Sarath Wijesinghe – President’s Counsel, Former Ambassador  to UAE and Israel and former Chairman Consumer Affairs Authority , President Ambassador’s forum UK/Sri Lanka, Solicitor in England and Wales.

Economy of a Nation is the Cradle on which all others are based on and the cradle of the economy is SME’s worldover

Transforming the outlook of the economic developments onto an upper level.

This has become a disputed area in AI and Digital era when everything is transforming  and changing so fast in a different era and area  with industry as development of the SMEs and economy too as a backbone in different directions jointly developing industries and economies fast new inventions and innovations in all sectors. Small and medium enterprises are a necessity for the world economy maintaining a flexible middle path assisting  the GDP, employment and innovations promoting exports and injecting economic developments and stability of nations in all parts of the world adopting themselves with different definitions and criteria – yet acting as the backbone of the economy during good as well as downturns acting as a strong strength to the economy on recovery and development. SME’s World is blessed with 3600000 SME’s and 145000 venture capitals spreads unevenly over the main economic regions of the globe for the purposes it is formulated conducting in moderation with most flexible circumstances with least burden to the economy with 368 million SME’s spread world over! with identifiable independent definitions and criteria  in most flexible circumstances consisting basic necessities and specified employees and limited capitals. The presence of such a large number of successful SME’s offering 1/2 the workforce to the world shows the necessity and importance of this blessed structure which is used in all parts of the globe successfully supporting the nation, economically GDP and the leading multinational corporations and business leaders as supporting staff at all times with least demand. Trend trickles down from world powers to small nations.It is so wide spread and made use of that 99% business in EU is with SME’s majority are private enterprises showing the power of private sector, cambers of commerce and the private sector as a whole that are lessons to other parts of the world with emerging economics such as Sri Lanka making attempts to improve SME’s based on entrepreneurship   and innovations following other models such as Israel which are successful  models on innovation mindset and new creative minds couped with technical knowledge now transforming  into ‘AI Age’. SME can be a small shop  keeper who is innovative up to Bill Gate or Mark Zuckerberg if the party is an innovator and a potential entrepreneur with the potential and will to be a SME in the same or different field when the definition of the SME varies from country to country spread world over with great success. Vital for SME is a mindset for a clear vision and a programme with determined efforts to start start ups new venters and all other kinds of venters that will be a part of the economy adding  to the GDP that with activate the development of the economy of the nation.  World has approximately 358 million SMEs that has  become power engines and cradles of respective nations and groupings mostly with the leadership of the private sector and organizations which  are  mini and major chambers of commerce locally and internationally in respective areas of trade and industry.

Small Unit

SME is initially a small unit on the development model in the complex econimic system with basic models and limited number of employees that is easy to manage and covers various areas from small to major establishments rooted in all parts of the world consisting 338 million SMEs world over covering small and medium entraprise which are easy  to establish and to manage due to the simplicity and versatility and necessity to the country or the region they are established. Though small the small unit is important to the economy as the cradle due to the econimic power vested concentrated worldover omnipresent as a necessary organ of the world economy. SME s vital to the Sri Lankan economy  contributing  750 millions that would be considered of 52% of the  GDP and manages hand in hand with the private sector and the chambers of commerce which are active performing well. In Sri Lanka  is a village and agriculture based unit  with  a log history of SME’sm commencing from 1800 by George Stuart still running as a lading enterprise spreading tentacles in varied aeras of/ Sri Lanka.

Necessity for any Nation of any magnitude and size

Small and medium enterprises are a necessity for any nation developed or developing as the cradle of the cenemic activity in motion. Economic activity is managed by private and the state sectors and mostly the private sector generally the engine of any economy in most sectors as a part pf the development for prosperity of the country –  a part pf the global economic movement and an incubator of upcoming emerging economy. SME’s are enterprises managed by small or big entrepreneurs or a group in given sectors generally initially village based yet emerged as leading entrepreneurs and a later stage. Definition is more complicated and comprehensive depending on the country, size, the nature of the enterprise investment capacity and the number engaged in. The success of the SMEs are proof of necessity and usefulness of the economy especially emerging economies with educated and enterprising labour force such as Sri Lanka that has proved internationally by serving the world over with 10% of the population overseas ( 30% in Philippine) employed indeed a great achievement. A pivoted role is played by the SMEs in Sri Lanka  that has a large proportion of 75% of the business and contributes s to 52% of the GDP and large number in the employment sector in SME establishments and USA 40% of GDP from SMEs.

Definitions and Guidelines

Each country and institutions give varied interpretations on different guidelines and definitions to SME yet the principle of the concept and the applicability  may be same or similar, ranging from a village agricultural entraprise, a dental practice, small bar, to a huge setup as Hayle’s and leading Banks  started as a small enterprise sometime as ‘’George Steuate’’ started business in 1800 as a small unit (mentioned before)currently a leading business leader in Sri Lanka. Role of SMEs are  varied and versatile with potentials to be converted to large firms of innovative entraprise initially with few employees, and a small capital with a large vision yet with a less capital depending on human capital so that the loss and difficulties could be absorbed initially and plays a vital rile in any economy at any given time. EDB requires SME s to have a capital of 4 million and 50 employees, a very moderate loose and flexible requirement, world bank suggests the number of employees to be 49 and some banks expect  less than 300 employees which are very reasonable and affordable to any SME preferred to engaged in innovations and productions on specific areas promoting production, development and economy of a nation contributing to the GDP of the named country. SMEs are easy to initiate and manage flexible with less complications with a limited staff aiming achievements mainly based on human capital as in SMEs in Israel one can use as a model to be studies and  an example to be followed as successful ventures. Israel had 625267 businesses out of which 97.5 being with 60,000 created each year, as sole partnerships converted to limited enterprises with the help of the state ever prepared to assist and promote.

