Sri Lanka Pearl of the Indian Ocean

1
Sri Lanka Pearl of the Indian Ocean

• A Profile of Information Technology

2
Group Members

• Ed Lavallee Background
• Amy Liang IT eCommerce
• XioFeng Zhang Investment Opportunity

3
The Teardrop of India
4
The People Ethnic Groups

• Population 20,222,240
• Ethnic groups
• Sinhalese 73.8, Sri Lankan Moors 7.2, Indian
  Tamil 4.6, Sri Lankan Tamil 3.9, other 0.5,
  unspecified 10
• Religions
• Buddhist 69.1, Muslim 7.6, Hindu 7.1,
  Christian 6.2, unspecified 10
• Languages
• Sinhala (official and national language) 74,
  Tamil (national language) 18, other 8
• English is commonly used in government and is
  spoken competently by about 10 of the population
  
• Literacy definition age 15 and over can read
  and write
• total population 92.3
• male 94.8 female 90 (2003 est.)

Source CIA The World Factbook
(https//www.cia.gov/cia/publications/factbook/geo
s/ce.html)
5
Geography Climate

• Geography
• Slightly Larger than West Virginia
• 65,610 square kilometers
• 1,340 kilometers of coastline
• Mostly low, flat to rolling plains, mountains in
  south-central interior
• Strategic location near major Indian Ocean sea
  lanes
• Climate
• Monsoon seasons - Dec-Mar Jun-Oct
• In late December 2004, a major tsunami took about
  31,000 lives, left more than 6,300 missing and
  443,000 displaced, and destroyed an estimated
  1.5 billion worth of property

Source CIA The World Factbook
(https//www.cia.gov/cia/publications/factbook/geo
s/ce.html)
6
Short History

• Originally settled by Sinhalese from Northern
  India
• 14th Century, a south Indian dynasty established
  Tamil kingdom in the north
• Occupied by Portuguese in the 16th century and
  Dutch in the 17th century
• Island was ceded to the British in 1796 and
  remained a British colony until 1948
• Ceylon declared its independence in 1948 and
  became Sri Lanka in 1972
• Ethnic unrest erupted in 1983 between the
  Sinhalese majority and the Tamil separatists
• Formal cease fire in 2002
• Recent terrorist attacks threaten stability of
  the country

Source CIA The World Factbook
(https//www.cia.gov/cia/publications/factbook/geo
s/ce.html)
7
Government

• Democratic Socialist Republic of Sri Lanka
• Government Type Republic
• Capital Colombo
• Three branches of government
• Executive President (6 year term)
• Legislative One Parliament (225 seats 6 year
  term)
• Judicial Supreme Court, Court of Appeals
  (Judges are appointed by President)
• 8 provinces Central, North Central, North
  Eastern, North Western, Sabaragamuwa, Southern,
  Uva, Western

Source CIA The World Factbook
(https//www.cia.gov/cia/publications/factbook/geo
s/ce.html)
8
Challenges

• Civil Unrest Tamil Tigers
• 2002 cease-fire agreement between Liberation
  Tigers of Tamil Eelam (LTTE) and the Sri Lankan
  government has recently been violated by actions
  on both sides
• Bomb blast on SLN vehicles, 70 killed (OCT 16
  Link)
• Rebels launch suicide attack on Sri Lanka naval
  base in south, 1 sailor killed (OCT 18 Link)
• Tigers ready for talks, Colombo should end
  offensives, air-strikes - Thamilchelvan (OCT 19
  Link)
• New peace talks scheduled at the end of October
  in Geneva

9
Economy

• Currency Sri Lankan Rupee (1US 105.85 LKR)
• Gross Domestic Product
• GDP (purchasing power parity) 85.34 billion
  (2005 est.)
• Per Capita GDP 4,300 (2005 est.)
• GDP Composition by sector
• agriculture 17.8 industry 27.6 services
  54.5 (2005 est.)
• Public Debt 92.8 of GDP
• External debt 11.05 billion
• Economic Aid 577 million
• Gini index 34.4 (1995)

Source CIA The World Factbook
(https//www.cia.gov/cia/publications/factbook/geo
s/ce.html)
10
Economy

• Industries
• Processing of rubber, tea, coconuts, tobacco and
  other agricultural commodities
  telecommunications, insurance, banking clothing,
  textiles cement, petroleum refining
• Exports
• Products textiles and apparel, tea and spices
  gemstones coconut products, rubber manufactures,
  fish
• US 30.9, UK 11.6, India 7.3, Belgium 4.8,
  Germany 4.5 (2005)
• Labor force 8.08 million
• Occupational Breakdown
• agriculture 38 industry 17 services 45
  (1998 est.)
• Unemployment 7.7 (2005 est.)

