Demographic growth

Central Bank Governor Dr. Indrajit Coomaraswamy this week warned that given Sri Lanka is fast moving beyond its demographic dividend, as a country with an aging population Sri Lanka would have to begin investing in innovation and R&D at a much earlier point than its emerging market counterparts.  

Delivering a wide ranging analysis on Sri Lanka’s economy, its challenges and how they were created, Dr. Coomaraswamy delivering the Dr. Saman Kelegama Memorial Lecture focused on the difficulties of growing rich before growing old as a country. He attributed Sri Lanka’s remarkable resilience of being able to grow at 4% year on year for nearly three decades during the war to the demographic dividend that was reaped at the time and stressed that this meant Sri Lanka would have to absorb and invest more in innovation, R&D, robotics and other sectors largely dominated by developed economies to foster significant growth. But this is easier said than done. 

For starters, Sri Lanka’s expenditure on R&D is the lowest in the region. In 2010, Sri Lanka’s R&D to GDP ratio was a meagre 0.16% and it has not risen much since then. Out of this 0.16% only 11% was spent by universities while the rest was spread equally between Government research institutions and businesses. Unfortunately, most of this research is targeted at academic goals rather than driven to achieve economically viable innovation. Universities in Sri Lanka are also not empowered to own patents from public funded R&D, thereby reducing the incentive to engage in this field.

In fact academics have become so disinterested in research that most of them do pretty much anything but R&D. According to a recent survey conducted by the World Bank, academics cited the heavy academic workload, inadequate lab facilities and a lack of facilitation with companies as significant factors for low collaboration with the industry on R&D.

In response industry leaders believe the lack of entrepreneurial spirit among academics and the low commercialisation potential of university research are key deterrents to invest in R&D in universities. Nonetheless, companies in Sri Lanka have also not historically performed well in terms of R&D expenditure, technology absorption and innovation in respect to the number of patents issued. 

World Bank senior education specialist Kurt Larsen, who was one of the researchers of the study, said that unlike industrial countries like South Korea or even India, Sri Lankan companies do not have the critical mass to invest in research. According to his estimates less than 100 local companies have the required capability. Without this commercially driven interest most companies prefer not to work with universities.

Another factor that continues to ail R&D efforts in campuses is the lack of PhD holders in the university system. The World Bank report estimates less than 50% of local university academics have doctorates. PhD holders from humanities account for 33% while those in management sciences account for only 20%, which is a telling disparity for R&D.

Establishing an ecosystem for R&D is tricky because even with resources and a well-oiled university system entrepreneurship can come from the unlikeliest of sources, but if a national platform is established then more startups have a better chance of becoming viable businesses. These bottlenecks, as well as the overall improvement of Sri Lanka’s business climate, and investment attraction would have to be tackled for Sri Lanka to resolve its demographic challenges.