Ambassador Blake: Transforming to knowledge economy is key to prosperity

May 12th, 2008

Full Text of Speech by Ambassador Robert Blake to the University of Moratuwa’s Closing Ceremony of Mentoring Program, Conference Hall of HNB Towers, Friday, May 9, 5:30 pm:

It’s a pleasure to attend this event today on behalf of my government. I am honored to participate in the closing ceremony of the mentoring program in the Department of Computer Science and Engineering. I also am pleased to help acknowledge the winners of the programming and drama competitions.

[Ambassador Robert Blake, file pic]

Today we celebrate two important themes in academic life: excellence and mentoring. The programming and drama award winners deserve our respect for their intellectual excellence, while the mentors deserve our admiration for their generosity and dedication.

While I occasionally get asked to do things that do not fall under the banner of normal diplomatic duties-like race down Galle Face with full champagne glasses-I certainly never won a programming or drama award. But I have had the benefit of great mentors throughout my educational and professional life, who taught me as much or more practical advice than I could ever have learned in a textbook. I commend today’s award winners for their achievements and applaud today’s mentors for sharing their knowledge, experience, and time.

The Knowledge Economy

I would like to focus my remarks today on what the World Bank and others often call the knowledge economy.

The World Bank defines knowledge economies as those that create, disseminate, and use knowledge to enhance growth and development. The Bank recently published a report describing how Sri Lanka could benefit by becoming a knowledge economy. It explains that a knowledge economy requires that the government focus on investing in education, innovation, and information and communications technology.

In a knowledge economy, knowledge products are traded and are more highly valued than traditional resources. A quick look at the statistics shows that Sri Lanka is moving away from industry and agriculture towards a service-based economy, as services now contribute 56% to the country’s GDP. So Sri Lanka is already headed in the direction of becoming a knowledge economy.

But this is not just about services being more important than industry or agriculture domestically. For Sri Lanka to truly prosper, it has to become a knowledge economy that is regionally and globally competitive.

What is necessary for this to happen?

To answer that, let’s look at a specific knowledge-intensive sector: business process outsourcing. The BPO industry involves providing business services that are less expensive, but as good or better in quality, than those previously based in more developed higher wage economies. Such services can range from call centers to accounting to software development.

Sri Lanka already hosts a number of impressive BPO operations. But as you all know, it is India that is widely regarded as the world leader in this sector. That is because, for the last decade or more, India has invested in its educational system, rewarded innovation, engaged the private sector in this area, and encouraged research and development.

India’s rise as a knowledge economy creates an opportunity for Sri Lanka to ride the same wave, as investors become more familiar and comfortable with South Asia. However, Sri Lanka will need to hurry in its implementation of knowledge economy reforms, because there are many other South and Southeast Asian countries also are eager to replicate India’s success.

To get ahead of this pack, Sri Lanka will have to do three things: expand and improve higher education, reward innovation, and invest in information infrastructure.

These have to be national goals. But the trick is that they cannot be easily achieved through government action alone. Instead, they are best realized when the government coordinates its efforts and pools its resources with the private sector-in other words, through public-private partnerships.

Here are three ways I believe public-private partnerships can set Sri Lanka on a course to become a truly world-class knowledge economy:

Expand Access to and Quality of Science Education

First, Sri Lanka needs to increase both the quantity and quality of higher education and vocational training. Sri Lanka’s public expenditure on education has remained at between 2-3% of GDP during the past decade and a half, compared to a 3.5% average in the rest of South Asia. The result is clear in Sri Lanka’s educational statistics. Around 150,000 Sri Lankan students pass their A levels to qualify for entrance into university. However, the 16 public universities in Sri Lanka can only accept 18,000 students. Of these, only a few thousand are able to study Information Technology, due to the limited size of IT faculties and facilities in the university system.

Because of these limitations, many bright Sri Lankan students are forced to attend university abroad or to stay here but study subjects other than science or IT. According to the Central Bank, about 32 percent of students at local universities study social science and humanities though these fields are less likely to lead to productive employment after graduation. This is a major lost opportunity, as there are many IT jobs in Sri Lanka going unfilled because firms cannot find workers with the required IT skills.

To address this, the government should encourage formation of more private universities in the country. Indeed, I was encouraged that the Central Bank recently called for laws to be changed to allow private universities to be established to bridge the skills gap in the country.

Of course university education may not be for everyone. In fact, 75% of those employed in India’s BPO sector have only an O or A level education – that is no university degree. While those employees don’t have degrees, they do have skills. To rapidly meet the demand for skilled workers here in Sri Lanka’s BPO sector, the government should set up vocational IT training centers to help meet the growing labor demand by local BPOs.

