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Anoop Singh: Improve productivity to raise income
Anoop Singh, Director of IMF’s Asia-Pacific Department, in delivering the keynote address, had identified three contributors that will enable Sri Lanka to increase its per capita income, measured in 2005 international dollars, to a level above $ 25,000 by 2037 so that the country will not be left behind the other emerging market economies (available at http://www.imf.org/external/np/speeches/2013/070913.htm). They are the productivity of human capital, productivity of physical capital and the combined effect of these two productivities known as the total factor productivity.
With improvements in these three productivities, Singh had found that Sri Lanka could increase its average growth rate which stood between 4.5 and 6.5% during 2003-12 to 8% in the period to follow. All these three are in turn dependent on one single investment, namely, human knowledge that comes from education, research and technology.
Education should help produce more with less
With respect to education, Singh had pointed out that Sri Lanka’s public education expenditure standing at less than 2% of GDP is a way below even that of Latin American countries which spend on average about 5% of GDP on education. He had found direct positive relationship between the amount spent on education and the level of labour productivity except in the case of Indonesia and India where higher spending has not brought in an increase in productivity, a factor attributable to the employment of a large labour force in production. In both these countries, like the public sector in Sri Lanka, less is produced by employing more.
Sri Lanka is a low spender on education and therefore, its labour productivity should also be low. Accordingly, Sri Lanka’s labour productivity measured as a percent of the output produced per hour of work in USA is slightly less than 20% meaning that US labour is more than five times more productive than Sri Lanka’s counterparts. In comparison, according to Singh’s numbers, Japan, Hong Kong and Singapore which spend between 3.5 to 4% of income on education produce as much as 55 to 80% of the output produced in an hour’s work in USA.
More research will generate more income
With respect to research, Sri Lanka spends only close to 0.1% of GDP on research and development compared to between 1 and 3.5% spent by China, Taiwan, Singapore, South Korea and Japan. In all these countries, higher share of expenditure on research and development has contributed to higher growth in the respective economies. With this negligible expenditure on research, Sri Lanka’s ability to have its own high technology is a remote possibility if not a total impossibility. Hence, Singh had advocated for higher foreign direct investment for acquiring technology from abroad and higher high-tech education to build the country’s capacity to absorb and use such technology.
In the recent past, Sri Lanka has produced less of science and engineering graduates and more of other types of graduates which mostly consist of graduates in art and commerce streams. The low science and engineering base in the education in Sri Lanka coupled with meagre expenditure on research and development has in turn impeded the processes that contribute to the development of technology within the economy.
Hence, Singh had implied that Sri Lanka should increase its expenditure on education and have more science and engineering based graduates to push its productivity up and ensure the required high economic growth rate of 8% to deliver prosperity to the nation.
Dr. Sarath Amunugama: Why produce more garbage by spending more on education?
But Dr. Sarath Amunugama, Senior Minister of International Monetary Cooperation, is reported to have pointed out in his address that an increase in public spending on education would not serve any purpose if the country does not change its curricula to suit a modern economy. He had asked the question: “What is the point in giving 6% for education if we’re teaching garbage? If we put 6% on the current curriculum then I think we’re being regressive, we must invest in the right type of education” (available at http://www.dailymirror.lk/business/other/32288-govt-must-invest-in-the-right-type-of-education-academic-.html).
His critical observation is valid even for the science and engineering curricula which Singh had identified as important for the country to improve its technology base. What Minister Amunugama had implied is that the graduates produced by local universities do not meet the market’s requirements and therefore are unemployable. The outcome has been pretty clear: The Government has been required to provide jobs to these unemployable graduates as the ‘employer of last resort’ at a huge cost to the taxpayers on the one hand and reducing the overall worker productivity in the public sector on the other. Thus, Sri Lanka has more workers in the public sector producing less output.
Professor Ajit Abeysekera: Universities are not that bad
But at a subsequent session of the Economic Summit, Sri Jayewardenepura University’s Senior Professor Ajit Abeysekera is reported to have defended the university curricula pointing out that the country’s university curricula have been on par with similar curricula offered by world’s best universities like Harvard and Stanford in USA (available at http://www.ft.lk/2013/07/12/jpura-uni-don-faults-the-system-not-curriculum-for-skills-woes/).
It is evidenced, according to Abeysekera, by the superior performance these graduates have shown when they have been hired by foreign employers. Even the feedback received from local employers, according to him, has revealed that the graduates produced by local universities do possess the needed hardcore knowledge to perform on their respective jobs.
However, Abeysekera had noted that the graduates have not been able to develop their full potential of creativity during the university career since they have now become somewhat ‘part time students’ due to their pursuing various professional qualifications at the same time. It has restricted their involvement in university matters which would have helped them to build their skills and creativity through interaction with others just like being members of sports teams or societies. According to Abeysekera, such interactions are needed to develop skills and learn “to manage successful life outside”.
He has said that it is not the university curricula that have to be blamed for the perceived non-employability of graduates; it is the deficiencies in the educational system in the country. In other words, those who have been produced by the country’s educational system have been victims of the system itself. What he has implied is that students should have a full university career to be persons with creativity and skills as they had had several decades ago. Hence, it is now necessary to return to that culture of relying on universities for acquiring skills and talents. However, to do so, there should be a change in the thinking and attitudes of both parents and students who have now lost their faith in the universities as the sole developers of human skills and talents.
