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Sri Lanka must drive the knowledge economy

Recently I was doing a key note for the Adyapana Education Exhibition -2008 that forced me to do some research on Sri Lanka’s performance in the Knowledge Economy. The revelation was very interesting. Sri Lanka apparently pays the highest cost for internet at 25 dollars per 20 hour duration which is four times higher than the cost in Malaysia.

Education reforms not happening in Sri Lanka has aggravated the situation by making a graduate less marketable in the world which I felt needed a policy makers attention which became the base of the key note I delivered.

A Knowledge Economy is not about being high tech, but it’s about how a country is strong on creating disseminating knowledge to the users to enhance growth and development in a country. A key to remember is that it is not only how a country uses Knowledge that will lead to a comparative advantage, but at the speed at which this Knowledge is turned into a commercial opportunity and thereby be first to market is the real essence of a Knowledge Economy.

The good news for Sri Lanka is that in the recently launched Knowledge Economy report of the World Bank, Sri Lanka has been ranked higher than India in all the components - ICT, education, innovation and economic incentives which is encouraging though we have not seen the innovative products from corporate Sri Lanka in comparison to the counterparts in India which has made a life of a housewife in Sri Lanka easier.

Corporate India on the other hand is on the cutting edge of technology with innovations flooding the market wooing a typical Indian housewife to be more modern more efficient and more confident to face the challenges of the world which includes creations like the first Nano car to the world beating the giants like Toyota’s and Nissans of the world.

Whilst Sri Lanka needs to be commended for being ranked above India it is important to note that the World Bank study reveals that there has been very little improvement in the last ten years. ICT has driven up its rating by increasing the usage of computers and connectivity but not at the fast pace that its competitors have done so, which means that Sri Lanka is not really making use of the Knowledge Economy that it actually could.

SL- Low penetration due to cost

Latest research reveals that the penetration of internet in Sri Lanka is estimated at low ebb of 7% whilst the penetration of phones is at a 34%. The key issue for the low penetration of internet is the high cost on connectivity.

Sri Lanka apparently pays the highest cost for internet at 25 dollars per 20 hour duration which is four times the higher in cost in Malaysia and it is for a lower quality in terms band width which also throws light on the regulatory reforms which is required with more private sector participation that can really propel this sector for higher performance.

The looming power crisis and the recently introduced 43% price hike will sure retard the speed of growth in this area which makes Sri Lanka’s quest of challenging the Knowledge Economy weak.

Some argue that the current regulatory regime in the overall education system needs an overhaul change so that Knowledge Economy can be developed to meet the needs of the market that can only be done with an iron fisted administration given the politics that are mangled in the University system.

It’s time that the authorities take note that the current products that the education system is churning out is losing its marketability to the extent that ultimately have been absorbed to the public sector that drives further inefficiency to the system.

If Sri Lanka is serious of the Knowledge Economy education reforms is a must but the question is who can do it in Sri Lanka and when will this happen, specially in todays political economy.

The link - GDP growth

The World Bank in the report states that a 1% increase in the internet users can boost exports growth by 4.3%. Which means on 7700 billion rupees the value increase can be as high as by 300 million rupees which is the opportunity lost for Sri Lanka when our counterparts are driving internet use by double digit. An increase of 10 mobile phone users per 100 people can boost GDP growth by almost 0.6 per cent. This explains the link between the Knowledge Economy and economic growth in a country.

Dialog experience

To quantify the GDP growth due to the Knowledge Economy the best case in point will be the Dialog experience that Sri Lanka has witnessed. A company who visions to be the undisputed leader in mobile communication technology and its convergence with the internet has tri-party link between Technology (the Universities/In-house techniques), the organisation (commercialisation) and the customer (the need).

The technology originators have conceptualised GPRS services that provide internet connectivity on mobile phones, Wi Fi connectivity at different locations across the country and this technology for instance drives a consumer benefit of email access at any time, online billing, online shopping and web access which the organisation would brand each of these technologies and drive consumer usage.

