The CMA Sri Lanka COVID-19 SME Development Committee has formulated the ‘Made in Sri Lanka’ project to obtain the government support in budget 2022.

It focuses on micro, small and medium enterprise (MSME) development in the rural areas to produce goods and services using local raw materials and agricultural farming and linking them with the retail markets, big companies, government institutions, export houses and domestic preparers to provide support in marketing, improving quality, productivity, skill development, better education, bringing down the cost of doing business by producing goods, services and agricultural products to the domestic and export markets.    

The Made in Sri Lanka project, while supporting the MSMEs, will generate 100,000 jobs in the rural sector and give a big boost to agriculture, handicrafts, horticulture, poultry, inland fishing, dairy farming, garment manufacture, IT services, food processing, etc. 

Budget 2022 will provide incentives such as tax holidays, lower tax rates, other infrastructure facilities and support to promote the MSMEs as well as the specialised institutions that will be set to assist these organisations and contribute to the rural and Sri Lankan economy.

1. MSME Development Act
A very important and necessary proposal to budget 2022 is to formalise the support to MSMEs by incorporating an MSME Development Act to be enacted with an object of a definition of MSMEs,  promotion, development and enhancing the competitiveness of MSMEs. 

This act to provide for the establishment of a national board for MSMEs, which is a statutory body, having high level forum for making policy decisions and programmes for development of MSMEs.

2. Made in Sri Lanka project 
The MSME sector is the backbone in the economy and is found in all sectors of the economy and accounts for 52 percent of GDP and 45 percent of the total employment, whilst making up more than 75 percent of the total number of enterprises in the country.

The Made in Sri Lanka project will be undertaken throughout the country and will be applicable to all new projects and existing projects, expanding their capacities. The products will include all industrial, handicraft, handloom, agricultural and services.

All projects registered under the Made in Sri Lanka project will be given a distinctive number to be eligible for the special facilities provided under this project.

All products of these MSMEs under the Made in Sri Lanka project will be given the highest priority to market them to the private sector, government ministries, public sector institutions, state corporations and retail trade and these institutions that purchase these products or services will be granted a 50 percent waiver on the tax on the profits applicable to these items.    

All banks will have a separate help desk in all their branches to assist investors and entrepreneurs looking for financial and other assistance under the Made in Sri Lanka project.

All chambers of commerce and industry and regional chambers will also be involved in the Made in Sri Lanka project and will actively provide the linkages between the large companies and MSME units. This will enable lower cost of production and enable the improvement of the quality of the products, provide raw materials, etc. and will market and buy back the products from MSMEs, making them sustainable ventures. 

The companies that buy products from MSMEs will be granted a tax exemption or 50 percent of the normal tax, as they are buying Made in Sri Lanka products and services from registered MSME projects and playing a major role in the development of the economy of Sri Lanka.  

3. Establishment of SME Credit Guarantee Institution
The proposal for the setting up of the SME Credit Guarantee Institution, a long felt need of the SME sector, was made by the CMA Sri Lanka COVID-19 SME Development Committee to the Industries Minister, who submitted a Cabinet Paper in 2020 and this was approved by the Cabinet of Ministers in April 2021, after receiving the recommendation from the Finance Ministry and the support of the Asian Development Bank, which will provide the funding for the project.    

The government should take steps to expedite the commencement of the SME Credit Guarantee Institution, which will enable entrepreneurs and start-ups without collateral to obtain loan facilities from banks by providing guarantees based on their projects. This will accelerate economic growth, improve access to finance and accelerate investments of SME investors, who are unable to provide collateral or security to banks and other approved financial institutions to obtain loan funding for their projects. 

4. Proposal to set up export houses 
This proposal will envisage the support under budget 2022 to set up export houses for the promotion and development of exports of the MSME sector. All institutions selling to export houses will be treated as indirect exporters and will enjoy the same benefits as export houses that do the direct exports. 

It is expected that with the implementation of the export houses concept the exports of MSMEs will be increased from the current 5 percent to 25 percent within a period of three years. The increased exports will bring in the valuable foreign exchange into the country.

All export houses to be granted five-year tax holiday and the same to apply to indirect exporters, who make supplies to export houses.  

5. MSME consumer product preparers
This budget 2022 proposal is for supporting the Made in Sri Lanka project by setting up MSME consumer product preparers, who supply MSME agricultural/industrial consumer products to retail markets. These MSME agricultural/industrial consumer product preparers will be part of the supply chain, which will support SMEs by buying SMEs’ raw products and improve the quality, add value, process as necessary and supply to the retail market and once developed will be able to cater to the export market.

These institutions to be granted a five-year tax holiday and the retail trade buying from these institutions will enjoy 50 percent of the normal tax on profits derived from such sales. These projects set up at village level will help the growth and development of rural agriculture and cottage industry.   

6. Conclusion
With the thrust given to the MSME sector by the government in budget 2022, with the active participation of the MSMEs combined with the private and public sectors, the Sri Lankan economy will be given a major boost and will provide a reawakening of the rural sector, generating a minimum of 100,000 new jobs, with the launch of the Made in Sri Lanka project.   

(Prof. Lakshman R. Watawala is President of CMA Sri Lanka and Co-Ordinator CMA Sri Lanka COVID-19 SME Development Committee)