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Keynote Address to the hSenid 10th Anniversary Celebration

22 March 2007

Thank you for your invitation to speak at this important occasion to celebrate the 10th anniversary of hSenid Software International.  It is an honor to speak to such a distinguished group of leaders representing an industry that is a driving force in this era of globalization.  Companies like hSenid and leaders like Dinesh Saparamadu are living success stories who prove that Sri Lanka can play a critical role in providing Information and Communication Technology or ICT services.

Ladies and gentlemen, today we live in a global village connected by microchips, satellites, fiber optics, and the Internet.  The digital revolution has transformed the global competitive paradigm.  Information technology has flattened the playing field, empowering small firms from small nations to compete successfully in the global market.  Today Sri Lanka recognizes that opportunity and is taking steps to strengthen its ICT industry and develop a digitally-enabled economy.  These steps will generate economic growth and prosperity, and integrate your country into the virtual community.  But there is much that can be done to accelerate ICT growth in Sri Lanka and make this industry one of your country’s economic pillars for the future.  How you might do so is the subject of my remarks tonight. 

The United States is proud of the role we have taken to spearhead the digital revolution.  70% of the U.S. population uses the internet.  Over 180 million of us, 65% of all Americans, are mobile phone subscribers.  The industry produces nearly 30% of U.S. exports, generates high quality jobs, and contributes strongly to our productivity growth in all sectors.  The U.S. invests more than $ 2 billion annually on IT research and development activities.  And that investment has yielded huge returns, as the IT industry accounted for 40% of all U.S. productivity growth in recent years.

The United States has succeeded because our government believes in encouraging innovation, not regulating technology and content.  How have we done so?  First, we encourage investment in research and development by offering tax incentives and government grants.  Second, we nurture human capital by investing in both private and public education.  Third, we protect innovators.  Where is the incentive to innovate if an inventor’s ideas can be stolen or his products copied with no penalty?  We believe respecting physical and intellectual property is essential to creating an entrepreneurial environment.

These are the principles that have made the United States the leader in the world’s information technology industry and individuals such as Bill Gates and Steve Jobs household names around the world.   The good news is that any nation can apply these basic tenets to increase prosperity and improve quality of life.  As Sri Lanka’s fastest growing sector, the IT industry has the potential to be one of the most significant revenue generators and employers for the country as you face the 21st century.

Sri Lanka has a lot to offer to the global marketplace:

An impressive technical literacy rate that results in high-caliber engineers who can not only adapt to new technological advances but who are creating their own innovations in-house. 

  • Cost-effective manpower that costs between 1/10 and 1/20th of what it costs in the United States, according to the Federation of the Information Technology Industry in Sri Lanka.
  • Infrastructure like the Southeast Asia-Middle East-Western 3 fiber-optic communication system and 15 communications satellites over the Indian Ocean.
  • Membership in the World Trade Organization, and growing recognition of the value of free trade agreements, such as those you have with India and Pakistan.  

The Sri Lankan IT industry already has experienced significant growth since 2000.  But there is scope for much, much more.  Although there is almost no one left in Colombo who doesn’t have a cell phone in their pocket, in reality only 27% of Sri Lanka’s total population has a mobile phone.  Internet penetration is even lower at just 1.4%, with only 280,000 registered users.  The world average is about 17%, while Singapore has over 65% of its population online. 

These numbers should not be cause for discouragement.  Rather they illustrate the significant opportunities for growth.  There is much potential for Sri Lanka as competition drives large corporations to seek high-quality, cost-effective sources in new and emerging markets.  Important initiatives are underway to build national infrastructure and open Sri Lanka’s market to more competition.  

The telecom sector in particular is well-positioned for vigorous growth.  Application product companies are growing.  For example, Sinhalese and Tamil language e-products are in high demand.  Sri Lanka also boasts a high number of open source coders that are creating significantly cheaper software compared to the proprietary products.  Further, the country is a great place for the establishment of off-shore development centers and software service centers. 

The small, but thriving IT companies here have made significant technological contributions to the industry as a whole.  This is reflected by the international awards that companies like hSenid have deservedly received.

But today’s digital era moves too fast for you to rest on those laurels.  There is much to do to improve Sri Lanka’s global competitiveness.  Sri Lanka's business environment poses challenges for the potential investor and established businessperson.

  • Foremost is the separatist conflict that deters many foreign investors from coming to Sri Lanka.
  • Over-regulation, corruption, high inflation, import restrictions and burdensome tax rates also affect Sri Lanka’s business climate.

Another challenge is the digital divide that I alluded to earlier, where the majority of people in the country are still supported by rural industry and have no access to computers or the internet.  

