Socioeconomic challenges in present era of technology and innovation

Following is a summary of the keynote address delivered at the first Student Research Symposium of the Faculty of Humanities and Social Sciences, Open University of Sri Lanka

It is a great pleasure to deliver this keynote address at this symposium which marks the launching of the annual student symposium of the Faculty of Humanities and Social Sciences of the Open University of Sri Lanka. The theme of this symposium is “Understanding the past, analyzing the present, facing the future: Humanities and Social Sciences and shaping vibrant communities”.

While congratulating all students who take part in this conference, I would like to elaborate the role of social scientists in tackling the complex socioeconomic challenges emanating in the present era of technology and innovation.

Fourth industrial revolution

We are living in an age of unprecedented technological progress. Our ancestors would not have imagined the comforts that we are enjoying today with all kinds of high-tech equipment. 

They did not have electricity, refrigerators, televisions, radios, motor vehicles, computers, mobile phones or international flight facilities. They hardly went out of their villages as there were no transport facilities. In fact, there was no necessity for such travelling as they produced their necessities including food in the village itself and they did not have to look for jobs outside. Still, they lived happily with simple life styles.

In contrast, today we are living in the midst of a technological revolution that radically changes the way we think, live, work, travel and communicate. Very often, this is identified as the fourth industrial revolution. The first industrial revolution began in Britain in the late 18th century with the inventions of textile machinery, iron and steam engines. The second industrial revolution was in the 19th century which led to mass production of consumer durables and equipment. The computer revolution of the 1960s marked the third industrial revolution. 

Today, the fourth industrial revolution has given rise to new technologies of artificial intelligence, robotics, internet products, mobile banking, e-commerce, auto-driven vehicles, 3D printing, blockchain, biotechnology and so on. The technological revolution has changed the landscapes in multiple spheres – society, culture, politics, business modes, legal structures, property rights etc. For example, Uber, the world’s largest taxi company, owns no vehicles; Facebook, the most popular media owner, creates no content; Alibaba, the most valuable retailer, has no stocks; and Airbnb, the largest accommodation provider, owns no hotels. Mobile-banking has enabled customers to conduct their transactions without going to a bank.

Sri Lanka’s position in the country ranking of knowledge economy is not very satisfactory

Role of social scientists

The changes are so radical that, from the viewpoint of human history, there has never been a time of greater opportunities as well as perils. Undoubtedly, the technological advancements have helped to uplift the living conditions to unprecedented levels. At the same time, they have led to many social pitfalls in the form of income and wealth inequity, moral breakdowns, digital crimes and social disharmony. It is the utmost responsibility of the social scientists to keep abreast of these pros and cons of technological advancements and to facilitate optimum decision making in both public and private sectors with the ultimate objective improving people’s quality of life. 

For example, the companies that do not own any property have to be regulated with new company laws. Internet banking too demands new regulatory frameworks and monetary management. The intellectual property right is another area that demands new business and legal modes. There are unprecedented social implications arising from technology such as Face Book-motivated suicides and other crimes. So, the social scientists engaged in their own disciplines and allied fields of sociology, anthropology, culture, languages, media, politics, economics, business management, legal professionhave a major role to play in identifying the possible disasters in the modern high-tech society. 

Knowledge economy

Unlike in the past, national production in the fast-fast growing economies are now driven by knowledge, rather than by factors of production – land, labour and capital. The underlying concept behind this new growth paradigm is ‘knowledge economy’ which is based on science, technology and innovation (STI). It consists of individuals, companies and sectors that create, develop and commercialize innovative products and export them across the world. The knowledge economy focuses on science-based industries and turning knowledge into profit.

The report notes that most problematic factors for doing business in Sri Lanka is inefficient government bureaucracy, poor work ethic in labour force and policy instability

Benefits of technological advancement

There is empirical evidence worldwide that knowledge economy has brought about many benefits to the society. Above all, it enables the countries to raise their economic growth at a much faster rate. The East Asian tigers –Hong Kong, Singapore, South Korea and Taiwan achieved high GDP growth of over 7 per annum for decades through science, innovation and technology. Many other countries in Asia including China and India are now enjoying faster economic growth using new technology. 

Development of technology along with economic liberalization and globalization have enabled many countries to grow fast and to reduce unemployment and poverty to a considerable degree. The fourth industrial revolution empowers the economically excluded people with digital networks. The use of mobile phones for banking transactions in Kenya is a good example to understand how new technology can help the poor. The mobile phone-based microfinance system, which is known as M-pesa, was founded in 2007 by the service provider Vodafone. Over 70 percent of households in Kenya and more importantly 50 percent of the poor, who are unbanked in remote rural areas, use this mobile banking facility. Now Vodafone offers its service in 10 countries. M-Pesa served almost 29.5 million active customers through a network of more than 287,400 agents, as at end on 2016. 

Downside of technological advancement

While observing the multitude of benefits of the modern technological revolution, we should not ignore its downside effects. It has given rise to unequal distribution of income and wealth, techno-led unemployment, erosion of global governance, potential abuse of robotics, genetic engineering, cyber weapons and business disruptions. 

As regards businesses, the average lifespan of a corporation listed on the S&P index has already dropped from about 60 years to 18. New business management tools are needed to deal with this changing landscape of the business sector. The digital technology has paved the way to financial crimes by hacking the websites of banks. For example, some Sri Lankans were arrested recently over the hacking of a Taiwanese bank.  

