Public Investment and Development

“The first industrial revolution that flourished in the West gave an advantage to western countries over the rest of the world. The division of labour between industrial countries on one hand and countries producing primary commodities like natural raw materials on the other created an unequal world. The terms of trade involved, in the emergent import- export trade were far more favourable to industrialized countries than for the countries producing primary goods.”
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by S. T. Hettige

(May 02, Colombo, Sri Lanka Guardian) If there is anything in common among developed countries, it is the high level of investment in Research and Development (R & D). In this country, politicians go around the country and tell the people that they are in the business of development but never mention how other countries have achieved a higher level of development. This may be due to sheer ignorance on the part of some political leaders. In the case of others, it may be due to utter dishonesty. To my knowledge, there is not a single country that has achieved a higher level of development without long term planning, rational human resource development and a very high level of investment in R and D). This is true in all parts of the world including Asia.

We have invested in education but our education system contributes little to human resource development. Most people who have secondary education are only fit for unskilled or semi- skilled employment in the FTZ, the Middle East and the service sector. There is little investment in Research and Development. There are no large, well funded R and D institutions in the country and the talented researchers have to go to other countries to engage in cutting edge research. Universities are mostly engaged in undergraduate teaching and their research budgets are negligible or non- existent. In any case, universities have degenerated so much that there is little recognition of serious research done by academics.

Each developed country in any part of the world has some product line or another to boast about. The name Nokia is synonymous with Finland. Nesle’ is synonymous with Switzerland. South Korea, Japan, most European countries, North America, Brazil, etc have brand names the whole world is familiar with. Our neighbour India joined the club many years ago. What are the aspirations of our political leaders for Sri Lanka?

The first industrial revolution that flourished in the West gave an advantage to western countries over the rest of the world. The division of labour between industrial countries on one hand and countries producing primary commodities like natural raw materials on the other created an unequal world. The terms of trade involved, in the emergent import- export trade were far more favourable to industrialized countries than for the countries producing primary goods.

Since the first industrial revolution, there have been two more equally or even more important technological revolutions that have enabled many countries to take off and join the developed world. These two subsequent revolutions involved electronics and ICT. What is significant is that many already industrialized countries have been able to ride over the new waves of technological advancement as well. Equally significant is the fact that many late industrial countries have also been able to play a significant part in the development of new technologies. Scientists say that the next technological revolution would revolve around Nano-technology. Sri Lanka will be left behind by this latest wave of technological advancement unless we provide the facilities and resources to our scientists to engage in research leading to new innovations. Today, some of the NIC’s are leading producers of technological goods in the fields of electronics and JCT. The technological advances mentioned above have bypassed us as a country. We have become mere consumers of goods produced elsewhere. Motor vehicles, household appliances, electronic goods, ICT products etc. are all imported to this country, using foreign exchange earned by Middle East workers, garment factory workers, employees in the plantation sector etc. and foreign loans. Our political leaders do not think twice before importing very expensive luxury cars costing over ten million rupees each for their own use.

Though we do not produce modern industrial goods, we have become avid consumers of such goods. What we need in such sectors as transport, health, education, communication, agriculture and industry is imported from developed countries. With the spread of ICT, we have been importing technological products like computers and mobile telephones in large numbers, it is estimated that we have over 7 million mobile telephones in the country. These imports are naturally more expensive than our export commodities which include cheap labour as well. When we export labour, vital sectors experience labour shortages, which is turn push the wages up, making cost of production high.

The expenditure on imports has been consistently higher than the earnings from exports. Inward remittances and foreign borrowings have helped bridge the widening gap between imports and exports. Foreign debts have been increasing steadily over the years; by now accounting to nearly 100% of the GNP. Increasing economic difficulties have encouraged more and more people to leave the country, mostly for short-term employment in overseas labour markets. This, of course is a blessing in disguise for our rulers. The latter do not have to think twice when they import the luxury vehicles and engage in foreign travel at public expense.

How can you develop a country when valuable human resources are constantly depleted due to exodus of labour and brain drain? How can you find investment capital when the country is indebted to the tune of nearly 100% of the GNP? How can you create a conducive environment for development when the on- going conflict drives away tourists and foreign investors? How can you create an enabling institutional environment in the country when corruption, wastage of public funds and politicization are widespread in the country? Can we think of a single country that has moved up the development ladder in spite of conditions similar to those described above? I leave these questions to be answered by someone who is more knowledgeable than myself, preferably by a pundit in the area of finance and planning.

(The Writer, Professor of Sociology , University of Colombo)
- Sri Lanka Guardian