Wider ICT use set to transform key industries in Sri Lanka

Policymakers are in the process of developing Sri Lanka’s first Digital Economy Strategy in an effort to harness technological innovation to boost productivity across sectors and promote inclusive growth. Development of the strategy, which began in 2017, is being spearheaded by the Ministry of Digital Infrastructure and Information Technology in partnership with consultancy firm McKinsey & Company and consists of three phases. In the first phase McKinsey analysed the country’s readiness to shift towards a digital economy, and in the second it designed three flagship programmes to launch the initiative and 10 projects to implement it. All industries were considered in terms of the competitive advantages they stood to gain from digitalisation, but the three with the most potential were identified as agriculture, manufacturing and tourism.

The final phase, which will begin once the strategy has been approved by the government, involves implementing the programmes. The strategy was presented to the Cabinet in October 2018, but its launch has been delayed due to the constitutional crisis that occurred between late October and mid-December of that year. According to McKinsey, the proposed strategy could boost the economy by 1-3% in 2019 if it is rolled out.

Growth Engines

Agriculture remains one of the main drivers of the economy. The sector employs approximately 25% of the workforce, according to the Department of Census and Statistics. Rohan Samarajiva, chairman of the Information and Communication Technology Agency, told OBG that the sector was highly unproductive, but that with innovation and the ability to leverage data analytics to drive real-time decisions across the value chain, producers would be able to control stock levels and product quality, and incorporate reliable information into the decision-making process in the event of a poor harvest or natural disaster.

According to a survey carried out by McKinsey of 50 local companies, manufacturing is the sector with the lowest digital maturity. Businesses in this industry could leverage cloud computing, augmented reality, artificial intelligence and the internet of things to help identify new revenue streams and improve efficiency. The quality of products would be improved and timing optimised through streamlining processes and capabilities.

Tourism, meanwhile, is seen as the low-hanging fruit, having experienced significant growth in recent years. Digitalisation and the use of data analytics could improve offerings and generate new revenue streams by tailoring products and services to different visitor types. Initiatives like this are already under way: in August 2018 the Sri Lanka Tourism Development Authority announced a new partnership with the hospitality platform Airbnb to launch Airbnb Experiences. The scheme will enable Sri Lankan micro-entrepreneurs to advertise activities, such as surfing in Mirissa and hiking the heritage trail in Galle, on the Airbnb site, with the aim of driving local and sustainable growth.

Risk Appetite

While strategists are laying the groundwork, the country still has some way to go before it can achieve digitalisation across sectors. The overall digital maturity of businesses in every industry is behind that of regional neighbours, including India. Even more digitally mature sectors, such as banking, are below global digital standards. McKinsey has said that the main challenge is low appetite for risk, which slows digital transformation. The consultancy firm said companies particularly struggle to integrate digital priorities into their business strategy; automate both internal and customer-facing processes; and foster collaboration between digital teams and other business functions.

Removing regulatory and infrastructural barriers to boost productivity and overall competitiveness across businesses is essential to encourage technology adoption. If company leaders commit to digital transformation they can significantly increase revenues, grant higher returns to shareholders and benefit society as a whole through improved labour standards, particularly within the manufacturing and agriculture sectors.