Youth with sub-standard knowledge: All are to
be blamed
It is difficult to disagree with Abeysekera because university students spending more time for the professional qualifications and the needed practical experience at work places as required by such professional bodies have in fact given lesser importance to their university career. The practical experience they get through those professional bodies is of course a blessing and its value cannot be discounted. Yet, they do so by neglecting entirely their university career and as a result, as pointed out by Abeysekera, they have become aliens to the rich intellectual environment to which they should be exposed at universities. In the case of universities located in and around Colombo, they just rush to the university in the evening totally exhausted and not in a proper frame of mind to absorb what is taught in classes.
Those universities which are located outside Colombo could keep their students inside the university during the week days, but during the weekends, they too rush to their professional classes which are basically conducted in Colombo. Hence, when they return to the university after the weekend, they too return to an alien place. So, if the graduates are unable to meet the requirements of the industry, universities cannot completely be blamed for that weakness. The blame should squarely go to all the institutions, both academic and professional, that have taken responsibility for training the youth of the country.
This writer recalls that, way back in Sri Lanka, undergraduates were not permitted to have concurrent registration at other type of academic institutions because the universities required them to have full time attention to their courses. This is the type of academic environment which Abeysekera had argued would help students to develop their skills and creative talents. As for practical experience, the universities could arrange such practical experience in collaboration with industry in between the semesters.
Acquiring mere qualifications won’t do
Hence, it is not garbage produced by a single institution that has ruined the intellectual minds of the youth of the country. It is the garbage produced by all institutions which have simply trained the youth for examinations and in turn converted them to be mere certificate collectors. The feedback of the industry is that though the youth possess a plethora of qualifications, they are unable to deliver on the jobs because they do not have the required talents and skills.
Capability building a must
What are those talents and skills which the youth of the country should possess and the educational institutions should help them to develop during the learning phase of their life? They range from technical skills to personal skills to social skills to soft skills which economists have categorised under a single heading called ‘capability building’. While universities and professional bodies impart technical skills, they do not help students develop personal, social and soft skills. Universities cannot do that because students are there only on part-time. Professional bodies do not have as their goal developing these skills in an effective manner.
Sri Lanka is now struggling to move up in the ladder to become a higher middle income country. In its present stage of economic development, the availability of a pool of people versed in science and engineering is a must to tap the vast economic opportunities available to the country. However, that is not the only skill which Sri Lanka should acquire today. It should acquire a range of skills and talents to transform scientific and engineering inventions to viable business enterprises. That is where the other skills matter for the continuous economic prosperity.
Capability building is facing market and its competition
A recent article published in McKinsey Quarterly in relation to China by three authors (Karel Eloot, Gernot Strube and Arthur Wang) under the title ‘Capability Building in China’ (available at http://www.mckinsey.com/insights/asia-pacific/capability_building_in_china?cid=china-eml-alt-mip-mck-oth-1307) has defined capability building to include ‘leadership, managerial and team-based skills rather than technical ones’. It says that skill building should be rewards-based, rooted in real work and tailored to local conditions.
As China, like Sri Lanka, is losing its cheap labour pretty fast, the article argues that Chinese “businesses must look for ways to increase productivity and internal collaboration, to better understand consumers, and to develop a more sophisticated appetite for risk”. In other words, Chinese businesses should find ways of producing more by using less as was argued by the Austrian American economist Joseph Schumpeter more than a half a century ago.
The authors have argued that this is more valid to China’s State-Owned Enterprises which have been recently converted from government departments to commercial enterprises. The problem with these enterprises, as the three authors have pointed out, is that they have found it difficult to adapt themselves to a competitive world and adopt a business mind-set to operate in such a competitive world. As such, they “generally lack a systematic approach to nurturing employees moving up the organisational ladder. They misconstrue capability building as a classroom activity, missing the impact of linking it to actual business. And they are too inflexible either to fire underperformers or to reward and promote employees, including managers, who change their behaviour and adopt the necessary mind-sets.”
Mindset of both the youth and their employers
should change
This observation is valid to all the state owned enterprises in Sri Lanka and also to many private sector businesses which rely on government hand-outs and concessions for continuing in business rather than getting used to market competition. Accordingly, it is not only the youth who have to be reformed; it is the prospective employers, both in the public sector and the private sector, who should also be reformed.
The youth in the country are trained to believe that it is the Government which should provide everything to them: jobs, careers, vehicles, houses, social life and everything. They are scared of the market and the competition in the market. This belief is made deep-rooted in their minds by the statements made by their leaders from time to time condemning the market and decrying economic reforms. They are also given a bad example by the policy authorities by bailing out the inefficient and loss making public enterprises at the expense of the taxpayers. They join work places with this mind-set. After they join those work places, their seniors confirm that belief and train them to look up to Government for future success of their careers if they are in the public sector and businesses if they are in the private sector.
Remove garbage in all places
Thus, it may be garbage that is produced at educational institutions; it is also garbage that one finds inside public and private work places which are scared of markets and the competition that rules in those markets.
It is necessary to remove garbage in all these places if Sri Lanka is to produce a talented, skilled and creative workforce.
(W.A. Wijewardena can be reached at [email protected].)