Status of Sri Lanka in the global technological setup

Although Sri Lanka has acquired bits and pieces of new technological revolution, particularly in the field of information and communication technology (ICT), it has fallen behind many fast-growing countries in the region.

 
Sri Lanka’s position in the country ranking of knowledge economy is not very satisfactory. She is placed at the 101st position out of 142 countries in the global ranking of knowledge economy. In the performance score schedule ranging from 0 (=lowest) to 10 (=highest), the Knowledge Index (KI) for Sri Lanka is only 3.63 as against 8.52 for Hong Kong and 7.97 for South Korea. Meanwhile, the Knowledge Economy Index (KEI) score for Sri Lanka is only 3.49 whereas the scores for South Korea and Hong Kong are 8.65 and 8.17, respectively. These wide divergences imply that Sri Lanka has to make substantial progress to evolve a modern knowledge-based economy. 

A major constraint to promote technology and innovation in Sri Lanka is the dearth of funding available for research and development (R&D). The total expenditure for R&D remains low at less than 0.2 percent of GDP in Sri Lanka in comparison with nearly 4 percent of GDP in South Korea, and over 2 percent in Singapore. These countries made substantial economic progress through R&D to achieve knowledge-driven growth, and graduated to high-income country status.

A major constraint to promote technology and innovation in Sri Lanka is the dearth of funding available 
for R&D

Sri Lanka is at crossroads

While this year marking the completion of four decades of economic liberalization in Sri Lanka, the 70th anniversary of Independence is to be celebrated next year. It is questionable whether, as a nation, we can be satisfied with what have been achieved as we are passing these key milestones. One could assess the performance by making some simple comparisons. In terms of social indicators such as life expectancy, health care, nutrition and education the country has made significant progress over the decades. But questions remain with regard to the quality of health care and education services.

The current plight of the economy is well known. While economic growth has been sluggish throughout the post-

liberalization period with the exception of a few short-lived economic booms, the country faces severe macroeconomic imbalances with regard to fiscal operations, balance of payments and heavy debts. 

All this means that SL could not reap the benefits of economic liberalization and technological revolution. There are many reasons for this predicament. One major negative factor was the 30-year long war which depressed GDP growth rate by around 2 percentage points each year.

Above all, the authorities have failed to foster science, technology and innovation to enhance the country’s production capacity. As a result, the country’s production and export structure is still confined to factor-driven products such as garments. High-tech products characterized by advanced computer electronics are lacking in the manufacturing structure.

Twin growth challenges

In the midst of the fourth industrial revolution, Sri Lanka faces two major challenges with regard to economic growth. First, GDP growth needs to be accelerated using new technology and innovation. Given the current factor-driven production modes, Sri Lanka’s potential GDP growth rate is only around 5 percent. In order to enhance growth, the country needs to graduate from the present ‘factor-driven growth’ mode to ‘technology and innovation-driven’ growth mode. 

Second, it is important to ensure that the benefits of high economic growth are shared among all segments of the population by way of inclusive growth. Income disparities remain acute for the last several decades. The richest 20 percent of the households possess around 53 percent of total household income whereas the income share of the poorest 20 percent is only 4.5 percent. The average income levels also vary across income groups. The average monthly per capita income of the poorest 10 percent of the population is only around 200 US dollars representing only about 5 percent of the country’s overall per capita income level of around 4,000 dollars. 

Digital divide

Disparities prevail with regard to Information Technology (IT) literacy as well. According to the latest data released by the Department of Census and Statistics, Sri Lanka’s IT literacy rate is around 38 percent, which is more or less in line with the developing country average. 

However, there are significant disparities across different groups and geographical locations. The IT literacy rates of males and females are 43 percent and 35 percent,  respectively. The digital literacy rate for the urban sector is 55 percent while for the rural and estate sectors are only 36 percent and 16 percent, respectively. Wide disparities are evident across districts as well. 

Deteriorating global competitiveness

Urgent attention needs to be drawn to the rapid deterioration of the country’s global competitiveness.  According to the latest Global Competitive Report (2017-2018) Sri Lanka has dropped 14 places from the 71st place to the 85th place. The report notes that most problematic factors for doing business in Sri Lanka is inefficient government bureaucracy, poor work ethic in labour force and policy instability.  Sri Lanka has fared poorly in all four basic requirements with regard to institutions, infrastructure, macroeconomic environment and health and education. the country’s performance is not satisfactory with regard to efficiency enhancement and innovation either, according to the report. 

Challenges ahead

It is clear that Sri Lanka faces a multitude of socioeconomic challenges in the face of technological revolution and stiff global competitiveness. The country needs to adopt a new growth model to reap the benefits of new technology and also to remain competitive in the international trade environment of trade and capital flows and labour mobility. 

The emerging growth through technology and innovation needs to be inclusive so as to share the growth benefits by all, particularly the bottom of the income pyramid. While the natural and physical scientists have been playing their role in fostering technology and innovation, it is left to the social scientists to check and ensure that such advancements are translated into betterment of the society. 

(Prof. Sirimevan Colombage is an Emeritus Professor of the Open University of Sri Lanka)