The role of universities in bringing continued economic prosperity to Sri Lanka

This is an expanded version of the Convocation Address delivered at the 13th General Convocation of the Wayamba University of Sri Lanka on 30 August.

W.A. Wijewardena delivering the Convocation Address

An ambition to become a rich country in 15 years

As pronounced by the Government in its economic policy statement, Sri Lanka aspires to become a developed country within the next 30-year period. To attain this goal, the statement says, Sri Lanka should have a minimum annual economic growth of 7% over this period. Given an annual population growth of 1%, what it means is that the average income of a Sri Lankan, known as per capita income, will double in every 12-year period. Thus, in 36 years, the country’s per capita income will increase eightfold from the current level of $ 4,000 to $ 32,000. Since the developed country threshold, according the World Bank’s classifications, is per capita income of about $ 12235, at 6 % annual per capita income growth, Sri Lanka will be able to attain the status of rich country in 15 years or by 2031.

 Sri Lanka’s past record is disappointing

This is indeed a laudable ambition. However, in the whole post independence era, Sri Lanka’s average annual growth rate has been at a dismal 4.4%. During this period, Sri Lanka had made progress on many fronts, but they all have been small gains when compared with its main target of creating sustained prosperity for its people. Thus, despite the proclaimed ambition to elevate the country to the status of a developed economy, Sri Lanka has remained a developing economy throughout.

 Adopt policies to break the vicious cycle of inadequate development 

The country’s track record of creating prosperity shows that there is a vicious cycle working against the country. It is therefore necessary to break this vicious cycle if the country is to attain a significant economic growth. The challenge to break the cycle is difficult but not impossible if proper policies are adopted.

Sri Lanka’s best resource is its people

The policies should recognise the country’s resource endowment and use the most abundant resource to push the economy up on a sustained basis. Sri Lanka is a natural resource poor country unlike some of the neighbouring countries such as Myanmar, Malaysia or Vietnam. Hence, it cannot leverage its future growth on natural resources. The only resource it has is its manpower which, according to employers, is easily trainable and upgradable. And that is the resource which Sri Lanka has to use for its future economic growth.

Empowering people is development

Economists for many years had believed that the availability of physical capital such as buildings, roads, ports and airports, etc. would guarantee that a nation can attain a high economic growth. The presumption made was that the human resources available to a country could use such physical capital to produce more goods and services to ameliorate the living conditions of people. 

But development today is a wider concept than mere production of more goods and services. It is more to do with improving the conditions of people, their ability to sustain prosperity and the quality and nature of the freedoms they enjoy as citizens. Thus, it actually refers to the improvement in the quality of life of people. With better health, education and income, it will empower people to attain self- perfection, the ultimate goal of living as human beings.

 Democracy and development are interrelated

A simple question then to be asked is whether people will be happier if economic wellbeing is delivered to them without freedom of choice. If the answer is yes, then, an authoritative ruler can deliver a sufficiently large basket of goods and services to people and keep them happy. But without human freedom, such wellbeing is incomplete. Accordingly, ushering human freedom in a democracy is the best ground condition for people to have a real quality of life. It is an essential condition that facilitates them to attain the final goal of their living, namely, self-perfection. 

Hence, democracy and development cannot be separated though economic growth can take place temporarily without democracy and freedom. This was cogently presented by Nobel Laureate in economics, Amartya Sen, when he equated development to freedom in a book published in 1999 under the title ‘Development as Freedom’. To elevate growth to development, it should be connected to human freedoms which in turn will depend on the maturity, knowledge and wisdom of people.

Growth and development are also interrelated

Therefore, growth and development imperatives should go hand in hand. They are two separate goals but interconnected. Development imperatives cannot be introduced without growth. In the same way, growth without development imperatives becomes meaningless. Sri Lanka’s present development thrust should encompass both these requirements.

Trade has been Sri Lanka’s growth source

Sri Lanka had depended, for thousands of years, on international trade to bring prosperity to its people. During the times of Sinhala kings, especially during the reign of Parakramabahu, the Great in the 12th century CE, Sri Lanka was a leading entrepot trading centre in the world. 

In this trading model, Sri Lanka stockpiled goods imported from the rest of the world and resold them to traders who visited the country from all other places. This is the development strategy adopted by Singapore in the initial stage of its economic advancement to a rich country. However, Sri Lanka cannot play the same role today with other competitors like Dubai which has succeeded Singapore when it switched over to an industrial powerhouse in mid 1990s. 

Invent for prosperity

Yet, Sri Lanka could leverage its flexible and easily trainable human talent pool to mark its place in the global economy today. The strategy to do so is the acquisition of the new technology. But the acquisition of mere technology will not help Sri Lanka unless its talent pool is capable of coming up with new inventions – the product of using human brain to come up with new ideas. This requirement was cogently presented to Sri Lankan population in 1940s by Sinhala writer Munidasa Kumaratunga when he emphasised that ‘a nation that does not continue to invent will not prosper in the world’.

