COLOMBO, Sri Lanka – Southern China has its assembly plants. India has customer support centres, research laboratories and low-cost lawyers.
And Sri Lanka’s contribution to global outsourcing? Accountants – thousands of them, standing ready to crunch the world’s numbers.
As this tiny island nation staggers back from a bloody, decades-long civil war, one of its brightest business prospects was born from a surprising side effect of that conflict. Many Sri Lankans, for various reasons, studied accounting in such numbers during the war that this nation of about 20 million people now has an estimated 10,000 certified accountants.
An additional 30,000 students are currently enrolled in accounting programs, according to the Institute of Chartered Accountants of Sri Lanka. While that ratio is lower than in developed economies like the United States, it is much greater than in Sri Lanka’s neighbouring outsourcing giant, India.
Offices in Sri Lanka are doing financial work for some of the world’s biggest companies, including the international bank HSBC and the insurer Aviva. And it is not simply payroll and bookkeeping. The outsourced work includes derivatives pricing and risk management for money managers and hedge funds, stock research for investment banks and underwriting for insurance companies. Many developing countries have “one particular competency that they do better than anyone else,” said Duminda Ariyasinghe, an executive director at Sri Lanka’s Board of Investment. “Financial accounting is that door opener for us.”
With widespread use of English and a literacy rate of over 90 percent, along with rock-bottom wages, Sri Lanka hopes to transform its postwar economy from a sleepy tea and textiles island into a tiny, high-end outsourcing powerhouse. Already there are thousands of other Sri Lankans working in more common outsourcing fields, like information technology and software development. About 50,000 people in Sri Lanka are now employed in one form of outsourcing or another, according to SLASSCOM, an outsourcing trade group, and that figure is growing by 20 percent a year.
But accounting is Sri Lanka’s speciality.
During the war, Sri Lankan certified accountants would often use their skills as a springboard out of the country. That is why there are now Sri Lankans sprinkled among executive suites around the world, including the vice president of global business services at American Express and a financial controller at Standard Chartered Bank in the United Arab Emirates.
Now, though, the government and business community hope the country’s young financial whizzes will have reason to stay home instead. Sri Lanka’s government, headed by President Mahinda Rajapaksa, expects revenue from so-called knowledge-based outsourcing – which includes accounting – to triple to $1 billion in revenue by 2015.
The stark wage differences between Sri Lanka and America, or even Sri Lanka and India, are a big part of the country’s drawing card. In the United States, the median annual wage for accountants and auditors in May 2008 was $59,430, according to the Bureau of Labor Statistics. Sri Lankan workers in the accounting profession receive an average annual pay package of $5,900, according to a 2010 survey by the Chartered Institute of Management Accountants.
Wages in Sri Lanka for financial outsourcing are about one-third less than in neighbouring India, and hiring educated employees is easier in Sri Lanka, according to executives who do business in both countries.
If the rest of the world discovers Sri Lanka’s pool of low-cost accountants, as the government hopes, the country could lose some of its competitive edge because wages will go up and there may not be enough workers to meet the demand.
But the government is offering various other incentives – including tax breaks, subsidized telecommunications and streamlined procedures for setting up new businesses – meant to encourage international companies to come here instead of India, Eastern Europe or the Philippines.
As foreign companies ramp up their presence here, local developers are building to accommodate them. In a neighbourhood thick with tea warehouses and crossed by rail tracks, Jeevan Gnanam is turning the textile mills his grandfather built into a high-tech outsourcing centre.
Orion City, as the development is called, is kilometres from Colombo’s slick World Trade Center skyscrapers, near a canal fringed with rundown buildings and palm trees. But it has already drawn big-name clients, including a division of the publishing giant Pearson and MphasiS, a technology company partly owned by Hewlett-Packard, which has said it will hire 2,000 people here in the next three years.
“Sri Lanka offers us a rich talent base that will allow us to serve our global clients,” said Dinesh Venugopal, chief corporate development officer for MphasiS.
Ultimately, Orion City will have 279,000 square meters of office and retail space, including a 19-storey building, said Gnanam, 28, who is the chief executive of the consortium that manages the development. It was difficult to convince his father and uncle that technology, not textiles, were Sri Lanka’s future, he said, but they have come around recently. Building the industry and attracting foreign investment is crucial, he believes.
“Economic development has to take place,” he said, “for people to put the war in the past.”