The government has announced that one of the key export industries they are focusing on is Information Technology.
Sri Lankans talk as though we are the chosen people – not the biblical chosen people, the Jews, but us. We are born experts in everything. Sri Lanka can become the hub of everything -financial services, IT services, shipping services, aviation services what not.
We have been talking about how smart we are since the 1980s, and claiming the IT industry will make the difference to our Economy. But what do we have to show?
Early history of Sri Lankan IT Industry
We had a head start against India which chased away IBM from the country in 1977 with restricted imports of electronic items, including computers, while Sri Lanka liberalised imports beginning in 1977.
In the late 70’s and early 80’s there was a company in Colombo named A-Z, founded by Maya Sittampalam Rainford, which was providing programming services to the UK Court System, employing about 200 staff, all straight from university.
In the very early 80’s, the company I worked, DMS had done projects in Oman. On behalf of the company, I was negotiating with the TATA group companies Taj Hotels, TELCO (now Tata Motors) to set up a joint venture company for software development in Sri Lanka in 1983. With Intel to provide software development services for their factory, they were planning to build in Sri Lanka.
While we were planning to sign MOUs in late July 1983, all such plans went up in smoke as a result of Black July along with the properties of Tamils. Intel abandoned the factory idea after spending USD20 million, thanks to the valiant effort of Minister Cyril Mathew backed by the then commander-in-chief J.R. Jayawardena and actively supported by quite a few members of the cabinet. On July 29th, instead of being present in a planned meeting with Taj Hotels, I was holed up as a ‘refugee’ in a house of my officemate in Wellampitiya.
Before the Indians could gear up, after Rajiv Gandhi opening up the Indian economy systematically and very cautiously, not hastily and without a plan like Sri Lanka, our company was able to snap up the business of an Indian company doing software in the UAE. We got contracts to computerise the Dubai Duty Free shopping complex and financial system for the Sheik of Abu Dhabi and few other government contracts in the late 80’s. I believe the financial system for the Sheik of Abu Dhabi is still maintained by DMS.
The Export Development Board (EDB) was giving a 5% incentive payment for software exports, provided that supporting documents including contracts, invoices and certification from banks that moneys were received on account of these software services was provided. We knew for sure how much was the export. Then Indian companies took hold of the markets aggressively.
Government intentions
A few months ago, I was listening to the Deputy Minister of Digital Economy in a forum where he was explaining government intentions on IT export. Currently, he said, software export is USD 1.5 billion. This the government hopes to increase to USD 5 billion by 2030. The website of the Sri Lanka Association for Software Services Companies (SLASSCOM) states the same.
I was fascinated to learn how well the IT industry has marketed itself to the extent that the industry itself believes in the lies it creates. I am told the Deputy Minister is from the IT industry.
In 2015, under the Yahapalanaya government, when my good friend Muhunthan Canagasooryam took over as CEO of ICTA, SLASSCOM told him that IT export revenue was USD 1.5 Billion. He asked how the sum was arrived at and refused to accept the figure saying the method adopted to arrive at that figure was not acceptable. Though initially he refused to accept the figure, I believe he went along with that figure finally, on what basis I do not know.
Determining the software export figure
For tangible products that we export, we can determine the export figures from the Customs entry which is verifiable. But no Customs entry is available for export of services. I do not know how India determines its numbers. In India, major players are public listed companies and one can get the figures from the published audited accounts. In Sri Lanka, the companies are private or branches of foreign companies.
The only way numbers can be determined, I believe, is from the Bank remittances. For any remittance banks get, other than for goods exports supported by documentation, banks request the reason and contracts and invoices, to prevent money laundering.
That mechanism can be used to determine the value of export of software services. The Central Bank can publish these figures, collecting them from banks, to determine the value of export services. Of course, this will exclude foreign sales proceeds not remitted back to the country. As far as the country is concerned, in economic terms, unremitted money has no value really.
Will the Central Bank undertake this task? I doubt it, since they are unable to perform even supervision of financial institutions properly. They intervene only after the horse has bolted the stable. They use their independence, it appears, to look after themselves.
Without reliable export figures, no amount of planning will help in the achievement of sizable export of services. As the saying goes, civilization started only when man learn to count.
Stabilized export for 10 years
If for the moment we leave aside the question of reliability of the process of arriving at the figure, it is amazing to note how from 2015 to 2025 the export of software services has been ‘exceptionally stable’, at USD 1.5 Billion, and we seems to be happy with this stability.
However, in the next five years by some miraculous formula, it will grow by 233% and be USD 5 billion in 2030 according to the Deputy Minister and SLASSCOM. But they will not reveal the miraculous formula to ordinary mortals, citizens of Sri Lanka.
I recollect, I think in 2018, Ranil Wickremesinghe, then Prime Minster, addressed the IT industry. He said he started working with the IT and Garment industry 30 years before. The Garment industry exports USD 5 Billion today, whereas IT brings in only USD 1.5 billion assuming of course the figure is reliable.
Ranil of course overlooked one thing which is that in IT sector the whole export is local value addition. In the garment industry however, I am not sure how much is the total value addition out of USD 5 billion.
