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Center for International Private Enterprise

ECONOMICREFORM Feature Service® July 15, 2010

Youth Entrepreneurship and Leadership in Sri Lanka Lochana Yasath Wijesinghe

Article at a glance • Sri Lanka suffers from high youth unemployment and the culture of entrepreneurship remains weak. • Y oung entrepreneurs face many challenges, including lack of education, training, mentorship, access to finance, and adverse cultural attitudes. • The way forward is to reinforce an entrepreneurial culture and improve the business climate, mentorship opportunities, access to capital, and support for aspiring young entrepreneurs.

This article is a 2009 CIPE International Essay Competition second place winner in the category of entrepreneurship and leadership. To comment on this article, visit the CIPE Development Blog: www.cipe.org/blog.

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Introduction Renowned as the “Pearl of the Indian Ocean,” the tropical isle of Sri Lanka is perched off the southern coast of India. Though Sri Lanka earns a comparatively low GDP per capita income of U.S.$4,400, its social development has reached a significant level with a high literacy rate (90.7 percent), low HIV/AIDS prevalence (below 0.1 percent), high life expectancy at birth (74.97 years), and a low infant mortality rate (19 deaths per 1,000 live births).1 However, for over nearly two decades, the country has been engulfed in ethnic tension and scarred by a civil war between government troops and Tamil Tiger insurgents. This conflict has left more than 100,000 civilians dead, over half a million people physically and mentally traumatized, and has severely challenged economic progress. In the spring of 2009, following a major military offensive, the government captured the final stretch of territory held by the separatists and they surrendered, bringing the long years of conflict to a close. Apart from the protracted civil war, the country faced its worst catastrophe in 2004 when the coastal community was hit by a tsunami. It left 30,000 people dead and more than 500,000 displaced.2 The devastating tsunami affected livelihoods in various sectors such as fishing, agriculture, tourism, retail, and trade. In a society recovering from decades-long armed conflict and a devastating natural disaster, Sri Lankan youth faces serious challenges. Key problems affecting young people include unequal wealth distribution, political favors in the form of biased awarding of employment opportunities, and the continuing failure of politicians to address these issues. These problems are the very causes of the major insurgencies in 1971 and 1990; coupled with the separatist ethnic conflict, they have contributed largely to today’s problems of youth unemployment and underemployment.

Youth Entrepreneurship and Leadership in Sri Lanka

The Status of Entrepreneurship among Sri Lankan Youth Sri Lanka has a population of over 20 million people, with about four million households,3 and a labor force of 7.4 million. The labor force participation rate of youth between ages 15-19 is 21 percent, rising to 63.2 percent for youth between ages 20-24. However, estimates illustrate an alarming situation: 21.6 percent of youth between ages 15-19 and 21.1 percent between ages 20-24 are unemployed.4 Additionally, more than half of Sri Lanka’s soldiers belong to the youth age bracket. Since the conflict has drawn to a close, a significant portion of these young people are likely to add to the numbers of unemployed as they are discharged from the military. Thus, youth unemployment is a formidable problem in Sri Lanka. Not surprisingly, youth entrepreneurship in Sri Lanka is considered weak. In spite of that perception, a noteworthy number of organizations have been working to encourage entrepreneurship among young people, such as the Hambantota Youth Business Trust (HYBT),5 Start and Improve Your Business (SIYB),6 Young Entrepreneur Sri Lanka of Junior Achievement (YESL/JAI),7 and the Junior Chamber of Commerce (JCSL).8 These organizations give greater significance to entrepreneurial education and promotion in Sri Lanka. Similarly, the Youth Entrepreneurship Board, established in 1999, strives to support indigenous entrepreneurship among youth in the country. Over the years there have been notable entrepreneurship initiatives launched by governmental ministries, such as the Samurdhi,9 Gemidiriya project,10 Maga Neguma,11 and Gama Neguma.12 Their aim has been to boost motivation among existing young entrepreneurs, to encourage more youth to take up self-employment and start their own businesses. These efforts have been meant to foster entrepreneurial thinking and development in

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Youth Entrepreneurship and Leadership in Sri Lanka

order to create solid, rewarding employment opportunities and reduce the burning issue of youth unemployment. However, it is unfortunate to see many of these worthy efforts struggle to stay on course in the face of the many barriers that prevent today’s youth from becoming tomorrow’s entrepreneurial leaders of Sri Lanka.