Ability to think is the essential quality of people

The same ideology has been presented by two modern economists, Paul Romer and Robert Lucas in a new growth theory. According to them, human capital should be blessed with an essential talent: ability to think and come up with new ideas and innovations. The improvement in productivity which is essential for sustaining a high economic growth comes from new ideas and innovations. Innovations are simply doing old things by new methods which take fewer resources but produce more outputs. 

When inputs become scarce, improve their productivity

Paul Romer has used an example from the kitchen to explain this point. In a kitchen, we mix inexpensive ingredients according to a recipe to cook a meal. The cooking is constrained by the supply of ingredients and if we cook according to the same recipe, sooner or later, we would run out of ingredients because more meals mean more ingredients and the supply of ingredients is finite. But if we come up with better recipes, we could still cook more meals with new ingredients or in the case of old ingredients, with fewer ingredients.

Applying this analogy to an economy, Romer says that “history teaches us that economic growth springs from better recipes and not just from more cooking”. New recipes come from new ideas which are translated into innovations through vigorous and rigorous research and development.

Apple’s iPod was a destructive invention

A good example is Apple’s iPod. Prior to iPod, music was available to music lovers either through long playing or LP records or cassettes which were not portable and limited in the number of songs that could be stored. 

It is reported that the British entrepreneur Sir Richard Branson of Virgin Group fame who himself had been involved in music business had once humorously remarked that he would come up with a new system of music that would record thousands of songs in a digital system and it would replace overnight the old LP records or cassettes. This is in fact a new idea of doing old things in a new way. This new idea led to innovation by Apple to produce iPod and make it available to music lovers on a commercial basis.

Create and use knowledge productively 

Thus, modern economic prosperity is based on the advancement of human knowledge to think in a different way. Creation of knowledge is one thing but using that knowledge for economic development is another. This was amplified by Alison Wolf, a Professor of Education at the University of London in a book published in 2002. In the book ‘Does Education Matter? Myths about Education and Economic Growth,’ she argued that education or knowledge mattered if it was relevant knowledge and if there was enabling environment for using that knowledge productively.

 Joseph Schumpeter: innovations are different from inventions

This had been elaborated in economic terms long ago by Austrian-American economist Joseph Schumpeter in his 1911 book ‘The Theory of Economic Development’ and in his subsequent publications. According to Schumpeter, continuous economic growth comes from innovation which is different from invention, the creation of an output of knowledge.

Inventors should be linked to entrepreneurs

Knowledge will enable researchers, engineers and scientists to create new things which are known as ‘inventions’. There are thousands of such inventions made by knowledgeable people every day. But not all these inventions lead to creating a commercially viable new product or service. For instance, there are stories of some Sri Lankan youth inventing remarkable new products such as a ‘sea-water driven motor car’ or a ‘multi-tasked paddy-thresher’. 

While such inventions have their own merit, they may not be commercially viable at the current stage of technology due to higher cost of production compared to available alternatives. Hence, they just remain as prototype inventions incapable of going through an assembly line of a factory that depends on commercial viability for its survival. Schumpeter says that these inventions are used by entrepreneurs by converting them into commercial production lines. That process was named by Schumpeter as ‘innovation’

Universities as creators of knowledge

Universities are the creators of knowledge in societies today. They do so by providing higher learning to students and engaging in research and development. But there are several prerequisites for them to perform this duty by the society. They should embark on creating new knowledge which had not been there earlier. 

In this respect, the instructions issued by the Singaporean Government to all universities and technical colleges at the turn of the century is an eye-opener everyone. Taking into account the changes in modern technology, it instructed them to concentrate on four new fields in the new millennium. They were nanotechnology, ICT, genetic research and engineering and entertainment. This was because in the new millennium, the masters of the world would be those nations which have mastered these four areas. However, after nearly two decades, new areas have now been added to this list.

 Universities should link their inventions to business

A salutary development today is that Sri Lankan universities have embarked on a dynamic research program, supported by funding from the Government. While this is a must at the initial stage, it will run into problems in the long run when the Government is faced with constraints for continued funding. 

In this respect, universities should explore other avenues of continued funding for their research programs. They should perforce link themselves with the private sector to undertake collaborative research projects funded by the latter. It will also solve the problem of finding entrepreneurs to transform their inventions to commercially viable products. Since universities just sit on a massive resource base – the talent pool represented by its staff and free-thinking students – it would not be difficult for them to go for this option. 

Sri Lanka’s universities too should take notice of the modern developments in the global technological field and amend their curricula to suit such developments. In that manner, they can effectively contribute to the growth momentum that has been started by the Government today.

(W.A. Wijewardena, a former Deputy Governor of the Central Bank of Sri Lanka, can be reached at [email protected].)