Israel as a Role Model

Israel  has direct links with USA for exposure especially on innovations and Hi Tec sector the new and innovators  Israel are aiming at generally backed by ‘ISMEA’ the the SME authority in Israel to show how active and helpful the state towards the innovators and  entrepreneurs. Despite the ongoing wars with neighbours and within Israel continues to go ahead with the developments and innovations as a matter of safety, protection and development with no natural resources and depending on scientific based innovative human resources that made a barren land to be what it is today to be a leader on agriculture and innovations guiding world powers on technology by applying 95% technology on agriculture also ‘Kibutths’ ( Kibbuths are communes  Israel adopted from the creating of the state in 1948 with sheer dedication, innovations and visions by visionary leaders) as incubators and mini SMEs. SMEs are utilized by almost every nation on the developments of economy as a medium the state, when Asia’s 90% of the businesses are products of SMEs rallying round in the voyage of the tiger and booming economy.

Developments in Other countries

This is common in EU with 99.8 businesses being SMEs and many other countries, when London has one million, and  Northern Ireland around  121800, Asia 71 million, and UK 5.6 million with 90% worldwide businesses are SMEs of 400 million world over, indicating how this concept is integrated and made use of in the other parts of the world. The issue before is whether and to what extent this opportunity that has proved successful is utilized in Sri Lanka for our benefit and whether there are innovative and productive ways and means to apply for ourselves successfully and effectively. Sri Lanka must learn from Thailand Vietnam and emerging developments using SME as a vehicle for the developments braking the cultural barriers and backwardness of the village expanding entrepreneurships along the length and breath of the country on developments with the media education institutions government outlets chambers of commerce and government outlets as a group afford aiming at the common aim aiming at developments and prosperity.

Way Forward

It is time for Sri Lanka to follow the achievements in other countries by using the concept and application of the SME s for the benefit of the society and development and prosperity on innovations, hard work, vision and strategies based on the network of the SMEs easy to setup and maintain and productive with a small capital and a limited number if employees and less complicated infrastructure with flexible mechanism easy to prate and the state supervision, guidance, organization for create a network linking the worldwide network on SME being creative and enlarging and improving the current structure to be more compressive and workable with aims and strategies developed by state private establishments. SMEs are the cradle of the economy and a necessary to leapfrog the ailing economy and it is the duty of the governance and the private sector to give priority to set up more and improve teh existing units small or large.  SMEs too are facing some difficulties on financial issues of volatile and uncertain nature in unexpected circumstances on the financial and economic front such as Perata Executions that is the execution of recovery process without going to courts based on agreements entered into with the establishments which ha been approved by the supreme court as a result of a recent judgement on a short cut on recovery of loans the banks claim to have utilized t0 protect the investors  of the banks from the wilful deflaters which is a controversial statement in deed in the banking process, in which 1188 SME s have lost the existence due to ‘’Parate’’ execution, when 89% of micro and small SMEs are in the process of victimised in the recovery process under the banking act no 4 of 1988 and recovery loans act no 4  of 1990 to 1900 special provisions in force. It is to be noted that 1.3 million SMEs employing 2.2 million employees and contributing 50% to the GDP ae to be improved organized and protected in the name of the economic progress. 1200 ‘’Parate’’ executions have been a blow to the SMEs in the recovery process from the Covid 19 and the financial crisis and it is timely the state come out with a new vision strategy and a plan of action on the promotion of this concept as a matter of urgent need and essential. There should be a concerted effort by all the state and private sector led by the chambers of commerce and the bodies such as EDB promoting exports and agriculture using SMEs as a medium are to be made active. It is time for Sri Lanka to be active in the worldwide SME chain on the process of developments and prosperity of natthe downward trends of economy and grave need of foreign exchange due to the loans taken and demands by the IMF on economic reforms the duty and the need of the assistance of SME ‘s are increasing and it is the duty of the governance to promote encourage  and support the SME’s is a priority for a better future of Sri Lanka in the doorsteps at the Artificial Intelligence and digitalization age and use SMEs as a cradle as a basis  of the development process by innovators and entrepreneurs with a vision for the business and the nation. Indonesia has 295,27 SMEs for 1000 spread countrywide on the developments and many sectors as an emerging economy using SMEs as vehicle. And in Australia has 47 million entraprise with 98% businesses are in the hands of SMEs at initial stages, when 40% of the GDP in USA is from the SMEs  well organized and backed by the state sector. Sri Lanka is emerging as a nation look forward to apply this golden sector for the development and prosperity to the nation in the upward trend on tourism and econimic boom based on SME s industries and economy as the backbone. ( references Lanka Web 29/12/23 Small and Medium entraprise, Colombo Telegraph 9th may 2016/29.12.23 Colombo Telegraph, 1st Aug FT 2019, news lk Gove portal  146.1.23, 9th volume financial services on SMEs Ambassadors forum publication, Colombo Telegraph 22.1.2016)