Talk ng Econom cs

July-December 2012

Digest

A Publication by the Institute of Policy Studies of Sri Lanka

SPECIAL ISSUE

INNOVATION

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EXECUTIVE DIRECTORSaman Kelegama, DPhil (Oxon)

DEPUTY DIRECTORDushni Weerakoon, PhD (Manchester)

TALKING ECONOMICS TEAMAnushka Wijesinha EditorCharmaine Wijesinghe Appekka FernandoNalaka Liyanapathirana

DESIGN/LAYOUTShafraz Farook – Consultant Designer (Kalambo Active Pvt., Ltd)

Anushka Wijesinha

CONTRIBUTING AUTHORSAshani AbayasekaraDr. Nisha ArunatilakeSamanthi BandaraG. D. DayaratneHarshanee JayasekeraSunimalee MadurawalaChatura RodrigoDr. Dushni WeerakoonKanchana WickramasingheAnushka WijesinhaTehani Welgama

Dr. Razeen SallyProf. Ajith De AlwisProf. Veranja KarunaratneProf. Gehan AmaratungaDr. Harin De Silva WijeratneShalini Dharmawardena

Institute of Policy Studies of Sri Lanka 100/20, Independence Avenue Colombo 07, Sri Lanka Tel: +94 11 2143100, +94 11 2665068URL: http://www.ips.lkBlog: ‘Talking Economics’ – www.ips.lk/talkingeconomicsTwitter: www.twitter.com/TalkEconomicsSL

PRINTINGKarunaratne and Sons (Pvt) Ltd.67, UDA Industrial Estate, Homagama, Sri Lanka

Copyright and DisclaimerAll material published in the Talking Economics Digest are the copyright of the Institute of Policy Studies of Sri Lanka (IPS), unless otherwise speci-fied. It cannot be quoted without due acknowl-edgement to the IPS and the author. It cannot be reproduced in whole or in part, without the written permission of the IPS. The content, com-ments and posts of the Talking Economics Digest and the IPS blog represent the views of individual authors and do not necessarily represent the views of the IPS.

Sri Lankans have proven to be a creative and innovative group of people. Whether in the past - the world-leading irrigation systems during the reign of the Kings-or more recently - the trailblazing telecom industry that beat India in introducing GSM and 3G – Sri Lanka has proven itself. But our priorities seem to have shifted lately. The structure of the econ-omy, and consequently the interests of the workforce, appear to be shifting more towards domestic non-tradeable activities like construction and retail, taking the focus somewhat away from export-oriented manufacturing and services, as evidenced from published trade statistics. The Sri Lankan economy cannot achieve faster growth, and sustain, it without a heavy focus on exportable knowledge-driven economic activities with innovation at its core. In an increasingly troubled external economic climate Sri Lanka will need to develop world-class products by a world-class workforce.

The importance of STEM subjects (Science, Technology, Engineering, and Mathematics) in building this workforce is now firmly on the education agenda globally. It is recognized that gearing a workforce towards an innovation-driven economy means giving young people an enhanced STEM education. While the e-Sri Lanka initiative has certainly helped bridged the digital divide, the situation of Science education is alarming. Nine out of every ten schools in the country do not have the facilities to teach science stream subjects at A/Ls. Young boys and girls living as far off as Anuradhapura, Kantale and Vavuniya are travelling to Kurunegala to attend A/L science tuition classes. Sri Lanka spends less than 0.2% of our GDP on research and development each year, while our competitor countries spend nearly 3-5%. Many people are quick to declare the end of US preeminence in the global economy. But I would argue differently. A major reason why the US will still prevail is because of innovation and the agility and adaptability that come with it. Publishing nearly 300,000 scientific journal articles each year, registering over 700 patents every day, and commercial-izing inventions at a faster rate than anywhere else, the US will remain the world’s innova-tion leader.

We are pleased to bring you a discussion of these issues and more in this ‘Talking Econom-ics’ Special Issue on Innovation. IPS is leading the discourse on this area, producing new insights and policy recommendations in both the 2011 and 2012 editions of the ‘Sri Lanka: State of the Economy’ report and releasing a Working Paper on innovation in December 2012. In the latter, the authors call for the setting up of a ‘National Innovation Council’ to drive the innovation agenda at the highest levels of government. This Special Issue has a compelling cross-section of content – from guest articles by the pioneers of Sri Lanka’s nanotechnology initiative to interactive feature articles on venture capital and techno-en-trepreneurship by the editorial team.

As always, this issue of the Digest also contains insights by IPS researchers on many of our focus areas – fiscal policy, human development, public health, environment, climate change and international trade.

The innovation discourse is relatively new in the Sri Lankan policy space. Innovation is multifaceted and Sri Lanka doesn’t need to follow a set course in how the country engages with it. Yet it is clear that there needs to be a step-change in our priorities. While sectors like tourism certainly offer ‘low-hanging fruits’ capable of delivering quicker prosperity island wide; sustained, rapid and dynamic growth will only come from a ruth-less focus on innovation. A Sri Lanka that ignites the fire of innovation across sectors and across regions will be a vastly different Sri Lanka to one that choos-es to follow a more conservative ‘business-as-usual’ path. This new ‘fire of innovation’ must be ignited by every corporate boardroom and every government agency. This fire, if ignited without delay and without exclusion, can power Sri Lanka’s ambitions of greater prosperity for its people.

Anushka WijesinhaEditor – ‘Talking Economics’

(Research Economist, IPS)anushka@ips.lk

Igniting a New Fire

Editor’s DeskTALKING ECONOMICS

www.ips.lk/talkingeconomics

IPS

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The Institute of Policy Studies of Sri Lanka (IPS) is an autonomous institution that aims to promote policy-oriented economic research and to strengthen the capacity for medium-term policy analysis in Sri Lanka. Its mission is to contribute to the socio-economic development of the country through informed, independent and high quality research that seeks to influence the policy process. With over two decades of substantial research expertise, IPS has emerged as a regional centre of excellence and the most influential think tank in Sri Lanka. Research. Inform. Impact.

P22 INNOVATION - Special Issue

P23 Innovation, Invention, R&D; Breaking Down the Concepts

P24 The Narrow Human Resource Base in Science and Technology Could Con-strain Sri Lanka’s Knowledge Economy Ambitions

P26 Nanotechnology in Sri Lanka: A New Beginning with a New Technology but Com-mitment is Key

P28 Supporting Start-Up Enterprises

P30 Firm LookA look at some of the world’s top brands and what innovation means to them and what is has meant for their stellar business performance...

P32 Driving Manufacturing and Export Competitiveness Through an Innovation Focus

P34 Towards More Science, Research and Innovation in Sri Lanka

P36 State’s Role in Boosting Nanotechnology

P38 Our TakeA somewhat different take by the editorial team on why three things that are sometimes seen as challenges in Sri Lanka could in fact be oppor-tunities for innovation, if harnessed cleverly

P39 Private-Public Partner-ship for Innovation: Case of SLINTEC

P40 Fresh ViewFour young tech leaders give us their perspective on innovation. Scan the QR codes on the page to watch their full interviews

P2 Mind the Gap: Where Will Sri Lanka Find the Money to Finance its Development Needs?

P5 Economic Freedom and the Asian Century

P7 Fiscal Imperatives for Growth and Stability

P8 Greening Jobs:Getting Things Started

P9 Public Health: Healthy Public Policies Begin with Health in All Policies

P11 Lankan University Graduates:Late Birds, No Worms?

P13 Oop(s);Struggling for equity in Sri Lankas Health Sector Amidst Rising Out of Pocket Expenditure

P15 Giving Tourism a Green Shade: Studying Environmental Practices in Sri Lanka’s Hotels

P16 Gender Equality in Hu-man Development; What’s Holding Sri Lanka Back?

P18 Global Trade Protection-ism is Rising Discreetly Sri Lanka Must Stay Alert

P20 Economics of Global Climate Change New Innova-tions on Mitigation, Adapta-tion and Research

P43Talking Economics ‘Expert Voices’ Panel Discussion on ‘The Jobs Challenge’

P44IPS News

P46 Staff Spotlight: The Innovative Librarian

P47Fast facts

Average University Students in Sri Lanka Graduate 3 Years After Their Peers in the West

UK

USA

Sri Lanka

A year in School

A year in University

A year of Idling

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and rehabilitation efforts. In this back-drop, strengthening the spending capac-ity of the state, to finance the bridging of the gaps and the provision of social ser-vices is vital.

Contracting Foreign Aid

This situation is changing, as Sri Lan-ka moves into middle income country sta-tus. The country is becoming increasingly less eligible for concessionary loans from sources like IDA (International Develop-ment Association) – which carry low in-terest rates, long tenors and grace periods and a high grant element - to finance its public investments1.

IPS spoke with several aid missions. The Deputy Head of Mission of a lead-ing European aid donor told me that, “Since 2010, Sri Lanka no longer qualifies for bilateral development assistance due to the Low Middle Income status of the country”. This sums it up well. Many of the aid donors surveyed noted that in the last 2-3 years there has been a reduction in their funding to Sri Lanka (mainly due to contraction of humanitarian assistance, but extending to development assistance too), and this trend is likely to continue. They noted that the changes have been in:

‘the volume of the funds received/dis-bursed’; ‘the type of funding’; ‘how the funding is being allocated and the nature of projects’; and ‘the sources of the donors (countries/agencies) themselves’. They add-ed that the top reasons for these changes/reductions were: ‘change in the country’s economic situation (MIC) and change in the types of needs’, ‘economic growth of the coun-try’, ‘status of the global economy’. The head of a UN agency reported that “the funds we have traditionally accessed have con-tracted by 70%”; while a leading Europe-an bilateral donor indicated a more than 60% contraction in funds between 2009 and 2011.

Another UN agency chief remarked that “in 2012, [institution name removed] has only been able to resource less than one third of what it mobilized from donor sourc-es in 2009”. Meanwhile, a leading donor agency added that “[as] Sri Lanka graduat-ed to a middle income country, many donors feel that there is some responsibility on the part of the government to undertake a larger role…”

Development Gaps and State Capacity

The Sri Lankan state continues to be a key provider of social services, such as education and health but has been invest-ed less and less in both sectors over the years.

Investment by the Sri Lankan state in education is low and has declined steadi-ly over time. Public expenditure in educa-tion has averaged at 2.3% of GDP during the 2000 to 2010 period, falling to a 10-year low of 1.9% of GDP in 20122. This is smaller than the average of middle in-come countries. As a percentage of GDP, the average upper middle income country spent 5% of GDP, and the average lower middle income country spent 4% of GDP on education. Meanwhile, access to better schooling facilities is grossly insufficient, with only 10% of all schools in the coun-try able to offer A/L science, and those, too, concentrated in urban areas only.

Similar issues prevail in the health sector. Health investments by the Sri Lankan state have reduced, threaten-ing to compromise the impressive gains made in the past.

Total expenditure on health remained below 5% of GDP between 1995 and 2008, and is low compared to the global aver-age of around 8%. Within this, the con-tribution from the state was only around 45.8% (2009) – the rest came from private sources (private sector health providers as well as Out-Of-Pocket-Expenditure - OOPE). The proportion of out-of-pocket expenditure (out of private health expen-diture) has grown remarkably over time - Sri Lankans spent Rs. 70 billion more out-of-pocket on healthcare in 2009 than 20 years ago.

Tackling the development challenge of building a skilled and healthy work-force crucially hinges on investing more in health and education. Funding this will now depend more than ever on govern-ment finance through tax revenue.

Financing Human Development: Taxa-tion Imperative

One way of financing it is through loans - Sri Lanka has, of late, been in-creasing its volumes of borrowing from international debt capital markets. But as highlighted in the forthcoming ‘State

of the Economy 2012’ report by IPS, this comes with its own set of concerns.

Therefore, a stronger domestic rev-enue mobilization effort must be under-way to strengthen the capacity of the state to address the critical development chal-lenges, whether it is in health, education or infrastructure.

Lewis (1984) argued that ‘an increas-ing share of tax revenue in national in-come or in GDP is an instrumental ob-jective of economic development policy’ (p.6). High-income countries have had rising shares of tax revenue and gov-ernment expenditures to income as they have become more advanced.

As developing countries need to spend more on public infrastructure, ed-ucation, health services, etc., they need to increase their tax ratio in order to grow and improve human development out-comes of its people (Bird et al., 2008). Almost half a century ago, Kaldor (1963) argued that for a country to become “de-veloped” it needed to collect taxes at 25-30% of GDP. Though Sri Lanka is classi-fied as a lower middle-income economy by the World Bank, clearly Sri Lanka’s tax ratio does not correspond to one.

Tax revenue as a share of GDP (the ‘tax ratio’) dropped to around 15% during 2003-2008, compared to about 19% before 1995. The bench-mark tax-GDP ratio for a low-in-come country is 18%, and is 25% for a middle-income country (Gal-lagher, 2005)3. Sri Lanka’s was just 12.4% in 2011 (Figure 1). Sri Lanka’s performance compares poorly with countries like Vietnam, Thailand, Malaysia, Singapore, Ghana, and South Africa, but better than other South Asian neighbours, including India, Pakistan and Bangladesh and marginally better than Indonesia and Philippines.

Sri Lanka performs particularly poor on collection of direct taxes – i.e., taxes on income and profits – collecting just around one fourth of total taxes from direct sources. The rest is from indirect taxes (mainly consumption-based taxes like VAT), which hurt the poor dispro-portionately as they are inherently regres-sive. Many other countries’ tax collection

The head of a UN agency reported that “the funds we have traditionally ac-cessed have contracted by 70%”; while a leading European bilateral donor indi-

cated a more than 60% contraction in funds between 2009 and 2011.

As Sri Lanka presented its third full budget since the end of the war, Anushka Wijesinha (Research

Economist – IPS) looks at the formidable challenge for Sri Lanka’s development – finding the money to finance it. Taxation, he argues, must be a major

policy priority in strengthening the capacity of the Sri Lankan state.

Where Will Sri Lanka Find the Money to Finance its

Development Needs?

Development Finance

While Sri Lanka has made strong progress on many social indicators, significant development gaps remain.

This is one of the core messages of the Sri Lanka Human Development Report 2012 launched at IPS in late 2012. Sri Lanka’s health and education sectors demonstrate

notable gaps and heightened investment by the state would be required to bridge them, the report argues. In the past, Sri Lanka found it easier to finance these needs with generous donor aid flowing into the country. Sri Lanka was consid-ered a “donor darling” as one of the first countries in South Asia to embark on

market-oriented reforms following eco-nomic liberalization in 1977 and conces-sional loans from international aid donors soared for decades since then.

But this is changing. Sri Lanka is mov-ing away from low-income country status to the middle-income bracket. This means that it has less access to cheap/concession-ary funds from international aid donors.

Based on an ongoing survey of local and international development agencies that rely on foreign funding, it is becom-ing clear that Sri Lanka’s access to con-cessionary funding from abroad is rapid-ly shrinking. This comes at a time when there is a heightened pressure on public finances with the continued massive, and no doubt vital, post-war reconstruction

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Asian Century

Guest Article

Start with historical les-sons. First, for most of the past millennium, Asia had predatory states that suppressed individu-

al freedom and enterprise; and they were inward-looking. Recent avatars were China under Mao, India’s licence raj, and Indonesia under Soekarno. These gross errors should obviously not be repeated. Second, Asia should emulate the factors behind the West’s ascent during the past millennium: institutions to support indi-vidualism, competition and enterprise in market society; and openness to interna-tional trade, especially in the nineteenth century.

Third, Asia can reconnect to a gold-en age of commerce – Indian Ocean and southeast-Asian trade before Western colonialism. Trade flourished among “port-polities” like Cambay, Calicut, Ma-lacca and Macassar – the precursors of modern-day Hong Kong and Singapore. Their rulers encouraged enterprise and overseas trade with light-touch regulation and very little protectionism. They also fostered religious tolerance and cosmo-politan societies. This plus the freedom of the seas enabled trading diasporas to knit Asia together through commerce.

Fourth, the key lesson of the “East Asian miracle” of recent decades is to

“get the basics right”: prudent monetary and fiscal policies, competitive exchange rates, low domestic distortions (such as price controls), openness to internation-al trade, and investments in education and infrastructure. The alleged success of “industrial policies” — selective inter-ventions to promote targeted sectors — is highly debatable. Indeed there is little hard evidence – only assertion – that they worked.

Now turn to key planks of contempo-rary policy.

First, financial-market policies. In

most of Asia financial systems remain backward. Command-economy controls restrict opportunities for all but the po-litically well-connected and do a bad job in turning savings into productive investments. They restrict the transition from catch-up growth to more advanced, sustainable growth based on produc-tivity gains. Enabling the transition to a more prosperous, sophisticated economy demands more financial freedom. That requires liberalisation – removal of inter-est-rate controls, opening to new entrants, including foreigners, broadening capital markets, and, ultimately, capital-account

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So many facets of the “Asian century” are discussed heatedly. But one is glossed over — economic freedom.

Market liberalisation is a crucial enabler of Asia’s current awakening. Its “negative” acts – removing restrictions that

repress economic activity – have unleashed the animal spirits of ordinary people, and they are transforming Asia and the

world in the process. But there is much unfinished business, for economic freedom remains substantially repressed across

Asia. Expanding it will be vital to the progress of the Asian Century. This should be the leitmotif for public policy and

governance.

and the

Economic Freedom

is more from direct taxes, for example Malaysia (over 60%), India (over 50%), Pakistan (around 40%), Thailand (50%), Uganda (just under 30%), and Kenya (just above 42%)4.

Tax Policy Reforms

Meanwhile, the fiscal system in the country constantly undergoes ad hoc tax changes, which have excessively complicated the tax system. It is uncer-tain whether these complications are related to the weak revenue-raising performance of the country. According to Waidyasekera (2004, IPS) unplanned and ad hoc fiscal measures including tax exemptions, tax amnesties and tax con-cessions; the increase in the exemption threshold for income tax and the reduc-tion of import duty rates; lack of elastic-ity and buoyancy of the fiscal system; complexity in tax legislation and lack of fiscal consistency; and weaknesses in tax revenue administration, has caused the level of tax collection to be lower than optimal in Sri Lanka.

A report by the Presidential Com-mission on Taxation 2009 identified all these issues and provided comprehen-sive recommendations to address them in a phased manner – especially with the objective of expanding the tax base5. However, full implementation of the recommendations, particularly those on reforming of tax administration to make it more effective and efficient in collect-ing more tax, have not taken place - pos-sibly due to competing stakeholder in-terests and political sensitivities.

Yet, some reforms aimed at expand-ing the direct tax base have begun. For instance, in an unprecedented reform measure, the 2011 Budget extended PAYE income tax to public sector em-ployees, stripping away the income tax exemption that they enjoyed since the

late 1970s. Additionally, corporate and personal income tax rates were reduced with a view to induce private economic activity – particularly firms - and thus generate more total tax revenues and encourage greater compliance. But the revenue effect of these reforms is still uncertain. For instance, a recent simula-tion study by the IPS has showed that although adding the previously exempt public servants to the tax base certainly corrects the horizontal inequity between public and private sectors employees, the structural changes that came with the new tax scheme may result in a de-cline in tax revenues.

According to the study results, the amount of tax revenues is reduced, from LKR 12.2 billion in 2007 to LKR 6.3 billion in 2011. Two main reasons are cited for the decline under the new 2011 tax system: i) the new tax brackets induced an increase of the “tax free” threshold from LKR.300,000 in 2007 to LKR.600,000 in 2011, and ii) the tax rates were also reduced to 4%-24% from 5%-35% in 20076.

Mind the Gap

With steadily declining internation-al aid, resources to finance Sri Lanka’s development needs would increasingly have to come from within. There is of course always the option of raising risk-ier and costlier funds from international capital markets or friendly nations, but this is neither ideal nor stable. The capac-ity of the state to deliver services to the broader population and address human development gaps would depend on greater and better availability of finan-cial resources to the state. In this context, improving the state’s tax revenue be-comes a critical public policy issue.

Comment: bit.ly/YFNkxq

Endnotes1 ‘Sri Lanka to get funding from higher cost window: World Bank’, Lanka Business Online http://www.lankabusinessonline.com/fullstory.php?nid=1230609135 [accessed on 20th September 2012]2 When figures from other education allocations related to different line Ministries are added, the total expenditure on education is likely to be higher than this 3 Gallagher 2005.4 World Development Indicators database5 Government of Sri Lanka. 2009.6 Arunatilake, N., P. Jayawardena and A. Wijesinha (2012), ‘Impacts of 2011 Tax Reforms on Tax Reve-nues and Redistribution in Sri Lanka’, PEP Policy Brief No. 101 October 2012

Mick MooreAnushka Wijesinghe is perhaps too kind about Sri Lanka’s tax perfor-mance over the past thirty years. It has been a miserable failure. The normal expectation, when average incomes rise, is that the proportion of national income taken in tax will also rise – to meet growing demands for higher quality health and education services and public infrastructure. But, as Anushka shows, in Lanka, as in-comes have risen, the tax take has de-clined. The immediate causes include the points he lists about endlessly changing tax policy and over-generous tax exemptions. One might add to this the failure seriously to modernise the tax collection system. But behind it all lies politics. It was the trades unions and the left political parties who used to make sure that the government raised enough revenue to take care of the poor. These forces no longer have much of a voice. It seems that neither the JVP nor any of the more mainstream political parties are at all concerned about these issues. The rich in Lanka are doing very nicely. They pay little or no tax on their incomes or assets. But what about the poor? They increasingly have to pay for their own health and education. Does no one care?

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Source: Central Bank of Sri Lanka Annual Report (various issues); Department of Inland Revenue 2010.

Figure 1: Sri Lanka’s Declining Tax Revenue to GDP Ratio (1977-2010)

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Fiscal consolidation efforts as set out in the Budget 2013 were not entire-ly unexpected.1 With revenue collection falling short of the target, adjustments to ensure that the deficit for 2012 re-mains close to the forecast 6.2% of GDP is to be brought about by a sharp cut back in public investment. Indeed, fis-cal consolidation efforts appear to be on track with the deficit expected to decline further to 5.8% of GDP in 2013 (Table 1).

The public investment-led develop-ment drive is set to continue and under-pin the economic recovery efforts, with public investment as a percentage of GDP set at 6.1% in 2013. In a departure from recent years when foreign financ-ing comprised a large chunk of the defi-cit financing requirement, the Budget 2013 has opted to rely heavily on do-mestic borrowing to bridge the deficit. Of the relatively high domestic financ-ing component of 4.8% of GDP, 3.3% is to be raised from non-bank borrowing.

