Small and medium-sized enterprises (SMEs) are an integral part of any economy, and the Sri Lankan economy is no exception. SMEs, when taken together with microenterprises, contribute to about 52% of the country’s gross domestic product (GDP), and according to the National Human Resources and Employment Policy of Sri Lanka, they account for about 80% of all businesses.
Tourism is one of the key sectors which accommodates thousands of local SMEs and the third largest foreign income earner in Sri Lanka. During the last decade, there has been unprecedented growth in the industry, especially after the end of the civil war in 2009. The sector has contributed more than $ 2,980 million to the economy, second only to foreign remittances and the textiles and garments industry.
However, tourism is also one of the worst-affected sectors from Covid-19 and is yet to witness a significant recovery from the pandemic that shook the world last year – and still continue to do so. Regardless of the concessions and assistance provided to those engaged in tourism-related businesses prior to the pandemic, these businesses are still financially struggling as they try to find alternative ways to make a living.
To discuss further about the impact on SMEs as well as the measures that were taken so far and will be taken in the near future to support SMEs of the tourism sector, The Sunday Morning Business caught up with Sri Lanka Tourism Development Authority (SLTDA) Chairperson Kimarli Fernando for an exclusive interview.
Following are excerpts of the interview.
Could you brief us on the SMEs in the tourism sector in Sri Lanka?
SMEs play a significant role in our country’s economy as well as in the tourism industry, where they make up 60% of the total industry, which includes small-scale hotels, guesthouses, homestays, wellness centres, cafes, guides, tourist drivers, and small-scale tourist shops, to name a few.
However, until recently, SMEs remained as a part of the informal sector of the industry, where they neither were encouraged nor had the opportunity to register to avail facilities offered by Sri Lanka Tourism.
What were the barriers, according to you, that stopped them from registering with SLTDA?
I could give three main barriers which might have prevented them from registering with SLTDA: Complex and cumbersome guidelines, financial constraints, and time-consuming documentation.
What measures has SLTDA taken under your leadership to overcome these barriers?
Being sensitive to the above barriers SMEs face, we adopted a four-pillar framework to encourage SMEs to register with SLTDA, so they can be a part of the formal tourism sector of Sri Lanka.
The four-pillar framework includes (i) making the registration process 100% online, (ii) creating more flexible guidelines, (iii) streamlining the documentation process, and (iv) granting provisional registrations. I’m pleased to announce that this has resulted in a record increase of 38% of SME registrations in 2020 compared to 2019.
To encourage more SMEs in the formal sector, we also gave a generous incentive scheme where the registration costs were considerably lowered. Previously, the initial payment for registration was Rs. 10,000, which was lowered for homestay, bungalow, and travel agencies to Rs. 1,100 and hotels, guesthouses, restaurants, and spa and wellness centres to Rs. 2,200 for provisional registrations.
Furthermore, registered SMEs can be part of the grants, relief packages, and concessions provided by us and they can also be a part of industry forums where policy-level discussions are held with all stakeholder associations.
What are the initiatives taken to create awareness about these measures?
As part of the registration facilitation process, Sri Lanka Tourism conducted mobile services in January 2020 in Ella and Hapulate to further encourage SMEs to register. These drives promote and create awareness on the potential opportunities, especially for women entrepreneurs in the region who are benefited through homestays.
Currently, this has given way to 170 women homestay entrepreneurs while empowering them and their communities economically.
Now that Sri Lanka is open for international tourists, what are the supportive measures extended to SMEs for operating during the pandemic?
In preparation, we requested the assistance of GIZ Sri Lanka to develop and publish a “Practical Guidebook for SMEs” where all safety guidelines and health protocols of Sri Lanka Tourism are mentioned.
GIZ Sri Lanka also developed short video clips to cover the contents of the “Sri Lanka Tourism Operational Guideline”, which will enable SMEs to be safe and organise their operations to function under the new normal.
To further benefit the SMEs, a series of pandemic preparedness programmes were conducted with the support of S4IG Australia to cover five districts: Polonnaruwa, Anuradhapura, Batticaloa, Trincomalee, and Ampara. These programmes were especially designed for SMEs to train and assist them to better manage new normal tourism operations, and we are happy to announce that we have successfully empowered over 772 people in the process.
Are they eligible for the ‘Safe and Secure’ certification offered by Sri Lanka Tourism?
Yes, indeed. We offered the Safe and Secure certification free of charge for them where the cost is being borne by Sri Lanka Tourism as a means to assist them further. On average, about one-third of the Safe and Secure-certified hotels/accommodation places represent SMEs.
Any future initiatives to empower the SMEs of the tourism sector in Sri Lanka?
Micro, small, and medium-sized enterprises (MSMEs) are the building blocks of the tourism industry in Sri Lanka, and they represent the largest segment. However, they were neglected in the past as they had no or limited representation in the decision-making or strategy-making process of the industry.
This needs to be corrected and we are working very hard for it. I’m also happy to inform you that industry representation and engagement was expanded to include 52 associations which were previously limited to a handful, which I think ensures a stronger voice and representation for the SMEs of the tourism industry.
Sri Lanka Tourism will continue to support, engage, and empower SMEs through means of technical, financial, and other facilitations to push them for growth and thereby to enhance the strategic contribution to the national economy.
We cordially invite the SME sector to register with Sri Lanka Tourism and be a part of the formal tourism sector of Sri Lanka.