Presentation to Public Utilities Commission of Sri Lanka

Transcription

1 Presentation to Public Utilities Commission of Sri Lanka 4 th April 2013 Imran Furkan Executive Director - SLASSCOM

2 THE GLOBAL OPPORTUNITY Global Off-shoring Market Size c.usd 200Bn Sri Lanka s Total Exports..c.USD 10Bn Sri Lanka s IT/BPO Exports.USD 0.5Bn 2

3 Why IT/ BPO for Sri Lanka? Top 5 Export Revenue Earner Near 100% High value Addition White Collar Jobs in comfortable surroundings Globally Competitive No Quotas Clean and Green 3

4 Why IT/ BPO for Sri Lanka? Industrial Harmony Less reliance on Govt funded infrastructure or Institutional support Low Investment / High ROI 4

5 VISION of SLASSCOM IT/BPO Industry to become 1 Billion USD in Export Revenue and create 80,000 Jobs 946 IT/BPO Export Revenue in mill USD Actual Estimated Source: ICT Export Value Survey (Aug PWC publication) 5

6 Workforce employment generation 40,000 35,000 30,000 IT Workforce ITES/ BPO Workforce Total Workforce 29,211 35,615 25,000 20,000 15,000 18,268 14,268 20,629 15,179 24,505 15,871 17,827 11,384 21,914 13,701 10,000 8,634 5,000 4,000 5, Est Source: ICT workforce Survey

7 Sri Lanka is clearly emerging as a Global IT/ BPO Sourcing Destination Ranked among the Top 25 in the AT Kearney Global Services Location Index (GSLI) in 2011 Ranked number 5 in financial attractiveness, ahead of India, China and all of CEE Gartner's 30 Leading Locations for Offshore Services ( ). Included among the Top 10 in Asia pacific. 12th in the top ranking destinations in IBM Global Location Trends Report Ranked among the top 10 emerging global destinations by Global Services Magazine. Sri Lanka is another Asian country that has succeeded in positioning itself as an alternative to India. - IBM Global Location Trends Report 2010 Sri Lankan s geographical location, infrastructural facilities, direct access to the Indian market, high quality standards of the workforce, open economy and various free trade agreements make it an attractive outsourcing destination. Global Services Destinations Compendium

8 Unknown to most global observers, a significant knowledge services industry has been developing in Sri Lanka Key Insights Over 300 IT, BPO and KPO companies employ more than 35,000 Sri Lankans and generate more than $400 million in exports in 2011 Companies in Sri Lanka provide sophisticated accounting services and financial analytics to their customers, as well as offshore legal services, medical diagnostics, and architectural drawings Sri Lankan companies export services to a wide variety of clients across regions Select MNCs operating in Sri Lanka Select clients of Sri Lankan firms 8

9 Financial Attractiveness Office space is available and relatively affordable, and new developments are underway Real Estate Companies in Colombo do not report office space to be a problem Several BPO companies are housed in class A facilities downtown as opposed to in suburban campuses In addition, class B real estate in Colombo is easier to come by and of better quality than in many emerging market capitals Private actors have created dedicated IT/BPO industry parks - not yet at capacity Office rent, class A office space in major business hub, US$/m 2 Mauritius Sri Lanka Bangladesh Philippines Malaysia UK Egypt Vietnam Pakistan China India UAE 9 Source: CB Richard Ellis 2011, A.T. Kearney analysis

10 People Skills & Availability Literacy and secondary enrollment rates are on a par with developed countries Enrollment rates With free primary and secondary education and an extensive university system, Sri Lanka has had a very strong education system for decades Sri Lanka s literacy rate is the highest in South Asia, positioning it to train a large number of high-quality personnel Secondary Enrollment Rate, % Adult Literacy Rate, % UAE UK 98% 96% UK Philippines 99% 95% Sri Lanka 90% China 93% Mauritius 89% Vietnam 93% Philippines 82% Malaysia 92% Egypt 81% Sri Lanka 91% China 76% UAE 90% Malaysia 70% Mauritius 88% Vietnam 70% India 59% Bangladesh 44% Egypt 66% India 62% Bangladesh 56% Pakistan 33% Pakistan 55% 10 Note: Gross enrolment ratios measure total enrolment as a percentage of the total population corresponding to the relevant age group