Barriers to Youth Entrepreneurship and Leadership Lack of Education and Training Even though various entrepreneurship training programs have existed in Sri Lanka for more than a decade, they are vulnerable to many inherent weaknesses. There are short training programs conducted over just one or two days and longer residential workshops, but there is no governmental institution responsible for entrepreneurship training at the national level. Therefore, various institutions conduct training courses in random intervals that mostly overlap in content and aim. They do not have the cooperation necessary to implement a unified and coherent vision of entrepreneurial development. The lack of an authoritative body also means that the quality of these training programs, their content, and their required readings go unsupervised and the overall number of youth participants is unknown. Business training programs on finance, marketing, and other technical aspects of entrepreneurship have met with only limited success due to the practical issues youth have to face. Although in theory there are abundant sources of institutional support available to aspiring young entrepreneurs, these sources are often beyond their tangible grasp. Moreover, many existing training programs do not cater to the correct target audience. This is partly due to the fact that the selection of participants is not based on aptitude, interest in entrepreneurship, or leadership background. Participants are often selected based on political connections, while

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more appropriate target groups – such as young married mothers who have taken on additional responsibilities of household maintenance with limited disposable income – are entirely ignored. General school curricula as well as certain vocational and training curricula have minimal space to inculcate entrepreneurial thinking and enterprising attitudes among school youth. Therefore, many full-scale entrepreneurship training programs have a mixture of youth who aspire to become entrepreneurs (mostly those who have left school and/or are engaged in the informal sector) and undecided youth (mostly schoolattending youth who have come to trainings out of curiosity or by accident). This results in the dilution of training goals, waste of resources, and most importantly waste of valuable time. Additionally, lack of sufficient dual or Tamil language programs in state- and non-governmental organization (NGO)-led initiatives excludes many Tamil and Muslim youth from reaping benefits of such programs. Almost all of these training programs also tend to exclude disabled youth, as well as young felons and offenders. No public data has been made available on their training needs and whether any of them have been met. Limited Access to Finance Lack of access to sufficient capital is a key barrier to starting a business. Most financing programs available in Sri Lanka depend on support from the state or international donors, without which they would not be sustainable. Most banks and financial institutions demand extremely high amounts of collateral and charge stifling rates of interest on any funds made available to young entrepreneurs. The viability of business plans is largely overlooked by lenders and the qualifying criteria are made extremely restrictive with short loan periods. In most instances, even the amounts released to individuals who satisfy myriad requirements still do not suffice to launch any worthwhile business venture.


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A few entrepreneurs may opt to sell individual assets inherited from their family or bought with savings, but this option is not available for most. Some may borrow from family members, but this too is a very constrained source of funding. Most middle and low income earning families have little disposable income and meager savings. Although much heated debate is taking place in Sri Lanka on planned reforms in the microcredit and financial services industry, it remains unclear to what extent these reforms would relieve the mounting financing needs of young entrepreneurs. Lack of Business Development Support The dire need for quality support services arises from youth who have finished school and want to start up their own businesses. This need is also evident among those youth who operate in the informal sector, which amounts to 61.9 percent of total employment in Sri Lanka. Most firms specializing in business development support provide minimal or no support to young entrepreneurs and their fledgling ventures; these young entrepreneurs are compartmentalized high risk ventures with extended pay back periods. The unavailability of quality business development support is directly related to these promising young entrepreneurs losing business vision, motivation, and ultimately failing at their ventures. The business development support sector should instead tie its long-term growth prospects to the increasing numbers of successful young entrepreneurs. Cultural Attitudes Most youth in Sri Lanka, as well as their families, still prefer state employment over other sources of employment since state jobs are regarded as high status jobs with better job security and pension, allowing youth to lead a lavish life style. Next to state employment, the second preferred choice of profession is self-employment or starting a business. However, a massive gap remains between these two employment paths.