With the government tapping do-mestic sources for the bulk of its defi-cit financing requirement, a pertinent question is whether Sri Lanka’s pri-vate sector, starved of funding in 2012 through the imposition of a credit ceil-ing on commercial bank lending, will be crowded-out further in 2013 from un-dertaking investment. Indeed, a related issue is the extent to which Sri Lanka is making room for private investment to step-in, and relieve the fiscal burden of driving the country’s investment growth in the current post-conflict phase of development.

At first glance, it appears that con-ditions to ease the current monetary policy stance and encourage private investment growth in 2013 are emerg-ing. Policy interventions introduced in February/March 2012 to curb credit growth is having the intended results. In August 2012, credit growth to the

private sector eased below 30% for the first time since March 2011. However, the conditions for an immediate easing of the monetary policy stance are not present in view of a greater recourse to domestic borrowing by the government in the last quarter of 2012 to bridge end-year budgetary financing gaps. As a result, even as credit growth to the private sector has been cut off, upward pressure on interest rates is continuing (Figure 1).

However, with inflationary pres-sures moderating in the economy, with end year annual inflation targeted to be 8.5% in 2012, and fewer price pres-sures expected in 2013 with a muted economic recovery, better agricultural output, and slowdown in international oil prices, inflationary pressures in 2013 too can be expected to remain fairly moderate. Thus, the conditions to ease monetary policy and reset interest rates at a lower rate in the first quarter of 2013 in support of higher GDP growth are emerging.

Sri Lanka’s private sector may thus benefit from an easing of mone-tary policy in the first quarter of 2013. However, it appears unlikely that a more favourable environment to undertake investments can persist over the course of the year, if as suggested by fiscal policy projections for 2013, the government resorts to a high volume of domestic borrowing for deficit financ-ing purposes.

Sri Lanka’s private sector is likely to find itself competing with the gov-ernment for investment finance that will drive up interest rates in the econ-omy, and be crowded out once again from a more vigorous participation in the country’s post-conflict growth process.

Comment: bit.ly/SkkXTw

Fiscal Imperatives for Growth and Stability

Insights

IPS Deputy Director Dushni Weerakoon takes a closer look at the pressures likely to emerge for private sector growth from emerging policy changes.

W.A WijewardenaDushni has presented an excellent overview of the current budgetary position in SL. However, in modern public finance, one does not go just by numbers and look more into the impact of public expenditure pro-grammes. With easy money raised by the government through borrowing from local and foreign sources and money printing by CB, it has become possible for the government to undertake infrastructure development projects and the engineering feasibility has in fact created such outputs in physical form. But what is missing, according to modern public finance experts, is outcome and impact of these projects on the economy. That requires the government to follow market principles, linking of infrastructure with private initiatives and when they are run by the state, to have a good business plans. All these three are missing in the current budgetary policy. As a result, physical infrastructure is there, but it does not add to the wealth generation of the country on a sustain-able basis. Just consider Rs 600 million Ranminitenna Rupavahini Village or again Rs 680 million Diyagama International Sports Stadium. The analysis of budgtary policy will be complete only after conducting a proper impact assessment study to gauge their true contribution to the economy.1 See IPS, “Prospects” in Sri Lanka: State of the Economy 2012.

Table 1: Fiscal developments (as% of GDP)

2012f 2012e 2013f

Revenue 14.7 14.0 14.5

Expenditure 21.2 20.4 20.5

Current 14.7 14.7 14.6

Public investment 6.6 5.8 6.1

Deficit -6.2 -6.2 -5.8

Foreign financing 2.6 2.7 1.0

Domestic financing 3.6 3.4 4.8

Non-bank 2.8 1.1 3.3

Source: MOFP, Department of Fiscal Policy.

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liberalisation – though this has to be balanced with prudential con-trols to reduce vulnera-bility to extreme exter-nal shocks.

Furthermore, “fi-nancial repression” is at the core of “unbal-anced growth” in sev-eral Asian economies – notably in China. It promotes over-saving and over-investment, while repressing pri-vate consumption, real wages and employ-ment growth. Chi-na’s financial system channels – and wastes – massive amounts of capital through state-owned banks to state-owned enterprises while more efficient, labour-intensive pri-vate-sector firms are

starved of funds. Carefully managed fi-nancial liberalisation would liberate do-mestic private-sector growth, especially in services.

Second, trade and foreign-investment policies. In Asia, trade and investment lib-eralisation has created dynamic, globally-integrated, world-class sectors, especially in manufacturing in East Asia. But there are still large pockets of protectionism, with huge variation across Asia. Tariff barriers are still a problem, but a plethora of non-tariff barriers obstructs trade and foreign investment much more. Most of these are embedded in complex domestic regulation. Domestic red tape – on prop-erty rights, contracts, licensing arrange-ments, paying taxes, opening and closing businesses, labour laws and customs pro-cedures – continues to stifle the business climate much more than in the West. This is reflected in the World Bank’s Doing Business Index. OECD countries occupy 8 of the top 10 places (Singapore and Hong Kong are in first and second place). Ma-laysia, Thailand and Japan are in the top 20. But China is 91st, India 132nd and Indo-nesia 129th.

Let us not forget that these regulations restrict economic freedom at the same time. The Fraser Institute’s Economic Free-dom of the World Index has only two Asian societies – Hong Kong and Singapore – in the top ranks; the others are way behind. Generally, Asian economic institutions – public administration, enforcement of property rights, domestic regulatory au-

thorities – are relatively weak and keep business and trade costs high, repressing entrepreneurship, innovation and con-sumption. They also result in badly inte-grated regional markets, beset by high in-tra-regional barriers to trade, investment and the movement of workers – a far cry from the EU and NAFTA.

Third, energy and environmental poli-cies. Energy consumption in developing Asia is expected to double over the next two decades. That translates into much more demand for fossil fuels – oil, natural gas and coal. China and India will import much more of all three, especially oil and natural gas, for which they will become even more reliant on the Middle East. But energy markets are throttled by govern-ment intervention and state-owned en-terprises. Price controls, subsidies, export restrictions and inward-investment re-strictions are the norm. Energy is hardly covered by WTO rules. China and India are attempting to secure energy sup-plies through command-economy rather than market instruments – sending out highly subsidised national oil companies, striking long-term contracts with foreign governments, and pledging loans for oil. These measures make energy markets pricier and more volatile, and they exac-erbate geopolitical tensions.

More energy freedom is required to make energy supplies more stable, secure and cost-effective – and to preserve peace-ful international relations. That means liberalisation – removing price controls and subsidies, encouraging private-sector and foreign investment, “unbundling” generation, transmission and distribution in the power sector, and freeing interna-tional trade.

Increasing Asian consumption of fos-sil fuels to power industrialising growth translates into rising carbon emissions. However, according to the climate-change consensus, Asia – particularly China and India – will need to commit to binding targets to cap and then reduce carbon emissions sooner or later. Given the targets set, for example by the Stern and Garnaut Reports, that will inevitably lower growth potential. Here scepticism is in order. Climate science is not “settled”, contrary to the conventional wisdom. It, and much of the economics that flows from it, do not take adequate account of long-range uncertainty. And many of the proposals contained in heavy-hitting economic studies – on targets, subsidies and massive aid transfers — owe more to soft central planning than anything else. They constitute a huge threat to economic freedom. Adaptation to global warming

through market-based energy efficiency measures is advisable, but so is scepti-cism regarding mainstream advocacy of carbon mitigation.

Now for some concluding observa-tions. First, Asia’s poorer economies – those in the low-income and least-devel-oped brackets – should concentrate on “first-generation” reforms for catch-up growth. This involves a combination of macroeconomic stabilisation and mar-ket liberalisation. That will provide the right environment for mobilising savings and investment, labour and capital, for growth. Asia’s middle and high-income economies should focus on “second-gen-eration” reforms – more complex struc-tural reforms in the thickets of domestic regulation – to boost competition, innova-tion and productivity gains.

Both first and second-generation re-forms entail the expansion of economic freedom. The former do not require deep reforms in underlying economic institu-tions; catch-up growth depends more on getting the policy basics right, which spurs a measure of institutional reform. But structural reforms demand deeper in-stitutional reforms in order to deliver pro-ductivity-led growth. Otherwise catch-up growth tapers off and countries get stuck in a “middle-income trap”.

Finally, economic reforms to expand economic freedom beg the question of political reforms to expand civic and political freedoms. The track record in Asia and elsewhere shows that catch-up growth is compatible with a variety of po-litical systems, ranging from authoritari-anism to democracy. Liberal institutions and open societies, with their plural ideas and their checks and balances, are not a prerequisite for catch-up growth. But unreformed autocracies, with unchecked vested interests at their core, are badly fitted to undertake structural and insti-tutional reforms. Expanding economic freedom, embodied in the rising expecta-tions of a burgeoning middle class, comes into conflict with straightjacketed, nean-derthalic politics. Now the link between political and economic reforms becomes stronger. Will Asian institutions adapt? Or will political sclerosis keep countries stuck in a middle-income trap – or worse? This is a mighty Asian challenge – not least for China.

Comment: bit.ly/YJGJS6

Disclaimer: ‘Economic Freedom in the Asian Century’ is a Guest Article. The views expressed in this article are strictly the author’s own and do not necessarily reflect those of the editor of the ‘Talking Economics’ blog or the Institute of Policy Studies. Any queries can be directed to talkingeconomics@ips.lk

Dr. Razeen Sally is Visiting Associate Professor at

the Lee Kuan Yew School of Public Policy and the Institute of South Asian

Studies, both at the Nation-al University of Singapore. He is also Director of the

European Centre for Inter-national Political Economy

in Brussels.

http://www.spp.nus.edu.sg/Faculty_Razeen_Sally.aspx

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Health” of the population in a country is not solely dependent on health sector activities alone. It is also

determined by a variety of factors outside of healthcare services. These are referred to as the Social Determinants of Health (SDH). It is accepted that social factors such as, education, environment, working conditions, eating habits, leisure activities, influence people’s health. For instance, obesity1, which in Sri Lanka is currently at 25% for women, and 17% for men2, is a major risk factor for non-communicable diseases such as cardiovascular disease, diabetes, and cancers. It is linked to unhealthy diets, physical inactivity, harmful use of alcohol, and tobacco consumption3. Therefore, many countries have made concerted efforts to integrate health considerations into other public policies which have an impact on health4.

What is HiAP?The rising importance of addressing

social determinants began during the adoption of the Alma-Ata Declaration in 1978, in which “Health for All” was a key goal. Subsequently, the importance of Intersectoral Action for Health (IAH), which is the development of symbiosis between health and other sectors, was

recognized as a vital mechanism when addressing the SDH.

Most recently, the concept of Health in All Policies (HiAP), was initially introduced by Finland in 20605. Subsequently, HiAP was recommended as a complimentary policy related strategy to integrate health into other sectors in the Adelaide Thinker in Residence in 20076.

The two concepts, which emerged in different eras, have significant differences. The concept behind IAH was that the health sector be directly involved at the policy implementation level in other sectors, and attempt to get their support in order to mitigate health impacts. In contrast, HiAP requires that the health sector partnership with other sectors begin at the policy formulation level, and continue towards implementation as well as evaluation7

The Sri Lankan contextSri Lanka began intersectoral actions

on health during the pre-independence era. Yet, the objectives of these initiatives were not strictly compatible with the concept of HiAP. However, it is important to look back upon about these early inroads because they have laid the foundation for the implementation of HiAP. Some of these early interventions included

the setting up of the National Health Development Council (NHDC) in 1979, the NHDC had the major responsibility of coordinating and reviewing the policy implementation in the health and health related sectors, ultimately reporting their strengths and weaknesses to the government8,9 . In 1980, the country made the commitment to provide Health for All (HFA) by the year 2000, when the Prime Minster and the Minister of Health, together with the World Health Organization (WHO), signed the Charter for Health Development. Accordingly, the National Health Development Network was established to address IAH. Afterward, the “National Health Council” (NHC)10, chaired by the Prime Minister, was established towards the end of 1980, as the governance tool at the Cabinet level to implement and coordinate IAH. Consequently, the NHC came to be seen as an apex body, ensuring political commitment on IAH. However, when looking at the key functions of the NHC11 carefully, it can be observed that the NHC functioned in some respects as a HiAP concept, in that it dealt with 2 out of three HiAP requirements, namely, policy formulation and implementation. As per the available records, the NHC appeared to not be operational as of 2003. Thereon,

Healthy Public Policies Begin with

Health in All Policies

Public Policy

Health permeates all aspects of social life. This factor is now being recognized in public policies, with health increasingly being included as a key concern in all policies. Marking National Health Week, Samanthi Bandara explores the concept of Health in All Policies (HiAP) in the Sri Lankan context and stresses the need to do more.

Public Health:

“

Getting Things Started

Environment

UNEP (2008) defines the concept of green jobs as encompassing two basic elements. The first involves, “averting dangerous and potentially unmanageable climate change and protecting the natu-ral environment which supports life on earth.”

The second element focuses on “pro-viding decent work and thus the prospect of well-being and dignity for all in the face of rapid population growth world-wide and the current exclusion of over a billion people from economic and social development.”

It is accepted fact that the promotion of green jobs encourages sustainable de-velopment and it is by definition, a tool for coping with climate change. In ad-dition, green jobs can provide a business advantage for the private sector which will contribute towards the sustainable development of a country. Also, and most importantly, green jobs explicitly provide decent work. The ILO defines decent work as being “productive work for women and men in conditions of free-dom, equity, security, and human digni-ty.”

Accordingly, decent would should include “opportunities for work that is productive and delivers a fair income; provides security in the workplace and social protection for workers and their families; offers better prospects for per-sonal development and encourages social integration; gives people the freedom to express their concerns, to organize and to participate in decisions that affect their lives; and guarantees equal opportunities and equal treatment for all.”

Therefore, it could be argued that “green jobs” are not merely sustainable, but also ethical in their inherent promo-tion of equity and personal growth.

The widespread acceptance of the concept would then increase the number of jobs through which environmental sus-tainability and decent work conditions are incorporated into economic activities. Therefore, green jobs can be considered as a positive outcome of sustainable de-velopment with particular reference to the energy sector, where there is an in-creasing recognition in the potential of creating green jobs and the emphasis on finding sustainable solutions for current energy-related issues.

Identifying the “Green”Estimating the number of green jobs

in a country or a sector is a challenging task, given the complexity of different processes/components, range of stake-holders and skill classes involved. In the first instance, it is difficult to measure which of the activities are environmen-tally sustainable using macro level data because this essentially requires a mi-cro level assessment. There isn’t a com-prehensive set of criteria developed for identifying environmentally sustainable activities.

Therefore, the first step would be to identify these criteria. Once the envi-ronmentally sustainability aspects have been identified, then comes the issue of ‘decency of work,’ which is, again, chal-lenging to assess. The criteria for iden-tifying green jobs can vary depending on the nature of the economic sectors, and further complicating the mat-ter, differences can exist between different countries for the same sector as well.

Green Jobs in Sri LankaAgain, there is no read-

ily available information to provide an estimate of the country as a whole. How-ever, a number of eco-nomic sectors which have significant in-volvements in the nat-ural environment and deal with natural resources, have the potential to generate green jobs, which means that green jobs can be found in the industri-al, fisheries, forestry, agriculture, energy, water, tourism, and waste management sectors. As mentioned previously, envi-ronmental sustainability aspects are not uniform across sectors. The dependence on the natural environment and the con-tribution of different economic sectors to the environment vary to different degrees and are incredibly complex. In addition, even within the sectors, identifying the activities or sub-sectors which adopt sus-tainability aspects remains a challenge. There can also be geographical variations in this regard.

Incorporation of decent work aspects, further, adds to the complexity of green job assessments. In many cases, there is

no compiled information about aspects which constitute decent work. This again, highlights the urgent need for the development of country-specific criteria for the different economic sectors.

Given the increasing importance of sustainable development, Sri Lanka has taken steps to promote the concept of a “Green Economy” in various ways. A Na-tional Action Plan has been developed by the Ministry of Environment for the fur-therance of this concept. This action plan, called the National Action Plan for the Harith Lanka Programme, has deemed “Number of green jobs increased” as a measurement of the Strategy/Action 9.3 which is to, “Promote private sector and

other profes-s i o n a l

i n -

stitutions to incorporate sustainable development practices in the economic and social development systems/proce-dures.”

Although there has been no direct ini-tiative to promote green jobs, increased emphasis on making the ongoing devel-opment activities sustainable as well as the provision of decent work will have direct implications on the availability of green jobs in Sri Lanka. As green jobs brings simultaneous implications on two distinct development aspects, environ-mental sustainability and decent work, coordinated action is required between the agencies which are mandated to un-dertake them.

Comment: bit.ly/YJGEOi

By Kanchana Wickramasinghe

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Average University Students in Sri Lanka Graduate 3 Years After Their Peers in the West

UK

USA

Sri Lanka

A year in School

A year in University

A year of Idling

The university system is in cha-os again. Following the disruption of a month of academic activity due to an island-wide strike by university non-ac-ademic staff in June this year, the aca-demic staff also took trade union action in early-July. The two strike actions have cumulatively taken two months off the undergraduate calendar and a suitable resolution has not been made to date.

While this article excludes itself from commenting on the politics of such ac-tion, it rather serves to highlight how it impacts youth in Sri Lanka and the econ-omy as a whole. The movement of youth from being just students to workers has great economic and social associations, which in turn contributes towards pro-ductive human capital and healthy cit-izenship. Therefore, it is important that young people move from one chapter of life to another in a healthy socioeconomic and political setting.

“A successful transition to work for today’s many young people can acceler-ate poverty reduction through better allo-cation of their labor, and boost economic growth. Difficulties in entering the labor market can persist and be very costly to mitigate”- World Development Report (2007)

In 2007, the World Bank dedicated the World Development Report to the subject of enabling smooth youth tran-sition to adulthood. It pointed out how economically and socially important it is to enable a smooth transition from school to work and stated that youth often face problems such as ‘starting too early, failing to enter the labour market, and difficulties in moving across jobs.’

From Education to WorkThe problem of failing to enter into

the labour market has many facets. The most common one in Sri Lanka being the lack of skills or the mismatch of already acquired skills with employer expecta-tions[1]. However, there are other rea-sons such as administrative inefficiencies and disruption in the university system – similar to what the system is currently

going through – delaying students from entering into the labour market.Ensur-ing smooth movement from education to work will not make a significant impact on the youth entering the labour mar-ket if the transition cannot be done fast. A quick transition from school to work ensures that new labour market entrants remain young when they start working. This is essential because educated young people are innovative, barely risk averse, positive in their thinking, and open to change.

A majority of students in the OECD graduated from university by 25 years of age, although mature students (30+) were prominent in Finland, Iceland, Norway, Sweden and Israel. Mature graduation in these countries is a result of a very flexi-ble education system where going away and coming back to school or university is relatively easy[2]. In the UK, students graduated younger (at age 24) than the average European graduate of age 26+. This was mainly the result of younger students entering into universities and also relatively shorter study courses[3]. In the USA, the median age of graduation has risen mainly because undergraduates tend to stay longer in college to avoid be-ing unemployed. They continue to be on

parental support and live as students[4]. Although statistics for India and China and other Asian countries are not avail-able, a report published by the Indian University Grants Commission indicated that Indian students in university educa-tion are usually between the ages of 18-24[5]. Similarly, Chinese undergraduates too graduated at an average of 24 years[6].

In comparison, Sri Lanka doesn’t seem to be placed particularly lower in terms of its median age of graduation, which is 24+. However, what is import-ant to note is that Sri Lankan students could graduate at a much younger age, ideally 22+ or 23 years at most, if not for long time lags taken by the authorities to put out results and make selections for universities.

In Sri Lanka, a child born in 1988 who pursued education up to university would be idling for approximately two years until administrative and examina-tion procedures were carried out. Sim-ilarly, in Finland and Ireland students usually stay more than one year to attend university after qualifying examinations. However, staying between qualifying certificates and university admission in these countries is often a voluntary deci-sion by the students[7].

Late Birds, No Worms?

By Harshanee Jayasekera

Higher Education

Lankan University Graduates:a variety of fragmented committees and task forces were established in the health sector to look after the concerns of SDH with support from other sectors12, for example, the National Nutrition Committee; and the Presidential Task Force on Dengue. These committees remain fragmented, and therefore do not represent a wide enough group of stakeholders to count as a national mechanism, which can make an adequate impact on national health outcomes.

The International ExampleSeveral countries argue that Health

Impact Assessment (HIA)13 is the most appropriate governance tool in order to implement the HiAP, which can be used as an intersectoral strategy14. This helps decision makers to gain better knowledge about public health. Further, as the study on the “effectiveness of HIA,” which looked at 16 countries in the European Union in 2007, revealed that the practice of HIA exerts a substantial influence on the decision making process, regarding the determinants of health15.

According to the empirical evidence gathered from various countries which have implemented HIA, substantial support from the highest levels of government, in terms of administration and legislations, are major factors that influence the success of HIA16. In addition, the stakeholders in Sri Lanka argue that political commitment is an essential condition when setting up HiAP17.

A good regional example is the Government of Thailand. It enacted the National Health Act in 2007, with the aim of mainstreaming health in public policies18. Following that, the National Health Commission and Health Impact Assessment was established in order to implement the aims and purposes of the Act.

According to the Declaration of the National Health Commission in Thailand, any project or activity which has an impact on health has to obtain the HIA, prior to the commencement of the project or activity. Further, the Commission has conducted the National Health Assembly each year since 2008, to share the knowledge and experiences of other countries on their HiAP practices.

The Way ForwardIt is evident that Sri Lanka currently

does not have an integrated governance tool which deals with health in other public policies through policy formulation, implementation and evaluation at a national level. There are

fragmented committees and task forces which are addressed various health issues at different levels.

However, it is observed that many government institutions, the private sector, NGOs, and civil societies, are not aware of the concept of HiAP and its importance for a healthy society19. Hence, mainly two proposals were made at the stakeholder meeting to cement the commitment of these sectors, and to regularize the HIA in the country. Forming a sustained and effective governance tool should be the foremost initiative of this agenda.

To accomplish that, a series of effective advocacy programmes needs to be conducted for wider groups of stakeholders from each sector, while the commitment of the political machinery needs to remain strong..

Finally, a legal window for regulating the HIA needs to be set up, in similar to the Environmental Impact Assessment, as it is the most effective governance tool for Healthy Public Policies in the country.

