Development priorities for Sri Lanka



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By Shan Fernando


In post- war Sri Lanka, a massive infrastructure development drive can be witnessed. In fact the infrastructure development drive commenced well before the end of the internal armed conflict. The merits of developing physical infrastructure such as roads, ports, airports, power plants etc. are well known. However, another equally important area that needs to be developed in parallel is human capital development. The East Asian development experience provides valuable lessons on how those countries set about developing their human capital.


A key contributory factor to rapid economic growth in both South Korea and Japan was government action aimed at promoting education and training. Singapore too had placed significant emphasis on developing her higher education system to be on par with the best in the world. China too is heavily involved in upgrading her higher education. According to a recent survey conducted by London-based rankings firm QS, China took six of the top ten slots in a study of Universities from among the "BRICS" nations. The report had placed Tsinghua (48th place in world rankings) and Peking University, both located in Beijing, in first and second place while noting that China was "the most likely of the BRICS nations to achieve its goal of developing world-class universities". The report has further stated that spending on higher education in China had tripled in the 10 years from 1996 and the sector is now the world’s largest.


The development of human capital is vital in attracting Foreign Direct Investments (FDI) into Sri Lanka. Foreign investors will require skilled human resources, particularly if they are keen on setting up technologically intensive ventures in the host country. Besides, empirical studies have shown that technologically intensive exports grow at a higher annual average growth rate compared to other manufactured exports. Therefore, it will be imperative for Sri Lanka to take steps to upgrade her human capital so that the country could produce adequate numbers of scientists and technicians etc. enabling the country to achieve technological deepening and migrate to high-tech exports. In the risky environment that prevailed in Sri Lanka during the three decades of internal armed conflict, the country managed to attract FDI mainly into light industries, where fixed capital costs are limited and mainly low skilled labour is employed. Therefore, in this post-conflict era, the country should not waste any further time in upgrading her human capital base, which will be crucial in attracting high tech oriented FDIs which are vital in achieving higher growth in export earnings.


Although Sri Lanka’s overall unemployment rate had declined from 9% in 2000 to 4% in 2012, about 20% of 15-24 year-olds were still unemployed in 2012. According to a recent survey, over 50% of firms had stated that the system does not produce skills that are relevant. Moreover, about 33% consider the lack of adequate skills as one of the major constraints on operating and growing their businesses. In this context it is encouraging to note that the World Bank had recently approved a USD 101.5 Mn IDA credit to expand the availability of employable workers by increasing access to high quality, skills development programmes relevant to the labour market. This project supports the Skills Sector Development Programme (SSDP) launched by the Government of Sri Lanka as part of its Public Investment Strategy for 2014-16.


Apart from the development of physical infrastructure and human capital, another critical area for sustainable development is the emphasis placed by a country on research and development. Good quality research and development is vital in moving on to the production of high-tech products. Sri Lanka’s national R&D investment as a percentage of GDP is very low. Sri Lanka’s Gross Expenditure on R&D (GERD) recorded 0.21% of GDP in 2004. It came down to 0.17% in 2006 and further down to 0.16% in 2010. This figure compares with 3.74% in South Korea, 2.09 % in Singapore and 1.07 % in Malaysia.


Apart from the decline in R&D expenditure as a percentage of GDP in Sri Lanka, there is also a decline in the number of R&D scientists from 4,520 in 2006 to 4,037 in 2008. (Source: Fostering Innovation to Fast-forward Growth in Sri Lanka by Anushka Wijesinghe and Nethmini Perera– Research Studies: Working Paper Series No.16, December, 2012 – Institute of Policy Studies of Sri Lanka). In this context it is important to note that President Mahinda Rajapaksa had noted in his Budget 2012 speech that the present number of researchers of around 4000 in our universities and research and technology institutes should be increased to around 20,000 by the year 2020.


