Digitalization

Budget Allocations and Key Policies

IT Education and Infrastructure

• Nenasala Centers: Rs.1,000 million allocated to set up fully equipped Nenasala centers in each Grama Niladhari division in 2015.

• Prajashakthi Technology Centers: 26 centers established in plantation areas to raise IT literacy.

• University Townships: Expansion of facilities and new subjects for advanced studies in universities.

• Vocational Education: Construction of new institutes and expansion of existing ones to provide technical education.

Digital Economy Goals

• IT Literacy: Raised to 45% in 2014, with a goal to be among the 'Top 30' IT destinations globally by 2022.

• Foreign Earnings: Target to raise foreign earnings from IT to US$ 5 billion by 2022.

Impact on Startups, IT Industry, and Infrastructure

• Positive Impact: The budget allocations and policies have provided a conducive environment for startups and the IT industry through tax incentives, infrastructure development, and educational initiatives.

• Infrastructure Development: Investments in university townships, vocational education, and the ICT Zone at Hambantota have bolstered the infrastructure necessary for a thriving digital economy.

• Triple Deduction for R&D: Private sector partnerships in Nano Technology and other research areas.

• Tax Incentives: Concessionary tax rates and exemptions for new investments in IT/BPO sectors.

ICT Zone at Hambantota: Facilities for IT/BPO services to transform Sri Lanka into an ICT Hub in South Asia. 

Budget Allocations and Key Policies

Allocation

•  Rs. 10,000 million.

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Key Policies

• Free limited Wi-Fi in selected public places and state universities.

• Comprehensive Digital Development Strategy by 2018.

• National Digital Identity (NDI) for secure financial and non-financial transactions.

• National Payment Platform (NPP) for fund transfers via mobile phones.

• Special purpose company under ICTA for efficient telecommunication resource sharing.

• Single window concept for citizen-centric services.

• 200 smart digital classrooms by 2016 and 1,000 by 2017.

• Open Government Partnership (OGP) and national big data platform.

Investment Promotion

• Restructuring BOI, EDB, and Sri Lanka Tourism Development Authority.

• Establishment of "Agency for Development".

• Removal of tax on leasing land to foreigners and restrictions on ownership for identified investments.

• Repeal of Exchange Controls Act and introduction of Foreign Exchange Management Bill (FEMB).

• Exemption of income from dividends on investments made by non-citizens and foreign companies in listed shares.

• 50% tax reduction for new companies in lagging regions with a minimum investment of USD 10 million or 500 new employment opportunities.

Impact on Startups, IT Industry, and Infrastructure

Startups

• Introduction of a venture capital approach for providing equity financing to SMEs.

• Establishment of mini-industrial parks as incubators.

• Implementation of MSMEs Credit Guarantee Scheme.

• Allocation of Rs. 500 million for MSMEs Credit Guarantee Fund.

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IT Industry

• Allocation of Rs.10,000 million for digitalization.

• Establishment of smart digital classrooms.

• National Digital Identity (NDI) and National Payment Platform (NPP) to facilitate digital transactions.

• Encouragement of private sector involvement in digital initiatives.

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Infrastructure:

• Development of digital infrastructure to connect government buildings and services.

• Establishment of a special purpose company for telecommunication resource sharing.

• Implementation of a single window concept for citizen-centric services.

Budget Allocations and Key Policies

Allocation

• Rs.15,000 million for the implementation of digital economy initiatives.

Key Policies

• National Digital Identity (NDI): Implementation by Information and Communication Technology Agency (ICTA) to facilitate secure transactions.

• National Payment Platform (NPP): Facilitates peer-to-peer payments, fund transfers, and online payments.

• National Data Center: Establishment planned for 2017.

• Toll Charging System: To control traffic by the third quarter of 2017.

• Cryptography Using Blockchain Technology: Ensuring data integrity and security.

• ​Video Conferencing Facilities: For government ministries to improve efficiency and interactions.

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Impact on Startups, IT Industry, and Infrastructure

Startups

• Establishment of incubators in 5 districts in collaboration with Nenasala, with plans to expand to all 25 districts by 2020.

• Allocation of Rs. 100 million for this purpose. 

• Support for startups in niche areas like electronics through the Center for Advanced Electronic Design at the University of Moratuwa. 

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IT Industry

• Encouragement of investments in ICT and infrastructure development. 

• Allocation of Rs.250 million to the Sri Lanka Institute of Nanotechnology (SLINTEC). 

• ​Establishment of the Centre of Excellence in Robotics Applications (CERA) with an allocation of Rs.50 million. 

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Infrastructure

• Development of a National Data Center. 

• ​Implementation of a toll charging system to control traffic.

• Provision of video conferencing facilities for government ministries.

Budget Allocations and Key Policies

• IT Initiative: The government will finance the "IT Initiative" by providing Rs3 billion over a period of 3 years.

• ​ This initiative will support local startups, attract foreign startups, and assist small and medium IT companies with financial and non-financial support.

• Erambuma Credit Scheme: University graduates with viable business ideas are eligible for the "Erambuma" credit facility, with a maximum loan size of Rs1.5 million per idea per person, fully guaranteed by the government.