11 People Skills & Availability Sri Lanka has cultivated distinctive capabilities in particular technical and professional services Professionals To compete with large countries, Sri Lanka needs to focus on growing competitive talent in specific areas Already Sri Lanka boasts more people with UK-recognized accounting qualifications than any country outside the UK Given a similar emphasis on other professional qualifications (in medicine, law, engineering, architecture, etc.), the country has the potential to develop distinctive remote services offerings in these areas also The IT industry has also developed distinctive capabilities in a number of niches such as open source, cloud apps and mobile technologies Sri Lanka South Africa Malaysia India China Pakistan Zambia Ireland Poland Top Ten CIMA Student Populations UK 45,280 Sri Lanka s contribution to global outsourcing? Accountants thousands of them, standing ready to crunch the world s numbers 11 Source: Chartered Institute of Management Accountants 2011, A.T. Kearney analysis

12 Business Environment Sri Lanka also offers superior infrastructure to most other low-cost countries Infrastructure Overall infrastructure quality, including transportation and utilities, surpasses that of South Asian and almost all Southeast Asian competitors This is a welcome difference to other locations, often plagued by inefficient infrastructure Colombo s Bandaranaike International Airport has more flights to India than any other country In terms of ICT infrastructure, Sri Lanka also scores better than most regional competitors UAE Malaysia UK Sri Lanka Mauritius China Egypt India Pakistan Philippines Vietnam Bangladesh Overall Infrastructure Quality Score 12 Source: World Economic Forum Global Competitiveness Report , A.T. Kearney analysis

13 Business Environment Contrary to perception, Sri Lanka is one of the lowest-risk emerging markets in terms of personal safety Safety & Security Sri Lanka scores very well from a terrorism and crime perspective MNCs in the country report not to have had to stop operations in Sri Lanka, whereas they have suffered disruptions in most other global locations due to industrial disputes, natural disasters, and terrorist attacks Colombo scores exceptionally well in terms of personal safety, as demonstrated by its low homicide rate Business Cost of Terrorism, Score UAE Mauritius Malaysia Sri Lanka China Bangladesh UK Vietnam India Philippines Egypt Pakistan Homicides per 100,000 people, Most Populous City Egypt Sri Lanka India UAE UK Malaysia Bangladesh Philippines Mauritius China Vietnam Pakistan N/A N/A N/A 13 Source: World Economic Forum Global Competitiveness Report , UN Office in Drugs and Crime 2011, A.T. Kearney analysis

14 SOME CHALLENGES.. CHALLENGESCH CH 14

15 Impact of electricity Tariff category IT/BPO/KPO Industry has three main recurring costs 1.Rent 2.Labour 3.Electricity Rent is in comparison to our competitors reasonable Labour is high but still cost competitive to India However Electricity cost is extremely cost uncompetitive relative to competitors IT/BPO/KPO Industry is not categorized as an Industry for electricity tariff purposes in Sri Lanka!!!!!!!!!!!! 15

16 Infrastructure While labor and rent costs are very attractive, rates for electricity and international bandwidth are relatively high Standard electricity rates are the highest in the group, with Sri Lanka almost 20% higher than India. The industry is trying to reclassify service centers as industrial units, which will help to reduce electricity costs As a whole, telecom costs in Sri Lanka are very competitive multiple companies compete, and standard rates for local and international calls are much lower than in developed markets However, rates for international leased lines tend to be high A new national broadband policy is expected to introduce new directives to bring international bandwidth costs in line with neighboring countries Standard Commercial Electricity Rate, US$ per kwh UAE Egypt Bangladesh Philippines Malaysia Vietnam China Pakistan Mauritius UK India Sri Lanka Internet Cost, US$, 2 Mbps International Lease Circuits 1 India 600 Pakistan 624 Nepal 732 Bangladesh 936 Sri Lanka 2, Note: Internet cost data not available for full benchmark set.

17 Impact of proposed electricity tariffs Peak Hours as defined by CEB is the Prime Working Hours in our Markets!!!!!!! Electricity is required to run computers but also for A/Cs required to keep computers and servers in prime working conditions-conservation opportunities are limited The Industry is based mainly in rented properties/office complexes hence self generation by the industry is not feasible We are at the mercy of a monopoly-ceb 17

18 Countries that classify IT/BPO/KPO an Industry have seen steady growth India classifies IT/BPO/KPO an Industry for electricity tariff purposes Phillipines also classifies IT/BPO/KPO an Industry for electricity tariff purposes 18

19 Actions that can reduce CEB losses Reduce Losses in Transmission Implement a smart grid system Conclude negotiations on new power plants be it Coal/LNG/Mini Hydro Consistent policy on Renewable Energy pricing A detailed study should be conducted on the load profiles of Domestic consumers, whom contribute heavily to the system peak demand, the possibility to adopt mandatory/ optional TOU tariff for larger domestic consumers should be examined from a national perspective 19

20 Thank you