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Implications of Budget 2014 on IT/BPO Industry

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Sri Lanka’s IT/BPO industry has set its vision to achieve USD 5 billion in exports by 2022 while generating 200,000 jobs and creating 1000 Start-ups in this process. Various stakeholders have put various plans into place to achieve these goals. Considering the plans of the government, vision for IT/BPO and Knowledge Service Industry (KPO) is set to promote Information Technology (IT) as a major industry in Sri Lanka.

This will include reforms in the education system to emphasize science and technology subjects and a fast-track skills development programme, together with fiscal concessions for IT and IT related products. Budget 2014 has brought in various benefits for the development of IT/BPO and KPO industry and SLASSCOM has published a report together with PwC explaining these benefits. Some of the benefits granted for IT/BPO/KPO industry, as explained these report are given below.

Branding Sri Lanka as the “Fast Emerging South Asian Knowledge Services Hub”

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With many efforts being taken to position Sri Lanka as a knowledge service hub, the government has brought various initiatives through this year’s budget. One of the key elements in this is the proposed ICT Zone in Hambantota which is expected to take the IT/BPO industry out of the Colombo city. The proposed ICT Zone is expected to attract many foreign investments as well as the local investment while generating many employment opportunities. In addition to setting up the ICT Zone, the government has also unveiled plans to expand Nenasala center programs with an investment of LKR 1,000 million and this plan is also expected to improve the IT usages in the rural Sri Lanka.

Retaining Human Capital and Sustaining the Growth

The human resource availability is seen as a crucial element for the sustainability of the IT/BPO industry, since the country is heading towards a brain drain resulted through high level of migrations. There are various initiatives taken by the industry to bring back the Sri Lankan professionals who are working abroad in order to create the brain gain in the IT/BPO industry. To support this aspect of the industry, the government has a tax incentive on income taxes of professionals where the maximum income tax rate applicable to employment income of professionals such as Software Engineers, Accountants of a recognized professional body, Researchers, etc. will be reduced to 16%.

Incentives to Nurture New Tech Start Up

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The entrepreneurship in the IT industry is booming where there are many entrepreneurs starting up their tech startup ventures based in Sri Lanka. One of the major challenges faced here is that the lack of a conducive eco-system for startups, which combines various stakeholders related to tech startups. Nevertheless, the industry has set the target of reaching 1000 startups by 2022 and as a measure to support this growth, the government has proposed a 5 year half tax holiday for new partnerships or firms engaging in international services in the field of Accountancy, Commerce, Finance, Law, IT, Engineering and Architecture.

Employability Training

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Because Sri Lankan IT/BPO industry positions itself to be quality focused as opposed to cost leadership, the government has taken various initiatives to develop the quality of the human resources. The funds allocated to fast track skill development programs are expected to expedite with the establishment of a technical college affiliated to Moratuwa University in Homagama and an Information Technology center in Kelaniya University. Furthermore, the government has also decided to increase Science and Technology subjects in the main stream tertiary education to meet demands of the ICT industry.

SLASSCOM PwC Budget Proposal Summary – 2014 IT/BPO and Knowledge Services industry can be downloaded here

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Hajara is a former Program Officer at SLASSCOM (Sri Lanka Association of Software and Service Companies) and an MBA candidate of Staffordshire University - UK. She holds a BA (Hons) in Business Administration (First Class) from Staffordshire University - UK and currently pursuing studies on CIMA Strategic Level. Hajara is dreaming of a Sri Lanka with IT/BPM industry as the number one industry and she can be followed on Twitter via @hajara_. Views are personal.

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