Be a Professional, Be an Entrepreneur
By Tharindu Dananjaya Weerasinghe
Sri Lanka’s economy contracted by 3.6% in 2020, recording the worst recession in Sri Lanka since independence, in line with the global economic downturn caused by the Corona epidemic. This is the second time that such a negative economic growth rate has been reported in the country. Earlier in 2001, the country recorded an economic growth rate of -1.5%. In the year 2020, not only in Sri Lanka but also in 167 out of 194 countries in the world recorded negative economic growth rates. It is also significant that those economies represent about 78% of the world economy.
Thus, it has to be considered as a red light for the future of the global economy. Sri Lanka is ranked 86th out of 194 countries in the list. Currently, the economic growth in Sri Lanka is estimated at 4.1%; the average growth rate of the last ten years. The Manifesto; Vistas of Prosperity and Splendour states that it is expected to maintain an average economic growth rate of 6.5% over the period 2020-2025. However, to achieve that goal, it will be necessary to maintain an economic growth rate of at least 7% in the coming years.
But in the current context, it is very clear that this is a challenging goal. Even the Central Bank of Sri Lanka has stated that it expects only an economic growth rate of around 5% by 2021. How to achieve that is still a problem. This shows that this is the high time to review our strategies and identify new ones. Also, Sri Lanka is currently suffering from an unbearably heavy debt burden. Sri Lanka is in a situation where it has to take loans to repay the loans. By the last quarter of 2020, Sri Lanka’s total public debt as a percentage of GDP was around 100.08%. It is clear that some of the funds obtained as foreign loans by Sri Lanka in the recent past have been used for some showing-off purposes and not for income earning investment projects.
Currently, the Sri Lankan economy is stuck in a debt trap. International economic analysts also use the current economic situation in Sri Lanka as the closest example to describe the concept of the ‘debt trap’. Inviting foreign investors to alleviate this situation might be a temporary solution. Getting out of the debt trap requires a sustainable strategic plan with a vision of 30 to 40 years.
To this end, the development of export-oriented local entrepreneurship is still a viable strategic option. Inevitably it must have been a practice that goes beyond the usual entrepreneurial focus so far. In the year 2020, Sri Lanka was ranked 99th in the Ease of Doing Business Index. In 2018, Sri Lanka was ranked 100th in the list. So it’s not a big achievement in 2020. Also, the unemployment rate rose to 8.8% in 2020 from 8.4% in 2019. The World Bank says that about 70% of Sri Lanka’s workforce is made up of informal workers, and that their employment opportunities might be lost in the face of the Post-Corona consequences which could further increase unemployment in the economy.
It shows that what is needed to overcome the post - Corona economic challenges is not traditional job seekers but job creators with new thinking. Parallel entrepreneurship development and promotion in the economy is a very successful strategic option to solve many of the problems mentioned above and achieve the desired economic goals. It can increase both national production and employment. However, in the 2019 Global Entrepreneurship Index, Sri Lanka has obtained a score of 19.10. This is a decrease of 12.72% compared to 21.88 in 2018. Further, the number of entrepreneurs in the local economy is less than 1.5% of the total population of the country.
It is a very low percentage compared to some other countries in the Asian region such as Thailand and Vietnam. What is parallel entrepreneurship? It is not about running several businesses at once. Nor is it an investment in a business portfolio / group. Nor is it the launching of several projects at once. This does not mean generating secondary or tertiary income sources by engaging in full-time employment and other two or three part-time jobs. Freelancer employment is also not parallel entrepreneurship. Parallel entrepreneurship is created by productively associating entrepreneurship and the labour employed in the economy at the same time.
Parallel entrepreneurship emerges where professional are armed with the business mentality, to operate enterprises, and are outside the dependency mentality. That is, working as an employee in connection with an organisation and starting their own businesses and creating employment opportunities for others simultaneously. This strategy can be seen in most of the developed countries in the world. The strategy is implemented by empowering such professionals who can start their own businesses and contribute to the national income and employment.
Analysis of employment data in the United States shows that about 47% of the professionals between the ages of 18 and 35 are parallel entrepreneurs. The researchers also point out that the percentage of parallel entrepreneurs in France has risen significantly due to the ‘legal right to dissociation’ enacted in France in January 2017, prohibiting workers from taking their jobs home. A good local example is the Chartered Accountants of Sri Lanka who are often employed in an organisation and also provide services in the economy by creating many more job opportunities through the audit firms they have started.
They export accounting and auditing services through these businesses and also contribute to raise foreign exchange for the national economy. Looking at the countries where successful implementation of the parallel entrepreneurship promotion strategy it should be noted that there are several preconditions that must be met. First, professionals with the potential to become parallel entrepreneurs need to move from the dependency mentality to entrepreneurial mentality. In the face of rising cost of living, if somebody starts a business as a source of secondary income in addition to the salary / primary income, it is dependency mentality, which is just to recover additional living expenses.
Researchers also point out that one of the reasons why many small and medium scale enterprises in Sri Lanka fail in a very short period of time is this dependency mentality of business owners. Businesses that start with the aim of providing a value-added product to market in the face of business risk will actually create employment opportunities for the economy. It can only be done by professionals with the right entrepreneurial strategy / business sense. They should be able to accurately identify business opportunities and predict the aggregate economic behaviours.
Education has a huge impact on the development of entrepreneurial intentions of people. There are only a handful of courses dedicated to entrepreneurship education in the Sri Lankan higher education system. Also, most people who complete education or higher education expect a job. Therefore, as is the case in Japan, China, Finland, Norway, Sweden, Germany and Denmark, there should be a significant space for entrepreneurship education from Sri Lankan schools. There are many foreign courses as well as foreign universities in the world that allow for an entrepreneurship project, regardless of the subject / field of education.
Second, savings must be invested for the success of parallel entrepreneurship. In Sri Lanka, it is often savings, not investment, that are promoted. Transforming the savings of professionals with the capacity to start a business into investments requires the necessary institutional background, legal framework and a stable financial market. Consider the Chinese methodology, for example. Their household savings, business savings as well as government savings are high. Business savings are often reinvested in the business itself.
Government savings are often used to acquire projects in foreign countries. There is a mechanism in place to absorb household savings and invest them efficiently in the economy. So many professionals in China are also entrepreneurs. Economic analysts point out that it has a strong positive impact on China’s economic growth. Indeed, it is easy for professionals to develop the aforementioned business sense when they move away from the savings mentality to the investment mentality.
Moreover, clear regulation is essential for the success of parallel entrepreneurship. It is imperative that the outdated, inflexible parts of the country’s business law be updated in a timely manner and that there be a system of independent, nonpoliticised institutions responsible for enforcing the relevant legal framework. This practice can also be regulated through the existing Industrial Development Board of Sri Lanka, the Board of Investments and other relevant authorities in the country. There must also be a strong code of professional ethics and business ethics to achieve the desired outcomes from this strategy.
Then the role of government can be concentrated on activating the necessary mechanisms to regulate the strategy. In the face of the Corona epidemic, the centralised mechanism of globalization is becoming questionable today. An appropriate trade-off among the globalisation and localisation has become a necessary mechanism for the world of the future. In order to conquer the global market with a local identity, professionals with entrepreneurial potential must be developed.
Parallel entrepreneurship should be promoted by identifying and facilitating such professionals. If so, the economic development goals and employment targets can be achieved while minimising the aforementioned debt pressure. If the work starts today, results will be available in about tentwenty years.
Tharindu Dananjaya Weerasinghe (Senior Lecturer, Department of Human Resource Management, University of Kelaniya)