Comment : bit.ly/YJGfeS

Endnotes1. A person with BMI between 25.0 and 29.9 is considered overweight and ≥30.0 is considered obese. 2. http://whosrilanka.healthrepository.org/bitstream/123456789/425/1/Sri%20Lanka%20ahead%20in%20controlling%20communicable%20diseases%20-%20WR.pdf 3. Non-Communicable Disease in the South East Asia Region: Situation and Response, 2011, Regional office for South East Asia, World health Organization.4. Stahl Timo at el., Health in All Policies: Prospects and Potentials, Ministry of Social Affairs and Health 20065. Puska P.,(2007), Health in all policies, European Journal of Public Health, Vol. 17, No. 4, 3286. Kickbusch, I., Healthy Societies: addressing 21st century health challenges 20087. David V. McQueen et al, Intersectoral Governance for Health in All Policies, Structures, actions and experiences, World Health Organization 2012, on behalf of the European Observatory on Health Systems and Policies8. Personal communication with Dr. Sarath Samarage, National Consultant-WHO Country Office, Sri Lanka, and Former Deputy Director General/Planning and Country Coordinator, Secretariat for Social Determinant of Health, Sri Lanka. 9. The chair of the committee was the Secretary of Health and the Secretaries of other relevant ministries were the members. 10. The Ministers from the following ministries represented at the NHC: Ministers of Health, Higher Education, Finance and Planning, Labour, Rural Development, Housing and Construction, Home Affairs, Local Government, Agricultural Development and Research.11. Key functions of the NHC were: (1). to guide Ministries, departments and other organizations engaged in health activities; (2). to coordinate activities of Ministries and other organizations; (3). to create greater awareness among people of the importance of health; and (4).to promote community participation and involvement12. Round Table Discussion on Public Policies and its Impact on Health: Health in All Policies (HiAP), 21st February, 2012 at the Institute of Policy Studies 13. According to the WHO European Centre for Health Policy, 1999, pg. 4, HIA is “a combination of procedures, methods and tools by which a policy, program or project may be judged as to its potential effects on the health of a population, and thedistribution of those effects within the population”14. Louise St-Pierre et al, Governance Tools and Framework for Health in All Policies, European Observatory on Health Systems and Policies.15. Wismar et al.,The Effectiveness of Health Impact Assessment, 2007, European Observatory on Health Systems and Policies.16. ibid17. ibid18. Thailand’s Rules and Procedures for the Health Impact Assessment of Public Policies, 2010, Health Impact Assessment Coordination Unit, National Health Commission Office, Thailand19. Ibid

Saroj Jayasinghe Faculty of Medicine, Univer-sity of ColomboThanks Samanthi for the excellent introduc-tion. It is high time Sri Lanka initiates activi-ties to introduce, strengthen and improve the systems available for Health Impact Assessment. We could piggy-back on the Environment Impact Assessment legislation and regulations that the country is already familiar with. A recent example of HIA is to study the health impact of the highways that are coming up all over the country. These could include more high-speed accidents, more air pollution, less travel time for emer-gency transport of patients. These should be predicted and the health system should respond appropriately (e.g. strengthen Trauma Services in hospitals close to the Highways, to tackle high-speed vehicular impacts). I think the IPS is ideally placed to take this area up.

Sisira Siribaddana Faculty of Medicine and Allied Sciences, Rajarata University of Sri LankaThe health impact of green revolution is acutely felt in NCP with Sri Lankan Agricul-tural Nephropathy. Traditional knowledge harvesting (agriculture and medicine) is probably the answer. Western medicine fail-ing in front of my eyes.

SamanthiMany thanks Sir. Yes, we should take this area forward to introduce HIA into the system. Particularly, HIA needs to be legislated urgently.

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The healthcare system in Sri Lanka is the metaphorical “feather in the nation’s cap”. The relationship between social fac-tors that lead to health or chronic diseases has long been recognized in Sri Lanka’s public health care delivery system. This has led to the establishment of a network of 954 government health institutions, including central dispensaries in 276 ar-eas designated by the Ministry of Health (MOH) with a health workforce of nearly 50,000, widely spread throughout the country providing free healthcare. The excellent progress in numerous health-care indicators, such as maternal and in-fant mortality, and life expectancy, have – quite rightly – been acknowledged as being on account of the reach and potency of this system.

The Sri Lankan healthcare system is a combination of public health – the main driver enabling universal access which is financed by general revenue sources – and the private sector which is financed through fees levied for service arrange-

ment. But the emerging trend is the ris-ing Out Of Pocket (OOP) expenditure on health – which refers to the cost that is borne by the private consumer for the purchase of healthcare goods and services that are not covered by private insurance providers (or the national healthcare sys-tem). It is, by definition, a non-reimburs-able expense. As per the Sri Lanka Na-tional Health Accounts (2009), household OOP expenditure on health in Sri Lanka rose from just Rs. 5.2 billion in 1990 to 76.1 billion in 2009. The share of OOP expen-diture in Total Health Expenditure was 46% while the share of OOP expenditure in Private Health Expenditure was 89%.

The OOP expenditure on health in a household is mainly spent on the pur-chase of hospital care, professional ser-vices including physician services, pre-scription drugs and non- prescription drugs. This expenditure can have a direct impact on poverty because of its affect on the general consumption levels of poor households. For instance, it may reduce

access to health care for individuals in a household because of an increase in the price of drugs or treatment.

Unraveling OOP expenditure

Expenditure on medicine in the pe-riod 1990 – 2009 (Figure 1) indicates that nearly 50% of OOP expenditure was con-sumed by medical goods dispensed to Out-Patients each year. In 2009, it was found that Rs. 32 billion was spent on the purchase of medicines out of the Rs 84 bil-lion of Current Expenditure (constituting to just over 38%) by Private Sources. The data clearly portrays the fact that private expenditure on medicine has an indel-ible impact on household incomes. This is particularly critical in the context of the present volatile exchange rates, as 96% of medicinal drugs are imported.

PUBLIC SECTOR: Gaps in Healthcare Provision

In Sri Lanka, public expenditure allo-cation for medicine for patients through

Struggling for equity in Sri Lankas Health Sector Amidst

Rising Out of Pocket ExpenditureBy G.D. Dayaratne

• Sri Lankans spent Rs. 70 bil-lion more out-of-pocket on healthcare in 2009 than 20 years ago

•Poor are hit hardest by medicine shortages in state hospitals and lack of regula-tory framework for drugs

Health Sector

Oop(s);This years’ final year graduates in

Sri Lankan state universities will not be graduating until they are 25+, as a result of the ongoing trade union action by the university academics and the forthcom-ing third trade union action to be taken by the university non-academic staff. These trade union actions have prevented the final year students from completing their degree requirements, which otherwise would have been completed by Septem-ber this year.

As a result, students who are applying to foreign universities for their Master’s Degree will have to stay back a year in Sri Lanka be-cause deadlines for financial aid applications and admissions are almost passed. This also delays job market entrants who would be on, or above, the industry norms of entry-level age requirements. Al-though there are no hard statistics, more time taken to graduate means that students will be less desirable to the private sector. This leads to the waiting line for state employ-ment longer. Further, being stu-dents for longer than necessary in-advertently puts their personal life on hold. Marriage will have to wait until students graduate and stabi-lize their finances before embarking on starting a family.

One could argue that Sri Lankan stu-dents do not miss much because median age of graduation for both local and for-eign students is almost the same. Howev-er, evidence suggests otherwise. Students in Europe and the OECD voluntarily choose to enter into education later than the typical age.

Late Graduation: We Are Missing More

The cost of education in most OECD countries has been the main driver of the recent rise in the median age of gradua-tion there. At the same time, soaring job opportunities for graduates and young people seemed to have encouraged more students to stay in education. This dilem-ma is not faced by Sri Lankan undergrad-uates as tertiary education is provided free-of-charge. Therefore, the cost of edu-cation is an unlikely factor affecting later graduation of university students in Sri Lanka.

In most European countries tertiary education is provided free or at subsi-dized rates. Students are encouraged to choose university education at leisure. The European education system is also relatively flexible and allows students to leave and re-enter education free of has-sle. This relative flexibility has further encouraged European students to opt for several years of employment exposure before re-entering into education. As a re-sult, 30% of Finnish students enrolled in university and 52% of Italian undergrad-uates had paid employment experience.

This is not an option for universi-ty students in Sri Lanka as social norms suggest that students should complete education before entering into the labour market. Further, rigidities in the educa-tion system and tight competition to en-ter into state universities make it almost impossible for a student to choose when to start higher education. The times are changing. But for many students await-ing university admission, the private sec-tor has nothing to offer because students are unlikely to stay in employment after being selected. Even if they wanted to, the academic programme is designed in a way that makes part-time employment unviable. Therefore, the period between the Advanced Level qualification and university admission is almost entirely spent idling.

This highlights another disadvan-tage Sri Lankan graduates face when entering into the labour market after late graduation – their lack of labour market experience. Part-time work and research opportunities within university are often available for students in other countries but are not so in Sri Lankan universities. Even formal internship opportunities and part-time employment while studying are not viable options for students if lec-ture times are greatly spread out.

Evidence suggests administrative drawbacks as being the major cause for the late graduation of Sri Lankan stu-dents. Therefore, it is quite clear that cutting down on the time taken to enter students into universities would signifi-cantly improve the job market experi-ence of young undergraduates as they have more time to shape themselves for the private sector. It would also facilitate entrepreneurship by encouraging young people to take calculated risks before they reach the typical age of marriage.

Administrative Delays: Biggest Con-straint

Sri Lankans born in the late 1950’s graduated at the age of 21 or 22. With no

drastically different changes taking place in the education system, the increased time taken for today’s undergraduates to graduate is a modern phenomenon. The graduates on the verge of graduating this year are forced to idle in the indefinite “nowhere” between studentship and em-ployment. A quick graduate output for a country is a catalyst for development and has a lasting positive imprint on the indi-vidual. Overall, with low levels of tertiary education quality [8] and low enrolment rates, undergraduates in Sri Lanka are more disadvantaged than their peers in other developing countries.

With all that has been said, it is clear that authorities should seriously look into reducing the time taken to graduate stu-dents from education to work. Given the development aspirations of the island, a young workforce can contribute towards economic growth. Administrative delays should not get in the way of this. The country’s innovative capacity and entre-preneurship potential must not lie idle in transition between education and em-ployment.

*The author acknowledges the valuable

input and guidance provided by Dr. Nisha Arunatilake, Research Fellow and Head of the Human Resource Development Policy Unit – IPS.

Comment: bit.ly/YJGCGf

Endnotes1 School-to-work transition of Youth in Sri Lanka (2004)2 Highlights from Education at a Glance (2010) OECD3 The Flexible Professional in the Knowledge Society – new demands on higher education in Europe (Report 5) (2008)4 The jobless young: left behind (2011) The Economist5 HIGHER EDUCATION IN INDIA: Issues related to Expansion, Inclusiveness, Quality and Finance (2008)6 Starting your career in China country guide for international students7 Eurostudent IV database. eurostudent.eu (data-base)8 The Global Talent Index. Heidrick & Struggles (2012)

Wasantha KumaraI expected to read some overall economic impacts of the situation in Sri Lanka but unfortunately there is nothing like that. Yes the facts provided in the article is rather OK but the comparisons made with developed countries and India and China is not relevant and incompara-ble to Sri Lankan case in my opinion. What Sri Lanka lacks is a behavioral and attitudinal change among the youth towards labour market. It is not mere the reason that the author is trying to pop-up

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Racing AheadTourist arrival statistics indicate the strong

revival of tourism in Sri Lanka following the end of the separatist war. While the South Asian re-gion recorded an 11 % increase in tourist arrivals in 2011, Sri Lanka showed a remarkable growth of 48 %1. The arrivals have increased by 98 % in 2011, when compared to the situation before the war ended in 2008. The World Travel Market 2011 Industry Report identifies Sri Lanka as one of the six emerging countries in tourism along with Brazil, Russia, India, China and South Africa; due to its revival after the separatist war, high investments in infrastructure development, and the beauty of the destination.

Given the vast potential emerging in the tourism industry, the Sri Lankan government has set ambitious targets to attract 2.5 million tour-ists by 2016. The target is nearly 2.9 times that of the arrivals in 2011. Several initiatives are in place to cater to the increasing demand for hotel accommodation by means of new investments and expansions of existing accommodation facil-ities. Accordingly, the number of hotel rooms is expected to increase to 50, 000 by 2016, from 14,653 in 2011.

Growing PainsTourism is an industry which consumes sig-

nificant quantities of water and energy resources, and generates waste. In the case of Sri Lanka, the hospitality sector ranks as the most energy in-tensive and therefore, the most costly to power. The electricity demand of the hotel sector con-stitutes 4-5% of the national electricity demand and the cost of this energy consumption makes up about 18% of the total operational expendi-ture of a hotel2. With the increasing number of tourist arrivals, there is a likely increase in the amounts of energy and water used, and a conse-quent generation a larger quantity of waste.

Considering both economic and environ-mental factors, it is important that the hotel sector undertakes investments in efficient envi-ronmental management practices and implement effective waste management approaches. Adop-tion of environmental management practices

will promote sustainable utilization of water and energy resources, and minimize the probable negative impacts on the environment through waste management. To sweeten the whole deal, it has been found that there is a possibility of a 20% savings in ener-gy and water consumption as well as a 20% re-duction in waste generated by the hotel2. This translates to an overall reduction in operating costs for the hotel industry, and given current tourism trends, might lead to a better reputation resulting in an increase in consumer demand.

It is widely believed that hotels tend to adopt good environmental management prac-tices as a cost reduction strategy, and a means to get a market advantage. The evidence from different parts of the world reveal that the adop-tion of good environmental management prac-tices by hotels is governed by an array of factors. The aforementioned two factors are irrelevant in certain contexts. The literature shows that the determining factors can be either, hotel-spe-cific or external. Government incentives, gov-ernment monitoring, managers’ characteristics (such as age, managers’ industry tenure and ed-ucation), receipts of environmental awards, envi-ronmental news in print media, trade association membership, and hotel focus on ‘green’ consum-ers, are among some of these factors.

Identifying the problemThere isn’t a benchmarked environmen-

tal management process in Sri Lanka. It hasn’t been well researched or documented, leading to a host of questions regarding the relationship between the location, star classification, chain affiliation, attitude and awareness of higher man-agement, and their affect on environmental man-agement practices. The lack of evidence puts the industry in a difficult position, as all or none of these factors could affect the management of en-ergy, water, and waste in hotels. The fact remains, that until we gather such evidence, the green-ing efforts in this sector are akin to scrambling around in the dark.

Research-based evidence on environmental management practices in the hotel sector will be pivotal for the sustainable development of the industry on two fronts. First, given the significant expansions in the accommodation sector, such evidence is vital to make the on-going and forth-coming developments environmentally and eco-nomically sustainable. Also, given the increased demand ecologically sustainable tourism, such studies can provide implications and data which could be used to leverage Sri Lanka’s position as a sustainable tourism destination.

First StepsThe IPS, with the financial and technical

assistance from the South Asian Network for Development and Environmental Economics (SANDEE), is undertaking a research study to assess the energy, water, and waste management practices, in the hotel sector in Sri Lanka. The two-year research project will come up with vi-tal information on environmental management in the hotel sector, factors governing the adoption of environmental management practices, and policy implications to promote environmental management in the hotel sector. In sum, the study will shed light on a benchmarked environ-mental management process for the tourist sec-tor in the country.

Comment: bit.ly/YJGvdT

This post is in our new category ‘The Note Pad’, where IPS researchers bring you short informal opinion pieces contain-ing their personal thoughts/ideas/questions/contentions from ongoing research work and related engagements (seminars, presentations, conferences, etc).

References1UNWTO (2011), UNWTO Tourism Highlights 2011 Edition2Miththapala, S. (2011), Good practice guidelines on environmental management for Sri Lankan hoteliers. Colombo: SWITCH Asia Greening Sri Lanka Hotels Project, C C Solutions.

Studying Environmental Practices in Sri Lanka’s Hotels

Giving Tourism a Green Shade

By Kanchana Wickramasinghe

Marking World Tourism Day 2012, Kanchana Wickramasinghe discusses a pioneering new study that attempts to measure the impact on the environment of Sri Lanka’s booming tourist hotel sector

government health institutions was around Rs.15 billion in 2009. Around 60% of drug allocations were being distribut-ed amongst National Hospitals, Teach-ing Hospitals, Provincial Hospitals, Base Hospitals, Districts Hospitals and other Specialized Hospitals. The remaining 40% was distributed through peripheral units such as Rural Hospitals and Cen-tral Dispensaries. Rural hospitals and peripheral units cover nearly one third of the population, and it has been regularly reported that these institutions are fre-quently experiencing shortages of essen-tial medicines.

Therefore, although public sector

hospitals are expected to provide drugs free-of-charge for patients, the reality is that most patients tend to purchase ex-pensive drugs and sometimes even de-vices that are needed for surgeries (such as lenses needed for cataract operations, stents required in certain heart surgeries, valves and several other items) from pri-vate pharmacies. This leaves the patients with a choice of either having to forgo the medical interventions they need, or to bear higher OOP expenditure. This i sug-gests the fact that the main objective of having a public healthcare service, which is to protect a household from financial burden when they fall ill, has been severe-ly hampered as a result of the shortages of essential drugs and equipment, especially in primary and secondary level facilities.

Private Sector: Private Hospitals, Drug Prescriptions, and Illegal Pharmacies

The private hospital industry remains highly concentrated in densely populat-ed metropolitan localities and continues to portray oligopolistic market charac-teristics. In 1990, there were 44 private hospitals in operation, which increased to 112 in 2011 (excluding Estate hospitals

and Co-operative hospitals). The number of Out-Patients treated in these hospitals increased from 419,000 in 1990 to 6 mil-lion in 2011,[1] and the number of In-Pa-tients treated, increased from 65,000 in 1990 to 401,000 in 2011. Most of the pri-vate facilities, mainly In-Patient facilities, are patronized largely by higher income households who have the financial capac-ity and private insurance facilities to miti-gate the impact of high medical expenses, when compared with poorer households. In comparison, Out-Patient facilities are used by all income groups, but mostly by higher and middle income groups. Con-straints in access to medicines in public facilities (mainly for Out-Patients treat-ment), has forced poor households also to seek treatment from these private fa-cilities despite the adverse impact to their household’s other expenditure levels.

Due to industry pressure certain

doctors are in the habit of prescribing medicinal drugs marketed by selected manufacturers and importers when more affordable alternatives are avail-able. In Sri Lanka, there were approxi-mately 10,000 varieties of drugs imported (including generics) as at 2011 , compared with 2200 varieties imported in 2001. Taking in to consideration the volatile exchange rate regime present in the coun-try, this makes the general cost of drugs in private pharmacies go up exponentially.

This situation has been further ex-

acerbated with the influx of over 3000 private pharmacies that are in opera-tion illegally without proper regulation. Unregulated markets such as these are often supplied with stolen and diverted drugs from government hospitals. In some instances, patients do not purchase the prescribed dosages of drugs due to their economic constraints. In other, more

alarming instances, it has become com-mon practice for a patient to get drugs directly from these pharmacists without a doctor’s prescription or with the use of out-dated prescriptions, which would cost less when taking in to account the cost of travelling and the consultation fee. This creates a very precarious situa-tion for the health and well-being of the citizens of the country, who for reasons of unaffordability are forgoing proper medi-cal care which could contribute to further, direr, complications in the future.

Conclusion

OOP expenditure on health hits particularly hard on the poor, whose ail-ments will either remain untreated or end up forcing them and their families into deeper poverty. To mitigate the economic and health impact on household, the most pressing need is to maintain an uninter-rupted flow of life-saving essential drugs in government health facilities. Since the much anticipated Medicinal Drug Policy is still to come in to effect, the pharmaceu-tical retail market is primarily responsible for the increasing OOP expenditure on health. To mitigate the financial burden on health in these households, the only remedy available lies with the Ministry of Health.

Here are some key priorities for the MoH in mitigating the impacts of increas-ing OOP health expenditure:

• Increasing financial allocation for medi-cines

•The regularization of the distribution of medicine to the hospital network in or-der to avoid intermittent shortages

•Enhancing the production of the allotted variety of medicines at the State Phar-maceutical Manufacturing Corporation

•Streamlining the distribution network of the State Pharmaceutical Corpora-tion and the Implementation of the Me-dicinal Drug Policy

•Offering equitable access with a pricing mechanism that ensures affordability through the introduction of legislation requiring the prescription of generics and allowing cost-effective generic sub-stitutions to be freely available.

Comment: bit.ly/YJGzds

For more information on the latest Health Expen-ditures and related data, see “Sri Lanka Nation-al Health Accounts: 2005-2009” published by the IPShttp://www.ips.lk/publications/latest_publications.html[1]IPS Census of Private ,Co-operative, and Estate Hospitals 2011

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the total 225 seats). This scenario is even worse when it comes to the district level. In 16 of the 25 districts, the proportion of female representation at the national parliament is 0.1% . According to the Sri Lanka Human Development Report 2012, political parties are the single biggest bar-rier to women’s greater participation in politics. Males are preferred over females, both by political parties and voters, to be nominated and to be elected. “Reasons for the low representation of women in politics start at the personal level, where fewer women than men self-elected themselves for a political career because of socio-cultural, economic, and psycho-logical barriers ”. The vicious climate of violence in the election process has also become an influential factor in discourag-ing interested females from entering the political arena.

Be employed or not to be employed? In Sri Lanka, labour force participation by females is lagging behind their male counterparts, remaining stagnant at 30% for many years. This means that despite the Sri Lankan economy’s heavy depend-ence on women (tea, apparels, and mi-grant worker remittances), more than half of the females in the work force are not engaged in any kind of economic activity and their capabilities are under-utilized. National-level data also reveals that the unemployment rate is higher for women with higher educational attainments, im-plying that investments made on them are not generating the expected economic returns to the country. Labour force participation for women de-pends much more on the social context than it does for men. Factors that appear to have no effect on male participation in the labour force do affect the level and trend of female employment. For exam-ple, other than the standard economic variables such as education, experience, wages and income, many non-economic variables, like marital status and fertility, influence the female labour supply. The

social context would dictate that women are expected to play many roles in their day-to-day lives. Despite being engaged in productive activities (being employed), women also have to engage in reproduc-tive activities, and social activities. This sets a ‘triple burden’ on women. It creates career related stress for female employees – adversely affecting their productivity, necessitating more time off, restricting their ability to undergo rigorous training locally and overseas, and working over-time.

