By Dinesh Weerakkody
Sri Lanka in order to become a knowledge hub would require to invest big, to strengthen the existing skills base, that would however require the sort of great national leap forward we saw in 2009 to ensure we have the kind of skilled workforce needed to compete in a new, high tech industrial era.
A Knowledge Hub is broadly defined as a designated region intended to attract FDIs, retain and attract foreign students, build and grow a reputation for providing high-quality education and specialized training for both international and domestic students, and finally create a knowledge-based economy. A knowledge hub is concerned with the process of building up a country’s capacity to better integrate it with the world’s increasing knowledge-based economy, while simultaneously exploring policy options that have the potential to enhance economic growth. A higher education hub can include different combinations of domestic/international institutions, branch campuses, and foreign partnership, within the region.
The main functions of a hub would be to generate, apply, transfer, and disseminate knowledge and thereby act as a talent magnet and also attract top MNCs to set up operations in the country. The government has today recognized the fact that Sri Lanka needs to ramp up its higher education system to staff its rapidly expanding economy and that need creates major changes in the demand for knowledge workers and the skills they posses.
The President in his budget speech pointed out that the country needs to fast track the country’s skills development program to meet market demands by gearing our youth to secure high paid jobs. Further he said the government has secured around $350 million budget support from the World Bank and ADB to supplement government expenditure on skills development. In addition, the budget proposal to support top professional bodies to set up and expand technical programs in the country would also help to grow our professional talent pipeline.
Today any emerging country that is looking to build their exports, needs to prepare a large number of people to work in the industry. However, maximizing their value requires us to know our talent, upcoming skills shortages and understand the impact of the social media infusion. Therefore the investments we make now in education will contribute significantly to economic growth and will be key to our current and future competitiveness.
Indeed, if the private returns are so high on these investments, most households on their own accord are likely to make adequate investments in human capital development. However, the difficulty of borrowing to send children to school affects especially the poor. Creditors cannot easily stake a future claim on embodied human capital as they can for other types of collateral and therefore many low-income families are forced to invest less in their children’s schooling.
These Free market failures in principle, suggest making concessionary loans available via the state. A more common, alternative is for the government to reduce the direct costs for schooling by making quality public schooling available free or at subsidized rates. Most interventions generally consist of making schooling available free and sometimes even compulsory. Research suggests the difference between social and economic returns from education at a macro level is probably higher at the primary and secondary levels than at the university level. Many positive spillovers come from literacy acquired at lower levels of schooling, while the returns from training at the university level are almost fully captured by the higher income of university graduates. Vocational training also has high economic payoffs, if it improves worker productivity. More importantly, evidence suggests that vocational training is most cost-effective if the trainees have a solid base of primary and secondary education. All of this argues for primary and broad based secondary education as a means to improve a nation’s productivity and income distribution.
Postsecondary education
To meet demand of the economy, the country would need more workers with post secondary education. It is suggested that two – thirds of all jobs will require post secondary education by 2020. The government in its budget proposals says that their 2014- 2020 Vocational Education Strategy consists of rehabilitation and construction of Technical Collages and vocational training centers, development of training material and the provision of equipment, staff training and professional development. This is a positive move because in most of the successful export economies the training provided by VTIs jointly to upgrade the skills of their work force has been crucial, since high-level skills are essential for manufacturing related activities.
But while vocational training is widely recognized as important, such training is rarely cost –efficient when provided by the state systems. Most firms therefore prefer to do their own training, partly because many skills are company specific. There is ample research to show that the return on the training investment is higher in industries that engage well-educated workers and also in environments where there is rapid technological change.
Singapore’s use of training to promote the information technology sector through a concerted program that involved educational institutions, providing training subsidies to schools and office workers, and digitizing of the civil service, helped the country to achieve leadership in technology related services. This success illustrates the importance of a government’s ability to foresee a major opportunity and then promote public-private partnership to invest in human capital formation. However, to make it a success, businesses must also stand ready to take advantages of the support the government is willing to provide to promote human capital formation. In addition, the state must ensure that they maintain the per student share, in real terms, of government funding education, the economic benefits of better educated workforce will certainly offset the costs.
Policy options
Interestingly, higher shares of national income devoted to education cannot only explain the larger accumulation of human capital in some of the East Asian economies. In the 80s, public expenditure on education as a percentage of GDP was not much higher in East Asia than elsewhere. In 1960s the share was 2.2 percent for all developing economies, 2.4 percent for Sub-Saharan Africa, and 2.5 percent for East Asia.
During the decades that followed, the governments of East Asia markedly increased the share of national output they invested in formal education, but so did governments in other developing countries. In the late 80s the share in Sub-Saharan Africa was around 4.1%, and was higher than the East Asian share, 3.7 percent, which barely exceeded the average share for all developing economies, 3.6 percent. Research suggest that allocation of public expenditure between basic and higher education is perhaps one of the top public policy factor’s that accounted for East Asia’s Extraordinary performance in the area of providing basic education.
Low public funding of secondary education results in poorly qualified children from low-income backgrounds being forced into the private sector or entirely out of the education system. Research suggests that the share of public expenditure on education allocated to basic education has been consistently higher in East Asia than most other regions. By giving priority to expanding the primary and secondary bases of the education infrastructure, East Asian governments have stimulated the demand for higher education, while relying to a large extent on the private sector to satisfy the demand at the skills formation level. In the final analysis what we need is for the Sri Lankan education sector to design and implement curriculum that so completely equips students with the marketable skills the country and region needs. The journey has already commenced, but a lot still remains to be done.
By Dinesh Weerakkody
