Sunday Sep 22, 2024
Sunday Sep 22, 2024
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President and the office bearers of the Colombo University MBA Alumni Association, distinguished invitees, ladies and gentlemen, it is indeed with great pleasure that I accepted this invitation to be associated with this important event and to make the guest speech of the afternoon session at the ‘Five Hubs Forum’ jointly organised by the Daily FT and the Colombo University MBA Alumni Association.
The five hubs concept was launched with the ‘Mahinda Chinthana – Idiri Dakma’ vision statement. The question is why Sri Lanka needs to discuss being a hub.
‘Monsoon Asia’
Let me begin with an idea expressed about ‘our region’ by a leading contemporary American scholar on global geo politics. The book is titled ‘The Monsoon,’ and the author is Robert D Kaplan. Making an interesting symbolical analogy, in introducing his argument, Kaplan refers to the world map in the form it is commonly used in America. In the common world map used in America, the Western hemisphere lies right in the front, while the Indian Ocean region is relegated to the edges, split up along the outer reaches of the map, almost disappearing.
However, Kaplan observes that this world map, in this form, belonged to the 20th century. It was in the Atlantic and Pacific Theatres of Action that the great wars of the 20th century, both political and economic, were lost and won. The world was geo politically Euro-centric for nearly two centuries, before it became America-centric during the last century.
For many centuries before that, the balance in global geo-political power was decided by the Indian Ocean Region – or by the ‘Monsoon Asia’, as Kaplan chooses to call it.
Kaplan further says that the world map of the 21st Century will have the Indian Ocean Region in the Centre. We, as a region, share as much in common in our development challenges as we do in our historical and cultural heritage. In ‘The Monsoon’, Kaplan makes a multi-faceted, in-depth analysis, and a vivid presentation on how the world stage is set for re-emergence of the ‘Monsoon Asia’, as the theatre of action that would determine the future geo-political balance of the world.
Of course, Kaplan being an American, the book is intended to awaken the Americans, particularly those responsible for influencing and deciding upon the American Foreign Policy, to this impending geo-political reality. Kaplan is right.
Asia rising
It is no secret that Asia is bound to emerge as the economic powerhouse of the world, if the current trends of development continue for the next couple of decades. It is now incumbent upon us, the present inhabitants of this great historic region – its governments, its industries, and its professionals to ensure that the strategic positioning necessary for its eventual realisation is effectively managed.
It is in this larger backdrop, that our countries in the South Asian region, which are faced with similar development challenges, are also presented with similar opportunities to prosper. Needless to say Sri Lanka which is located at the centre of the Indian Ocean can be the hub of the region in the new era.
From a socio political perspective, the South Asian region consists of mature democracies and, at the same time, consists of highly literate populations.
However, ironically, the region has not yet been able to optimally leverage the benefit of its rich base of human capital and, for many decades, has been a supplier of trained human resources to the other techno-economically more advanced regions of the world. One of the main reasons for this situation is the fact that the industrial capacity of the nations in the region is yet to develop to the desired optimum level. This is quite in contrast to the position in East Asia, mainly Japan, China and Korea. Therefore, obviously, one of the key priorities in the desired process of transformation of our region would be ‘development of industrial capacity’.
Economic development
When we look at the type of economic development that has taken place in the world during the last two and a half decades or so, that has lapsed since the beginning of the industrial revolution, we could identify three distinct phases on the basis of the type of driving forces that have spurred economic growth at each stage.
The first phase was the factor-driven economy, where cheap labour and resources were leveraged to overtake other economies.
The second phase was the efficiency-driven or investment-driven economy that required greater fund injections.
The third phase was the invention-driven economy, where inventions drove some economies over others. LED technology, nano-tech, gene-tech, efficient computers, communications tech, 3D printing etc. were important inventions in this age.
The first phase, spans for nearly one century, beginning from the early days of the Industrial Revolution that sprang around 1760. As we are aware, invention of the first powered textile machine by Richard Arkwright in the year 1764 is widely regarded to mark the beginning of the industrial revolution.