Traditional familial responsibilities of a female, especially as a mother, constrains women in their choice of employment, as do her family’s and society’s attitudes to-wards certain types of employment, that keep the job market segregated by gen-der – with certain jobs being classified as ‘masculine’ or ‘feminine’. Further, costs related to maternity and child care ben-efits that need to be borne by employers create gender discrimination against fe-males. Work Related Costs (WRC) tends to rise with marriage and children, thus affecting the balance of benefits and costs of being employed.

Breaking the BarriersIt is true that attempts have been made by several interested groups to increase women’s political participation, includ-ing through lobbing and advocating. But progress is rather slow as what is required is a ‘system change’. Women’s political participation should be encouraged from the very bottom (i.e., at the local govern-ment level). In this context, abolishing the preferential voting system (which is seen as the main reason for political violence ) at the local government level, and pass-ing the new Local Authorities Election Amendment Bill and the Local Authori-ties Special Provision Bill by the national parliament, can be regarded as a good move. Strong commitment by members at the highest level of political parties is another crucial factor in increasing fe-male political participation. Women, on the other hand, have a responsibility to be vigilant; to vote, and elect women who can address their problems and issues ef-fectively.Low labour force participation by females can be reduced by addressing issues aris-ing due to ‘non-economic’ factors (i.e., marriage, children, etc.). More efficient government intervention in this regard, for instance, regulating and monitoring existing day-care centers and crèches, is a practical step that should be taken im-mediately. More formalized regulatory framework would also encourage the private sector to make more investments on day-care centers and crèches and thereby, close the gap in supply. Research on female labour market issues also sug-gest that the provision of an allowance to working mothers, in order to cover child care costs (for example, Child Care Benefit (CCB) payment in Australia and Universal Child Care Benefit (UCCB) in Canada) would be beneficial to employ-ees as well as to the economy as a whole, as it would bring down the Work Related Costs of working mothers and, thus, en-courage them to remain in employment .

Comment: bit.ly/YJGp61

GII Maternalmortality

rate per 100,000 live births (2008)

Adolescentfertility rate

(2011)

Seats innational

parliament(% female) (2011)

with at leastsecondaryeducation(% ages 25

and older) (2010)

Labour forceparticipation rate(%) female (2009)

Very high human development 0.224 16 23.8 21.5 82.0 52.8

High human development 0.409 51 51.6 13.5 61.0 47.8

Medium human development 0.475 135 50.1 17.3 41.2 51.1

Low human development 0.606 532 98.2 18.2 18.7 54.6

World 0.492 176 58.1 17.7 50.8 51.5

Sri Lanka 0.419 39 23.6 5.3 56.0 34.2

Source: UNDP (2011), Human Development Report 2011, Sustainability & Equity: A Better Future for All

Table 1: Gender Inequality Index and

related indicators

Despite being engaged in pro-

ductive activities (being employed), women also have

to engage in re-productive activi-ties, and social ac-tivities. This sets a ‘triple burden’ on

women.

According to the Sri Lanka Human De-velopment Report 2012, launched recent-ly by the United Nations Development Programme (UNDP), Sri Lanka ranks at 97 out of 187 countries – scoring 0.692 on the Human Development Index (HDI) . A key part of HDI for a country is the Gen-der Inequality Index (GII) which meas-ures inequality in achievements between women and men. Calculation of GII is also based on three dimensions; repro-ductive health (measured by the mater-nal mortality rate per 100,000 live births, adolescent fertility per 1,000 women aged 15-19), empowerment (measured by par-liamentary representation and the per-centage of people who have at least lower secondary education in the age group of 25 years and over), and labour market (la-bour force participation rate for the 15-64 age group).

Sri Lanka is widely acclaimed as having established excellent human develop-ment at a relatively lower level of eco-nomic growth. Although Sri Lanka is categorized as a country with ‘medium human development’ with a GII rank of 74, health and education indicators for Sri Lanka are as good as countries with ‘very high’ and ‘high’ human development. With such good performances on health and education indices, what is holding back Sri Lanka from further improving its standing in the HDI? According to the comparable data given in the table below, the problems lies in the poor female representation in the national parliament and low female participation in the labour force.

13 to represent 10 millionSri Lankan women are more educated,

and participate in the labour market more actively, than most of their regional coun-terparts. At the community level too, we can observe that females are as actively engaged in social activities as males. The majority of the members of Community Based Organizations (CBOs), such as funeral assistance societies and micro-finance societies, are females. In nearly every village in Sri Lanka, women’s soci-eties serve the community in many ways. Sri Lankan culture itself promotes and ensures a woman’s dignity and her place in the society. Sri Lanka has produced the world’s first Female Prime Minister, and elected its first female Executive President in 1994. In such a context, it is quite sur-prising to see poor political participation by Sri Lankan women. This is not a recent trend but a phenomenon observed since independence. Even though the major-ity of the country’s population is female, there are only 13 female parliamentar-ians in the current parliament, of which 3 are from the national list (less than 6% of

Gender Equality in Human Development

Human Development

What’s Holding Sri Lanka Back?

Fixing poor political representation and low labour force participation can boost the country’s human development indicators, argues Sunimalee Madurawala.

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rise. In 2009, approximately 60% of all protectionist measures were taken by G20 countries, and this had risen to 75% by 2011 and to a further 79% by June 2012. Moreover, as pointed out by the WTO, it is worrying to note that the more recent surge in trade protectionism appears to be no longer aimed at dealing with the effects of the global crisis, but rather at trying to fuel recovery.

It’s not just the developed country members in G20 that are contributing to this trend; these measures are steadily rising in emerging markets including China, Vietnam, India, Russia and Brazil too (Table 1). China ranks first in terms of the number of trading partners affected by discriminatory measures and third and fourth in terms of the number of sectors and number of tariff lines affected, respectively. Results of a study which attempts at identifying the most harmful state measures to the world trading system indicate that China appears top on the list, with the measure of export tax rebates affecting 243 tariff lines and 155 trading partners.6 Vietnam is another top offender, affecting the highest number of tariff lines, while Russia has imposed the second highest number of discriminatory measures. India has also imposed a significant number of protectionist measures and has in turn affected a high number of its trading partners. In fact, compared to a ranking based on the total number of discriminatory measures implemented, India is among the four top economies to move up the list of offending G20 nations.

Trade TensionsMounting trade tensions between

China and the US is another cause for concern, as it could further dim the already gloomy economic outlook. Frictions have increased as China and

the US both focus on the high-end manufacturing sector including new energy and materials. US protectionism has been shifting from traditional sectors to emerging ones. In the past two years, the US has launched a host of trade investigations targeting China’s new-energy products.7 Signaling a further rise in trade protectionism, the US set up the Interagency Trade Enforcement Center in February 2012 to investigate ‘unfair trade practices’ from its major trading partners. Moreover, trade investigations from the US have also prompted other nations to follow suit.8

Sri Lanka - Staying AlertRising protectionist trends in both

the developed world and emerging economies could have significant repercussions for developing and least developed countries, in particular for countries that depend on external demand for its goods and services to sustain growth.

As a small open economy, Sri Lanka is dependent to a large extent on external demand both to sustain domestic growth as well as to earn foreign exchange for its import expenditures. The recent decline in absolute export earnings of the country – in addition to a declining share in world exports and exports-to-GDP ratio – is a significant concern. The fact that Sri Lanka’s key trading partners – the US, EU and India – feature top on the list of countries imposing the highest discriminatory measures is possibly the most worrisome part of this whole discussion. The escalating trend of discreet yet damaging trade restrictive measures will no doubt pose a considerable challenge to Sri Lanka’s export growth drive.

Comment: bit.ly/YJGsyK

Table 1: Highest Imposers of Discriminatory Measures

Number imposed Number of tariff lines affected

Number of sectors affected

Number of trading partners affectedRank

1 EU27 (302) Vietnam (931) Argentina (63) China (193)2 Russia (169) Venezuela (786) Algeria (62) EU27 (187)3 Argentina (141) Kazakhstan (732) EU27 (57) Netherlands (163)4 India (74) China (701) China (52) Germany (155)5 UK (67) EU27 (656) Nigeria (45) Poland (155)6 Germany (64) Nigeria (599) Russia (45) India (153)7 France (61) Algeria (476) Germany (44) Indonesia (153)8 China (60) Argentina (467) Kazakhstan (43) Belgium (152)9 Italy (56) Russia (446) USA (43) Finland (152)10 Brazil (54) India (401) Ghana (41) Argentina (151)

Source: Evenett, Simon J., 2012, Debacle: The 11th GTA Report on Protectionism, London: Center for Economic Policy Research.

Endnotes:1’The Growing Threat of Global Trade Protectionism’, http://carnegieendowment.org/2010/09/28/growing-threat-of-global-trade-protectionism/40ef2The Smoot-Hawley tariff act was an act sponsored by Senator Reed Smoot and Representative Willis C. Hawley, and signed into law on June 17, 1930, that raised US tariffs on over 20,000 imported goods to record levels and which reduced US exports and imports by more than half.3http://www.wto.org/english/news_e/news12_e/igo_31may12_e.htm.4http: / /trade .ec .europa.eu/docl ib/press/ index.cfm?id=8045 Evenett, Simon J., 2012, Debacle: The 11th GTA Report on Protectionism, London: Center for Economic Policy Research.6 Evenett, Simon J., 2011, Trade Tensions Mount: The 10th GTA Report, London: Center for Economic Policy Research.7 Evenett, Simon J. and Johannes Fritz, 2012, “Jumbo” Discriminatory Measures and the Trade Coverage of Crisis-Era Protectionism, Center for Economic Policy Research, GTA Analytical Paper No. 3..8One example is the launching of US anti-dumping investigations against China’s leading solar panel manufacturers.9The imposition of anti-dumping duties by the US on Chinese-coated paper in 2006 prompted Brazil, Argentina and Thailand to launch similar investigations.

R.M.B SenanayakeHow relevant are these measures for us. We lost GSP Plus from the EU because of our human rights violations and the Gov-ernment refuses to apply for them again, preferring to take a loss of almost i billion dollars according to some calculation. Our trade with China is only about 2%. As for European protectionism the main problem is that the EU wants to protect agriculture. We will lose if India goes the protectionist way. But India has offered us CEPA which is the way out of protection-ism. But our suspicion of India prevents us from accepting it. We ourselves need to resort to protectionism at least until we make our cost structure globally competi-tive after holding the Rupee constant for so long despite higher differential inflation. We have to regain competitiveness by Rupee depreciation. So we need to protect our agriculture at least for a time. Global protectionism after 1929 dragged out the depression. Hope it will not happen again. But DOHA Round is dead and the way for-ward is only through Regional Free Trade Agreements. If we miss the Indian offer we will be a write -off

AshaniThank you for your input, Mr. Senanayake. Some of these measures have a significant impact on us. For example, India recently banned its cotton exports to ensure supply for domestic industries, which would have no doubt impacted Sri lanka, given that In-dia is our largest source of cotton imports.As you rightly point out, it is thus crucial to to fully leverage on trade agreements available to us – particularly the CEPA – which can offer us considerable potential in tapping into the Indian market.

CO

MM

ENT

S:

“Global trade is under strain. You can hear the acid of protectionism starting to drip-drip-drip on the mechanism of global trade. It hasn’t penetrated the structure yet, but it is starting to stain the surface”, is how Douglas Paal, of the Carnegie Endowment for Peace in the USA, characterized the emerging trend1. It was expected that the 1930s style protectionism of Smoot-Hawley tariffs1 would be unlikely after the 2008/09 global economic crisis. This has certainly held true as trade wars using tariffs as a principal protectionist tool has not taken place. In fact, at the G20 Summit in Seoul in 2010, while the crisis was still burning, leaders of the grouping of developed and emerging economies strongly affirmed that protectionist measures will be restricted. But as global economic prospects have continued to dip, so has the resolve by countries to

refrain from protectionist measures. Several reports have sounded the alarm.

A joint WTO-OECD-UNCTAD report2 released in May 2012 shows that since mid-October 2011 the G20 economies – which account for a vast majority of the world’s economic output and trade – have added 124 new restrictive measures affecting about 3% of global imports and nearly 4% of G-20 trade. A report3 released by the European Union (EU) identifies a “staggering increase in protectionism” in recent months with a 25% rise in trade-restrictive measures. The latest Global Trade Alert (GTA) report4 which monitors trade tensions demonstrates that protectionism in 2010 and 2011 was significantly higher than previously estimated, representing a 36% increase, with many more measures to be implemented in the pipeline.

Harder to DetectTrade protectionism isn’t always

optimal as it could often translate into lost commercial opportunities, threatened jobs, and slower economic recovery. As pointed out in the GTA report, the recent rise in protectionism has not been very conspicuous because protectionist measures have taken new and subtle forms, many of which are not captured by existing WTO prohibitions. For instance, the GTA report5 identifies 101 out of the 132 new protectionist measures adopted in the fourth quarter of 2011 as forms of discriminatory state intervention other than traditional trade defense measures or tariff increases. Such measures, termed ‘behind-the-border’ or ‘creeping protectionism’ include environmental clauses, discriminatory investment measures, export subsidies, discriminatory bailouts, and wage subsidies.

G20 – Main CulpritsThe GTA report shows that the G20 is

responsible for the bulk of protectionist measures and that the share is on the

Global Trade Protectionism is Rising Discreetly

Sri Lanka Must Stay Alert

Ashani Abayasekara writes that trade protectionism is raising its ugly head through subtle yet substantial ways, and the Sri Lankan export sector must keep a close watch.

Some of the top offending countries are Sri Lanka’s leading trading partners.

International Trade

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or redeems them as a tax benefit or cash reward, whichever is most desired. The government could choose to value Green Credits in some way other than a cash rebate or tax deductions. There are cer-tain advantages in using tax deductions in terms of encouraging social change. The key point is that the value of a Green Credit should be real, clear, and easy to understand.

The government, meanwhile, funds Green Credits from revenues generated from carbon taxes on big polluters such as industries and utilities, for instance. A direct tax is more appropriate for these large corporations. The government can also redirect funds already set aside for individual and small and medium sized business carbon reduction schemes. A Green Credits scheme is built on individ-ual incentive and reward for verifiable carbon reductions or other initiatives that fit a government’s green agenda. It is sim-ple to understand, as almost everyone is familiar with consumer reward schemes. The reward scheme approach and is less complex than individual carbon quotas and cap-and-trade mechanisms, and less confusing than the myriad of different in-centives that are now common. A Green Credits scheme will also be relatively quick and cheap to implement. Technol-ogy to support reward schemes is readi-ly available, cost-effective and proven. A government would not need to develop new technology, and, if preferred, could outsource the operation of a Green Credit scheme to an experienced service provid-er.

Innovation in Adaptation: Social Inno-vation

The concept of social innovation draws attention to the broader, collec-tive dimensions of the adaptation aspect of global climate change. As suggested by many studies, the effects of climate change are most pronounced among poor and marginalised populations whose livelihoods are primarily natural re-source-based, and where climate change has a potential long-term impact on local social-ecological systems. There is a grow-ing emphasis on preparing for climate variations by encouraging adaptation

- a process whereby societies improve their ability to manage climate risks and fluctuations. Viewing local adaptation as contributing to a long-term ability of local populations to cope with climate risk calls attention to wider social and economic drivers of vulnerability. Climate action is increasingly viewed as an integral part of sustainable development, contributing to both equity and environmental integrity in the long term. Sustainable policies for climate change adaptation need to feed on local knowledge, experiences and ideas. However, in doing so, the decision making authorities must clearly identify the different power dynamics of the com-munities as well as their perceptions. Dif-ferent communities might have different perceptions on the climate change issue, which is largely based on their experienc-es as well as their awareness. Therefore, in formulating adaptation policies that in-volve society, everyone has to be brought on to the same level of understanding for the interventions to be successful.

Innovation in Research: Empirical Methods

Economists over the years have used many techniques to investigate the im-pact of climate change on the economy of a country. However, with the complex nature of climate change, that affects all parts of the world with varying intensi-ties, many of these techniques have be-come contentious of late. Increasingly, more countries are using ‘decoupling indicators’ to measure the relationship between carbon dioxide emissions and economic development. Decoupling in-dicators were originally used to reflect the asynchronous changes in the relation-ship between environmental pressures and economic growth. But now these are being applied to measure the relation-ship between carbon dioxide emissions and economic development. There is an increasing demand to use decoupling techniques to identify the relationship be-tween greenhouse gas emissions and eco-nomic growth involving multiple areas, such as transportation, energy consump-tion, resource utilization, agricultural policies and so on. However, most de-coupling studies only take in to account a

single country or a single region. There is little research focussing on cross-country and cross-regional comparative analysis. Moreover, the target research period is generally short, which is not conducive to study the decoupling relationship between carbon dioxide emissions and economic development which require a longer time series analysis. Studies have found that the decoupling elasticity in de-veloping countries is significantly higher than in developed countries. Further-more, studies suggest that it will take a longer time for developing countries to achieve developed countries’ decoupling achievements mainly due to the prolifer-ation of green technology and emergence of markets for green products.

ConclusionOver recent years, innovative tech-

niques are emerging from the policy and research arena in dealing with climate change. Some of these measures are al-ready in use, while others need more validation and further research. Yet, it is encouraging to see the development and application of new tools as the battle against the climate change, through a col-lective effort, intensifies. Therefore, it will be interesting to see how these new ap-plications would work in the developing world, especially innovations like “Green Credits”.

ReferencesJonathan M. Haris and Brian Roach, The Economies of Global Climate Change, Global Development and Envi-ronment Institute, Tufts University, 2009

Ron Dembo, Green Credits: A Unique and Innovative Program for Governments to Reduce Carbon Emis-sions of Individuals and Business, Zerofootprint Foun-dation

D.R Taylor, M F. Olwig and N Chhetri, Adaptation as Innovation, Innovation as Adaptation: An Institutional Approach to Climate Change, Applied Geography, 2011

Andreoni, S., & Galmarin. Decoupling economic growth from carbon dioxide emissions: A decomposition analy-sis of Italian energy consumption. Energy, 2012

X. Ru, S Chen and H. Dong, An Empirical Study on Relationship Between Economic Growth and Carbon Emissions Based on Decoupling Theory, Journal of Sus-tainable Development, Vol 5 (8), July 2012Innovations for Greenhouse Gas Reductions: A Life Cycle Quantification of Carbon Abatement Solutions Enabled by the Chemical Industry, International Council of Chemical Associations, July 2009

There is a growing emphasis on preparing for climate variations by encour-aging adaptation - a process whereby societies improve their ability to manage

climate risks and fluctuations. Viewing local adaptation as contributing to a long-term ability of local populations to cope with climate risk calls attention to

wider social and economic drivers of vulnerability.

Economics of Global Climate Change

New Innovations on Mitigation, Adaptation and Research

There is an increasing competition for renewable and non-renewable natural re-sources in the world today. This competi-tion has resulted in the over use of natural resources while creating environmental problems such as waste generation, soil degradation, ecological and biodiversity degradation and, most critically, green-house gas emissions. Among all these impacts, greenhouse gas emissions is considered the foremost challenge in the world today as it fuels global climate change. Over the years, scientists and economists have argued on the effects of greenhouse gas emissions which could possibly be solved through either mitiga-tion or adaptation. Some of the new tech-nologies proposed by scientists, however, are often not feasible for developing econ-

omies. Therefore, new innovative ap-proaches, especially on the policy front, are needed. At the moment, the popular policy tools are carbon taxes or the auc-tion of emissions permits. Over recent years, however, economists have come up with new and innovative methods of mitigation, adaptation and research in dealing with global climate change.

Innovation in Mitigation: Green CreditsEconomists have recently come up

with the concept of “Green Credits”, which is broadly based on the popular mechanism of consumer reward schemes (such as frequent flyer miles and loy-alty points). However, while such retail schemes reward people the more they fly or shop, in Green Credit schemes, the

government rewards citizens the more they reduce their environmental foot-print. Green Credits have clear cash or tax-deductible value, which is the reward component of it.

The government awards Green Credits for verifiable actions that reduce carbon emissions, such as reducing elec-tricity or heating fuel consumption, in-creasing home insulation, installing a renewable energy heating source, switch-ing to a hybrid vehicle, etc. For example, if a household reduces its electricity con-sumption by 100 kilowatt/hours (kWhs) or heating oil consumption by 100 litres, the government could award them 100 Green Credits. At the end of the year, the citizen or business either banks its credits,

By Chatura Rodrigo

Climate Change

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Innovation, Invention, R&D

BreakingDown the Concepts

Invention vs. Innovation – What’s the Difference? Many up-and- coming entrepreneurs share the common mis-conception that invention and innovation are one and the same. Should the initiation and subsequent development of invention and innovation be strictly handed over to people wearing white coats in labs? Defining the innovation problem is often over-looked, but it is essential to comprehend the distinction between the two in order to better calibrate policies. Here is a framework that will help.In its purest sense, invention can be defined as the formulation of new ideas for products or processes. Innovation, on the other hand, is the practical application of new inventions into market-able products or services. That is, innovation occurs if someone improves on or makes a significant contribution to an existing product, process or service. For instance, Tim Berners-Lee in-vented the worldwide web (internet). Mark Zuckerberg then used the internet to define social networking – that required in-novation. Presented with the choice to invent or innovate, most entrepre-neurs would choose the latter. But the truth is that innovation alone is not enough. Too often companies focus on a technology alone rather than the customer’s needs. In order to transform a great idea into a world-changing innovation, it is imperative to align these ideas with the strategic objectives of the organiza-tion. In other words, smart innovators frame their ideas in ways which are compatible with the existing market landscape, and their company’s position in that marketplace.

Is it just about more R&D expenditure? A break-down of the term R&D (research and development) is important - what does this concept really entail?Given that innovation is typically ‘the commercially successful exploitation of ideas’ the common understanding is that a pro-cess of research and development is necessary to achieve this state. Contrary to this belief the “poster child” for innovation, Steve Jobs, states that “innovation has nothing to do with how many R&D dollars you have”. Further, the consultancy Booz Allen completed a study of the top 1,000 R&D spenders among public companies globally in 2005. Based on Booz Allen’s anal-ysis, they concluded, “Contrary to conventional assumptions, R&D spending levels within the Global Innovation 1000 had no apparent impact on sales growth, gross profit, operating profit, enterprise profit, market capitalization, or total shareholder re-turn”.1

The explanation behind this phenomenon could be that compa-nies focus more on the ‘research’ aspect rather than the ‘devel-opment’ aspect of R&D. That is, they spend too much time on re-

search and technology development but too little time applying these findings to suit the market landscape, consumer wants and strategic goals of the enterprise. Clearly, consumers must come first as it is they who drive demand for the marketed product or service.