But none of these challenges is insurmountable, particularly if public and private institutions collaborate to advance Sri Lanka’s information and communications industry.  This kind of collaboration is fundamental to modernizing the Sri Lankan economy and boosting your competitiveness in the global marketplace. 

The revenue generated by Sri Lankan software exports is currently estimated at $150 million per year. The local software industry believes that Sri Lanka can achieve $1 billion in annual ICT related export services by 2012.  That is ambitious but certainly achievable with the right mix of industry coordination, policy incentives and academic support.  Following are some suggestions that might help Sri Lanka to realize or exceed its goal.    
One key will be continued close partnership between the ICT and Government to create the conditions for investment and growth in the industry.  Private companies are driving the digital transformation, but they have found that they also need to establish industry associations and partnerships with government to improve the business environment.  In Sri Lanka, one umbrella group of IT companies is the Software Exporters Association that Dinesh helped establish.  Together with the Sri Lanka Association for Software Industry and the IT-Enabled Services Association, they are working with the government’s Information and Communication Technology Agency and Board of Investment to create a cluster development initiative for industry growth, promotion and human resources development.    

One priority for both Government and industry must be to encourage innovation that will drive exports and new investment. Government can foster innovation by encouraging investment in research and development by offering tax incentives and government grants.   

Another sine qua non for creating the appropriate climate and incentives for innovation is a strong legal system to protect and allow innovators to profit from their ideas.  No inventor will innovate if his or her ideas might be stolen or copied with no penalty.  Sri Lanka can and must do more to protect intellectual capital.  Sri Lanka is party to most major intellectual property agreements and to a U.S. Bilateral Agreement for the Protection of IPR.  But its enforcement of these commitments is weak. 

The American Embassy is committed to help.  We provided expert input on the 2005 IPR law.  We funded IPR training for government officers.  And we facilitated meetings between the International Federation of Phonographic Industry, Microsoft, and key government officials.  Rigorous enforcement of Sri Lanka’s laws will send a strong message that innovation will be protected and therefore encouraged.   

Public and private collaboration can also assist in the development of the quality and quantity of Sri Lanka’s high tech workforce.  Presently, the local ICT industry has more job opportunities for qualified workers than are currently coming out of the Sri Lankan education system.  Although the number of ICT graduates has doubled in the last few years, there is demand for more. 

Sri Lanka’s universities are focusing more resources on ICT education.  The Sri Lanka Institute of Information Technology is leading the way by partnering with CISCO, Microsoft and IBM to provide international-accredited, professional certificates.  But much more capacity is needed if Sri Lanka is to become the billion dollar industry hub that you aspire to develop. 

IT professionals tell us that another growing need for the industry is English language competence since so much of the work of the industry is conducted in English.  The U.S. Agency of International Development is doing its share to help.  AID spent $350,000 in piloting voice recognition English instruction software in eight training centers across the country.  USAID also teaches English along with basic computer literary, and skills such as problem solving and confidence, in a workforce development program called the Accelerated Skills Acquisition Program. 

Aside from these efforts to improve education and protection of intellectual property, the U.S. Embassy in Sri Lanka sponsors several programs in collaboration with local institutes and government to bring internet connectivity into Sri Lanka’s rural heartland. 

Six months ago, USAID launched the Last Mile Initiative.  This program aims to increase access to telecommunications and the Internet by creating 25 internet and communication centers for those communities that lie that "last mile" beyond where the Internet currently reaches.  The initial centers will open next month.  These centers will stimulate self-sustaining, fee-based businesses that utilize computers, telecommunications, and internet tools.  Private firms have matched dollar for dollar USAID's $380,000 investment.  The program will use Wimax and other connectivity technology to teach computer skills, English, small business management, and even agricultural techniques.  We are confident that this program will increase productivity and provide new opportunities for farmers, small businesses, and other organizations in that do not have access to the web. 
These collaborative efforts all aim to create a healthier and more competitive IT industry.  Financial figures aside, a flourishing IT industry has many social benefits to the country.  Increased access to the Internet allows citizens to express ideas and opinions more freely, encourages the expansion of democracy and accountable government, lowers the cost of doing business, creates new jobs, and expands the provision of education, health and government services.

The three initiatives I highlighted today focused on developing the technical workforce, ensuring innovation through enforcement of intellectual property rights, and spreading the benefits of IT services to those Sri Lankans that cannot yet benefit from them.  If all of us working together can accomplish those things, I am confident that Sri Lanka can soon be an IT hub -- a place where village kids do their homework online; where rubber and coconut small holders can check commodity prices instantaneously; and where a migrant worker can instantly send money via her mobile phone to her relatives at home. 
In closing, let me commend all of you here tonight for leading Sri Lanka’s IT industry.  My Government and the US information and communications technology industry look forward to partnering with many of you to help realize the bright potential for your industry in the years to come.

Thank you.