• Innovators to Industry (I2I) Initiative: This initiative aims to connect university graduates and NVQ 4 certified graduates with the industry.

• ​ The government will bear 50% of the monthly salary up to Rs.

• ​ 50,000 per month for 24 months and the cost of patenting in Sri Lanka.

Impact on Startups, IT Industry, and Infrastructure

• The "IT Initiative" aims to provide both financial and non-financial support to local startups, attract foreign startups, and support small and medium IT companies to double their revenue in 3 years.

Budget Allocations and Key Policies

Digitalize Budget Allocations

• Proposed Allocations: Rs. 300 Mn for the IT Initiative to train 1,000 unemployed Arts Graduates in IT-BPM, and Rs. 100 Mn for e-Governmental Digital Document Management.

Key Policies

• Expansion of the IT Initiative, removal of minimum employment requirements for IT companies, and introduction of Limited Liability Partnership structures to support startups.

Impact on Startups, IT Industry, and Infrastructure

Startups

• The introduction of Limited Liability Partnership structures and access to capital through the "Enterprise Sri Lanka" Loan Schemes is expected to foster startup growth.

IT Industry 

• The removal of employment requirements and financial support for training can enhance the industry's capacity and competitiveness.

Budget Allocations and Key Policies

• The government has reduced VAT and NBT from 17% to 8% and increased the applicable turnover threshold for VAT to Rs25 million per month.

• Income taxes on agriculture, plantation crops, livestock, and farm activity have been removed.

• The PAYE tax on information technology-related jobs and foreign employment has been removed.

• The government has allocated funds for various sectors, including health services, COVID-19 assistance, interest subsidies for senior citizens, loans for SMEs, and infrastructure development.

Impact on Startups, IT Industry, and Infrastructure

• The removal of PAYE tax on IT-related jobs may positively impact the IT industry.

• The reduction in VAT and NBT and the increase in the VAT threshold may benefit small and medium-scale businesses, including startups.

Infrastructure development projects, such as the 100,000 km roads program and urban development projects, are mentioned but not specifically linked to the IT industry or digital transformation. 

Budget Allocations and Key Policies

Allocation

• The budget allocates Rs. 8,000 million for expanding the technology sector.

Key policies

• Special attention is given to enhancing Digital Governance using Information Technology.

• Establishing e-commerce and e-payment systems, high-speed data exchange, and new laws for data security and cyber security.

Impact on Startups, IT Industry, and Infrastructure

• Startups and IT industry benefit from the focus on technology-based entrepreneurial economy.

• Infrastructure development includes creating Techno Parks and expanding broadband services.

Budget Allocations and Key Policies

• Digitalization Budget: Allocation of Rs. 3,500 million for public service digitization, with an additional Rs. 500 million proposed.

• Techno-parks: Establishment of techno-parks to boost a techno-entrepreneurship driven economy, with two already set up and three more planned by 2023.

Impact on Startups, IT Industry, and Infrastructure

• Startups: Encouragement for startups through improved infrastructure and support for digitalization.

• IT Industry: Proposed amendments to laws to facilitate foreign exchange inflow for IT freelancers, enhancing the sector's growth.

Budget Allocations and Key Policies

• Mandatory Electronic Payments: Rs. 200 million allocated for implementing online government payments by 01-03-2024.

• Data Protection Authority: Establishment planned in 2023 to regulate personal data processing, ensuring privacy.

• Tax Administration Digitalization: Expansion of electronic tax filing and linking of revenue collection agencies for improved compliance.

Impact on Startups, IT Industry, and Infrastructure

• Positive Impact: Enhanced digital economy framework supports startups and IT industry growth through improved governance and data protection.

• Infrastructure Development: Allocation of funds for developing digital infrastructure is crucial for supporting these sectors

Budget Allocations and Key Policies

Allocation

• Digital Economy Initiatives: Rs. 3 billion allocated for the establishment of a digital authority, technological innovation council, and National Center for Artificial Intelligence.

• National Research Policy: Rs. 8 billion proposed for research and development to support technological advancement.

Key Policies

• Restructuring IT Organizational Structure: Aimed at facilitating the digital economy by 2030.

• Concessionary Loan Scheme for SMEs: Rs. 30 billion to support small and medium enterprises, enhancing their digital capabilities.

Impact on Startups, IT Industry, and Infrastructure

• Positive Growth: Increased focus on digitalization has created opportunities for startups in tech and innovation sectors.

Support for IT Infrastructure: Investments in digital identity and AI are expected to bolster the IT industry. 

Budget Allocations and Key Policies

Allocation

• Rs. 3,000 million for Digital Economy Development.

Key Policies

• Introduction of Sri Lanka Unique Digital Identification (SL-UDI), establishment of a Digital Economy Authority, and enhancement of digital payment infrastructure (e.g., GovPay system).

Impact on Startups, IT Industry, and Infrastructure

Startups 

• A conducive investment environment is aimed to attract private capital, fostering innovation in sectors like FinTech.

IT Industry

• Target to grow the digital economy to USD 15 billion, with ICT exports reaching USD 5 billion annually.

Infrastructure

• Investment in advanced scanning systems and digital public infrastructure is crucial for improving overall efficiency.