Is innovation just about products?At the most basic level there are two extensions to innovation – process and product innovation.

Product innovation involves launching new or improved prod-ucts (or services) on to the market. It could facilitate the cre-ation of new markets, especially if new technology creates dif-ferent products for consumers. Product innovation can also be associated with subtle changes to the characteristics of an ex-isting product which enhances product performance and quality.

Process innovation involves finding better or more efficient ways of producing existing products, or delivering existing ser-vices. It involves changes to the way in which production takes place, whether it is in manufacturing, business logistics or man-agement of the employee base. Firms can benefit through a lean cost structure facilitated by process innovation.

Aside from a more efficient use of resources in production, firms can also enjoy higher profits as a reduction in cost can cause an outward shift in market supply, providing scope for businesses to profit. An example might help differentiate these two concepts better. If a Sri Lankan porcelain tableware manufacturer was to develop a new type of porcelain tea pot that, through the embodiment of nanotechnology features, was able to keep the contents of the pot hot for hours on its own – that is an example of a product innovation. Whereas if the same manufacturer tweaked its pro-duction process which cut down the time taken to fire items in a kiln by, say, 50 per cent, which in turn reduces costs and increas-es production capacity – that would be an example of process innovation.

In summary, what does innovation entail?• Improving or replacing business processes• Developing entirely new and improved products and services• Adding value to existing products, services or markets to dif ferentiate from competitors.

Endnotes1 Bordia, R., Dehoff, K., Jurelzekski, B., “The Booz Allen Hamilton Global In-novation 1000: Money Isn’t Everything”, Strategy + Business, Winter 2005, p. 5

RESEARCH

DEVELOPMENT

Scientific investigation Invention

Develop prototypes Testing and review Feedback

SPECIAL ISSUE

This groundbreaking special edition of ‘Talking Economics’ tackles what is clearly now a critical public

policy issue of our time – Innovation. This is true both globally and locally. In a series of articles by IPS

researchers and guest contributors together with compelling editorial content, this special edition takes a closer look at the concept of innovation, uncovers the innovation dynamics of some of the world’s top firms, presents interactive insights from young local

technology leaders, discusses Sri Lanka’s status quo and policy priorities in driving innovation (especially through

nanotechnology), and provides a clear agenda for the country’s future.

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Figure 1: Sri Lanka’s S&T Human Resource Base and its Sub-categories

Human Resources For Science and Technology (HRST) In Sri Lanka (2009/2010)

"Graps" HRST only qualifies by education

"S&T Grap-loyees" HRST qualified by

both education and occupation

1,566,658 qualified to be categorized HRST

"S&T Employees" HRST only qualified by occupation

129,057 218,629 1,218,973

Benchmarking Sri Lanka____________________________________

Compared to other countries, only a small percentage of “Graps” in Sri Lanka remained unemployed or employed in jobs for which they are overqualified. It is likely that these “graps” are queuing for government employment. However, giv-en that most of the graduate output from state universities is in the fields of Arts and Humanities (nearly 60% in 20101), the possibility of these “graps” actively con-tributing towards an innovative economy is, arguably, low. For the most part, “S&T grap-loyees” are the drivers of innovation. A detailed look at the “S&T grap-loyees” in Sri Lanka shows that close to half of them are teach-ing professionals. The likelihood of these workers innovating is small (except, pos-sibly, university academics). Higher skilled workers are more likely to be able conduct research and devel-opment to create new technologies and to profit from existing know-how. The level of skills that often lead to innova-tion comes largely from higher education.

Therefore it is important that more young people pursue degree qualifications in S&T fields of study. In Sri Lanka, S&T undergraduate enrol-ment on average between 2008 and 2009 were 2 students per thousand popula-tioniv. Comparatively, in India, it was 3 students per thousand population (2003), and in China it was 7 students per thou-sand population (2006)2. Compared to these dynamic emerging knowledge economies, Sri Lanka’s performance lags significantly behind.

Constrainining the Knowledge Economy____________________________________

Capacity and resource constraints only allow a thin slice of the students gradu-ating from general education to enter into state universities. Therefore, the growing demand for “S&T employees” capable of performing in occupations that demand higher levels of skills, will have to be sourced from people who have less than university level education. Even of the few that enter university, many study

Arts which is not the kind of educa-tion suited towards building a strong S&T workforce which can engage in high end technological and knowledge creation activities. This is not ideal at all, especially for a country aiming to grow as a knowl-edge-based economy. With the ever-grow-ing human resource demand for S&T oc-cupations, it is essen-tial that more school leavers pursue uni-versity education. However, in enabling this, the almost entire-

ly state-funded tertiary education system faces two main challenges - (1) increasing access to tertiary education, especially in S&T subjects, and (2) improving its quali-ty. With more than half of youth between the ages of 20 - 24 not enrolled in any form of education, the former calls for more re-sources to sustain this inevitable growth of skilled labour demand, while the latter calls for a paradigm shift from Arts and Humanities to science education.

Figure2:

HRST Count in Sri Lanka vs. Selected European countries (as a percentage of total HRST count)

Source: Own calculations based on 2009/2010 Labour force Survey Data, Department of Census and Statics and Eurostat database

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Endnotes1 Based on data obtained by the University Grant Commission, Sri Lanka (2010)

2 Levin Institute (2009);“The evolving global talent pool: lessons from the BRICS countries”

DilaniInteresting article.However, according to the National Science Foundations R& D survey, in 2006 Science and Technology Personnel (STP : which is defined according to the Canberra Manual (OECD) ) was 44,068 and it was increased up to 44,655 in 2008 which means that Sri Lanka is moving to a positive direction… isn’t it?

HarshaneeThank you for your input Dilani. Yes it does indicate that Sri Lanka is improving. However, given the broad definition recommended by the Can-berra Manual a mere HRST count is not going to be sufficient to assess whether Sri Lanka is going towards THE right direction. As I have pointed out in the body of the article, Sri Lanka’s HRST is dominated by persons only qualified by occupation. Ideally the HRST count should be dominated by personnel with the right education working in suitable occupations.

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The Narrow Human

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Sri Lanka’s Knowledge

Economy Ambitions

By Harshanee Jayasekera and Nisha Arunatilake

Around the world, knowledge and innovation have become the drivers of global competitiveness. Countries are competing with each other to invest more on Research and Development (R&D) to help create more novel technologies to gain comparative advantages in knowledge. Workers in Science and Technology (S&T) are a key element of this. Towards understanding Sri Lanka’s development prospects from a human resource perspective, this article hopes to define and quantify the S&T human resources in the country and assess the quality of the S&T workers for their innovative potential.

Measuring Human Resources for Sci-ence and Technology____________________________________

Measuring the stock and flows of S&T human resources would give a clear pic-ture about the innovative potential of an economy. This calls for a common and accepted measurement to both define this S&T workforce and to compare it across countries. One of the commonly accepted measurements is the Human Resources for Science and Technology (HRST), in-troduced by the Canberra Manual in 1995.HRST is a broad definition encompass-ing those who are educationally quali-fied with tertiary education, those people working in S&T jobs, and those who are both educationally and occupationally qualified. For easy and memorable ref-erence throughout this article, let each of these groups be referred to as “Graps” (in reference to them being graduates), “S&T employees”, and “S&T Grap-loyees”, respec-

tively.According to author’s calculations using available data, the count of HRST in Sri Lanka on average for the years 2009/2010 was 1.6 million people. Out of this, 218,629 were “S&T Grap-loyees,” while the number of “Graps” and “S&T employees” were 129,057 and 1,218,973 respectively (see Figure 1). Ideally, the larger HRST category in a country should be “S&T Grap-loyees” be-cause it reflects the demand for S&T oc-cupations filled in by persons with suit-able skills. But, in Sri Lanka the HRST workforce is dominated by persons only qualified by occupation, i.e., “S&T em-ployees” (see Figure 2). The dominance of “S&T employees” indicates that either it is relatively easy for people with less-than-ideal qualifications to be employed in S&T occupations, or that better matching is necessary between education and occu-pational demands.

26 TE DIGEST Jul - Dec 2012 Jul - Dec 2012 TE DIGEST 27

equipment and services and the non-availability of essential tools have stalled progress in Science in Sri Lanka. If we are to benefit from a new opportuni-ty, some bold decisions are needed and it needs to come with commitment from the highest levels of authority.

Commitment to nanotechIn fact, in developing the National

Nanotechnology Initiative (NNI), these pre-requirements were met. Strong de-cisions often cause opposition as well, and it is instructive to hear the voices of Scientists as well at times. Continuous dialogue and all-round contribution by way of results was what got the nanotech initiative off the ground. With the country poised to take off after 30 years of terrorist conflict, the NNI is quite important. The country has a choice, as one scientist said, of ‘becoming a smart country or a screw-driver economy’.

It was felt at the National Science Foundation (NSF) and the Ministry of Science and Technology that Science should be channeled for national devel-opment and that the emerging arena of nanotechnology offers an exciting oppor-tunity. The NNI in Sri Lanka is an inter-esting case of a group of enlightened Sri Lankans abroad influencing an equally enlightened group of individuals in Sri Lanka to consider the emerging field of nanotechnology as an opportunity for Sri Lanka to forge ahead in economic devel-opment. The idea and the concept were well received by the Ministry of Science and Technology (now the Ministry of Technology and Research) along with the NSF which spearheaded the drive with the blessings of the H.E. the President. In fact, the President was briefed in detail quite early by a visiting Scientist whose presentation received his full attention. This prompted a Cabinet paper cement-ing the commitment by the Sri Lankan state to this cutting edge project. The presentation to the President took place

in November 2005, after which the NSF took a key role in moving the initiative forward. The support given by the Head of State was vital for the initiative to take off and this should be acknowledged.

The Cabinet memorandum titled National Nanotechnology Initiative was presented to the Cabinet by the President and the Minister of Science and Technolo-gy and the approval given on 23rd August 2006. The objectives were to generate a critical mass of personnel supported by the necessary facilities to innovate at the national level. To promote nanotechnolo-gy based research and develop industries and to attract best Sri Lankan expertise, both here and abroad, was an objective from the inception. Today, the govern-ment has allocated 50 acres of land for a ‘Nanopark’ and helped in setting up Sri Lanka Institute of Nanotechnology (SLINTEC). The NSF has already final-ized the National Nanotechnology Policy, which would be presented to the Cabinet shortly.

Sri Lanka’s opportunityThe national nano initiative’s main

emphasis is to strengthen the competi-tiveness of the local industries, add val-ue to national resources, and developing human resources to meet the needs of the industry. It is quite clear that esoteric re-search is not the aim, and rapid economic results are expected. Speed and the effi-ciency are closely monitored. Towards the end of 2011, a news item from the USA noted that the global nanotechnolo-gy industry output is set to reach US$2.4 trillion by 2015. Even with the global eco-nomic recession and dampened enthusi-asm in many sectors, the global market for products incorporating nanotechnol-ogy is projected to grow at an annual growth rate of 11.1% between 2010 and 2015 to reach this value.

As of 2011, a total of 175 different types of consumer nano products have been identified in nine different sectors.

The Emerging Nanotechnol-ogy Project of the US Wood-row Wilson Centre re-cords around 1345 products of nanotech-nology in the general con-sumer seg-ment. This should be ex-citing news for Sri Lanka. The planning community should be interested in know-ing more, supporting more and embed-ding more of this type of innovation-led endeavours in future planning We are about to discover that Sri Lanka is a ‘trea-sure island’ in this ‘nano era’.

The objective of giving Sri Lankan sci-ence a new lease of life and adding pride to the label ‘Made in Sri Lanka’ would hopefully be an outcome of the country’s nanotechnology drive. But its realization, in any meaningful manner, needs the en-gagement and commitment of all players in the economy, especially the key deci-sion makers.

The Institute of Policy Studies is a partner institute in a regional study on ‘Nanotechnol-ogy in South Asia: Building Capabilities and Governing the Technology in India, Pakistan and Sri Lanka’ supported by the IDRC, Can-ada. IPS is looking at the socio-economic im-pact of nanotechnology for Sri Lanka.

Other partners include the NSF, National Institute of Occupational Safety and Health (NIOSH), SLINTEC, Sri Lanka Standards Institution (SLSI), and Practical Action. Prof. Ajith De Alwis is the Project Team Leader. The lead researcher for the project from the IPS is currently Anushka Wijesinha (Research Economist), and was previously Asha Gunawardena (on PhD study leave).

Prof. Ajith De Alwis is a Lecturer at the Depart-

ment of Chemical and Process Engineering, Uni-versity of Moratuwa and

was formerly the head of SLINTEC. He holds a B.Sc. Eng. from the University of

Moratuwa and PhD from University of Cambridge.

Talk to Prof. De Alwis - ajith@cheng.mrt.ac.lk

W.A WijewardenaThe work so far done is commendable, but as usual, SL appears to have missed the bus. The world came to know about nano revo-lution in late 1970s due to the fundamental research done in USA and UK in harnessing nano carbons for a variety of economic applications from energy harvesting to medical application to military work to high tech electronics. But SL knew of it only after the onset of the new millennium and there-again, well into the middle of the first decade. In contrast, Singaporean authorities

in 1999 instructed that all higher education institutions should concentrate on four fields in their curricula and nano was one of them. To meet the challenge, the government allocated some S$500 million to National University of Singapore to do research in nano area. Today, that university is hiring the world famous Nobel laureates to help it to build up the knowledge base. What we do here is thinking big with poorly funded SLINTEC whose birth was mainly due to the participation of a few far-thinking private companies exclusively engaged in garment

industry. SL’s electricity producer, badly hit by droughts and high petroleum prices, has not thought of looking at the possibility of harvesting solar power through nano tur-bines as is being done by a private company called Nano Solar in California. The reason: no challenge because the Treasury pumps up funds to make good its losses regularly. Israeles are used to saying that hard times are the prime drivers of innovation. Without facing hard times by individual ventures, it is unlikely that SL will make a much headway in this area.

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Across the globe another technolog-ical revolution is shaping up. The new revolution is termed Nanotechnology – controlling and manipulating matter at atomic scale for economic and social ben-efit. Unlike other industrial revolutions, this is open to anybody who has a sense of importance and an understanding of science and technology. As capabilities increase in leaps and bounds and the information revolution creates a “flatter world”, the right mindset can grab these new opportunities offered. Globalization has its positives and negatives, but as this process is nearly irreversible, it is import-ant that we take up the positives and cap-italize on them.

More than 70 countries in the world

have their own nanotechnology initia-tives. Today, Sri Lanka has joined in this with its own initiative, but the leadership given to this initiative by key decision makers is still weak. One wonders why this is the case. Why are we so conserva-tive when it comes to innovation and risk taking, which is a characteristic that sets nations apart?

Country’s can, and should, benefit from technology…

Sri Lanka had, unfortunately, failed to benefit from earlier technological revolu-tions in any meaningful manner. While Information technology has transformed Bangalore in India, in Sri Lanka, we are still only thinking in terms of Business

Process Outsourcing (BPO) opportuni-ties. Forays into biotechnology have cre-ated millionaires in India. India’s richest woman started her industry with extract-ing enzymes from papaya. In Sri Lanka, much of our fruits go to waste – close to 50%! This is far from ideal. We still have tussles over plastic crates when we know that it is useful and can transform agricul-ture.

Sri Lanka over the years has main-tained a poor percentage close to 0.13% of GDP into research and development. Much of that again has been spent on sal-aries and general expenditure, with the result that the scientific infrastructure has fallen grossly behind globally competi-tive standards. The poor state of

COMMITMENT IS KEY

by Ajith De Alwis

Nanotechnology in Sri Lanka: A New Beginning

with a New Technology but

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ReferencesMahmood, Hina. (2012) ‘SeedStartup: Riding the wave of Entrepreneurship in the Middle East’, Your Middle East, 11 May.Mansoor, Zainab. (2011) ‘Oasis500: A Technology Startup Accelerator from Jordan’, DinarStandard, 1 April.“Oasis500 – About us” (http://ww.oasis500.com/about-us/)“SeedStartup – What we do” (http://seedstartup.com/)Wijesinha (2011), ‘Introducing Venture Capital for Traditional and Small Enterprises in Sri Lanka’, Briefing Paper, Policy Strategy Committee, Ministry of Traditional Industries and Small Enterprise Development, April 2011.

Previous Efforts at VC in Sri Lanka and the “Banker’s Trap”

The VC industry in Sri Lanka emerged in the early 1990s, resulting from a govern-ment decision to provide fiscal incentives for VC funds (tax deductibility for invest-ment in approved VC funds and a 10-year tax holiday for VC profits). The two devel-opment banks at that time, National De-velopment Bank (NDB) and Development Finance Corporation of Ceylon (DFCC), one state bank, People’s Bank, one pri-vate bank, Commercial Bank, two invest-ment banks, DCIC and Asia Capital, and one finance company jointly with another private bank, Central Finance/Hatton Na-tional Bank (HNB) floated VC subsidiaries, launching 7 VC funds. In the years 1993-1996 they made 76 investments, an average of just over three investments per year, per fund.

A study funded by USAID and con-ducted by an American expert John Burr revealed that the performance of only 1 out of the 101 investments made by these VCs truly qualified as a ‘successful VC in-vestment’ in terms of a return equal to a significant multiple of the value of the original investment. This was Millennium Information Technologies (MIT). PVIC was the only company to invest in MIT when it first bid for the computerization contract at the Colombo Stock Exchange. PVIC invested LKR 7.5 million in 1996. In 1999, PVIC sold its stake to a foreign fund for LKR 43 million, a 573 per cent return on investment. Subsequently, MIT sold out to the London Stock Exchange for US$ 30 million.

The defining feature of all these VC companies, as clear from the list of VCs given above, was that they were all sub-sidiaries of banks. The Directors of these companies were largely veteran bankers. Even much of the senior management were taken up by bankers seconded from the parent companies. Essentially, the funds

were managed by bankers with a banker’s mindset rather than by venture capitalists with a venture capital/risk capital mindset. As the VC companies rarely had industry experts, enterprise experts, and those with strategic business development expertise, these funds did not really pick ‘winning firms’, i.e., firms with high intellectual cap-ital and extremely strong upside potential if the right guidance and hand-holding was provided. By the early 2000s, many of the companies invested in by the VC funds had either returned only modest returns or had under-performed completely, and con-sequently, many of these VC funds them-selves failed.

Lanka Angel Network

With the aim of assisting innovative Sri Lankan start-ups to accelerate their growth Blue Ocean Ventures (BOV), a Sri Lankan BOI-approved venture capital, was set up in 2010. BOV provides the neces-sary funding and support for local talent to make a global mark. In order to accel-erate the entrepreneurial ecosystem in Sri Lanka BOV tied up with the Indian Angel Network in 2012 to launch Venture Engine (VE), an innovative new platform that helps turbocharge the startup ecosystem in Sri Lanka. The goal of VE was to help Sri Lank-an entrepreneurs accelerate their business to the next level via access to potential investors and develop stronger business plans.

Over the last year, VE has been in-volved with several other annual start up events to help develop this ecosystem. VE was instrumental in creating the Hack-athon where ideas were created over a weekend. VE also partnered with the Academy of Design to create the business launch at the Sri Lanka Design Festival where the top design entrepreneurs got funded. Currently VE has partnered with the Ceylon Chamber to launch Spark IT for ICT Entrepreneurs.

All these events created a need for entrepreneurs to get access to funding throughout the year. This prompted the formation of the Lankan Angel Network (LAN). LAN is a group of investors who have a passion for promoting Sri Lankan entrepreneurship. LAN comprises of in-dividual investors, venture capitalists, and angel investors. It brings together the Sri Lankan investor and mentor community to scale up startups. LAN identified key challenges that entrepreneurs face at each stage of their life cycle and helps them overcome these and accelerate their busi-ness. The active investors meet every sec-ond Thursday of the month to look at busi-ness plans/proposals sent to the network. The selected entrepreneurs get invited to give a five-minute pitch and if success-ful, get mentoring and funding assistance. LAN also has set up ethical practice, which governs investor behavior and protects the entrepreneur.

Managing Director of BOV Mr. Pra-jeeth Balasubramaniam said, "Sri Lanka was lacking an entrepreneurship ecosystem, especially capital sourcing and angel invest-ing were hard to come by. Sri Lanka has entered an era of unprecedented growth in all sectors. Opportunities to build new businesses are increasing, and at a time like this, VE and LAN will help perfect those entrepreneurial solutions to grow success-ful businesses. We are hoping to provide the ideal start-up platform through these programs”.

LAN members receive a minority stake in the company, leaving the entre-preneur in control. The members bring business building experience, functionality experience, Industry experience, contacts for partners, customers and follow-on fi-nancing. The network looks for clear path to profitability, solid management, realistic business plan, scalable business, compet-itive edge, market acceptance, realistic fi-nancial projections, realistic valuation and a well-articulated exit strategy for investors.

estate and traditional businesses, to turn to the more exciting and often signifi-cantly higher return area of ICT, Mobile Apps, and Digital media”.

Entrepreneurs who survive the train-ing are eligible for funding of JD 10,000, and those who manage to thrive after the first stage of incubation are eligible

for a further JD, 50,000. Successful entre-preneurs who manage to get their seed investment from Oasis500 have the op-portunity, over a 3-month period to ac-celerate and achieve milestones that oth-ers would take a longer time to achieve without the same level of assistance. This gives them a significant competitive edge.

Moreover, the Oasis500 Angel Net-work serves ICT, digital media and mo-bile companies by preparing them for funding by venture capitalists and pri-vate equity funds. Their goal is to provide a platform to showcase pre-selected start-ups looking for angel capital, to potential angel investors.

