July 5, 2010 (LBO) – Although Sri Lanka was not known for exports of IT and business processing services, since 2005 this activity has graduated to earn around US$ 250 million of foreign exchange, in addition to giving a place of pride to our IT professionals enabling to establish their names in international markets.
This sector has a comparative advantage to become a billion dollar export activity considering the skilled labour force and their exposure to international languages—2010 Budget Speech
It’s not only the Deputy Finance Minister who thinks that our skilled labor force is a source of comparative advantage. Many Sri Lankans are proud of the 90+ literacy rate. Education is a much loved topic of discussion, even if much of the talk consists of bemoaning its ills. It seems that the high literacy of Sri Lankans should be a key factor in making a success of Minister Basil Rajapaksa’s plans to create a knowledge hub in Sri Lanka.
But it appears that we are not as well endowed in skilled people as we like to think.
The first piece of evidence is the AT Kearney Global Services Location Index (GLSI) compiled every year since 2004 (http://www.atkearney.com/index.php/Publications/global-services-location-index-gsli-2009-report.html). The good news is that Sri Lanka advanced to 16th place in the rankings in 2009 from 29th in 2007.
The bad news is that we are still way behind India and the Philippines and the reason we are behind is people; we fall short on quality and availability (Table 1). In terms of cost we are equal to India, and behind the Philippines by a hair. The gap that has to be made up with regard to business environment is also bridgeable.
The yawning chasm is the component on people skills and availability, over 1.5 points behind India and .2 points behind the Philippines.
When one hears negative things being said of one’s country the appropriate response in these patriotic times is to trash the messenger. Not much point in trashing me (water off a duck’s back) so best to focus those energies on trashing AT Kearney.
It is a management consulting firm that makes its money advising companies where to get the best bang for the buck in outsourcing. Its method is somewhat opaque. It’s possible that it’s got a thing against Sri Lanka. Our paranoid times demand this possibility be considered (but then, why would the ICT Agency of Sri Lanka rely on AT Kearney in its presentations if it is hostile to Sri Lanka?).
The reason I pay attention to these kinds of indices is because they influence the decisions made by the firms that give us the outsourcing business. As far as I know that is not something the government can decree like ordering patients in government hospitals not to eat bread.
To get from USD 250 million in export earnings to USD 1 billion in a few years it is necessary to get BPO firms to set up operations in Sri Lanka (as the Mahinda Chinthana II states: “I will promote the establishment of Business Process Outsourcing (BPO) through international institutions to create new employment opportunities for the youth”) and to then get companies located abroad to give business to Sri Lankan BPO firms. AT Kearney and the GSLI influence such decisions.
If I was Minister Rajapaksa, I would take AT Kearney seriously. I’d task some knowledgeable people to advise me on how to raise Sri Lanka’s ranking in the GSLI, especially on how to improve either the actual levels of skills and availability and/or the perception thereof.
But the evidence does not end with AT Kearney. The ITU (the International Telecommunication Union, a part of the UN System) is also telling the world that Sri Lanka is slipping on skills; that it has fallen back in relation to its competitors since 2002. The biggest contributor to Sri Lanka’s slippage from an overall 97th position in 2002 to an overall 100th position in 2007 (being overtaken by Algeria, Azerbaijan and Vietnam) has been poor performance on the Skills component (Table 2). This has washed out the advances made in the access and use components.
One could of course take solace in the fact that Sri Lanka still has the highest score in the skills category among our SAARC peers. The ITU, unlike AT Kearney, looks at entire countries, not just the parts that BPO firms have to deal with. And it relies on government data more than on perceptions of business people. Therefore, India, which is way ahead of Sri Lanka in the GSLI, falls back in the ITU ranking. Yet, the fact remains that Sri Lanka’s relative position has deteriorated, even according to the ITU. And nothing miraculous happened after 2007, as far as I know.
In light of the above, it is worth asking how realistic the government is in its assessment of human resources as a source of comparative advantage.
In pursuit of the rapid growth envisaged in the post-conflict Sri Lanka, the government’s development strategy places higher priority on a knowledge based economy. Economic progress based on unskilled labour is fast diminishing as our society has attained sound educational standards. We will focus on the development and export of professional skills and expertise to enhance foreign exchange earnings as well as the reputation of Sri Lanka. As our President always emphasizes, our government would like to see our engineers, architects, technicians and project managers being engaged in construction activities abroad. Similarly, the economy can provide medical scientists to collaborate in the development of next generation drugs and medical treatment through clinical trials and research and our legal, financial, accountancy, military and other professionals to be engaged in consultancies with global customers and industries. Our knowledge economy strategy will enable our teachers and nurses to become service providers to global markets. Such reform initiatives will promote Sri Lanka as a knowledge hub providing high quality services from which we target US$ 6 billion in 2015.—2010 Budget Speech
It is for the reader to decide. And, for Minister Rajapaksa to act?
Rohan Samarajiva heads LirneAsia, a regional think tank. He was also a former telecoms regulator in Sri Lanka. To read previous columns go to LBOs main navigation panel and click on the ‘Choices’ category.