An excellent example of how public-private partnerships can cooperate to develop a skilled workforce is USAID’s state-art-of-the-art Samanturai Vocational Training Center in Ampara district. This center will train specialists for the apparel industry. While the center will be operated by the Vocational Training Authority, a partnership with the Joint Apparel Forum Association will ensure that graduates have the skills industry needs. The IT industry should consider similar public private partnerships.

Sri Lanka also needs to improve the relevance of what its educational system teaches. I have already mentioned the importance of IT programs. Another critical skill is English language training. Whenever I talk to companies about their hiring needs, they tell me that they will hire virtually anyone with good English skills. The US Agency for International Development has collaborated with the Ministry of Education to create a center at the University of Peradeniya to train English teachers who can then be deployed to schools around he country.

I was pleased to see recently that Sri Lanka and India recently agreed to collaborate with private investors from both countries to create a Job-Oriented English Language Program called “English as a Life Skill” that will teach communicative skills in IT related BPO industries.

The lesson here is that, whether through university or vocational training, public-private partnerships can ensure that real skills are taught in fields that truly reflect the needs of the marketplace.

Reward Innovation and Boost Research and Development

The second way public private partnerships can help Sri Lanka become a knowledge economy is by encouraging and rewarding innovation. According to the World Bank, Sri Lanka’s output of research papers, patents, and innovative new products is lagging. In 2004, the government spent only 0.14% of its GDP on research and development. This is far short of the Mahinda Chintana goal of 1.5% by 2016, six times less than what India spent, and ten times less than what China spent, in terms of percentage of GDP.

As a bridge between academia and the world market, private sector firms know what research is relevant and in demand. They can help universities improve academic curricula and assist researchers in marketing their findings. The private sector can also infuse money into a university to help finance research to develop innovative, commercially viable products. In turn, universities will produce qualified graduates that private companies need.

The University of Moratuwa understands the significance of these private-public partnerships – this is a major reason why the university is producing many of the country’s top scientists, businessmen, and policymakers.

As is often the case around the world, American companies are leading the way in forming these partnerships with the University of Moratuwa. For example, Microsoft Sri Lanka partners with the university to equip its computer labs with the latest Microsoft developer tools, operating systems, and server software.

Virtusa, another American IT company with offices here in Sri Lanka, has also collaborated closely with the university. Virtusa invites university staff to attend its in-house IT and management course, while also sending some of its best technical experts to teach courses at the universities. And Zone 24/7, an American technology development company, recently established an R&D laboratory here at the University of Moratuwa.

But the government should not just wait for private sector firms to initiate partnerships like these. Again, the role for the government is both direct and indirect: it can stimulate the knowledge economy directly by increasing public resources devoted to R&D and indirectly by offering tax and other incentives that make it less risky and more attractive for companies and universities themselves to invest in research and development.

Invest in Information Infrastructure

The final way public-private partnerships can boost Sri Lanka’s transition towards becoming a knowledge economy is by improving basic information infrastructure. According to the World Bank, an increase of 10 mobile phone users per 100 people can boost GDP growth by almost 1%. And a 1% increase in the number of internet users can boost GDP growth by 4.3%. In its report, the Bank states that the best way to encourage a high quality and low cost information network is by establishing a liberal regulatory structure that allows for competition and private sector participation.

The Bank notes that Sri Lanka made real progress by liberalizing the telecom sector in the late 1990s. But there is more to do in this respect, as the market is still not as competitive as it could and should be.

And where competition alone doesn’t provide the needed information infrastructure, private public partnerships can again fill the gap. One I am very proud of is our own U.S. Agency for International Development’s Last Mile Initiative. In this, USAID is partnering with Dialog Telecom, Microsoft, Qualcomm, the National Development Bank and Lanka Oryx Leasing Company to create 50 rural internet and communication centers island-wide. We have heard from various local and international private sector firms that they expect to finance-on their own-an additional 450 new high speed internet centers in the next two years, now that we have demonstrated that the model is successful and viably profitable. That is the power of public-private partnership!

Conclusion

I began by noting that today we are honoring academic excellence and mentoring. I think it fitting that these are in fact both important components of a healthy knowledge economy. In this sense, the University of Moratuwa is, as always, leading the way to a prosperous and competitive future for Sri Lanka. And you, the students and faculty, are the human dimension-the most important dimension-of the knowledge economy. So, whether your future lies in research, teaching, or business, I urge you to maintain your commitment to academic excellence, and to give back by mentoring those who come after you.

I congratulate you and wish you continued success.

[Source: US Embassy. Colombo, Sri Lanka]

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