In most developed countries, much of the R&D expenditure is accounted for by the private sector and in most cases the private sector’s share of national R&D expenditure is over 65%. However, in Sri Lanka it is a mere 18%. The state sector accounts for 57% of R&D expenditure in Sri Lanka. This has strong implications on the rate of commercialization of science and technology research. (Source: Fostering Innovation to Fast-forward Growth in Sri Lanka by Anushka Wijesinghe and Nethmini Perera– Research Studies: Working Paper Series No.16, December, 2012 – Institute of Policy Studies of Sri Lanka).


There are only very few noteworthy examples of industry-research linkages in Sri Lanka. In this regard the establishment of the Sri Lanka Institute of Nanotechnology (SLINTEC) in 2008 through a public-private partnership, with the purpose of adding value to Sri Lankan products and thereby enhancing their competitiveness in international markets, can be considered as a very good model of such industry-research linkage. This first-of-its-kind initiative has brought together leading private sector firms with key Sri Lankan nanotechnology scientists. In its first full year of operations alone, SLINTEC had been able to secure 5 international patents on nanotechnology products, including carbon nanotubes, nano fertilizer and nano rubber. (Source: Fostering Innovation to Fast-forward Growth in Sri Lanka by Anushka Wijesinghe and Nethmini Perera– Research Studies: Working Paper Series No.16, December, 2012 – Institute of Policy Studies of Sri Lanka).


Some examples for the potential that nanotechnology has, to add value to raw material is given in the table.


Laugfs Holdings Limited has set up a joint venture with SLINTEC to set up the country’s first plant to produce titanium dioxide. This venture will enable value to be added to mineral sands (which have so far been exported in raw bulk form) by allowing production of titanium dioxide from ilmenite obtained from mineral sands extracted from Sri Lanka’s Pulmoddai region. (Source: Fostering Innovation to Fast-forward Growth in Sri Lanka by Anushka Wijesinghe and Nethmini Perera– Research Studies: Working Paper Series No.16, December, 2012 – Institute of Policy Studies of Sri Lanka).


According to Senior Minister for Scientific Affairs, Prof. Tissa Vitharana, "Sri Lanka is to change the age-old practice of exporting raw graphite with the innovation of a value added graphite product using nano technology…Sri Lanka Institute of Nano Technology (SLINTEC) has carried out extensive research relating to carbon nano-tubes composed of carbon atoms built at nano-scales. These nano-tubes have the strength approximately 100 times that of steel, while the weight is one sixth of the weight of steel. It is used for computer components, electronics and space technology" (Sunday Times – 29.06.2014). The Senior Minister had further "revealed that a Sri Lankan company is to set up a carbon nano-tube factory with foreign assistance to meet the high demand for such material made of Sri Lanka’s graphite…such high-tech products made of Sri Lanka’s graphite is worth around Rs.150,000 per gram…currently, Sri Lanka exports raw graphite at a price of around Rs. 200 per kilogram" (Sunday Times – 29.06.2014).


A country’s high-tech exports are a significant measure of that country’s ability to innovate and commercialize scientific findings effectively. The share of high-tech exports out of total manufactured exports was only 2.2% in Sri Lanka in 2001. This share had fallen further to a mere 1% by 2010. In the last decade, Sri Lanka had recorded a meagre high-tech exports share of 1.8%, on average, each year, compared to South Korea’s 75%, Thailand’s 27% and to over 50% recorded by Singapore and Malaysia. (Source: Fostering Innovation to Fast-forward Growth in Sri Lanka by Anushka Wijesinghe and Nethmini Perera– Research Studies: Working Paper Series No.16, December, 2012 – Institute of Policy Studies of Sri Lanka). In this context the establishment of the Sri Lanka Institute of Nanotechnology is a timely move, since value addition through the use of nanotechnology has the potential to enhance export earnings of the country significantly. More such initiatives are required to shift Sri Lanka to a trajectory of increased high tech exports which will help the country to achieve sustainable development through enhanced export earnings.


 
 
 
 
 
 
 
 
 
 
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