Youth Entrepreneurship and Leadership in Sri Lanka

Although this situation is not as bad as it used to be, youth do not prefer self-employment or business mainly due to the lack of social regard, stability, and security. Most parents still cling to the dream of seeing their sons and daughters as stateemployed doctors or engineers. This prevailing cultural attitude impedes the creation of a healthy environment for entrepreneurial thinking and development. Lack of a Coordinated Mentorship Initiative Most youth in the Sri Lankan society depend on informal methods of mentoring given freely by family members, peers, and colleagues. However, in many instances, these mentors may not possess the necessary levels of experience and expertise to groom inexperienced youth to become tomorrow’s successful entrepreneurs. Many communities in the country include a number of successful and experienced entrepreneurs who have made it to the forefront of entrepreneurial achievement through sheer hard work and dedication. Their wealth of knowledge and experience would be an invaluable source of strength and insight to most youth and upcoming young entrepreneurs who struggle and hope to find success. However, most Sri Lankan youth do not have the opportunity to take advantage of the expertise these role models have to share due to the absence of any public forums or mentorship circles. Social Problems The ethnic conflict in Sri Lanka was fuelled mainly by unrest among the youth stemming from frustration at mainstream socio-economic policies. The two decade long strife left one of Southeast Asia’s potentially prosperous economies damaged and vulnerable. Youth are one of the main groups affected by this cruel war in many ways: physically, psychologically, economically, and socially. Thousands of youth lead ravaged lives as refugees, destitute orphans, displaced persons, disabled persons, widows, single parents, young ex-combatants, army deserters, and –4–


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Youth Entrepreneurship and Leadership in Sri Lanka

victims of torture.

education and vocational subjects such as wood carving and carpentry are as important as theoryfocused mathematics, religion, and science.

This conflict has affected almost all youth in the country across gender, race, caste, and creed in varying degrees. These are the young people who can fully appreciate the resilience and fortitude to face daily difficulties and move forward as a nation.

These business lessons must be made relevant and practical by incorporating real life case studies. This would allow youth to apply concepts learned at the university to real life professional situations and to be business savvy.

The Way Forward: Removing Barriers to Entrepreneurship

The syllabus content should focus both on technical aspects and socio-cultural aspects of entrepreneurship in order to develop a holistic young entrepreneur. The content needs to address broad issues affecting Sri Lanka as a country and the broader business world. Simultaneously, teachers should be encouraged to engage in entrepreneurial education and training so that all educators develop a similar mindset toward business creation and transfer such learning to youth in the classroom.

Reinforce an Entrepreneurial Culture Entrepreneurship remains fundamentally weak in Sri Lanka. If a proper blueprint is to be drawn outlining the promotion of entrepreneurship among Sri Lankan youth, it must begin with the nurturing of a robust entrepreneurial culture. A deeply-held belief in Sri Lankan society is that individual wealth does not determine a person’s success in society. Individual success must be congruent with the success of the community at large. Therefore, an entrepreneurial culture embedded with a strong values system that benefits both the individual and the community needs to be encouraged.

By incorporating business lessons that instill enterprising attitudes among youth, the largescale entrepreneurial programs can fully focus on graduates and those youth who have chosen to embrace life as an entrepreneur. This would enable the larger programs to be conducted with maximum efficiency and effectiveness, having attracted the correct target audience.

If entrepreneurship is to be promoted and accepted widely in Sri Lanka, conceptual clarity is required. Currently, no proper demarcation exists among concepts such as entrepreneurship, enterprise development, self-employment, and smallsized businesses. This creates confusion in drafting pro-entrepreneurship policies and results in duplication of efforts. The focus should be on clarifying what entrepreneurship is and what it requires, and eliminating ambiguity.

