI LANKA [email protected]Abstract:- Small and Medium Enterprises (SMEs) have been recognized as an important strategic sector especially among the developing countries. This paper intends to study the development of SMEs in Sri Lanka compared with developed Asian country of Singapore. The paper further reviews the empirical studies in order to identify the major contributions and challenges faced by the country. The key message from the study is that Sri Lanka faces several challenges include the absence of adequate and timely finance, limited capital and knowledge, non-availability of suitable technology, low production capacity, constraints on modernization and expansions, non availability of highly skilled labour at affordable cost, follow-up with various government agencies to resolve problems etc. However, Singapore have technical trade barriers, high operating and labour cost, and intense competition, the SMEs of the country sharpened by ongoing government support, a robust infrastructure, a strong financial sector and myriad schemes aimed at developing a pro-enterprise environment. The government of Singapore is seized of the issues and earnestly trying to encourage effective and creative business development. This paper attempts to identify the challenges and offer a few suggestions towards formulating a workable framework for the SMEs in Sri Lanka. Key Words:- Performance, Economic Growth, SMEs, Challenges, Environment
Pretheeba, P.Wayamba Journal of Management 3 (2)45 1.Background of the Study Small and Medium Enterprises (SMEs) are the backbone of the economies, because it trigger employment, output, export, poverty alleviation, economic empowerment, economic development, etc in developed as well as in developing countries. It is more important to developing countries as the poverty and unemployment are burning problems. In developing Asia, SMEs have made significant contributions over the years measured in terms of their share in number of enterprises, employment, production and value added, GDP, and regional dispersal of industry, among others. The contribution of SMEs is vital in as much as they make up 80-90% of all enterprises, provide over 60% of the private sector jobs, generate 50-80% of total employment, contribute about 50% of sales or value added, and share about 30% of direct total exports (Narain, 2003). Table –1 illustrates the contribution of small business ventures across various Asian economies. Among the countries in the table –1, Singapore is the strongest-growing economy in Asia for the year 2010 and probably in the world. The country is rated as the most business-friendly economy and also considered as the fasterest growing economy in the world (The Economic Times, 2010). As a partner of Colombo plan Singapore developed themselves better than Sri Lanka.