Factor-driven
The economic development during this first-phase was factor-driven. England, as the country where the Industrial Revolution originated, was spearheading this factor-driven phase of economic growth. They had access to an extensive base of natural resources. They also had access to cheap, or almost free, slave-labour, both of which they could exploit at their will from across the colonies of the British empire that kept on expanding at the time.
Technological tools were being developed in the meantime, and the other vital aspects of social-economic infrastructure, such as markets, were being developed in parallel, thereby complementing the elements necessary for the sustenance of this factor-driven phase of economic growth. During this phase of economic growth, the imperialists were obviously riding on a predatory wave of exploitation, ruthlessly inflicted upon hapless colonies.
It is pertinent to reflect on several questions that are naturally relevant here. Why did the industrial revolution not take place in China, India or elsewhere in the Asian Region, which was the manufacturing centre of the world up to the 18th century? Why did China, which possessed the maritime and naval expertise and capability, as demonstrated by producing the first naval fleet to go around the world, much before Europeans, not invade other nations?
Even our own ancestors of ancient Sri Lanka had excelled in Naval and maritime activities that had placed them in a strong position as regional maritime power.
However, such naval, maritime or military capabilities had seldom been used by Asian counties in the history to invade and exploit other countries, other than for self-defence.
Why? They simply did not have that predatory attitude to prey on, and exploit, other peoples. Invasion for exploitation was not part of their culture, not part of the underlying doctrine. It was alien to them.
Efficiency-driven
Let’s look at the second phase. The distinctive characteristic of this second phase of economic development is that it is efficiency-driven. Advent of fossil-fuel powered machines for replacing hitherto muscle-power-based production activity marked the beginning of this new era.
Inventions from internal combustion engine to early developments in communication technologies mark the beginning of this phase from 1860s onwards. This was soon followed by introduction of the concept of production-line by Henry Ford, which revolutionised the concept of production and enabled much greater volumes of production, in much shorter time, with much lower costs. A turning point in the history of ‘production’!
The period around World War I saw the firm establishment of this efficiency-driven economic activity. In the decades that followed, Japan and Germany emerged as the two nations that championed the model of efficiency-driven economic growth. Parallel to the vast strides made in production efficiency, new management techniques evolved; And in the sales domain, the simple traditional act of ‘sales’ evolved into the more complex, multi-faceted function of marketing.
Innovation-driven
The next, or the third, phenomenal shift in the driving force of economic growth occurs in the 1990s. In a world where efficiency-improvement measures which had been vigorously followed well over a century had virtually reached a state of diminishing marginal returns, innovation had come to occupy the role of the driving force of economic growth.
So we are already two decades into the era of innovation-driven economy. In fact, going by the revolutionary nature of transformation that occurred in the driving force of economic development in this transformation, the impact of which can be compared to that occurred at the beginning of the industrial revolution, I personally prefer to use the term ‘New Industrial Revolution’ to refer to this transformation.
What is innovation? The term ‘innovation’ used to be synonymous with science and technology and research and development until recently. However, at present there is growing recognition that innovation encompasses a wide range of activities in addition to R&D, such as organisational changes, training, testing, marketing and design. It can be described as a process of Implementation of a new or significantly improved product (good or service), or process, a new marketing method, or a new organisational method in business practices, workplace organisation or external relations.
It is also pertinent to note that this emphasis on innovation over the past decades has propelled the emergence of some new concepts, which critically question the conventional wisdom on innovations, and seek to supplant the same. We have already seen the ‘centrality’ of the role of ‘innovation’ in today’s economy.
In the meantime, it is equally important to shed some light on the ‘centrality’ of innovation from the perspective of certain environmental realities that call for such ‘innovations’ in economic activity.
Energy perspective
It is also interesting to analyse the three phases of economic development from an energy perspective. During the first, or the factor-driven phase of economic development, the energy supply was from muscle power – either human or animal. The second or the efficiency driven phase saw the replacement of muscle power by fossil fuel, which in fact amounted to multiplication of muscle power.