Further, state- and NGO-led programs should focus more on youth engaged in the informal sector, migrants to urban areas, disabled youth, youth in the coastal community that were affected by the tsunami, and young offenders. Most of these programs should be conducted bilingually in order to increase the participation of Tamil and Muslim youth who would then be able to fully contribute to and be part of Sri Lanka’s entrepreneurial and leadership force.

Introduce Educational and Training Reforms

A governmental body or an independent institution needs to be established and made responsible for the provision of entrepreneurship training on a national scale. It should also periodically assess the quality of entrepreneurship programs conducted by various institutions and

The government needs to take immediate strides to introduce business-oriented curriculum that fosters enterprising attitudes in youth across primary, secondary, and tertiary educational institutions. It must be acknowledged that business

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keep systematic track of its participants, their background details and impact of the training, and create a centralized database of potential future young entrepreneurs. Youth should be given sufficient training not only in entrepreneurship but in important related areas such as strategic business planning, banking and financial management, business leadership, cost effective procurement and human resources, etc. They should also be exposed to more possibilities and more opportunities in the production and service industries so that over time, a core of diversified entrepreneurs would emerge. Enhance Financial, Legal and Business Support Services The red tape within Sri Lanka’s financial sector needs to be relaxed to facilitate the growth of startup businesses. Financial institutions should be encouraged to introduce innovative methods of financing for young entrepreneurs. A national body needs to be established to provide promising young entrepreneurs with credit guarantees, innovative investment plans for small businesses, expedited granting of credit, and simplified collateral requirements. Additionally, information on available financial support should be systematically disseminated to aspiring entrepreneurs. Tax incentives and tax holidays should be also introduced to motivate young entrepreneurs. The existing legal framework needs to be reformed to incorporate the necessary changes, limit the operation of the informal sector, and make more legitimate funds available for youth to expedite the growth of entrepreneurial business in Sri Lanka. Providers of business development support should proactively treat young entrepreneurs as prospective clients and help them through the initial vulnerable stages to minimize the risk of failure. Likewise young entrepreneurs should be encouraged to seek the services of reputed business development support providers when starting up businesses. This cooperation would represent a

Youth Entrepreneurship and Leadership in Sri Lanka

mutually beneficial relationship for both sides. Incentives such as tax holidays, trainings, and government guarantees can encourage service providers to set up provincial service and development centers as mechanisms to expand services. These centers would specialize in offering a wide array of services to emerging entrepreneurs and in nurturing and transforming them into mature young businesspeople. Establish Mentorship and Advocacy Circles A pool of mentors – including successful entrepreneurs, social role models, CEOs, and managers of successful private organizations – should extend a helping hand to encourage young entrepreneurs by sharing invaluable experiences and expertise. This would enable emerging entrepreneurs to be better prepared for the challenges of running a business and avoid predictable mistakes. In order to encourage the enrollment and participation of quality mentors, successful businesses should introduce a mentorship screening and development program as part of their corporate social responsibility. If young entrepreneurs of today desire to be tomorrow’s entrepreneurial and leadership force they need to help themselves as well. A young entrepreneur cannot remain passive and hope that a higher authority will just make the business environment more favorable. Young entrepreneurs need to act together and become a powerful force for change. By doing so, they would be able to influence the country’s economic policies and be a voice heard across the policy-making process. Through working together, they could collectively advocate with the government, devise win-win strategies of mutual assistance, and find effective methods of gathering and disseminating information that matters to young entrepreneurs. Youth are Sri Lanka’s hope for the future. Their

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Youth Entrepreneurship and Leadership in Sri Lanka

potential is immense and is yet to be unleashed. Through proper educational and training, promotion of better business development support, streamlining financial and legal requirements, and building momentum as a united group, today’s youth could indeed become the driving force that propels Sri Lanka’s development in these turbulent times.

