ICT INDUSTRY
GROWTH STORY
Compiled by Yamini Sequeira
FORTUNE FAVOURS THE BRAVE
Reyaz Mihular treads the path ahead for the ICT industry and nation at large
The future of ICT in Sri Lanka lies in using connectivity as an enabler by providing solutions to businesses and other users, according to Reyaz Mihular. However, he believes that there are obstacles to this pathway.
STALLED PROGRESS “Looking at Sri Lanka’s ICT industry today, we’re punching well below our weight class. Ideally, Sri Lanka should be on a much higher plane than at present, given that we have the prerequisites for a robust industry,” he notes.
Several factors have led to this, he elaborates, “including inconsistent policies and square pegs in round holes in key positions who aren’t up-to-date with the changes required to build a vibrant ICT industry.”
He lauds the Sri Lankan president’s push for digitalisation but believes that execution and implementation down the line could falter – multiple approvals are needed to lease land for mechanised agriculture, for instance.
Sri Lanka, Mihular asserts, possesses the investments required to accelerate the pace of digitalisation – for example, fairly strong telecom coverage and having among the cheapest data rates in the world.
He explains: “What we need are world-class regulations. The ICT industry worldwide is moving very fast with AI; and if our regulations don’t keep pace, it will be like trying to regulate a fast-moving industry with old-world regulations, which will hamper growth.”
In his view, although Sri Lanka missed the bus with the IT boom, it’s possible to hop on it “if we can get our act together. The problem is that we’re still struggling to do so.”
“Another important area with potential is digitalising education. Students should be granted attractive data packages that are affordable, and access to online learning, assessments, tutorials and teaching,” Mihular adds.
He continues: “Yet another area that needs urgent digitalisation is the unique digital ID; it’s still paper-based in Sri Lanka. Unfortunately, we’re still struggling to award the task of digitalising IDs.”
In addition, Mihular emphasises the need to link these IDs to tax file numbers to realise the real value of this endeavour.
ROADBLOCKS Furthermore, the telecom industry (like many others) has been impacted by the tax hikes that came into effect on 1 January.
“Today, the telecom industry is liable for taxes amounting to 42 percent. I believe that the government should revise the telecom levy and remove the special commodity levy of 2.5 percent to facilitate telcos, and support the push for digitalisation at a time when we’re trying to encourage greater use of digital,” he recommends, asserting that “higher taxes will push up telecom service fees.”
Another challenge facing the industry is operating under old regulations for fixed and wireless licences, which don’t permit spectrum sharing.
The world over, almost without exception, unified licences are offered to enable companies to share fixed and wireless (mobile) spectrum. Mihular explains that the benefit is “savings of 35-40 percent in capex.”
“When you have separate licences without the ability to share spectrum, you must build separate infrastructure for fixed and mobile. This capital cost wastes foreign exchange because most of the equipment is imported,” he explains.
Commenting on the spectrum extended by the Telecommunications Regulatory Commission of Sri Lanka (TRCSL) to players, he says: “We must evaluate how effectively it’s used. In India, more customers are served with far less spectrum. So rationalising spectrum might support a better rollout and utilisation of services.”
MIGRATION TRENDS Noting the trend of migration, he observes: “Unfortunately, the tax rates are largely affecting the income bracket of young and upcoming IT talent.”
“Migration was a major challenge in 2022 at the height of the economic crisis but the situation has stabilised and the grass is not as green on the other side,” he remarks, adding: “Better sense is prevailing and people are rethinking migration. Once the country is more stable and there’s some rationalisation of taxes, the threat of migration might be more manageable.”
Mihular asserts: “It’s important that young people think carefully. We have to face a tough period; but if we want this country to be better for our children and grandchildren, we must make sacrifices now.”
He is of the opinion that “while it’s easy to blame politicians and officials for the hike in utility rates, we’re paying the price for the low fuel and gas prices that we enjoyed for decades. All of us have to share the blame. And the nation now has debts to pay, which must be honoured.”
Mihular says: “We now have more cost reflective pricing for power – as is the case around the world. Although we will endure tough times in 2024, we should see some relief from next year – The economy is in recovery mode and even grew incrementally in the last quarter, which is a good sign – but it will be a slow recovery.”
He reiterates that the going will be tough for the next five years.
“We’ll have to be disciplined in what we do and cannot play to the gallery. And we need to get people out of the ‘entitlement mindset.’ Politicians must stop taking people for a ride by saying we can ignore our debts,” he cautions.
ELECTION YEAR Mihular’s main worry revolves around “the upcoming elections – contestants will promise everything under the sun to voters, including withdrawing from the IMF programme, which could make us a pariah [state].”
He adds: “Among the key pillars of economic growth are stability, policy consistency and improved ease of doing business to enable corporates to make longer-term plans.”
“Sri Lanka is making the right moves in privatising education and state-owned enterprises (SOEs). I’ve always been an advocate of the belief that government should not be doing business and instead, act as an enabler and a regulator of business,” he maintains.
As for his outlook for 2024, Mihular states: “The elephant in the room this year is the upcoming elections. We have no idea where we’re headed and our future is in the hands of fickle voters who will decide whether the country comes out of this crisis or goes back into the doghouse!”
“The ideal scenario would be if for the next five to 10 years, all political parties come together and bring the country back from the brink,” he concludes.
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