When it comes to the global scenario of energy – its production, transportation and consumption – the Indian Ocean occupies a highly strategic position. A major proportion of total crude oil and gas transportation in the world takes place across the Indian Ocean. The production hubs in the Middle East and Indonesia are long established, and it is now believed that the Gulf of Mannar, situated off the North Western coast of Sri Lanka, could potentially emerge as another production-hub.
The largely fossil-fuel powered economic growth of the last century has created two burning issues. On one hand, the world has come to a stage where the days, or more realistically the decades, of fossil-fuel powered economic activity are numbered, and the world will witness its exhaustion, in an economic sense, during the next three to four decades. On the other hand, the staggering volume of carbon-dioxide that the burning of these fossil fuels continue to emit to the atmosphere, bring about untold misery to the whole humankind, in a multitude of forms, including irreversible changes in climate.
The only alternative is to move towards a ‘green economy,’ which will require innovation to play the central role. Fundamentally, the main challenges of a ‘green economy’ are to address two principle issues brought about by the fossil-fuel-powered economic activity of the past one and half century, namely environmental degradation and depletion of natural resources.
In the inevitable global quest for renewable energy options, South Asian region holds much promise: hitherto untapped potential for hydroelectricity in Bhutan and Nepal, wind energy in South India and Sri Lanka, ocean energy in Sri Lanka and solar energy in Afghanistan and Pakistan are important facts to consider here.
In the 21st Century, E.F. Schumacher showed that the availability of energy to an economy was more important than labour. Accordingly, he claimed in his book ‘Small is Beautiful’ that factors such as capital, resources, labour, facilities and market depended on how energy was generated and utilised. He suggested that what were required for a sustainable future were not centralised, massive industries, states and societies but rather, small but self-sustaining societal groupings. David Pierce, Edward B. Barbier and Anil Markandya, who initially conceptualised green economics, used the ‘Happiness’ based economic model suggested by Schumacher in his ‘Blueprint for a Green Economy’ in 1992.
Knowledge
We have to keep in mind that the centre of the hubs is nothing else but ‘knowledge’. All existing theories lead to never-ending cancerous growth. We need to get rid of those for the benefit of the humankind. The new world order needs not ‘growth’ but ‘dynamic equilibrium’ which is the ‘ultimate law of nature’. Hence humankind needs to find a new philosophy for sustainability.
From where can we find a new philosophy which teaches us frugality? That comes from our own roots. Our heritage: Theravadic Buddhism. Meditation is being increasingly looked upon and attempted globally as a means of reducing the pressures and stresses of worldly life. That’s why we say the world needs to listen to us; world needs to learn from us. Needless to say, Sri Lanka has the potential to be the real ‘knowledge hub’. If we can really recognise our true potential then definitely our future will be brighter.
Geopolitical advantages
Let me come back the question I raised at the beginning. Why does Sri Lanka need to be a hub? The answer is simple: Due to geopolitical advantages. This is a positive approach for the country to capitalise on the location specific advantages. However, unfortunately for Sri Lanka, the same geopolitical reason has applied in a negative way as well.
America based on the Robert D. Kaplan’s argument has decided to interfere with the sovereignty of Sri Lanka. America has a plan to interfere with the politics in Maldives, in Myanmar, in Afghanistan, in Pakistan in Bangladesh and specifically in Sri Lanka as it is the hub of South Asia. America wants to keep its foot on Sri Lankan soil. They want a ‘puppet’ to govern the country. For the same geopolitical reasons America has decided to support terrorism in Sri Lanka. The so-called ‘human rights’ issue raised by America is to interfere with Sri Lankan politics. The result is nothing else but the Geneva intervention.
We need to get together to face this threat, immaterial of which political party you are affiliated with, immaterial of what race you belong to. The five hubs are secondary; protecting the country is primary. We as Sri Lankan citizens need to work together to protect our sovereignty. Thank you.
