Digital Economies: Sri Lanka
1400 km southeast of India lies a small island renowned for producing the highest quality tea. Sri-Lanka, formerly known as Ceylon, is an upper-middle-income nation with a national GDP of $88.9billion. The country's main economic sectors include tourism, apparel, textile, tea production, and other agricultural products such as cinnamon and coconut.
The people of Sri-Lanka are notoriously resilient as a result of the many hardships the country has overcome over the past two decades. The economy was devastated by the tsunami in 2004, the 30-year civil war (ended 2009), the Easter bombing Attacks of 2019, and like the rest of the world, is currently facing the Covid-19 crisis. Despite the many disruptions, the country has bullishly pushed on. It has made tangible progress, with plenty of infrastructure investments, such as airports, highways, and ports, often backed by the Chinese government. Foreign inflows have also supported economic growth, especially from major hotel chains like Hyatt, Shangri-La, and Marriot, to name a few.
Sri-Lanka boasts an abundance of long-standing cultural traditions. As a result, people have somewhat resisted the global digital shift. For instance, many individuals still prefer traditional banking methods, with less than 15% of the population moving online. Further, the penetration of the internet has been weak, especially amongst the rural communities of the island. Back in January 2020, only 30% of the population made use of social media platforms. Despite the island's 31 million mobile connections, the broader population has failed to fully utilize and understand the efficiencies of digital platforms. Once the pandemic struck, the government implemented regulations to control the spread, which included having a one-and-a-half month long island-wide curfew. The resulting economic shut-down has led many to agree that this was the ideal circumstance for Sri-Lanka to accelerate its digital adoption.
Uber Eats and Pick-ME, both ride-hailing companies, played a crucial role in organizing and planning alongside the government to help meet basic household necessities. The technology companies coordinated with major supermarkets, vendors, restaurants, banks, and even small businesses to cater to the people of the country. As the population turned to these apps, the nation's versatile gig-economy enabled a fleet of 40,000 vehicles to meet the staggering 60% increase in demand. Uber Eats collaborated with social media platforms such as Instagram to support the struggling small and independent restaurants. They linked the "order food" button on Instagram profiles and "order food" stickers on stories to directly connect customers to businesses. Consequently, a surge in home-based bakeries and small businesses began setting up accounts to help drive awareness. According to many of the small companies, this feature was a "game-changer for both customers and businesses as it makes it easier to order their favorite dishes directly from the content they share."
Operating through their e-commerce platform, Daraz and Ali Baba initiated a seller stimulus program, providing small and medium-sized businesses (SMEs) financial incentives and the digital infrastructure to sell online. Many of the small-scale rural farmers can now access a broader customer base, particularly useful for those customers in urban communities that deeply value organically grown produce.
Previously the online retail penetration was less than 1%. However, as a result of the crisis, there has been a significant acceleration in businesses reaching customers via online platforms. Initially, the online sector focused on consumer electronics, but categories like groceries, food, fashion, and healthcare are now becoming more popular.
SMEs, whether well-established or new, are fully transitioning their business models to reach customers via online platforms. To do so, they will require essential digital infrastructure and a modern logistic network. Uber solved this problem by combing a digital app with a peer-to-peer network bringing about cost efficiencies to many small-scale businesses. However, this solution was limited to the people and businesses located in urban communities. Companies like Alibaba are investing $28bn over three years to connect remote users, offering the necessary digital and logisitcal services. They are currently expanding their operations globally, under their platforms AliExpress, Lazada, and Daraz, to name a few. Another Chinese e-commerce firm, Pinduoduo Inc, competes with Alibaba, but have reached customers through an entertainment offering and cheaper rates. Pindoudou has experienced rapid growth, hitting a trillion yuan (140 billion USD) in benchmark sales in half the amount of time as Alibaba.
As the future unfolds, it is evident and inevitable that there will be an increase in the dependency on digital platforms in Sri-Lanka, forcing many domestic businesses to set their traditional ways aside and adapt to current trends. Hopefully, such progressions are a sign of the bright future to come.