The Narva River, spanning 77 kilometres northwards into the Baltic Sea, delineates an international border between Estonia and Russia. Along this historically significant and intriguing border, two imposing fortresses face each other across the river: Narva Castle on the Estonian side and Ivangorod Fortress on the Russian side.
Beyond mere territorial boundaries, the Narva River represents a stark contrast between the two worlds. To the West lies a testament to European integration, where monthly gross wages exceed €1,700. In contrast, just across the river in Ivangorod, average wages are equivalent to less than a mere €600.
Similarly, life expectancy differs significantly: 79 years on the Estonian side versus 70 years on the Russian side (which is relatively high for Russia). Remarkably, only three decades ago, when Estonia was just a ‘satellite state’ of the USSR, the living standards of these two cities closely mirrored each other. Since the collapse of the Soviet Union, Estonia has achieved remarkable progress across various sectors. Estonia surpasses many European countries in terms of GDP per capita, reflecting its robust economic policies and dynamic growth.
“Estonia is a country from which Sri Lanka can learn a great deal,” states State Minister Kanaka Herath, who leads Sri Lanka’s tech transformation journey. Estonia has emerged as a global leader in digital innovation, pioneering numerous advancements in e-governance and digital infrastructure.
Since the early 2000s, the country has implemented an extensive e-residency programme, enabling non-Estonians to access its digital services. Estonia’s X-Road platform facilitates secure data exchange between various public and private sector databases, ensuring seamless and efficient service delivery. The nation also boasts one of the highest rates of internet penetration and digital literacy in the world. Its commitment to cybersecurity and robust legal frameworks has made Estonia a model for digital transformation, attracting international attention and investment.
How can Sri Lanka emulate Estonia’s success despite its current economic challenges? Is it possible for a country that has already faced setbacks in economic development? Can Sri Lanka attain goals that have eluded it for the past 76 years?
“Yes. We are optimistic. Sri Lanka has set an ambitious goal to develop its digital economy to reach $15 million by the year 2030.” says Herath further. In 2022 it was just a little less than $4 million or 5% of the GDP. The strategic plan to move ahead highlights the government’s commitment to fostering technological advancements and digital innovation across various sectors.
By focusing on the digital economy, Sri Lanka aims to enhance its technological infrastructure, promote digital literacy, and create new economic opportunities for its citizens. This initiative is expected to drive economic growth, attract foreign investment, and position Sri Lanka as a competitive player in the global digital marketplace. The government’s efforts will likely include investments in digital infrastructure, support for tech startups, and policies to encourage digital transformation in businesses and public services.
In 2023, individual internet usage in Sri Lanka increased by 3.9%, surpassing the global average of 1.8%, while social media usage surged by 6.5% and mobile penetration in terms of SIM card issues reached 148%, continues Herath, highlighting the country’s potential for digital transformation.
A major upcoming project is the implementation of a unique digital ID, approved by the Cabinet, which will serve as the foundation for digitalization, linking both government and private institutions, especially banks. The government is working with the Investment Promotion Ministry to support digital investors and aims to achieve nationwide 4G coverage by next year, with initial approval granted to Starlink to enhance connectivity across Sri Lanka.
Significant legal advancements include approving the Data Protection Act by Parliament in 2023 and establishing the Data Protection Authority this year, with plans to seek approval for the Cyber-Security Act, which is currently drafted and under review. In terms of FinTech, there are ongoing efforts to increase the cashless economy in Sri Lanka, with numerous programmes promoting cashless transactions, particularly at the grassroots level and among SMEs.
So how exactly will this be achieved? The Ministry of Technology has already paved the way for it. Sri Lanka’s National Digital Strategy 2030 is a comprehensive plan aimed at transforming the nation into a digitally empowered and prosperous society. This ambitious strategy focuses on several key areas to ensure that all citizens benefit from digital advancements and that the country remains competitive in the global digital economy. It has already been approved by the cabinet and is ready to be launched any time now.
A primary focus of the strategy is enhancing broadband connectivity, access, and use. The digital infrastructure sector in Sri Lanka has reached a level of maturity and is well-established. There is a significant level of competition across various services in this sector. Over the past two decades, digital infrastructure facilities in Sri Lanka have seen considerable development. The use of both mobile voice and mobile data connections has been on the rise. Broadband coverage is available in almost every part of the island, except for remote areas.
Who Needs the Internet?
Despite the progress made in infrastructure rollout and the availability of affordable retail prices, internet usage in Sri Lanka remains limited. This is primarily due to low awareness and poor digital literacy and skills among the population. While 62% of Sri Lankans between the ages of 15 and 65 have heard of the internet, only 37% use it. Among non-internet users, 61% state that they do not know what the internet is or what it has to offer, and 6% do not know how to get online or make use of the internet. These figures are even lower for women, the elderly, and individuals in rural, less-educated, and low-income communities.