Supporting Start-Up EnterprisesHere’s a look at some of the world’s top firms and what innovation means to them and what is has meant for their stellar business performance

Venture capital, star-up financing, seed investment – it may have many names but its role is unequivocal – providing new entrepreneurs with investment, mentoring

and networking that they may not otherwise have had access to, in order to realise the full

potential of an innovative idea. In the editorial of the last issue of the

Talking Economics Digest, I mentioned that while many other countries, including

in the Arab region, face similar problems to Sri Lanka’s in terms of unemployment

and creating opportunities for youth, they are also finding solutions which Sri Lanka

must sit up and take notice of. I noted that, “Innovative initiatives like Oasis500 in

Jordan, Seed Start Up in Dubai and Plug and Play in Egypt are fostering a network of mentors, investors and incubators to help to

fill finance and skills gaps for young people”. So in this issue we decided to take a closer

look at a couple of these, as well as look at a similar effort taking shape in Sri Lanka. We

also take a quick look at previous attempts at venture capitalism in Sri Lanka and why it

failed. – Editor

SeedStartup ____________________________________________________

In the span of a few years the Middle East has seen an escalation of seed start-up venture capital (VC) funds. Competi-

tion is becoming increasingly fierce but innovative ideas are gaining momentum as funds are investing in new ventures.

SeedStartup is an international start-up accelerator and seed venture fund located in Dubai, with a global approach and a focus on digital media (web, mo-bile, software) start-ups. Applications are lodged from around the globe and 5-10 are selected to participate in the program in Dubai. Participants then undergo a 3-month program inclusive of mentoring, seed investment (up to US$25,000) and networking and introductions to sources of follow on funding.

“Entrepreneurship is on the rise. Especially in the last three years we’re really starting to see a huge upswing in entrepreneurial enthusiasm. Also more and more VC funds are being launched. It’s a very encouraging thing and it’s also a great time to be an entrepreneur as well as an investor in the Middle East,” said Rony El-Nashar, founder and managing partner of SeedStartup in the UAE.

The purpose throughout the dura-tion of the program is for entrepreneurs to build and refine their products under the guidance of their mentors who can increase the start-up’s chances of success. By the end of the program, entrepre-

neurs would have built on and market-ed their new product, and strategically positioned themselves to raise their next round of funding from angel investors and venture capitalists. SeedStartup acts as a platform for want-to-be entrepre-neurs to successfully market their ear-ly-stage product.

Oasis500____________________________________________________

Oasis500 is a leading early stage and seed investment company located in Jor-dan which looks for enthusiastic entre-preneurs with either a feasible new idea or an existing startup, funding up-to 500 startups in the technology sector. It is the first of its kind in the Middle East and North Africa (MENA) region.

The program at Oasis500 includes entrepreneurship training, mentoring, incubation, sound legal advice, and ad-ditional follow-up funds if required. The training boot-camp is extensive and covers all business aspects including, business modeling, financials, pitching, facilitation and marketing, among others. The experience here, nurtures creative ideas in Information and Communica-tion Technology (ICT) and Mobile and Digital Media, transforming them into startup companies.

Oasis500 addresses the lack of seed and early stage funding for technology ventures in the MENA region. They help to overcome a challenge faced by many, which is the difficulty in obtaining funds when a new business startup really needs to grow and has no real revenues or a sol-id track record. The program of Oasis500 bridges this gap and will keep these new startups afloat by giving them the seed, early-stage, and follow-on funding that they require.

Dr. Usama Fayyad, Executive Chair-man of Oasis500, says “We hope to change the investment culture in this re-gion from having a strong focus on real Im

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TOYOTARelentless Pursuit of Process Innovation Toyota, seen as a long time organization of innovation, will forego today’s profits in order to dominate the market-place tomorrow. Toyota spent more on research and development (R&D) than any other company in the world in 2011, according to ‘Global Innovation 1000’. Aside from an alloca-tion of funds towards R&D, it is important to note that Toyota also invests time, money and effort in product and process innovation to maintain its position as a market leader.

The practical expression of Toyota’s customer-oriented philosophy is known as the Toyota Production System (TPS). The foundations of TPS are built on standardisation, to ensure a safe method of operation and a con-sistent approach to quality.

The processes at the heart of TPS are:

KAIZEN A process of ‘continuous improvement’ applied daily in every sphere of the company’s activities. It is continual striving for im-provement of standard processes and procedures, from the most basic manufacturing process to serving the customer, the wider community, and beyond. Just In Time (JIT) – The ‘just in time’ approach to production pi-oneered by Toyota has now gained almost universal acceptance in world manufacturing. Essentially, ‘just in time’ manufacturing allows the entire production process to be regulated by the laws of supply and demand. Customer demand stimulates the produc-tion of a vehicle. In turn the production of the vehicle stimulates production and delivery of the necessary parts and so on. This innovative process ensures the elimination of waste and maxi-mised efficiency as the right parts and materials are produced and provided in the exact amounts needed.

JIDOKAIncorporates quality checks into every step of the production process. By ensuring transparency in all processes, jidoka helps address any abnormalities immediately.

Toyota has successfully revolutionised its production process by applying these concepts innovatively and effectively. The result has been the pro-vision of high quality vehicles, at lowest possible cost in a timely manner with the shortest possible lead times. The TPS has driven Toyota towards long-term success by becoming the eleventh-largest company in the world by revenue and reporting the manufacture of its 200-millionth vehicle in July 2012.

APPLEInnovative Leadership to Facilitate Success Apple has assumed the top spot for being the world’s most innovative company. Successful business leaders, like Apple’s former CEO the late Steve Jobs, understand the concept of innovation and strive to imprint their behaviours as processes and philosophies within their organisation. Apple’s performance under Steve Jobs, versus other leaders, powerfully illustrates the importance of innovative leadership. Under his watch Apple’s net worth increased to become greater than the Gross Domestic Product of Sweden - US$458 billion.

Apple is founded on the belief that “innovation is creating a new way of doing something which results in positive change.” It is Steve Jobs’s under-standing of innovation that is widely communicated and followed at Apple and a few of his beliefs are highlighted below.

• “You cannot inspire unless you are inspired”. Jobs’ passion was not computers. It was creating tools to unleash creativity and enrich peo-

ples’ lives.• A clear, concise vision which

is consistently commu-nicated is of utmost im-portance. A vision allows you to see things others have missed.

• “Sell dreams not products”. Focus on customers and

satisfying their needs. A good product is one that helps peo-ple lead better lives.

Jobs said “You have to be different to buy

an Apple computer. You have to think different. The

people who buy Apple com-puters are creative spirits and

looking to change the world. Apple makes tools for them. In their craziness, we see genius.” • “Create insanely great experiences”. Steve Jobs believed that you have to start with the customer experience first and then work backward to the technology. It is not just about the product, it is about the cus-tomer’s experience with the product.

Following Apples enormous success it is evident that an innovative leader can drive an organization to offer the best and to continuously improve through innovation. Steve Jobs famously once said, “Innovation distinguish-es between a leader and a follower”.

http://www.kpmg.com/global/en/

issuesandinsights/articlespublica-

tions/technology-innovation-survey/

pages/apple-still-ahead.aspx

EMBRAERInnovative Strategy of “Reverse Outsourcing” Embraer, the world’s third largest aircraft manufacturer behind Boeing and Airbus, has thrived not because of their ability to out-compete their re-spective rivals, but because they were able to find a niche within the indus-try of small and medium-sized planes. Brazil’s Embraer has grown steadily since the former state-run company was privatized in 1994 and is now a leading force in aerospace technology and innovation, and has delivered more than 5,000 executive, commercial and defence aircrafts in its 40+ years, now operating in over 90 countries.

Embraer has innovation as one of its core corporate values. Owing to this fact, the company received FINEP’s Innovation Award 2012, the most pres-tigious recognition by Brazil’s apex innovation agency.

Upon winning this award Embraer’s President, Dilma Rousseff, said, “There must be an umbilical link between education, academic and research insti-tutes, and the private sector because life depends on innovation. Knowl-edge, technology and applied sciences equal innovation, and productive innovation leads to increasingly sophisticated products. Hence, Embraer’s award this year”.

Embraer applies innovation in six dimensions - product, service, process, marketing, entrepreneurship and new business development. In the last six years Embraer invested nearly US $1 billion in research and development. Following Embraer’s near collapse in the 1990’s they introduced an inno-vative business model of “reverse outsourcing” which has now become standard within the aviation industry. They have succeeded ever since. The company builds global planes yet remains at the top end of integrating, designing and assembling innovative regional jet planes while outsourcing many components. Reverse outsourcing enables Embraer to obtain the highest quality and cheapest components from all over the world, giving it a definite advantage over its more vertically and horizontally integrated competitors like Bombardier.

“We have a more flexible model. All our subassembly is done outside. Bombardier does it in-house. When we want to speed up we flow more activities out while Bombardiers subassembly holds up final assembly and becomes the driver of the cycle. With our supply chain and assembly pro-cesses it is very easy to build up the production rate. We need to make only minor investments to speed things up.” – Embraer’s CEO Frederico Curado.

The outsourcing model gives Embraer strategic alliances with component providers which keep it at the forefront of technology, speeds up the de-velopment phase, and keeps costs at a minimum. It is clear that innovation has pushed Embraer ahead of rival Bombardier of Canada and set the stage for present and future success.

Firm LookHere’s a look at some of the world’s top brands and what innovation means to them and what is has meant for their stellar business performance...

GOOGLE An Organizational Culture that Drives Innovation

Google is a champion of innovation and continues to maintain a reputation as one of the world’s most innovative companies owing to its strong orga-nizational culture. Employees are assigned to small teams and encouraged to propose wild, ambitious ideas in line with the company’s philosophy. Fur-ther, the prevalence of a flat organizational structure provides employees with easy access to face-time with senior management to present these ideas. Having their ideas voiced at a senior level, appeals to the employees intrinsic needs, motivating them to continuously innovate.

“We realise the minute we stop innovating is the minute we stop being a leader. Innovation comes from everywhere and is expected and supported in all segments of the company and from people at every level.”

Google’s culture is a combination of things. It is ethical, customer-respon-sive and spiritual. A noteworthy method used by Google to foster creativity and originality is the ‘Google’s innovation time-off strategy.’ This grants many of the employees twenty per cent of the working week to invest in their own interests. Encouraging employees to pursue personal interests and passions, builds on their innovative nature and has been a successful incubator for many new ideas.

“If you give people freedom, they will amaze you.”

Google leaders work for their teams - their goal is to ‘make managers resources not bosses!’. There appears to be a strong sense of team rather than self at Google, which enhances the creative ability of employee as they are encouraged to constantly network with diverse groups of people. They strategize and knock down barriers, setting an example as drivers of innovation.

“Google is not a conventional company. We do not intend to become one. Throughout Google’s evolution as a privately held company, we have man-aged Google differently. We have also emphasized an atmosphere of cre-ativity and challenge.”

The open and dynamic organizational culture at Google appeals to employ-ees and this is reflected in the high quality work produced. This facilitates a mutually beneficially relationship between employees and the corporation, and has collectively driven them towards their enormous global success of becoming a $200 billion company.

By Tehani Welgama

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industry-research linkages exist in Sri Lanka today. The most prominent one is the Sri Lanka Nanotechnology Center (SLINTEC). In its first full year of opera-tions alone, SLINTEC was able to secure 5 international patents on nanotechnology products. This is impressive when com-pared with Sri Lanka’s historic average of 1.8 total international patents per year6. Similar industry-research partnerships in areas aside from nanotechnology need to be cultivated, drawing lessons from SLINTEC’s business model.

Meanwhile, building a qualified pool of individuals geared towards S&T and R&D will be critical to Sri Lanka’s inno-vation ambitions. Education – especially science education at all levels – is import-ant not only for increasing general science and technology literacy, but also to build up a critical mass of scientists, research-ers and engineers. Yet, very few students are engaged in science and engineering courses at Sri Lankan universities7. Com-pared to a distinct knowledge-led econ-omy like Singapore, where the majority enrolment is in engineering sciences of nearly 30%, in Sri Lanka the majority en-rolment is in Arts of over 30%. This is a direct reflection of the fact that only 10 percent of all secondary schools in the country have the facilities to teach science stream at the A/L (Grades 12-13)8. This naturally restricts the number of students who are able to gain admission to science and engineering programmes in universi-ty. Eventually this leads to the low num-bers of qualified-professionals - Sri Lanka records only 237 researchers per million people, well below the developing coun-try average of 3749.

Additionally, R&D is now very much a global activity spurred by international knowledge networks. Globalization and the proliferation of online knowledge have resulted in the market for ideas be-coming a global one. As such, firms are now increasingly looking abroad to find new ideas and individuals who can drive their firms forward. This has led to a dra-matic increase in international research and development networks to tap in to the diversity of knowledge available across borders. Studies by Kerr and Lincoln (2010) and Hunt and Gauthier-Loiselle (2008) show the high potential for knowl-edge spillovers and increased innovative productivity associated with knowledge flows from abroad. Sri Lanka can benefit from such knowledge spillovers by enter-ing into technology transfer partnerships with countries leading on innovation.

Government policy also has a role to play in incentivizing innovation at the

firm-level. In fact, Budget 2012 was a wa-tershed moment in this regard. In Budget 2012, a range of tax incentives were an-nounced, including: reduction of income tax on research income from 24% to 16%; reduction in personal income tax of all those engaged in research and technolo-gy from 24% to 16%; reduction in income tax on all institutions engaged in research and technology to 20% and such institu-tions are exempt from Value Added Tax (VAT); triple deduction in relation to research and development expenditure undertaken by enterprises through Gov-ernment institutions, to promote private institutions to use Government research facilities; and so on. These measures have been commended by private sec-tor groups10. However, interviews with leading industrialists reveal that several issues may constrain these incentives: (1) the small number of suitable Government research institutions capable of catering to industry needs (the ITI was the only one mentioned by those interviewed); and (2) the limited capacity in, and low-industry orientation of, Government research facil-ities. However, this is a vicious cycle and needs to be broken. Government research institutions cannot develop greater indus-try-orientation without kick-starting this process. Meanwhile, Sri Lanka’s private sector needs to be given confidence in the abilities of Government research in-stitutions, and for this their financial and human resource capacities need to be ex-panded.

Policy PrioritiesFostering a forward-looking innova-

tion system, that supports knowledge-in-teraction among various parties, and commercialization, is critical, if Sri Lanka is to enhance manufacturing competitive-ness and produce higher value exports. Sri Lanka’s weak performance on inno-vation is a symptom of the low priority given to S&T and R&D investment over the past several years. This may be largely attributed to the distraction of fighting a war. In post-war Sri Lanka, reversing this it will be a key determinant of our com-petitiveness and rapid export growth.

A key point that needs emphasizing is that innovation is beyond just research. Innovations come from the entrepreneurs who make them happen and ultimately depend on a society’s responsiveness and ability to transform research into higher exports, into things that add value to peo-ple’s lives and to the economy. Encourag-ing these entrepreneurs with appropriate policy support for “techno-entrepreneur-ship” is important, for example by setting

a conducive business environment, better access to finance through venture capital, incentivizing commercialization of inven-tions, etc.

For successful innovation policy to kick-in, it will need the firm backing of top leaders, to lend credibility to the vi-sion and facilitate the adoption of key measures for removing bureaucratic hurdles. It is time that Sri Lanka set up a powerful ‘National Innovation Council’ chaired by H.E. the President or Prime Minister which can drive the innovation policy agenda at a national, strategic-lev-el. Meanwhile, rewarding and recogniz-ing innovations is important. In an envi-ronment where there are award schemes for nearly everything in Sri Lanka, it is high time that a ‘Presidential National In-novation Awards’ scheme is introduced to promote and recognize successful in-novations, particularly those that have resulted from industry-research collabo-rations.

Emerging economies that were poor-er performers than Sri Lanka only a few decades ago are moving forward at a rapid pace. South Korea’s Hyundai and Kia manufacture the most fuel-efficient cars in the world today. Brazil’s Embraer is one of the leading jet manufacturers and has partnerships with the market leaders, Boeing and Airbus. Taiwan’s Acer and Asus are now two of the lead-ing notebook manufacturers in the world. Innovation was at the heart of propelling these firms, and their countries, into the global spotlight. So, focusing on innova-tion must be a key policy priority in the coming decades. Only then can Sri Lanka boost its higher value exports and leap into the same league as these dynamic emerging economies.

Endnotes1 Ministry of Finance and Planning (2010) 2 products with high R&D intensity, such as in aerospace, computers, pharmaceuticals, scientific instruments, and electrical machinery3 Ministry of Technology and Research (2010)4 National Science Foundation (2008)5 Ibid.6 Ibid7 This is of course, aside from the broader chal-lenge of expanding tertiary education in Sri Lanka, where at present of more than 1000,000 deserving students only around 15 percent who gain the nec-essary A/L qualification are able to enter into uni-versity (Source: IPS, 2011).8 IPS (2011)9 World Bank (2008)10 “National Chamber commends the 2012 Bud-get proposals”, Island, November 22, 2011 http://www.island.lk/index.php?page_cat=article-de-tails&page=article-details&code_title=39577 [ac-cessed on 1 May 2012].

Embraer, Acer, and Hyundai are some of today’s top global export brands. What do they have in common? Firstly, they emerged

on the world stage because of their focus on innovation, often supported by smart government policy. Secondly, none of them are traditional “western” brands, and they broke through markets previ-ously dominated by the industrialized world. With technological transforma-tions continuing at a rapid pace, and the emergence of a globalised marketplace, firms in all countries are under pressure to become more innovative. Innovation is becoming the determinant of faster and sustained export growth. Emerging economies in particular have been able to ‘leapfrog’ by embracing innovation. With the end of the armed conflict, Sri Lanka too is hoping to ‘leapfrog’ and position it-self as a dynamic global hub. As stated in the Sri Lanka: Emerging Wonder of Asia document1, “Sri Lanka’s successful inte-gration with the global economy and its sustained success in international compe-tition will depend increasingly on effec-tive combinations of science, technology and innovation” (p.126). This article looks at what innovation is all about and some policy priorities for Sri Lanka.

There is a wide body of literature that demonstrates the role of innovation in economic development. For instance, the report ‘Innovation and Economic Growth’ by Goldman Sachs (2011) shows a clear statistical link between innovation and gains in the standard of living. Fostering

innovation cannot simply be measured in terms of university degrees and pat-ents awarded. Rather, the national goal should be to use the basic research and creativity inherent in our nation’s peo-ple and to translate these into innovative products and services through develop-ment and commercialization initiatives. Andrew Grove, the former Chairman of Intel, and Eric Schmidt, Executive Chair-man of Google, encouraged the need for “translational innovation.” It is this type of approach that will enhance returns to investment, boost economic growth and help create productive, well-paying jobs.

Innovation is as relevant in the de-veloping part of the world as elsewhere. Innovation was earlier seen as an activ-ity to be carried out by highly educated labour in R&D intensive companies that have strong links to leading centres of excellence in the scientific world. From this view point, innovation appears to be typically a “first world” activity. But, this view is flawed. Innovation – the effort to transform ideas into new and improved products or processes - is an aspect appli-cable to economies at all levels of devel-opment.

Sri Lanka’s ChallengeGiven that innovation is widely con-

sidered a primary source of economic growth, policies to facilitate firm-level in-novation are high on the agenda in most countries. Sri Lanka too needs to focus on innovation to achieve national economic prosperity and an improved quality of

life. A country’s high-tech

exports are a significant measure of a country’s abil-ity to innovate and commer-cialize scientific findings ef-fectively2. In Sri Lanka, the value of high-tech exports has drastically declined in recent years. The share of high-tech exports out of the total manufactured exports which just 2.2% in 2001 fell to 1% by 2010. While Sri Lanka recorded an average 1.8% of high-tech exports

share each year in the last decade, Korea recorded 75%, Thailand 27%, and Singa-pore and Malaysia over 50%3. Sri Lanka’s performance was poorer even when com-pared to countries in the region like Paki-stan and India (see Figure 1).

Sri Lanka’s weak innovation inputs could be a leading cause of this. For ex-ample Sri Lanka’s Gross Expenditure on R&D (GERD) as a proportion of GDP was just 0.11 percent in 2008 – a drop from 0.21% in 2004.4 The number of R&D sci-entists has also decreased from 4,062 in 2004 to 4,037 by 2008.5 Meanwhile, the ex-penditure on R&D by the private sector, out of total R&D expenditure, is remark-ably low. Unlike in most developed coun-tries where much of the R&D expenditure is by the private sector (over 65% in most cases), in Sri Lanka it is a mere 18%. The bulk of R&D expenditure in Sri Lanka is by the state sector (57%). This has strong implications on the rate of commercializa-tion of science and technology research.

Yet, innovation is distinct from just research and it doesn’t autonomously result from it. The nexus of industry-re-search collaborations, appropriate financ-ing options, and support for commercial-ization are vital drivers to move research to innovation. Unlike in most developed countries, many universities in devel-oping countries like Sri Lanka have not established sufficiently strong linkages with industry. Industry obtains access to university laboratories, talents research scientists and a pool of potential recruits. Universities receive industry’s financial support, necessary to conduct their work and expand their resources, and they also receive feedback from industry to adapt research to the needs of the economy. The Five Year Strategy of the Ministry of Technology and Research observes that, “at present very few knowledge in-tensive companies and very little R&D that is required for innovation, is taking place in the private sector. On the other hand, most of the R&D undertaken by Sri Lankan scientists end up as mere publica-tions in scientific journals with very few research outputs yielding a commercial product or a process” (p. 31).

Very few noteworthy examples of

Through an Innovation FocusBy Anushka Wijesinha

Export CompetitivenessDriving Manufacturing &

High-Tech Exports Share in Total Manufactured Ex-ports: Sri Lanka in Global Comparison (2010)

Source: World Bank Database, http://data.worldbank.org/.

South Korea

Philippines

Singapore

Malaysia

China

Thailand

Indonesia

India

Pakistan

Sri Lanka0 10 20 30 40 50 60 70 80

Figure 1:

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ilar career pathways and assessment and reward schemes to ensure focus. Uni-versities should consider moving out of the undergraduate emphasis and shift towards becoming research universities. This could initially start with a few select-ed universities.

Procedures ____________________________________

The regulatory environment applica-ble to research and development needs to be streamlined. Despite having lim-ited funds, there appears to be many procedural and system obstacles. The importance of research and its special characteristics need to be recognized and maximum support should be extended within an accountability framework. On the one hand, procedures should address financial, leave, promotions and reward mechanisms, while another set of pro-cedures should address relevant safety issues as with biosafety, chemical safety and occupational health and safety of new materials research (ie., nanomateri-als, bioimplants, GMOs). While simpli-fying procedures, the researchers them-selves should join in to support an ethical code of conduct which will go a long way in resolving conflicts and establishing credibility. Quality assurance should be

a basic necessary procedure applicable to all research activities.

Globally, benchmarking exercises are implemented to assess performance of individual nations, institutions and pro-grams. National benchmarking mech-anisms are also necessary in chartering progress as well as developing addition-al linkages. The alignment of a national benchmarking strategy will also support linkage to regional as well as to global platforms.