Source CIA The World Factbook
(https//www.cia.gov/cia/publications/factbook/geo
s/ce.html)
11
Hofstedes Cultural Dimensions
Source http//www.u.arizona.edu/nichalin/myfiles
/SouthAsia-Final.ppt
12
IT Telephones Broadcast

• Telephones
• Main lines in use 1,130,923
• Mobile Cellular 3,084,845
• Inadequate domestic service, particularly in the
  rural areas.
• Likely to improve with privatization
  encouragement of private investment
• Broadcast stations
• Radio AM 26, FM 45 Shortwave 1
• Television 21

Source CIA The World Factbook
(https//www.cia.gov/cia/publications/factbook/geo
s/ce.html)
13
IT-Computer Literacy

• Government sponsored survey of household members
  in the age group of 5 69 years of
  scientifically selected 11,500 households
• Definition of literacy was being able to do
  something with the computer
• Most literate were located in urban areas
• Overall .7 of households in nation have internet
  capability, however 20 of households with
  computers have internet access

Source Computer Literacy of Sri Lanka
Department of Census Statistics Sri Lanka
http//www.statistics.gov.lk/cls2004/index.htm
14
Geographic Map of Computer Literacy
Source Computer Literacy of Sri Lanka
Department of Census Statistics Sri Lanka
http//www.statistics.gov.lk/cls2004/index.htm
15
e-Sri Lanka Initiative

• Purpose is to use Information and Communication
  Technologies (ICT) to develop the economy,
  reduce poverty and improve the quality of life
  of the people.
• ICT Agencys core mandate
• Create a national ICT Plan
• Encourage mainstream adoption of ICT in public
  and private sectors
• The Agencys program areas are given below
• Build the implementation capacity
• Build an information infrastructure and an
  enabling environment,
• Developing ICT human resources
• Modernizing government and delivering citizen
  services
• Leveraging ICT for economic and social
  development, through public-private partnerships

Source Information and Communication Technology
Agency of Sri Lanka (ICTA) http//www.icta.lk/ins
idepages/e-srilanka/e-srilanka.asp
16
Infrastructure

• Today, Sri Lanka's infrastructure ranks as the
  best available in South Asia.
• Private and public investment programs have been
  implemented to improve the country's basic
  infrastructure facilities.
• Currently there are private investment projects
  in power, ports, water sanitation, transportation
  (highways and rail) and IT.
• Telecommunications
• Operations by multiple public and private
  telephone service providers, including three
  basic, four cellular and six payphone services,
  making the industry one of the most competitive
  in Asia.
• Deregulation has resulted in the country's
  largest ever privatization initiative, with NTT
  of Japan purchasing 35 of Sri Lanka Telecom for
  US 225 million.
• Roads
• The construction of 4 major expressways will
  improve the existing road network.

Source Board of Investment of Sri Lanka
http//www.boi.lk/BOI2005/content.asp?contentwhyi
nvest8SubMenuID8
17
E-Commerce Implementation

• Survey by Sri Lanka Business Development Center
• 80 Small and Medium Enterprises (SMEs)

Source http//www.asiafoundation.org/pdf/SMEsurve
y_srilanka.pdf
18
E-Commerce Implementation

• Internet Usage

19
E-Commerce Implementation
20
E-Commerce Implementation
100 uses internet for trade research.
21
E-Commerce Implementation

• Web Sites Maintenance
• Driving forces for establish web sites global
  exposure and direct interface with the
  customers
• Primary purpose of the site is to promote sales
• Majority of the SMEs agree that the Web sites are
  important to improve business exposure.
• The web hosting companies developed most of the
  sites while in-house development came second.

22
E-Commerce Implementation
Web Sites Location and Development Cost
Rs.USD 1001
23
E-Commerce Implementation

• E-Commerce Penetration
• Web based selling is not well established in Sri
  Lanka.
• Sales volumes were at the low end for the few who
  used web based selling.
• Everybody is positive about the sales to increase
  in the coming months.
• The portals do not provide enough sales
  information at present.
• Web based buying is limited to a few types of
  items.
• No local establishments have B2B transactions.
• Buying frequency varied. 37 declared the they
  buy very rarely.
• Purchase volumes over the Internet are very low.
• Bottleneck to purchase goods over the Internet
  Payment method.
• Using web portals for business propagation is not
  widespread among SMEs.

24
E-Commerce Implementation

• Banking Sector Applications

• The main reason for non-usage is the security
  concern.
• I-banking may sure catch up similar to the ATM
  cards since most of the banking operations
  except cash could be carried out from home.

25
E-Commerce Implementation

• Non Internet or E-Commerce Users
• Worries about the cost
• Lack of staff with adequate knowledge to run an
  internet based application
• Infrastructural facilities (such as insufficient
  telephone connections)
• The managements perceived lack of knowledge on
  the benefits of e-commerce

Prospective Users
26
Investment Opportunities and Challenges

• Investing in manufacturing semiconductor in Sri
  Lanka
• How it works?
• Private investor in the U.S. establishes joint
  venture with Sri Lanka government or local
  private businesses
• U.S. investor contributing technology and more
  than 50 of the capital
• Use local labor force for manufacturing and
  local management
• Set up production shops on the southwest coast,
  close to Colombo or Galle
• Ship in raw materials from Asia, and ship out
  the finished products back to Asia market
  (China, India, Japan etc)

27
Why semiconductor?
Semiconductor A solid whose electrical
conductivity can be controlled over a wide
range, either permanently or dynamically
Essential materials in all modern electrical
devices, from computers to cellular phones to
digital audio players Source
http//en.wikipedia.org/wiki/Semiconductor
28
Why semiconductor?
29
Why semiconductor?
30
Why manufacturing in Sri Lanka?

