TECH INDUSTRY
Compiled by Dona Senara
TACKLING THE FOREX CRUNCH
Jitendra Daulagala says policy makers may have realised the value of tech
Q: Which segments of the IT industry in Sri Lanka show the most promise, in your opinion?
A: Robotics and AI are two of the most sought after technology segments that are gaining momentum today.
Q: Do you believe that enough is being done to harness the talent there is in local computer engineering and information communications technology (ICT)?
A: In my opinion, policy makers have realised the importance of harnessing local IT talent. But inconsistencies and frequent reversals of policy tend to confuse people, and discourage local tech businesses from progressing at the required pace.
From the point of view of encouraging as well as nurturing the local tech industry, there is an often seen disincentive, which is that most blue-chip companies and large state sector operators tend to place emphasis on foreign products over what’s being developed locally.
One of the factors aggravating this situation could be the lobbying power of international operators and tech companies overseas.
Q: What’s your outlook for the tech industry over the next year or so in the light of the nation’s ongoing economic woes?
A: Given the unprecedented forex crisis that we are experiencing, the desired outlook would be to see the IT industry coming to the rescue by helping to address the depletion of foreign exchange reserves.
For this desired outcome to be realised however, there has to be a consistent policy framework that encourages the growth and sustenance of local businesses.
Those who are attracting valuable foreign exchange into the country should be encouraged by the implementation of favourable tax policies – such as when these revenues were exempt from taxation in the past. This should be in force for the next five years at least.
Q: Could you outline the most pressing challenges the IT industry faces today?
A: A shortage of skills is the primary challenge. Given the severe economic hardships faced by the general populace, a record number of Sri Lankans are opting for migration to greener pastures – and the IT industry has been one of the more lucrative routes to secure jobs overseas.
Another challenge is the mindset of most organisations; they believe that local software and services should be cheaper to purchase. This leaves little or no margin for most startups or local IT businesses to grow and prosper.
As regards the software marketed by international vendors in contrast, many organisations and institutions are willing to part with an arm and a leg so to speak! This not only results in higher costs and an erosion of our foreign exchange reserves but enables profit repatriation too.
In our experience, certain software skills are neither taught nor encouraged at most local universities and higher education institutions. They have a narrow scope of programming and database technologies on offer, and they are primarily open source.
This prevents students from being exposed to the proprietary technologies of Tier 1 network and Tier 2 global software providers.
Q: In your assessment, what are the initiatives that need to be taken to overcome these challenges?
A: Addressing the skills shortage can’t be done overnight. Nevertheless, we can start taking urgent steps – the first of these being to establish economic and social stability. While this is easier said than done, it’s a prerequisite for everything that follows.
As a nation, we should strive to create a ‘buy local’ mindset wherever it is practically possible. I read a quote in a local daily newspaper that said: “Sri Lanka has the expertise to export software – so why import it?”
Local universities and educational institutes should seek IT industry input on the types of skills that have the most demand – and therefore, employment potential. This would enable the creation of a diverse pool of skills for the local technology industry.
The sustenance of economic and fiscal policies such as tax exemptions on profits arising from foreign exchange earned is a very important factor to incentivise the local IT industry to grow while also ensuring that forex flows into the country.
Q: What are the most significant aspects that organisations such as yours should be mindful of today?
A: A primary concern would be to retain experienced staff as they’re the ones who stand the best chance of securing overseas employment.
In addition, due to the ‘new normal’ whereby overseas operators are offering IT professionals dollar salaries for remote work, there is substantial pressure on local remuneration policies. The situation is exacerbated by the fact that our cost of living indices have seen phenomenal increases in a very short span of time.
Though these factors have resulted in sharp increases in operational costs, it’s very difficult to justify corresponding rate increases to customers. Unless we can run businesses with deep pockets or sufficient foreign revenue to compensate therefore, it’s going to be very tough to survive.
The next 24 months will be telling – particularly since there is turmoil in the global arena with the war in Ukraine being a barometer of stability and sustenance.