Protection ____________________________________

Researchers have an obligation to dis-seminate new knowledge generated with-in their research activities by publishing research output. However, innovations which possess potential for commercial-ization must be protected. An innovation ecosystem must be created with mecha-nisms for developing patent writers, legal personnel with scientific and legal skills etc. The public sector research and de-velopment institutions, universities and other similar institutions and agencies should create policies to facilitate the fol-lowing:

An environment conducive for, and to provide incentives for, R & D activi-ties, and other knowledge creation activ-

ities towards commercialization of new knowledge.

Setting up operational units such as technology management units, commer-cial arms, knowledge exploitation units to promote spin off enterprises such as R&D based joint ventures with the private sector. Through these operational units, the universities and research institutes should promote processes related to busi-ness incubation and start-up companies.

• Providing funding mecha-nisms for the institutions to support IP creation.

• Inducing the private sector to conduct contract /collabora-tive research.

• Development of incentive systems to promote partner-ships.

• Effective transfer of IP rights.• Ensuring the effective man-

agement of IP rights.

Accepting that IP generation and pro-tection are critical to the development of Sri Lanka is of paramount importance. Alignment of policy, paired with ade-quate state support in an effort to make this a reality, would take Sri Lanka out of its commodity-selling mindset and usher in a smarter nation.

Funding____________________________________

Only about 0.15% of Gross Domestic Product (GDP) was spent on research and development in Sri Lanka last year which, in comparison to the average of about 1% contributed by most developing countries and over 2% allocated by developed na-tions, is an insignificant amount. Sri Lan-ka has a record of less than two patents filed at the USPTO compared to thou-sands filed by developed nations. Such a low number of patent applications clearly correlate with the low expenditure on re-search and development.

Thus, up to now, research has played a minimal role in Sri Lanka’s develop-ment. Owing to this fact, since gaining in-dependence in 1948, the Sri Lankan econ-omy has not been able to venture out of its commodity driven mindset. Further, of all our exports only 1.5 % arise out of advanced technology products. It is also noteworthy that Sri Lanka has not taken an active role in any of the technological waves that has swept the planet for the past two centuries.

In this backdrop, it is pertinent to ask how nanotechnology, considered as the fifth industrial revolution, can contrib-ute to the enhancement of the Sri Lankan economy.

Firstly, the state should provide a planned mechanism to reach a satisfacto-ry level of funding for R&D by increasing the contribution from the current rate of 0.15 % of GDP. For example, the Gov-ernment budget allocation for research should increase up to at least 0.5% of GDP in the next five years. Since state funds are not continuously available in sufficient

amounts to satisfy the R&D demand, in-novative mechanisms must be sought.

Examples of such funding mechanisms are: a) Developing private-public partnerships for R&Db) CESS schemes for targeted re-search with optimal use of fundsc) Venture Capital d) Tax concessions on R&D spendinge) Attracting foreign funds as an outsourced destination for research

All these policies are designed to encourage entrepreneurial researchers to commercialize innovation via startup companies. At present, venture capital, either from the state or the private sector is not available in Sri Lanka.

While it is conceivable that such sup-port cannot be engendered overnight, Sri Lanka must develop policies to direct in-novators towards this. What is also cru-cial in addition to venture capital funding (which normally undertakes innovations which are at least at the intermediate lev-el of development), are seed funds which are of a smaller nature.

They are essential in supporting re-search for commercially promising inno-vations. Many research projects carried out at Universities and Research Institu-tions perish at this “death valley” of re-search. Seed or angel funding to raise re-search toward gifted innovations must be encouraged and the state’s support will be critical in this pursuit.

Human resources____________________________________

The essential need for human resourc-es in research and development is never in doubt. In Sri Lanka, the number of practicing scientists are currently lower than 5000. For it to make an impact on R & D, this number must increase by at least four fold. Post graduate training abroad was the norm followed in the past. How-ever, it is critical to develop local training for post graduate students to engage in high quality research. A system of recog-nition and support for scientists who will undertake the task of encouraging and supervising students to pursue Ph.D. de-grees should be incorporated.

Institutions____________________________________

The research environment consists of both work systems and available facili-ties. Brain drain has not occurred due to a search for better salaries alone, but also due to a search for better R&D facilities available elsewhere. It is important to de-velop R&D clusters by bringing research institutes and universities into working arrangements as well as developing re-search triangles and quadrangles for dif-ferent physical locations. There are 37 research institutes and 14 state sector uni-versities across the island with significant capacities which have not been adequate-ly developed or made use of.

Clustering is a strategy to derive synergy, e.g., Western research cluster one - UOM, UOC, USJPu-ra with ITI, IDB, RRI and AEA; Cluster two - UOK, NARA, NERD and CRI; Central Re-search Cluster - UOP, IFS, VRI, PGRC and TRI. Regional clus-ters should be supported with state-of-the-art facility develop-ments preferably by having sci-ence / techno parks established initially with one per region.

It is also important that all research institutes fall within one ministry alone. All research personnel should have sim-

Towards More Science, Research and

Innovation in Sri LankaVeranja Karunaratne, Gehan Amaratunga and Harin De Silva Wijeratne

Sri Lanka Institute of Nanotechnology

An axiom generally agreed upon worldwide is that research and innovation leads to the prosperity and an improved qual-ity of life of a nation. In Sri Lanka, this state of prosperity can only be achieved by increasing scientific output i.e., research publications and patents, leading to commercialization. Such an effort must be supported by initiatives aimed at an expand-ing research capacity. However, Sri Lanka’s road to economic prosperity appears to be challenging.

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sum allocations, and the formation of a Technology Development Fund, award-ing research grants, and developing the venture capital market.

The initial steps taken by the Sri Lank-an government to form the Technology Development Fund with the assistance of the Malaysian Technology Develop-ment Corporation provided some hope in this direction. Such a fund would ide-ally finance commercialization of priori-tized research, provision of research in-frastructure and incubator facilities, and the acquisition of new technologies, etc., and should be duly utilized by the NNI. This fund can also be used to liaise with other international science parks, provide research grants to Multi National Corpo-rations (MNCs), cluster development, in-centivize man power training, and build Public Private Partnerships (PPPs).

In the longer term, the state can make further lump sum allocations to ad-dress the various ancillary and support fields which are essential for achieving sustainable long term growth in nano-technology research and development. The funds can be directed towards en-suring the minimization of environmen-tal and social costs of this technology, through the provision of recourse to affected sectors. For instance, given the invention of nano fabrics and nano paints which may have a detrimental impact on laundries and cleaners, an alternative source of employment for this segment of the workforce has to open to avoid unem-ployment problems.

Similarly, the invention of certain nano products may have environmental and health implications. The use of a well thought out quality standard procedure will be necessary to market products that are not socially or environmentally harm-ful. Obtaining certifications from ISO and SLS will be instrumental in this. In order to ensure sustainable (i.e., socially, envi-ronmentally and economically harmless) nanotechnology applications, a robust mechanism committed to this task needs to be implemented and funds should be allocated accordingly.

Additionally, funds can also be di-rected towards building a human capi-tal base. SLINTEC has plans to create an environment which attracts expatriate scientists to the country. Further, the ne-cessity to establish a platform of scientists and technical staff over a short period of time requires local and foreign train-ing, industrial internships, a Presidential award system, etc. Funds can also be com-mitted towards disseminating knowledge among school children and university

students on this novel technology, while the gradual inclusion of nanotechnology to the school curriculum is also essential.

However, the key to acquiring the necessary resources do not lie in new pol-icies and over involvement of the state alone, but the astute utilization of oppor-tunities within the existing frameworks. For instance, tax incentives offered for research and development has increased substantially over the past three years and the Board of Investment (BOI) grants special tax holidays and other incentives to ventures that are of strategic develop-ment importance to the nation. Machin-ery and lab equipment used for research and development are exempted from im-port taxes. Similarly, the 2013 Budget has allocated Rs. 9 billion for direct expendi-ture on research and related work done by researchers in government research institutions. Such budgetary provisions which encompass the entire domain of re-search and development should be duly utilized by the nanotechnology venture, which has been enunciated as the priority sector in the five year strategic plan of the Ministry of Technology and Research.

Furthermore, an environment con-ducive to attracting venture capital fund-ing is of utmost importance to provide finances for startup companies which will undertake the commercialization of research. The initial funds needed to ac-quire patent rights, legal costs and expen-diture on lab equipment should be easily accessible despite the high risk nature of these projects. The high initial cost in-volved in nanotech research is justifiable, owing to the potential exponential returns through research and development. Jack Uldrich in his book “The Next Big Thing is Really Small” illustrates this through

the example of a pond filled with lilies. He explains that if the amount of lilies in the pond double every day and takes thirty days to fully cover the pond it will be only half covered at day twenty nine. However, for it to be fully covered it will take just one day. The return of technolo-gy and research can be likened unto this metaphor where, long periods of labored experiments with precede before a clear outcome. Nevertheless, once the outcome is evident the returns will be immense.

That being said, in order for funds to flow to such high risk projects an econo-my should possess a strong venture cap-ital network. In a country where venture capital funds and angel funds are rarely spoken of, this task seems impossible without the intervention of the state. De-spite this predicament, it is imperative to bear in mind that it is primarily the mar-ket forces supported by the state sector that should be the focus. The cooperation of the banking sector is necessary as no state body can fully fund all technological projects of a country. The most the state can do to encourage the flow of funds to these high risk investments is to provide guarantees, refinancing facilities, and concessionary interest rates through var-ious state bodies. Therefore, the banking sector must be willing to pass the ultimate benefit to the borrower, charging reason-able interest rates, prioritizing the alloca-tion of funds, and emerging out of its risk averseness.

As a final thought, the importance of commitment and coherence of policy de-cision makers in making this endeavour a success cannot be over emphasized. The industrial thrust, budgetary allocations, commitment of financial institutions, education policy, and private sector en-thusiasm will be the key success factors in achieving a competitive edge in the in-ternational arena. Slower than anticipated progress of developing the nanoscience park can be detrimental to the country due to a potential loss of market leader-ship and the competitive advantage of investments. In order to avoid such an unfavourable outcome, there has to be a collaborative effort among all parties. Such will be possible when state allocat-ed funds, private sector participation, expatriate scientists contribution, and the financial sector involvement strive to syn-ergise the overall efforts.

(The views, opinions and recommendations in this article are solely those of the author’s and should not be interpreted as the views of the au-thor’s employer. The author is a member of the National Nanotechnology Committee of the Na-tional Science Foundation.)

In order to ensure sustainable (i.e., so-

cially, environmental-ly and economically harmless) nanotech-nology applications, a robust mechanism

committed to this task needs to be im-

plemented and funds should be allocated

accordingly.

The National Nanotechnology Initia-tive (NNI) implemented by the govern-ment can be viewed as a technological milestone for Sri Lanka. Given past fail-ures in grasping the full potential of the technological waves of Information Com-munication Technology (ICT) and elec-tronics, the timely exploitation of nano-technology is commendable. Learning by examples of the Asian Tiger economies (i.e., Hong Kong, South Korea, Taiwan, Singapore, etc.,) that moved from poverty to prosperity with the adoption of tech-nological advancements in their develop-ment agenda, Sri Lanka has acted wisely in this undertaking.

The much needed ‘quick wins’ has been reached and SLINTEC boasts of seven international patents to date. The nanotech park is also becoming a reality and has begun development of its first phase by laying the foundation stone of the Nanotechnology Centre of Excellence (NCE). Aside from these successes, given that investment in technology is a partial public good due to its unique traits of non-rival consumption and non-exclud-ability, the many socio-economic benefits

of investment in technology and research as well as the high initial costs calls for the state to intervene further in this venture. Nevertheless, it can be argued that nan-otechnology does possess features of a partial public good, which are particular-ly apparent when the patent period of an invention expires. This is the reality as the consumption of an invention cannot be constrained to the inventor and his/her immediate society alone, but will extend to the society at large.

A fitting example of the features of non-rivalry and non-excludability in nan-otechnology is the invention of a cure for cancer at a nominal cost through nano research, which will not only benefit the individual researcher, healthcare compa-ny, and cancer patients of that country, but will also be an asset to society at large beyond national borders. Once the patent rights eventually expire, other health care companies will make use of past research and will consume its benefits without paying the cost. This explains its nature of being a partial public good and the many socio-economic benefits it carries.

Research and Development lacks a

clear and certain outcome and is not time-bound. Contrary to this, entrepreneurs are profit-oriented and have time-bound goals and targets. Hence, a mismatch between technology-oriented research activity and application-oriented busi-nessmen is evident. Even though in most developed economies the percentage of private sector investments in technolog-ical research outweighs the state sector, the common perception in the developing world is that the state sector should invest in research and development, while the private sector focuses on less risky invest-ments. Sri Lanka belonging to the latter classification necessitates that the state sector intervenes in the development of nanotechnology which is still at an infant stage; as has been done by Asian Tiger economies at the outset of harnessing technology in their development agenda. The main problems faced by these econ-omies were the apparent lack of a clear mechanism linking research with market forces, the lack of an intellectual property system, and the lack of support services. These problems were addressed in nu-merous ways by tax incentives, lump

State’s Role in Boosting Nanotechnology

Guest Article

by Shalini DharmawardenaSenior Economist (Economic Research Department) - Central Bank of Sri Lanka

38 TE DIGEST Jul - Dec 2012 Jul - Dec 2012 TE DIGEST 39

The Sri Lanka Institute of Nano-technology (SLINTEC), which started research in August of 2009, provides a platform for research solutions based on nanotechnology to Sri Lankan indus-tries. The participating industries name-ly, Brandix, Dialog, Hayleys, Loadstar, and MAS Holdings, who are also the joint venture partners, have established niche markets for their globally compet-itive products and are national leaders in terms of export revenue in their re-spective sectors. It is envisaged that these companies would benefit from nanotech-nology differentiators provided by SLIN-TEC to their product line up.

Significantly, SLINTEC has applied for three patents at the USPTO to cover the innovations for its joint venture part-ners. Specifically, two of the patents cover a slow release nano-fertilizer formulation developed by SLINTEC which releases nitrogen to the soil in a slow and sus-tained manner. The loss of nitrogen (up to 50 %) due to evaporation and leaching out by rain water is a major economic loss to the agriculture sector. In Sri Lanka, the current fertilizer subsidy allocation by the government in the paddy and tea sector is Rs.30 billion. Even if the slow release na-no-fertilizer formulations saves merely 30 % of the current loss, Sri Lanka would still save an amount of Rs.9 billion. The third patent application is on an environmen-tally friendly, value-added, solid rubber tyre based on nano-materials.

SLINTEC’s proposed 50 acre nanotech-nology park in Homagama

Another key area SLINTEC continues to pursue since inception is adding value to Sri Lankan natural resources with na-

no-applications. SLINTEC has applied for two patent applications in this area. Firstly; to make carbon nano-tubes using unique Sri Lankan vein graphite (mined underground only in Sri Lanka) at Boga-la and Kahatagaha mines. Secondly for a physical method to make nano-magnetite from naturally occurring magnetite ore found in Matale. Carbon nano-tubes are used to manufacture integrated circuits, semiconductor chips used in comput-ers, and applications in nanoelectronics amounting to a global business of several billion US Dollars. On the other hand, na-no-magnetite, among its manifold uses, is an important ingredient in magnetic res-onance imaging contrast enhancement, magnetically controlled transport of an-ti-cancer drugs, and microwave devices. The global market for nano-magnetite is growing and currently 25 g is sold at Rs.19, 000.

In addition, SLINTEC has champi-oned the making of Titanium Dioxide from Ilmenite found in Pullmudai in Sri Lanka without exporting the raw sand. Globally Sri Lanka has the 9th largest Ilmenite reserve containing up to 65 % of Titanium Dioxide which ranks 3rd in terms of purity. Sri Lanka exports ap-proximate 80,000 Mt of Ilmenite earning about 8 million US Dollars. The same amount of Ilmenite is converted into Tita-nium Dioxide by the multinational com-panies who purchase them for a value of 120 million US dollars. Because Sri Lanka has not invested in technology needed to convert Ilmenite to Titanium Dioxide, the nation loses a significant amount of for-eign exchange.

In addition to making a strong nation-al case for making Titanium Dioxide from Ilmenite in Sri Lanka, SLINTEC has de-

veloped a process for converting Ilmen-ite to nano-Titanium Dioxide, which in terms of value addition is 1:250. SLINTEC has also turned its attention to is Mont-morillonite (MMT) clay or nano-clay. MMT is a little known Smectite clay min-eral in Sri Lanka, found in mainland India and in many countries in the region. In Sri Lanka, MMT had been recorded in small amounts in dry zone soils and is believed to be formed as a result of weathering of micaceous minerals such as biotite, phlo-gophite and muscovite.

In the current efforts to locate new mineral deposits with nano-applications, SLINTEC has applied for an explora-tion permit (with a view to secure min-ing rights) at the Geological Survey and Mines Bureau for a large MMT deposit. The MMT deposit was found in Murunk-an in the Mannar District of the Northern Province, and is the first of its kind in Sri Lanka. Although the global market for MMT currently is only about one billion US dollars, its use in clay polymer na-no-composites is growing globally. With the Sri Lankan deposit in Murunkan, es-timated to be over 75 million Mt, SLIN-TEC hopes to provide this resource to the industries where MMT is used as a raw material.

The nanotechnology initiative in Sri Lanka launched through the SLINTEC is unique among similar worldwide ini-tiatives, where the government and the private sector have invested equally. The spirit of this initiative, as reinforced in this case study, is to ensure that scientif-ic research findings directly contribute to national development.

This write up was provided by Prof. Veranja Karunaratne, Science Team Leader - SLINTEC

Private-Public Partnership for

Innovation

Case of SLINTEC

Do you agree with Our Take? Have an opinion you’d like to share? Write to us at talkingeconomics@ips.lk

The editorial team discusses why three things that are sometimes seen as challenges in Sri Lanka could in fact be opportunities for innovation, if harnessed cleverly.

Our Take

Economists have increasingly placed empha-sis on the role that good “social capital” can have in generating and nurturing good ideas and bringing them to fruition. Plenty of recent research of the most dynamic and innovative entrepreneurs point to the value of being connected to diverse social networks – links to people from wholly different socio-eco-nomic backgrounds. In Sri Lanka we have the good fortune of not having to look very far in search of a diverse network of people. Given our multi-ethnic community, we have a diverse network base here at home. Sri Lanka’s people can make optimal use of the

many positive spill-overs from diversity. We must not underestimate the true gains of our diverse community and ignore the dynamic benefits it brings, notably a boost in compe-tition, innovation and enterprise, raising long term productivity growth and hence stan-dards of living. Sri Lanka needs to do more to harness di-versity, by recognizing the scale and potential economic and social value of diverse cultures. Philippe Legrain, the prominent economist and the author of ‘Open World: the Truth about Globalisation and Immigrants: Your Country Needs Them’, writes that people

from different cultures come up with more innovative results to problem solving and entrepreneurship than if all have the same background. Further, Legrain observes that, “Diversity acts as a magnet for attracting cre-ative, talented people. Diverse societies are generally more entrepreneurial because they are more open and tolerant”. Following the end of a 26 year civil war, Sri Lanka should embrace a tradition of openness and cultur-al diversity and learn to treat diversity as an asset rather than a cost. Can our nation can draw on the widest possible pool of talent in order to foster innovation and propel growth.

Ethnic and Cultural Diversity Can Foster Creativity

At present the contribution of R&D to GDP growth is negligible. It is also recognized that the need to develop technology and a skilled and motivated S&T community within the country are necessary to overcome this predicament. A major challenge faced by Sri Lanka is that number of students enrolled in science and engineering courses at local universities is very low. Compared to knowl-edge-led economies such as China and Sin-gapore, that have achieved fast paced growth through an emphasis on S&T, with nearly 30 per cent of enrolment in science and engi-neering courses, Sri Lanka lags significantly

behind. For Sri Lanka to put itself on to the world technology map through an improvement in the number of student enrolments in the above mentioned fields will be long and chal-lenging process. The fact that over 30 per cent of enrolments in Sri Lanka are in Arts courses has been accepted as being a disadvantage or a handicap to innovation. But, what if we were to view this scenario in a different, broader perspective - is it not possible to see that this so-called handicap could in-fact work in our favour to foster innovation in Sri Lanka?Arts and humanities courses foster a great

deal of creativity in those enrolled in the field. The creativity cultivated in these courses will be engrained in 30 per cent of our nation’s university-educated young people each year – a significant part of the work force. This can be a valuable tool for innovation, as cre-ativity is a key part of the innovation process. Couldn’t this creativity and openness be har-nessed to contribute to inventions of prod-ucts, processes and procedures? Could Sri Lanka not embrace the arts and humanities talent pool by recognizing that it may actually be a gateway for creativity rather than being a handicap to innovation?

Heavy Enrolment in Arts and Humanities Can Be a Plus

It is accepted that developing countries such as Sri Lanka are destinations for outsourcing and FDI by entrepreneurs in other, particu-larly advanced, economies. Such internation-al outsourcing lowers the marginal cost of production for multinational Corporations (MNC’s) allowing them to compete in in-creasingly competitive global markets. Being a nation that receives a significant amount of outsourcing, Sri Lanka should strive to inno-vate on processes and procedures in manu-facturing in order to reap the benefits that offshoring may offer. Given cheap labour and input costs in countries such as Bangladesh and Vietnam, Sri Lanka has lost its labour-cost advantage in manufacturing. However, this need not be a hindrance to our efforts in at-

tracting MNC’s. Sri Lanka must focus on pro-viding high quality products with an emphasis on productivity and innovation, in order to maintain its attractiveness as an appropriate location for outsourcing. To benefit from this, Sri Lanka must broaden their domestic knowledge base and generate specialist capa-bilities. The initiation of appropriate firm-lev-el policy that provides incentives for innova-tion as well as the necessary infrastructure, support services and human resources are necessary.Sri Lanka can engage in process innovation, which can result from formal and informal investment in R&D and on-the-job learning. Such technological advancements raise total factor productivity which is an instigator of

economic growth. MAS Holdings, an innovation focused compa-ny in Sri Lanka, is the region’s largest supplier of intimate apparel and sports/active wear. Working in partnership with global brands such as Victoria’s Secret, Speedo, Marks & Spencer, and NIKE, Inc., MAS invests in in-novative processes to build on efficiency and high quality production so as to differentiate itself from its low-cost contenders in China, Bangladesh etc. Could the loss of the cost advantage in man-ufacturing be transformed into an oppor-tunity and encouragement to continuously improve the organization of production by means of investing in innovation, R&D and human resource development?