He said at that time SLASSCOM had forecast USD 5 Billion export of software services in 2025. He wanted that to happen in 2020 and wanted the industry to advise him what was needed from the government to achieve USD 5 billion in 2020. He wanted a report in two weeks’ time after waiting for three years of the start of his term of the government. Of course, the industry prepared the report, and it was pathetic.
The USD 5 billion export target seems to be a moving target, a lie created by the IT Industry and blindly believed by government, and now one from the industry is a Minister in the government.
The only strategy I observe in their plan, is expanding the software workforce to 200,000. I think the rate of addition will not catch up with the rate of migration of not just raw graduates but experienced and competent workforce.
Numbers is not our strength
Indian software export is USD 200 Billion. We are 1/70th of their population. We can achieve only USD 3 billion, even if we match the Indians in every respect, especially skill, hard work and marketing. We are far behind them in all, especially the last two. Let us analyse the success factors of the Indian software industry.
Quality of workforce
In 2003, with positive signals of conflict resolution, there were high expectations on the economy and Microsoft opened an office in Sri Lanka. The government made a push to convince Microsoft to open a development canter in Sri Lanka. I was told that Bill Gates was supposed to have said Sri Lanka did not have good universities.
In fact, a few years before that, in a forum of university dons, I said all other faculties teach engineering but in computing, training is generally for tradesman, at the best for technicians. Everybody was angry and they said their students are doing well in the industry. They take the cream for computer engineering and even if they do not teach them anything, they will learn on their own. In the US, they would have gone into atomic research or NASA, not for computing.
Today total university education has gone to the dogs in every field. Fifty years ago, in the Peradeniya engineering faculty, if you failed even one subject, you could not proceed to the next year. Today, standards are so low that you can go on with several subjects failed in previous years.
I believe the only exception is the medical faculty, where you cannot proceed without passing 2nd MBBs, first MBBS being Advanced Level. I was told there was a discussion about lowering the pass marks in the universities, when one of the professors asked whether all members of Senate would like to be treated at the hospital by people who passed with less marks. The suggestion was withdrawn.
These students who use taxpayers’ money are not worried about studies. I know in one of the universities, some repeat exams are known ‘Medical’ subject as first time student has submitted a bogus medical certificate. First reform Dr. Harini should perform in education is placing discipline in its right place. However, I doubt it, because University educational indiscipline was the building blocks of JVP.
Most of the Indian graduates in the IT industry are from IITs, where the standards are very high and studies demand a very high level of focus. In Sri Lanka, every demand of the student is accepted and standards lowered.
In the 1970s, our exams were held each day, morning and afternoon, and we completed the exams in a week. Today, students ask for more than a month because they want to study between exams. Subject matter is not assimilated but memorised, vomited in the exam and forgotten. With this kind of university education, you cannot produce a quality work force for IT or indeed any industry/ Management/ Administration.
Non-resident Indian
Not all Indians are from IIT. The majority of the work force is mediocre. I was employing some Indians on a SAP implementation project on a consulting basis. I got a complaint from a customer that for two weeks a problem was not resolved. I went for the meeting and was told that SAP software did not calculate interest income correctly for government bonds for a specific condition. I asked the customer how they knew that it is not correct. They said that they calculate the income using Excel formula.
I told them to use the calculator and compute. They found that was produced by the SAP software was correct, but the Excel formula computation was wrong. The Indian implementation consultant did not know this, and we had paid USD 5000, the fee for ten working days, for his ignorance.
On the same project, I trained a local person to install SAP software normally performed by trained ‘Basis’ consultant at the rate USD 500 plus expenses per day while the local person’s cost for a month was barely that.
On completion of installation, as some people in the company doubted the correctness of the installation, I requested an Indian company to send a ‘Basis’ consultant to verify. We found he did not know the process exactly and after two days, I send him back spending USD 1000 plus cost of air travel, which I could have used to pay the local person for three months. If I had employed him instead of my training a local person, he would have by trial and error installed and for his learning we would have paid USD 500 a day plus expenses. But the Chairman of our company kept on advising me not to rely on local people and to implement the system using the Indians.
There was an advertisement in the local papers by an Indian company, seeking people on outsourced basis. I was surprised and called the company and asked how long they needed the people. He told me they had told the customer it was a one-year project, but will take three years to complete.
There was a post on Facebook by an IT person from Tamil Nadu written in Tamil, about how Indian IT companies cheat western companies, and the western companies have caught the tiger by tail.
The point is how the Indian companies can sell all over the world. They have a formidable marketing force of non-resident Indians all over the world who promote all the Indian companies. Non-resident Sri Lankans have no such marketing force.
What we need to do
In my reckoning, IT export is a dream that can be achieved even now provided a proper strategic plan is formulated. We are a small country and trying to emulate India is not going to work for us. Without success locally we cannot expect the world to accept us. A few companies started by Sri Lankans with overseas exposure especially during their academic years and professional work may get success, but not as an industry.
Is the Government willing to develop a well-thought out strategic plan in a short time – we have already lost eight months – without repeating what we have been saying for last few decades?