On average, mobile phone users in Sri Lanka spend $5.30 per month on voice, SMS, and data, which accounts for 1.6% of GDP per capita. However, affordability is not the sole factor hindering mobile phone usage. Social and cultural issues, individual needs, level of education, and literacy also play significant roles.
According to a 2019 Policy Brief from LIRNEasia, among those who do not use a mobile phone, 58% state that they do not need one, and 11% state that they do not know how to use one. The study also found that 47% of mobile phone users in Sri Lanka use smartphones, while the remaining 53% use either feature phones or basic phones.
There are notable disparities in access and usage between urban and rural areas. In urban areas, mobile phone ownership among individuals aged 15-65 stands at 84%, compared to 77% in rural areas. Internet usage is at 45% in urban areas and 35% in rural areas, and the percentage of households with computers is 35.6% in urban areas and only 20.3% in rural areas. Gender disparities are also present, although relatively lower compared to some other South Asian countries. Women in Sri Lanka lag behind men in terms of mobile phone ownership (72% vs. 86%), Internet use (30% vs. 45%), and social media usage (21% vs. 39%).
Surveys conducted by the Department of Census and Statistics in Sri Lanka measure computer literacy rates. These rates have shown an increase of 5.7% from 2017, reaching 34.3% in 2021. However, computer literacy rates are higher among men, at 36.1%, compared to women, at 32.6%. There has been an improvement in computer literacy among school children and the youth population between 2019 and 2020. For example, the literacy rate among individuals aged 15-19 has increased from 64.9% to 67.9% within a year, with similar improvements observed in adjacent age groups.
The plan aims to improve digital infrastructure, ensuring that every citizen has access to reliable and high-speed internet. This initiative is critical for bridging the digital divide and providing equal opportunities for all Sri Lankans to participate in the digital economy. By improving connectivity, the government hopes to facilitate better communication, access to information, and overall digital inclusion.
Another significant aspect of the strategy is the development of a robust digital data and services infrastructure. This involves creating efficient and secure data systems that support the country’s digital transformation. With reliable data infrastructure, Sri Lanka can enhance its e-governance capabilities, streamline public services, and provide more personalized and efficient services to its citizens.
Despite a temporary surge in the use of digital services during the COVID-19 pandemic, the adoption of these services has now stabilized. While some digital government services are available to citizens, their usage remains limited, especially when offline alternatives are accessible.
For example, although 26% of internet users in Sri Lanka have accessed government information online, only 2% have interacted with government officers through web-based platforms, and a mere 4% have conducted transactions with the government. This is evident in the case of the online E-Revenue License, which has been operational since 2009. In February 2023, only 3% of vehicle owners utilized the online platform, while the majority (97%) continued to opt for the traditional over-the-counter method.
The 2030 Goal
To encourage the successful adoption of digital services, it is imperative to establish a robust foundational identity system based on acceptance and trust. Recognizing this, the Sri Lankan government issued a call for proposals in May 2023 to develop the Sri Lanka Unique Digital Identity Framework (SLUDI), which will be based on biometrics. The primary objective of SLUDI is to establish a foundational identity platform that will facilitate the issuance of new national identity cards for over 16.5 million adult individuals in the country. By implementing this platform, the government aims to enhance digital identity management and improve service delivery to the citizens of Sri Lanka. This includes the provision of e-KYC (electronic Know Your Customer) services for both public and private transactions.
The strategy also emphasizes the importance of digital transactions. By promoting digital payment methods and e-commerce, Sri Lanka aims to reduce its reliance on traditional cash-based transactions. This shift is expected to enhance the efficiency of financial transactions, reduce costs, and provide more convenience for consumers and businesses alike.
Ensuring cybersecurity and privacy is another critical component of the National Digital Strategy 2030. As Sri Lanka advances its digital infrastructure and services, protecting the digital ecosystem from threats and risks becomes paramount. The strategy outlines measures to safeguard against cyber threats, ensuring that citizens’ data and privacy are protected.
Fostering innovation, entrepreneurship, and skill development in the digital sector is also a key focus. The strategy aims to create job opportunities and upskill the workforce, preparing them for the demands of the digital economy. By supporting digital industry growth and skill development, Sri Lanka hopes to drive economic growth and create a more resilient and adaptable workforce.
Finally, the strategy seeks to leverage digital technologies across various key economic sectors, such as agriculture, healthcare, and education. By integrating digital solutions in these industries, Sri Lanka aims to enhance productivity, improve service delivery, and drive sustainable growth.
By 2030, Sri Lanka envisions a digitally empowered landscape that fosters innovation, inclusion, and prosperity for all its citizens. The National Digital Strategy 2030 is a forward-thinking plan that positions Sri Lanka as a competitive and inclusive digital economy, ready to meet the challenges and opportunities of the future.