Process Innovation Can Drive Manufacturing Competitiveness

40 TE DIGEST Jul - Dec 2012 Jul - Dec 2012 TE DIGEST 41

TALKING ECONOMICS ‘EXPERT VOICES’

PANEL DISCUSSION ON

IPS ‘Talking Economics’ hosted a unique networking event and ‘Expert Voic-es’ panel discussion on “The Jobs Challenge” on Wednesday 22nd August from 6 to 8pm in the IPS Executive Lounge.

The panelists, drawn from diverse sectors included Kishu Gomes (Managing Director/CEO, Chevron Lubricants Lanka PLC ), Prajeeth Balasubramanium (Founder and Managing Director, Blue Ocean Ven-tures),Nisha Arunatilake (Research Fellow and Head, Human Re-sources Development Policy Unit, IPS), Rashitha Delapola (Interna-tional Affairs Coordinator, National Youth Services Council), Gayan Panditharathna (young entrepreneur). Anushka Wijesinha, Research Economist and Editor of the ‘Talking Economics Blog’ was the Mod-erator at the discussion.

The audience was an eclectic mix of young professionals from the private sector, academia and public institutions. Sri Lanka continues to grapple with issues of youth unemployment and under employ-ment, and this ‘Expert Voices’ open dialogue provided an opportuni-ty to explore some of the challenges and dilemmas of this issue, but also identify innovative solutions.

The latest issue of the bi-annual publication ‘Talking Economics Digest’ (January – June 2012) was also launched at this event, with the first copy being handed by IPS Executive Director Sa-man Kelegama to Patrick Amerasinghe, respected private sector leader and founder/chairman of Young Entrepreneurs of Sri Lanka (YESL).

‘THE JOBS CHALLENGE’

Latest Publications Fostering Innovation to Fast-forward Growth in Sri LankaAnushka Wijesinha and Nethmini Perera

Research Studies: Working Paper Series No.16, December 2012

A new Working Paper by IPS looks at the imperative of innovation for Sri Lanka’s growth and competi-tiveness in this new post-war era. With technological transformations continuing at a rapid pace, and the emergence of a globalised market-place, all countries are under pressure to become more innovative. The paper explores the status of R&D investment, availability of a skilled talent pool, need for industry-research collaboration, importance of commercialization and innovative financing, attracting diaspora scientists, among other issues. The paper calls for innovation policy to be considered in a holistic manner, and calls for a powerful National Innovation Council to be set up to drive the agenda at a national, strategic level.

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EST

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LICA

TIO

NS

The Editor spoke with four young leaders in Sri Lanka’s technology landscape on their perspectives of innovation, creativity, techno-entrepreneurship, and the challenges facing Sri Lanka in driving innovation. To watch the full interviews, simply scan the QR codes with your smartphone or tablet and you’ll be taken directly to the videos on the IPS Youtube channel.

Fresh ViewLahiru Pathmalal, CEO of Sri Lanka’s latest e-com-merce start-up, says that his family context, external mentorships and partnerships, and the emerging ven-ture capital arena in Colombo helped him take the plunge from a job in a think tank to becoming a tech-entrepreneur. Takas.lk won seed funding through a lo-cal competition called ‘Venture Engine’ which invests in tech start-ups. While seed funding is usually quite small, Lahiru says that it’s more about who you raise funds from than how much you raise. Takas’s impres-sive investor list includes Rajan Anandan (Chairman, Blue Ocean Ventures and Head of Google India), the Indian Angel Network, and a private venture capitalist from Australia. What excites him about entrepreneur-ship, he says, is that “the sky is the limit”.

Lahiru PathmalalCEO, Takas.lk

“Entrepreneurship isn’t easy, but

people will nurture you and help you grow”

Kalinga is the founder of TechKatha an online plat-form that helps democratize the ICT information flow by breaking down technology concepts and address practical issues through free-to-download videos and podcasts. In this interview, Kalinga talks about the importance of taking technology beyond the confines of Colombo. Tech Katha was awarded the e-Swabhimani award by the ICTA in 2009 for its pioneering efforts. He has now turned to a more hardware-oriented approach to taking technology to the masses having built a micro-controller PCB which young people can buy for just Rs 1,600 and learn to make simple meaningful electronic devices. This, he says, has generated huge interest among budding coders and programmers from across Sri Lanka, especially in rural areas which have limited access to technology.

Kalinga AthulathmudaliFounder, TechKatha

“Sri Lankans need to get back to building things”

Rohan Jayaweera talks about what it really means to be innovative – as a company or as a society – and gives some interesting food for thought on what it will take to drive innovation in Sri Lanka if the country is to really stand out. Allowing people’s ideas to flourish and challenging tradi-

tional and cultural norms, Rohan says, is essential to building a more innovative nation. “We are so good at following than creat-ing. That needs to change. That’s a transition that I would like to see Sri Lanka make”, he says.

“Instead of always being

a follower, we must create

something new that others will

follow”

Rohan JayaweeraSri Lanka Country Consultant,

Google Asia-Pacific

Hiran Wickramasinghe talks about the untapped potential for innovation in Sri Lanka and the creative and technology talent that he's seeing emerging out of training institute's like his, the Informat-ics Institute of Technology (IIT). Hiran gives an example of one such creation, the 'Gaming Glove', created by students at IIT. He says that Sri Lankans need more access to technology but also certain attitudes need to change at the society- and company-level so that new ideas are embraced and people feel like innovation is encouraged.

Hiran WickramasingheGroup Managing Director, Informatics Holdings

“People must have access

to more technology”

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42 TE DIGEST Jul - Dec 2012 Jul - Dec 2012 TE DIGEST 43

Sri Lanka Economic Summit 2012

The Sri Lanka Economic Summit 2012, took place at the Cinnamon Grand Hotel during 10 – 12 July. The summit was organized by the Ceylon Chamber of Commerce. Dr. Nisha Arunatilake, Research Fellow, IPS was one of the keynote speakers at the “Skills & Productivity to Compete in the Global Market” Plenary Session.

IMF-World Bank 2012 Annual MeetingIPS Executive Director was invited as a Discussant for the IMF-World Bank Civil Society Town Hall Meeting of the IMF-World Bank 2012 Annual Meet-ing in Tokyo, Japan. The IMF Managing Director, Christine Lagarde; The World Bank President, Jim Kim, and Sheela Patel (second Discussant from India) participated at the Forum where the two Discussants posed questions to the Managing Director of the IMF and the President of the World Bank. As an IMF Fellow, the IPS Executive Director posed the questions to the IMF Managing Director at the Forum

Training Programme on Research Methodology for Department of Manpower and Employment

IPS successfully conducted a four day training programme on Research Methodology for the officers of the Research Division of Department of Manpower and Employment, at the Productivity Secretariat, of the Ministry of Productivi-ty Promotion, Colombo, during 24th to 27th September, 2012.

IPS research staff, Wimal Nanayakkara (Course Coordinator), Dr. Parakrama Samaratunge, Dr. Ganga Tilakaratne, Roshini Jayaweera, Dilani Hirimuthugoda and Priyanka Jayawardane, served as Resource Persons.

5th South Asia Economic SummitDr. Saman Kelegama, Executive Director, IPS, Dr. Dushni Weerakoon, Dep-uty Director, IPS, and Anushka Wijesinha, Research Economist of IPS were resource persons at the 5th South Asia Economic Summit (SAES), held in Islamabad, Pakistan during 11 - 13 September, 2012. IPS will host the 6th Summit in Colombo from the 2 – 4 September 2013.

Communication Policy Research South 7 – Young Scholar Seminar Programme

Buddhika Brahmanage, Research Assistant, IPS, won a competitive scholarship to attend the Communication Policy Research South 7 – Young Scholar Seminar Pro-gramme. This year’s CPRafrica 2012/CPRsouth7 was held during 3 -7 September, 2012 in Port Louis, Mau-ritius

Seminar on ‘Trade Facilitation in South Asia: Addressing Barriers to Foster Trade Chain’A seminar on ‘Trade Facilitation in South Asia: Addressing Barri-ers to Foster Trade Chain,’ organized by the SAARC Chamber of Commerce and Industry in collaboration with the Federation of Chambers of Commerce and Industry of Sri Lanka and Friedrich Naumann Stiftung, took place at the Taj Samudra Hotel, Colom-bo on 13th July, 2012. Ashani Abayasekara, Research Assistant, IPS, made a presentation on "Improving Trade Processes and Proce-dures in Sri Lanka" at this seminar.

Launch of the Sri Lanka Human Development Report 2012 The launch of the Sri Lanka Human Development Report 2012 (UNDP) titled, “Bridging Regional Disparities for Human Development,” took place on October 5, 2012 at the IPS. Chief Guest at the occassion was Dr. Sarath Amunugama, Deputy Finance Minister. The welcome address was made by Dr. Subinay Nandy, UN Resident Coordinator and UNDP Resident Representative in Sri Lanka and Prof. W. D. Lakshman, Chairman IPS. This year’s report focuses on issues if disparity and inequality that prevail in the country. IPS undertook extensive research and analysis for the preparation of the report. The authors and key contributors from IPS were, Dr. Nisha Arunatilake (lead author), Mr. Wimal Nanayakkara, Ms. Sunimalee Madurawala, Ms. Priyanka Jayawardena, Ms. Ayodya Galappattige and Mr. Anushka Wijesinha.

IPS17th Joint Committee Meeting of Business Cooperation Committees to mark the 60th Anniversary of Japan-Sri Lanka Diplomatic Relations

Executive Director of the IPS made a presentation on Japan-Sri Lanka Economic Relations: Trends and Opportunities at the conference to mark the 60th Anniversary of Japan-Sri Lanka Diplomatic Relations took place at the BMICH on 6th December 2012. The conference took place parallel to the 17th Joint Committee Meeting of the Sr i Lanka-Japan and Ja-pan-Sri Lanka Business Cooperation Committees

ADB South Asia Research De-partment (SARD) Economists’ Conference

The ADB South Asia Research Department (SARD) Economists’ Conference took place in Kath-mandu, Nepal, during 4-5 De-cember 2012. Economists from a number of South Asian countries participated in the Conference. Executive Director of the IPS was a Discussant to a Session on Infla-tion in South Asia and commented on the country papers on Sri Lan-ka, Bangladesh, and India

International Symposium on ‘Agriculture and Environment 2012’

Dilani Hirimuthugodage, Research Of-ficer, IPS, made a presentation on “The TRIPs Agreement in Protecting New Plant Varieties and Farmers’ Traditional Knowledge in Sri Lanka” at the Interna-tional Symposium on ‘Agriculture and Environment’ which was held at, and organized by the Faculty of Agriculture of the University of Ruhuna

International Conference on ‘Value Chains for Inclusive Development – Lessons and Policies for South Asia’

Dr. Saman Kelegama, Executive Director, IPS, Sunimalee Madurawala, Research Officer, IPS and Ashani Abayasekara, Research Assistant, IPS participated as resource persons at an International Conference on “Value Chains for Inclusive Development: Lessons and Poli-cies for South Asia”, jointly organized by the Institute for Human Development, New Delhi and Capturing the Gains Research Network, University of Manchester, in association with UN-ESCAP, South and South-West Asia Office, New Delhi, Centre for Globalization, Gover-nance and Competitiveness, Duke University, Centre for Policy Dialogue, Bangladesh and CARE-International, Bangladesh, held in Dhaka on the 24th and 25th of November, 2012

National Policy Dialogue on ‘The Taxation Link in Sri Lanka’s Devel-opment: Emerging Issues

IPS together with the Partnership for Economic Policy (PEP) organized the National Policy Dialogue at the IPS Con-ference Room on 23rd November 2012. The Dialogue, was attended by top of-ficials from the Department of Inland Revenue and the Central Bank of Sri Lanka, university academics, as well as representatives from civil society orga-nizations like Transparency International and Plan Sri Lanka.

IPS Annual National Conference, “How Can Sri Lanka Stay on the Growth Expressway?

The IPS Annual National Conference on the theme “How Can Sri Lanka Stay on the Growth Expressway?”, took place at the IPS Au-ditorium on 7th November 2012. At the National Conference, IPS released its flagship report: ”Sri Lanka State of the Economy 2012”. The theme for this year is “How Can Sri Lanka Stay on the Growth Expressway?” The programme consisted of a full days programme with two sessions. Session I was on “How Can Sri Lanka Stay on the Growth Expressway?: Bridging Disparities across Sectors, Regions and Population Groups”, while Session II was on “How Can Sri Lanka Stay on the Growth Expressway?: Private Enterprise Growth, For-eign Direct Investment, Innovation, and Competitiveness.’’. The Chief Guest at the event was the Hon. Senior Minister for Scientific Affairs, Professor Tissa Vitarana

Regional Conference on ‘Strength-ening Cooperation between Mem-bers of Parliament and the Private Sector in Making Public Private Partnerships More Effective’

Dr. Malathy Knight, Research Fellow and Head, Industry, Public Enterprise Reform and Regulatory Policy Research was invited to make a Key Note Pre-sentation at a Regional Conference on “Strengthening Cooperation between Members of Parliament and the Private Sector in Making Public Private Partner-ships More Effective”, jointly organized by the Bangladesh Enterprise Institute (BEI) and The Asia Foundation (TAF), in Dhaka on the 20th October, 2012

MIM-CPM International Management Conference

Anushka Wijesinha, Research Economist, IPS, was a speaker at the MIM-CPM International Management Conference 2012 organized by the Malaysian In-stitute of Management and the Institute of Certified Profession-al Managers, held on the 17th of October 2012 at Taj Samudra Hotel, Colombo. Anushka made a presentation titled ‘The Five Keys to Unleash Sri Lanka’s Po-tential for Economic Expansion and Job Creation’

Workshop on ‘Experimental Design for Savings and Payments Research: South Asia’

IPS, in partnership with the Global Financial Inclusion Initiative at Innovations for Poverty Action (IPA), organized a training workshop on “Experimental Design for Savings and Pay-ments Research” from 10-13 September 2012, at the IPS Conference Room

44 TE DIGEST Jul - Dec 2012

Premila, libraries have been around for a very long time. What challenges do you face in innovating on such an old sci-ence?The challenge, in my opinion is to be a part of organizational development. This is relevant to libraries globally. How are we to move away from the information provision model, to identifying, influenc-ing and shaping the manner in which in-formation can make a change institution-ally, socially and culturally? That is where we need to innovate.

What is your philosophy on the role li-braries and librarians play in the process of innovation in a country? What can we do without libraries? How will a nation move forward without in-formation literacy? We as librarians are responsible for knowledge creation – a facilitator of innovation. We are not only responsible for information gathering and the safe keeping of books but we are a multi-disciplinary profession. We try to make a nation’s people aware of informa-tion literacy and try to teach them how to use it independently in order to enrich their lives and also help the decision mak-ing process in organizations.

How did you enter into this field?Completely by accident while looking to fulfil my curiosity! After my A-level examination I started working as an as-sistant accountant (even though I had no formal qualification in this field) and I happened to stumble upon a classified ad-vertisement calling applicants to follow a Library Science diploma at Kelaniya Uni-versity. The advertisement awakened a curiosity which made me to apply for the course. By my final year I felt passionately

about the subject and wanted to implement what I had learnt. Fol-

lowing many failed attempts to find a job at a library, I came across a job vacancy advertisement at the Buddhist and Pali University which I applied for and was successful. I have been in this field ever since.

What would you say is your biggest ac-complishment thus far, personally or professionally?In my profession I have had the rare op-portunity of being recognized locally and internationally and for this I am pro-foundly grateful. I received my PhD in In-formation Management from Leeds Met-ropolitan University. While pursuing my PhD I was appointed as the chairperson of the regional activities at IFLA (Interna-tional Federation of Library Associations and Institutions) covering Asia, Oceania, Africa, Latin America and the Caribbe-an. Further, I was also on the advisory committee for ATLA (Access to Learning Award) through the Bill & Melinda Gates Foundation and I even had the good for-tune of meeting Bill Gates himself!

What is the next skill set you want to add to your repertoire?Aside from my professional life I have made a commitment to reach out to the wider community, especially in rural ar-eas. I work with lots of people at grass root level to make them aware that through the knowledge provided by li-braries a whole new world can be discov-ered. My latest ambition is to learn, mas-ter and eventually train the art of ‘digital story telling.’ I believe that we can use this to educate people and provide li-brary services - it is very interactive. I want to help children express themselves

and think analytically using this.

What opportunities are available for li-brarians in Sri Lanka?Loads of opportunities! Job vacancies are advertised in abundance but you have to make a commitment to play a different role and you will have a huge market in front of you. Most international organi-zations, even highly reputed company’s such as Google, hire librarians. So, there is a massive market within Sri Lanka and internationally.

What is your favourite area in the li-brary?In my view, the entire library is MINE and I love every inch of it! But having said that I am not keen on routine things – to cata-logue numbers, index.

Name one thing about yourself that most people wouldn’t know.Most people are not aware that I have a pen name. I contributed to a leading na-tional paper as a columnist under a pen name and I used to get very good feed-back. Also, some years ago I published a poetry book.

One final question. We can’t end an in-terview with a librarian without asking about your own books! So, what books are you reading currently, or read recent-ly, and would you recommend these to us?I recently read an English book ‘Half of a Yellow Sun’ by award-winning Nigerian author Chimamanda Ngozi Adichie about the Nigerian civil war and a Sinhala short story book named ‘Ara mihiri seenu naad-haya’ by Liyanage Amarakeerthi, a lectur-er at the Peradeniya university. I highly recommend both books - they are well crafted, engaging and creatively written.

The Innovative

Librarian

Staff Spotlight

Premila Gamage has been the Chief Librarian at IPS for the past 15 years, and is developing

new ways of combining library science and IT to ensure IPS researchers have the best

possible access to local and global information. Tehani Welgama (Project Intern) interviews Premila to find out more about what drives

this ‘innovative librarian’.

3.6 billionThe International Air Transport Association (IATA) released an indus-try traffic forecast last year showing that airlines worldwide expect annual passenger numbers to rise to 3.6 billion by 2016 - about 800 million more than 2011. The growing middle class in major markets like China and India is driving demand for leisure in general and air travel in particu-lar. Over half of the new passengers are forecast to travel on domestic routes rather than inter-national ones.

440,000 If the United States federal gov-ernment began right at this mo-ment to repay the U.S. national debt at a rate of one dollar per second, it would take over 440,000 years to pay off the na-tional debt.

US$110 billionAccording to recent UNEP findings, replacing all inefficient lighting worldwide would save coun-tries almost US $ 110 billion annually. In the 3 years from 2009 to 2012, the phase out of inef-ficient lamps in the EU alone has resulted in the reduction of 15 million tons of CO2 and saved 40 billion kilowatt hours of electricity per year.

1,299Water and sanitation remains a development is-sue across Sri Lanka. According to recent findings by UNICEF-Sri Lanka, 1,299 out of 9,662 schools across the country do not have functional sanitation facilities available for their students.

$2.5billionHSBC and Standard Chartered, the two biggest UK banks by market value, are to pay more than $2.5bn in fines as part of record settlements with US authorities over recent money laundering allegations. The broad allegations against HSBC were detailed in a report last July by the U.S Senate Permanent Sub-committee on Investigations. The bank was alleged to have stripped details from transactions that would have identified Iranian entities, which may have put the bank in breach of US sanctions against that country.

500 The Sri Lankan government plans to convert an old colonial building in Colombo to a 500-room five-star hotel. The Grand Oriental Hotel (GOH) in Colombo Fort, owned and operated by the Bank of Ceylon (BOC), and adjoining lands owned by the Police Department and the waterfront near the Colombo Port will be de-veloped to build a five-star hotel while preserv-ing the old heritage. The project will be carried out under a private-Partnership (PPP) scheme at a cost of US$ 1 billion.

50,000 A survey conducted by the Ministry of Health in Sri Lanka in the latter half of 2012 revealed that more than 50,000 dengue patients have been detected in the country last year. About 264 people died as a result of the disease.

77.3%The number of in-ternet and email subscribers in Sri Lanka increased by 77.3% Year-on-Year (YOY) during the second quarter of this year reaching approximately 1.15 million subscribers according to the lat-est economic indica-tors report from the Central Bank of Sri Lanka. The number of cellular phones in the country also saw a minor 6% increase reaching a figure of 19.27 million during this period.

14 millionClose to 14 million meals were served at the 2012 Olympic Games in London, where an Olympic village consisting of 10,500 athletes resid-ing in 2800 apartments were ca-tered with breakfast, lunch and din-ner. Officials state that the athletes had consumed nearly 330 tonnes of fruit and vegetables throughout the duration of the games.

4,627Sri Lanka's Disaster Manage-ment Centre stated 4,627 peo-ple across Sri Lanka had been displaced by flooding during tropical cyclone ‘Nilam’ that passed over Sri Lanka in Oc-tober 2012. Flooding resulting from the cyclone damaged about 1,000 houses, the centre said.

FAST FACTS

1,000Sri Lanka's state-run Bank of Ceylon has been ranked among top 1,000 global banks by UK-based Banker magazine. Bank of Ceylon serves over ten mil-lion customers island wide through 600 branches and has a rating of 'AA+(lka)' from Fitch with a stable outlook.

US$60mnFollowing a ruling by a US-based arbitra-tor, Sri Lanka's state-run Ceylon Petro-leum Corporation lost a 60 million dollar arbitration claim over oil derivatives against Deutsche Bank. A British court has also ruled against CPC in a case brought by Standard Chartered Bank, but the petro-leum utility won an arbitration case in Sin-gapore brought by Citi group. CPC bought into a complex options-based contract with heavy downside risk to resist global price increases and control oil prices at home.

Sri Lanka will soon have 'zero time' customs with an automated customs clearing process to begin up to 24 hours before a vessel docks at port according to Customs chief Neville Goone-wardena. Sri Lanka is implementing the latest version of Automated System for Customs Data promoted (ASYCUDA World) initiated by the United Nations Conference on Trade and De-velopment. "If all the taxes are paid, you can clear the cargo in 'zero time'," Goonewardene told a forum organized by the Ceylon Chamber of Commerce in November last year.

6.2%

0

The Asian Development Bank downgraded the growth forecast for South Asia for 2013 by 0.2 per-cent to 6.2 percent on a slowing Indian economy and low tourism earnings in Maldives due to weak Western markets.

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