Let me take a another technology a high speed internet connection branded as KIT net can drive penetration due its zero documentation and quick reactivation and recharge just like a normal mobile KIT card that demonstrates how technology can be a driver of trade thus the GDP of a country.

CEO of Dialog Telekom Dr.Hans Wijayasuriya says “We like to use technology convergence at the forefront of the Industry revolution” which says a lot of the visionary leadership that is required not only to a company but the telecommunication industry as a whole if it requires exponential growth.

Dialog today is a 25.6 billion rupees organisation with the brand valued at Rs.12.4 billion becoming the most valued brand in the country for 2007 which once again tells to the world the commercial benefits of the Knowledge Economy. May be its time that all organisations link with Universities so that a technology transfer takes place to the organisation to meet the changing consumer needs of tomorrow and to be in the cutting edge of competition.

If we analyse the Korean success story it was essentially driven by the Government. From the 1960’s Korea made successive reforms in the area of Education and Importing of technology through foreign licensing that have made Korean enterprises absorb sophisticated technology that can innovate products to out beat competition. The best case in point is Samsung which has beaten its rival Sony in every product range that Sony was once a leader during Akio Morita’s time.

It is said that the technology transfer is driven with so much of passion that the Samsung product development specialists are at furniture shows in France so that the TV of tomorrow will be to match the furniture that will be bought by a housewife of tomorrow.

The latest reports say that the company is investing $40 billion on research and development during the next five years, double what is spent in the preceding five years mainly due to the Government incentives and tax breaks extended by the Government.

The company has reported that it has double the number of researchers, to 32,000 from the 13,900 six years ago. Samsung now have a state-of-the art research and development centre in Suwan, and in fact is supposed to be the largest R&D centre in Asia.

It has towering glass offices and sprawling laboratories. Suwon’s newest facility is the Digital Research Centre, to be completed in September with floor space of 30 football fields and special picture and sound labs big enough for 9000 researchers, of which 150 are from foreign countries like China, India and the United States.

To my mind this reflects a Knowledge Economy at its best. In 2007 it is reported that Samsung invested US$ 6.4 Billion on R&D, which is 8.3% of the total sales of the company and the results are staggering.

The company has been recognised with 1600 patents and in the United States alone. Samsung was the first to launch a 102 inch Plasma TV and a mobile phone with a seven mega pixel photo capacity.

The performance of Samsung has happened due to a structured carefully architectured Government initiative post the 1997 crisis where focused reforms took place on corporate governance, transparency, removing anti-competitive regulations, introducing flexible labour markets and activated market mechanisms so that the private sector invested in education and technology to be ahead of competition.

Sri Lanka needs to take a que from such countries and fashion Sri Lanka. Korea also had its own problems of a Political Economy with coalition Governments but it did not lose its National Growth objectives and the reforms that had to be done with an iron whip.

Sri Lanka - lagging behind

We have to invest at least 1.5% of GDP on research and development (R&D). Current R&D investment is estimated at 0.14% of the GDP which explains why Sri Lanka cannot be a fore runner in the world of business.

If we take the Tea Industry the last R&D innovation that the industry has seen was around 20 years back with the fluid bed dryer. The last innovative cloned tea bush was in 1974 which explains why our global market share has dropped from a 34.1% in 1950’s to a mere 20% in today.

Very soon Sri Lanka will loose its self in the globally entrenched tea Industry. This is exactly what Korea did not allow to happen. It focused on the agricultural areas that required new technology and then developed technology centers regionally to ensure businesses used this technology for competitive advantage through promotional programmes like road shows and tax breaks for the heavy users of technology.

Hence we can see that the Knowledge Economy should be driven by the Governments with reforms in the areas of Education and IT infrastructure which then is driven by the private sector.

If we do not do this we are getting lost in the world of innovation.

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