Ranawaka calls for innovation-driven knowledge-based economy

Wednesday, 28 May 2014 00:00 - - {{hitsCtrl.values.hits}}

Following is the address by Chief Guest Minister of Technology and Research Patali Champika Ranawaka at the workshop on ‘Wealth Creation through Innovations: Role of Advanced Technologies’ held on 23 May at SLINTEC, Pitipana, Homagama ‘Knowledge Economy’ and ‘Innovation’ have become nearly unmistakable buzz-words that you hardly miss in the theme of any conference, discussion or even newspaper article, dealing with economic development today. In fact, it deserves to be the case. And this conference is no exception.

Indeed, the dialogue on the role of advanced technology-led innovation in transforming our economy into a higher middle income economy has obviously become intense, since our admission to the category of lower middle income nations, from the low income countries, in 2010. Going by the per capita GDP figures – despite the fact that per capita GDP is only one indicator amongst the many required for a balanced comprehensive assessment – we reached the $ 1000 milestone in 2003, and are well on course to achieve the medium term GDP growth target of $ 4,000 per capita by next year. As we look beyond, however, towards our next higher goal of achieving the “status of an upper middle income nation”, there lies a major barrier that our national economy has to cross! In the economics parlance, it is called the ‘middle income trap’. In fact, given the trajectory of growth that our economy has followed during the past two decades, overcoming the phenomenon of ‘Middle Income Trap’ will be THE challenge of our growth strategy. What is the middle income trap? The middle income trap is a theorised economic development situation. It is a situation where a country, after rapidly achieving a certain middle income level, stagnates at that level without graduating to the next higher income level. In the case of many countries, this has occurred at the lower middle income level. It is a known fact that, out of the countries that have rapidly progressed to a middle income level, only small proportions have managed to graduate to the next higher level. While the four Asian Tigers Singapore, Hong Kong, Taiwan and South Korea, stand as often-quoted examples of success stories, there are many other examples where the middle income trap has stalled the progress of economies worrying those nations for so long as two decades. Malaysia, Thailand, Brazil, Argentina, Vietnam have all experienced this situation. A common characteristic of the emerging economies has been that their growth is largely driven by increased utilisation of untapped and underutilised resources. This is termed the “First wave of growth”.

Sri Lanka Sri Lanka, just as much as many other countries that have gone through this phase of growth, continued to enjoy the advantage of such substantially untapped or underutilised resources while riding this first wave of growth. During its early phase of economic liberalisation, the country enjoyed the benefits of Foreign Direct Investment and export growth. Low cost labour was available for garment and other export‐oriented industries. There was substantial internal migration of workers from rural areas to urban areas. However, as was to be logically expected, those initial advantages could not be sustained for a long time, and started diminishing as more and more countries in the region began economic liberalisation. In the meantime, the country started gradually losing its ‘demographic bonus’ – the advantage of having a higher proportion of working-age population. With the decline of this demographic bonus and increased wages, the economy was bound to lose this particular comparative advantage to lesser‐developed countries which could offer cheap labour. This is why we witnessed some of the labour intensive industries such as garment factories increasingly moving to countries like Bangladesh and China, and then to poor African countries where monthly wages remain as low as $ 50.

As we know, the country did experience a fresh surge of growth after the defeat of terrorism, and enhanced economic activity in the north and the east. The growth rate accelerated from 3.5% in 2009 to 8% in 2010 and then to 8.2% in 2011 before experiencing some decline in 2012. However, the fact remains that the rising shortage of skilled labour, rising wage levels and limitations on global market access will continue to pose the threat of a middle income trap to Sri Lanka’s economy, unless we have clear strategies to overcome them. Obviously one prudent strategy would be transform our economy into an innovation-driven knowledge-based economy. We need to enhance our capabilities to develop advanced technology-based products and services. And this would be the only pragmatic way to enhance the national economic output in the face of current, advanced technology-led global competition. We need to increase the advanced-technology based component of our national economic output, which is at low ebb of around 1.5%. Some of the frontiers of cutting-edge technology that we need to focus on, in building our national advanced technological capabilities are nano technology, bio technology, ICTs and space technologies. New and innovative domains such as fusion of some of those technological fronts, such as fusion between dry and wet technologies should also be focused. In this regard, we are certainly happy about the achievements of SLINTEC, as a cutting-edge advanced technology research facility that has made some important initiatives towards generating high-tech knowledge economy outputs. I hope this conference will provide an opportunity to share the SLINTEC experience with a wider community. I congratulate the organisers Sri Lanka Association for Advancement of Science, SLINTEC, and Sri Lanka Association of Young Scientists for organising this event and wish you well in your deliberations at sessions. I thank you.