leadership. Lochana Yasath Wijesinghe’s essay, which won second place in the ‘Entrepreneurship and Leadership’ category, was written in response to the following question: “What needs to be done in your country to provide youth with the opportunity to become entrepreneurs and/or leaders in their communities?” To learn more about the essay competition, visit www.cipe.org/essay. Lochana Yasath Wijesinghe has his bachelor’s degree in Business Administration with a specialization in Marketing from the University of Colombo and holds professional memberships in accounting associations CIMA UK, ACCA UK, and CPA Australia. Upon completion of his degree, Lochana began working at Unilever- Sri Lanka and was involved in Sales and Special Projects Finance. Since August 2009 he has taken over a role in Brand Finance at Unilever-Australia. In his free time he enjoys listening to oldies music, swimming, and engaging in community service projects.

Endnotes CIA World Factbook, Sri Lanka, https://www.cia.gov/ library/publications/the-world-factbook/geos/ce.html. 2 Data on tsunami comes from: http://www. reliefweb.int/rw/rwb.nsf/AllDocsByUNID/ fe1f27fe0904206785256f8400619969. 3 According to the government statistics website, there are 4,054,385 households in Sri Lanka: http://www.statistics. gov.lk/PopHouSat/PDF/p7%20population%20and%20 Housing%20Text-11-12-06.pdf. 4 Sri Lanka Labour Force Final Survey Report 2007 released by the Department of Census and Statistics, Sri Lanka, www.statistics.gov.lk. 5 HYBT – organization founded by the Hambantota District Chamber of Commerce in association with Princes Trust UK to reduce youth unemployment, alleviate youth poverty, develop an entrepreneurial culture, etc. 6 SIYB – national association for business support services for micro industries. SIYB Sri Lanka is an affiliate of the Global SIYB program. 7 YESL/JAI – member organization of Junior Achievement International promoting youth entrepreneurship. 8 JCSL – national committee of the International Chamber of Commerce (ICC). 9 Samurdhi – national program introduced by the government in 1994 to alleviate youth poverty. 10 Gemediriya project - a 12-year project implemented in 2004 to ensure livelihood improvement and savings of rural community, funded by the World Bank. 11 Maga Neguma – one of the programs initiated by the President to rehabilitate and improve road infrastructure to provide easy accessibility to 15,000 villages in the country, create new employment opportunities, expand markets for poultry and other rural products, etc. 12 Gama Neguma – program intended to revitalize backward villages by the provision of basic infrastructure, implementation of village development projects, supporting farmer families, etc. 1

The views expressed by the authors are their own and do not necessarily represent the views of the Center for International Private Enterprise (CIPE). CIPE grants permission to reprint, translate, and/or publish original articles from its Economic Reform Feature Service provided that (1) proper attribution is given to the original author and to CIPE and (2) CIPE is notified where the article is placed and a copy is provided to CIPE’s Washington office. The Economic Reform Feature Service is CIPE’s online and electronic article distribution service. It provides in-depth articles designed for a network of policymakers, business leaders, civic reformers, scholars, and others interested in the issues relating to economic reform and its connection to democratic development. Articles are e-mailed and posted online twice a month. If you would like to subscribe free of charge, please join the CIPE network by entering your e-mail at www.cipe.org. CIPE welcomes articles submitted by readers. Most articles run between 3-7 pages (1,0003,000 words). All submissions relevant to CIPE’s mission will be considered based on merit.

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The Center for International Private Enterprise’s 2009 International Youth Essay Competition asked young people aged 18-30 to share their ideas about citizenship, democratic and market-oriented reform, and youth

The Center for International Private Enterprise (CIPE) strengthens democracy around the globe through private enterprise and market-oriented –7–


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reform. CIPE is one of the four core institutes of the National Endowment for Democracy. Since 1983, CIPE has worked with business leaders, policymakers, and journalists to build the civic institutions vital to a democratic society. CIPE’s key program areas include anti-corruption, advocacy, business associations,

Youth Entrepreneurship and Leadership in Sri Lanka

corporate governance, democratic governance, access to information, the informal sector and property rights, and women and youth.

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Youth Entrepreneurship and Leadership in Sri Lanka