• Cheap Labor Population (1)
• The latest destination for British companies
  outsourcing their operations overseas.
• Sourace http//news.bbc.co.uk/1/hi/busines
  s/3891023.stm
• Labor costs are lower in Sri Lanka than India
  Costs in Sri Lanka are 20 to 40 lower than in
  India (- Virtusa, a provider of IT and BPO
  services.)
• Sri Lanka has the lowest labor cost per worker
  in manufacturing
• (World Bank Development Indicators 2000)

Source http//knowledge.wharton.upenn.edu/100902_
ss5.htm
http//www.boi.lk/InvestorSite/content.asp?content
whyinvest4SubMenuID4
31
Why manufacturing in Sri Lanka?
Labor cost monthly (US)
Sourcehttp//www.boi.lk
32
Why manufacturing in Sri Lanka?

• 92 high literacy (2)
• Easy to train and manage
• Good health (life longevity longer than India)
  (3)
• Ideal for physical and assembly line work
• Educated, English-speaking professionals (4)
• Local university educated, English-speaking
  professionals
• can be used as local managers to build the bridge
  with local community
• managing the local facilities and dealing with
  govt and local businesses.

33
Why manufacturing in Sri Lanka?

• Favorable governmental policies (5)
• Constitutional Guarantee for Foreign Investments
• Bilateral investment agreements are valid for 10
  years
• extended automatically unless terminated by
  either party
• If the agreement is terminated, investments
  already made are protected for another 10 year
• Free remittance of earnings, capital and business
  fees
• Settlement of disputes under the International
  Convention for the Settlement of Investment
  Disputes (ICSID)

Source Board of Investment of Sri Lanka
34
Why manufacturing in Sri Lanka?

• Strategic location (6)
• Regional trading hub and short shipping distance
  to 4 continents
• - 16 airports and 2 seaports
• Colombo Port
• No. 01 port of South Asia and the 26th in the
  World
• Transshipment cargo accounts for 72 of
  throughput
• Computerized and linked to all major freight
  stations
• Fast turnaround and round the clock service
• EDI facilities with two modern container terminals

Source Board of Investment of Sri Lanka
35
Why manufacturing in Sri Lanka?

• Bandaranaike International Airport (BIA)
• 1 regional hub of air transportation in South
  Asia
• Frequent flights to Europe, Middle East, Far
  East, Australia, and the
• Indian Sub Continent
• Passenger movement increased from 2,234,962 in
  1995 to 2,880,387 in
• 2000, a 29 increase
• The cargo movements at BIA has increased from
  76,312 tons in 1995
• to 127,116 tons in 2000 respectively, a
  marked 76 increase
• The aircraft movement in the same period has
  increased from 16,543
• to 21,058, a 27 increase

Source Board of Investment of Sri Lanka
36
Why manufacturing in Sri Lanka?

• Indo Lanka FTA (7)
• Easy to expand into Indian market in the future
  if needed
• With its 1 billion population, India is a big
  market. Should the investor(s) contemplates
• Moving into that market to establish production
  facilities or just to sell, FTA between the two
  nations would serve a favorable channel for the
  both options.

37
Why manufacturing in Sri Lanka?

• Ease of doing business (Total 175) (8)

Source World Bank 2006 study
38
Why manufacturing in Sri Lanka?

• Peace through development (9)
• Civil conflict is an economical issue
• Fight for interest. Once interest met, peace
  becomes possible
• Development ? Opportunities ? Peace
• Canada model, still fight?

39
Why manufacturing in Sri Lanka?

• The worst waste in business is not money, but
  opportunity anonymous (10)
• Sri Lanka a virgin territory for investment
• Opportunity lies under risk
• - Tamil not averse to foreigners
• - Produce in the peaceful region (west coast)

40
Why manufacturing in Sri Lanka?

• Quality life for expatriates (11)
• Beautiful beaches and resort for foreigners
• Exotic tropical fruits
• Industry park
• International Schools

41
Why manufacturing in Sri Lanka?
http//www.srilanka.com/photogallery/gallery.php
42
Why manufacturing in Sri Lanka?
http//images.google.com
43
Why manufacturing in Sri Lanka?
http//www.srilanka.com/photogallery/gallery.php
44
Why manufacturing in Sri Lanka?
http//images.google.com
45
Why manufacturing in Sri Lanka?
http//www.srilanka.com/photogallery/gallery.php
46
Some Sri Lanka Websites

• Board of Investment Sri Lanka
• GOSL (Government of Sri Lanka)
• LankaNewspapers.com Sri Lanka news
• eSriLanka in English in Sinhala in Tamil