I remember having a heated debate one evening with one of my teachers, Ricardo Hausmann, who was wearing a faded pair of denim jeans and short sleeved shirt at Bell Hall, Harvard University, on the applicability of the practice value network as against the value chain development. When we parted, we had gathered respect for each other and I wanted to find more about Ricardo, which made me feel very small.
He was the Lead Professor of Economic Policy at Harvard University and was one of the authors cum advisors of the Global Competitive Report for the World Economic Forum edition of 2010. This link fascinated me and I had a brief discussion with the great Professor Hausmann before writing this piece for the Daily FT. Let me share a few key pick-ups.
The World Economic Forum bases its competitive analysis on the Global Competitive Index (GCI), which in turn tells the world of a nation’s competitiveness.
Competitiveness per se is defined by the group as a set of institutions, policies and factors that determine the level of productivity of a country. The level of productivity indicates the level of prosperity that can be earned by an economy.
Hence, the GCI indicates the rates of return one can earn by investing in a particular economy. In simple terms, the better the GCI score, the better the chances for an economy to grow in the near future.
SL at 52
In 2009 Sri Lanka’s performance was 79, but with the post war spruce in the economy, we jumped 17 places to be ranked at 62. This indicates to the world the potential of the economy with the buoyant private sector and the accelerated growth by the Government on infrastructure development.
However, the score of 52 this year on 142 countries made Sri Lanka cement its distinctive position as the tiger cub economy of South Asia, beating mighty India ranked 56, Bangladesh coming in at 118 and Pakistan at 108 and Nepal reeling at 125, which indicates the potential the country has in the near future when dominating economies like the US and EU are burdened with debt issues and a double dip recession.
Let’s accept it
Some can argue that we are a small country and this performance is usual for a country of our stature. Some can say that there are many countries clustered very close to Sri Lanka’s performance.
My take is that in the 100 meters sprint event, the athlete or the difference in performance at one hundredth of a second does not alter the event. The final standing remains. The world must accept Sri Lanka’s performance and determine how it will engage our nation via the private sector, given that the private sector accounts for over 80 per cent of the economy.
Nuts and bolts
We must now target to be a 100 billion dollar economy and be ranked in the first 30 in the world by 2015, which is the challenge ahead now for Sri Lanka.
In this light it’s worth pursuing as why the listed companies in the stock exchange were having almost 168 billion dollars in the bank, which in fact is above the 1.5 billion FDI target that Sri Lanka has set for 2011.
The question is if the issue is the non viability of the current projects in the country is making the organisations have such large amounts of money in a bank or if it is policy barriers that impinge meaningful investments.
From a strategic sense it could be interpreted that on the area of ‘basic requirements,’ which is essentially infrastructure and macroeconomic stability, Sri Lanka has forged ahead in 2011-2012, but from an ‘efficiency enhancer’ area such as higher education and training, market efficiency, labour market efficiency and technological readiness, Sri Lanka lags behind.
What is worrying is that if Sri Lanka is to be a top 30 country, there will have to be serious policy reforms so that overall productivity can have impact. Especially with a political economy at play, how this can be activated meaningfully in the market place will be the biggest challenge for Sri Lanka.
The private sector must be commended for the leadership it has given the economy, which has made the stock market buoyant even though it’s not solely on the fundamentals of business. One area the private sector must focus on is innovation so that it can launch the next generation products globally.
For instance, the one piece bra innovated by a local apparel manufacturer on the proposition of being carbon neutral was unique. We must now see similar products in the tea, rubber, cinnamon, vegetables and gems/jewellery businesses. I guess the low focus is what has made Sri Lanka rank at 42 in the Global Competitiveness Report of 2011-2012.
A key point from the economic report that we must address as a nation is on the attributes of ‘public trust in politicians,’ ‘irregular payments’ and independence of the Judiciary score, which has declined, taking the overall ranking on this pillar to 113 from the earlier rank of 39.
This is not very progressive for an economic development-driven agenda given that the ethos is private-public-people participation. This must be corrected as a priority if we are serious about making Sri Lanka the tiger cub economy of South Asia.
It also highlights the political issue facing the country, which once again does not auger well for a country that is trying to attract FDIs.
- The essence must be shared with the key policy makers of the country.
- Based on the key pick-ups, a task force must be set at the highest level to address the key areas that needs fine tuning.
- There must be a quarterly evaluation done so that bottlenecks can be identified and addressed whilst tracking key competitor performance and best practices.
- Sectoral breaking down of the economy to check productivity improvements can be done by the President-appointed productivity committee.
- Science and technology must bring in a system to drive innovation on a private-public partnership approach. May be the setting up of the Nano Park in Homagama can be the first initiative.
- A global nation branding campaign should be started initially sector-wise such as tourism, tea, pure Ceylon Cinnamon and apparel, given that the market needs are different and target countries also differ. Later on it can come under a nation branding strategy.
- A nation branding committee must be set up under a ministry such as the Ministry of Economic Development where the Global Competitiveness Index remains in the radar.
- A mock evaluation must be done by mid 2012 to determine if Sri Lanka is on track to be a top 30 country globally, given that other countries are also increasing their competitiveness.
(The author is an award winning marketer and business personality who has a double degree in marketing and an MBA and is currently reading for a doctoral degree in business. He is an alumnus of Harvard University. The thoughts expressed are his own and not the views of any organisation he serves in Sri Lanka or internationally.)