(March 25, 2008) Knowledge has always been central to development. The knowledge economy is not just about hi-tech industries and creating an innovative and entrepreneurial culture. Recent studies have shown that simply adopting existing technologies widely available in developed countries can dramatically boost economic growth and productivity.
Facts: - Sri Lanka posted economic growth as high as 8% in 2006 up from 6% in 2005, and 5.4% in 2004 - R&D budgets are currently less than one-tenth of the 1.5 percent of GDP - The composition of Sri Lanka’s economy has changed from that of an agriculture based economy to one dominated by the services sector. - The amount of internet users per 1,000 people was 14.40 within Sri Lanka, significantly lower than all of its comparator countries.
This paper highlights the Knowledge Economy (KE) issues that confront Sri Lanka and offers policy prescriptions that will allow the island to take advantage of the opportunities available in moving towards a knowledge based economy. As the economy is shifting away from industry and agriculture towards a more service-based economy and as government is promoting the island as an offshore hub there is great potential for Sri Lanka to benefit from strengthening its KE pillars.
Chapter 1: The Knowledge Economy - Why it is so important for Sri Lanka?
In light of Sri Lanka’s recent and continuing reforms and its ambitions to realize faster growth, it is important for Sri Lanka’s leaders and interested stakeholders to evaluate where the country currently stands on its journey towards a knowledge based economy and how best it can take advantage of the KE potential. This paper seeks to answer some of these questions by benchmarking Sri Lanka’s knowledge economy against competitors in Asia and elsewhere and highlights the specific areas which the country should improve upon in order to fully embrace the knowledge economy.
It is clear that Sri Lanka needs to improve its business environment – the question for policy makers is, “where to start on this challenging agenda?” Sri Lanka’s three most problematic factors for doing business are policy instability, access to finance and the inadequate supply of infrastructure according to the World Economic Forum’s Global Competitiveness Report for 2006/7. This view is supported by the World Bank’s earlier work on the investment climate in 2005 which highlighted electricity, policy uncertainty and access to finance as the key issues confronting formal sector businesses in Sri Lanka.
Sri Lanka has an opportunity to experience substantial and rapid growth with an emerging Business Processes Offshoring (BPO) sector. Over the last few years, many companies have become increasingly interested in setting up operations throughout the country in various fields including accounting, medical insurance, legal work, banking, call centers and others. This sector has already shown immense potential to produce jobs and growth. However, the supply of physical infrastructure and human resources, rather than demand, seems to be the ongoing challenges confronting the BPO industry.
Sri Lanka’s ability to facilitate a scientific culture that encourages innovative thinking will determine the country’s ability to effectively use knowledge for growth. The innovation system within a country consists of networks of institutions, rules and procedures, enterprises, universities, research institutes, think tanks, and consulting firms. In Sri Lanka the primary agenda for Science and Technology (S&T) development remains the progression of institutions and universities and the institutionalization and professionalization of science in order to create a science culture.
Chapter 5: Advancing Sri Lanka’s Education System through Quality Inputs
Sri Lanka has been successful at producing a population of literate individuals. However, literacy alone will no longer suffice in the knowledge era. It will be increasingly important for educated individuals to supply the workforce with the market oriented skills needed to create rapid economic growth and national development. Developing lifelong learning systems and improving quality are the keys for Sri Lanka. A lifelong learning system involves learning from early childhood to retirement and includes formal training (schools, training institutions, and universities) and non-formal learning (on-the-job training, and skills learned form family members and people in the community).
Case Study 1: Korea: Coordination as the Key to the Knowledge Economy
Korea’s sustained rapid growth rate is due to its strategic use of knowledge for development. The Republic of Korea has had consistent growth over the past four decades which has enabled it to overcome the economic and social damage caused by World War II and the Korean War. Korea’s growth is said to be significantly accredited to its ability to use knowledge effectively in all sectors of the economy. Although Korea had not conceived an explicit knowledge economy development strategy, its commitment to strengthening each pillar through a focus on coordinating knowledge according to industry needs, led the country to immense growth in following years.
Case Study 2: Singapore’s Transition to the Knowledge Economy: From Efficiency to Innovation
Singapore’s government had always been committed to the concept of efficiency, recognizing early on that, to compensate for the country’s natural “comparative disadvantage” associated with being a small economy with a limited domestic market and population size, Singapore would need to develop a highlyefficient and productive infrastructure system to help reduce production costs and attract foreign investors. This commitment to efficiency, along with an honest government, which adopted proactive growth strategies and a highly educated, English-speaking workforce, has made Singapore a choiceproduction base for multinational corporations.
Case Study 3: China: ‘Opening Up’ to the Possibilities of the Knowledge Economy
China‘s ability to maintain its current rates of growth will depend on investments in the KE. At almost 1.3 billion, China’s population is estimated to be 1.6 times the size of the population of the United States, EU and Japan combined. With such a large population and despite even greater economic disparities, the country has been able to enjoy long periods of stellar growth (averaging 9 percent per annum for decades). In order for China to maintain high growth rates and raise the living standards of its population the country will need to invest in new KE techniques and sectors that will make it more competitive.
World Bank Program Website maintained by the World Bank Office in Colombo, a launching pad to all information on World Bank activities in the country (strategy, projects, publications, etc.)
Development Data A wide range of social and economic measures on Sri Lanka, including links to the World Bank's most important online development databases.
Analysis and Research Compilation of all the World Bank's publications on Sri Lanka, with 'search' options and links to analysis and research on other South Asian countries.
World Bank Program in South Asia Launching pad to all information on World Bank activities in Afghanistan, Bangladesh, Bhutan, India, Maldives, Nepal, Pakistan, and Sri Lanka.
RSS