Following Wednesday’s ‘Smart Future’ article, I had a lot of very insightful feedback and pertinent questions. A couple of exchanges in particular were very rewarding, as it helped jog my thinking further as well. I thought it would be useful for the readers of the blog to get a taste of it, so I am reproducing extracts of it here. The gist of many of the Qs were: So why the declining export/manufacturing in China? Is it that it is being out-competed? What about their markets still being healthy, unlike the EU? Isn’t the US still the world’s consumer? And how come the markets reacted so sharply?
My responses covered 4 main areas, (apologies in advance as they may not be very well ordered):
This article appears originally in the Daily Mirror Business of 27th August, under the ‘Smart Future’ column
“When China sneezes, does the world catch a cold?” is a question on the minds of investors, economists and world leaders this week, as recent troubles in the Chinese economy sent ripples through markets around the world. The sneezing came in three bouts. In July, China’s stock market began to show the first signs of stress, with the markets in Shanghai plunging and over 1000 listed companies suspending trading. Then in a sudden move in early August, the People’s Bank of China devalued the Yuan by the sharpest amount in two decades, leading investors to believe that China was facing severe weaknesses in exports. The final sneeze was just last week when a key manufacturing factory activity indicator – the Caixin-Markin Purchasing Managers Index (PMI) fell to its most pessimistic level since the global slowdown in 2009 – a 77-month low of 47.9 (PMI below 50 on the 100 point scale indicates a decline). All of mini-sneezes combined to send jitters across the global economy, and since Friday last week the global economy has been sniffling. The full-blown cold came on Monday – now dubbed ‘Black Monday’ where nearly all major markets saw declines not seen since the onset of the global finance crisis. The Shanghai Composite Index fell by 8.4% – the largest one-day drop since 2007 and continued a further decline of 7.6% on Tuesday. Meanwhile, the Hongkong HangSeng fell by 3.5%, Singapore Straits Times Index by 2.3%, Australia S&P/ASX 200 by 2.6% (steepest since May 2012), and the Dow Jones Index and NASDAQ in the US and the FTSE in the UK all down by more than 3%. The Dow fell by nearly 600 points after starting trading down over 1000 points. Many of the markets have since recovered somewhat, but continue to be volatile. Whether the cold goes away or develops into a full-blown flu’ remains to be seen.
During a recent work visit to Switzerland I had a bit of down time and decided to visit some lesser-known sights in the country. I stumbled upon this Roman era amphitheatre
located in present day Avenches (Aventicum, back then). It so happened that this area was celebrating its 2000 year anniversary. The amphitheatre saw intense entertainment in the Roman era, where gladiators fought Bears and Lynx as 16,000 spectators looked on. The structure is nowhere near as impressive as the Collseum in Rome, and so it would easily be forgotten an
d derelict. Yet, guess what has kept it alive and relevant after all these years? A rock concert! Just last week, this Amphithéâtre Romain d’Avenches hosted a massive 3-day rock concert with 8,000 young people flocking to this Roman relic. I couldn’t help thinking – “Now THAT’S how you keep a relic relevant!” I also wondered, what are the chances of having a rock concert at the base of Sigiriya Rock? The organisers would pay a premium fee to the Sigiriya authorities, and tickets would have a small top up fee that each concert-goer would need to pay as his/her contribution. Money raised from it could go towards upkeep, improving facilities and enriching the museum, as well as heightened security to ensure everyone is careful of the ruins.
Here’s a panorama of the whole structure, taken as workmen were taking down the rigs from after the concert. Best viewed large, so just click on it. (And excuse my alteration over drive in the title – I couldn’t help myself!)
The Sri Lankan economy is in the midst of a unique, and tricky, transition. It’s easy for Sri Lanka to get stuck in what economists call “the middle income trap”. Already the country is finding it increasingly difficult to compete against cheap labour in low-income economies (like Bangladesh, Cambodia and Laos), on the one hand, and with the technology and innovation-driven economies (like Malaysia, Indonesia, and South Korea), on the other. Essential, then, to making a successful transition to upper-middle income levels and beyond, is fostering innovation in the country.
Sri Lanka needs an ambitious and focussed national programme to boost innovation. Fostering a forward-looking innovation system, that supports knowledge-interaction among various parties, builds linkages between domestic and foreign firms as well as between universities and R&D institutions and the private sector, and commercialization of inventions, is critical, if Sri Lanka is to achieve faster growth. Also, of course, the daunting but essential element of raising the overall level of R&D in the country – currently at an abysmal low of 0.2%. The innovation agenda needs to be driven across the economic spectrum – not just in manufacturing and exports, but also in sectors like agriculture, healthcare, urban development. This is why the innovation agenda needs to be driven at a national, strategic level, taking an economy-wide and all-of-government approach.
I’m posting this as I walk around the duty-free shops at Dubai airport, killing time during a long layover.
Have you noticed how sales assistants at cosmetic and skincare product stores like Clinique or Kiehl’s in airport duty-free wear white coats that are identical to those worn in laboratories (and also by pharmacists)? It’s a very clever strategy of subliminal messaging by these brands. What it probably aims to do is to tap into our subconscience and form an impression in the mind that “these products have been carefully researched in a lab, clinically tested and have medical backing” . It’s not really misleading because these brands do go through a lot of rigorous R&D and clinically-tailoring products to different skin types and problems. Yet to have the sales reps wear the white gowns is a stretch. Surely none of them would be experts in the science of the products, but experts at explaining the benefits to potential customers. But a clever strategy nevertheless…
Do you feel more confident and trusting of these products and their promise when you see the person advising and selling you the product wearing the white lab/clinical coats?
Over the past decade or more the Sri Lankan economy has become less and less open to the world than it has ever been. Exports to GDP has nearly halved; the share of trade in overall growth has fallen, our overall tariff protection rates are higher now than in the past; our export diversification and product complexity now is far behind countries that were at the same level as we were several decades ago; and our foreign policy has not focused enough on economic relations and trade agreements. Looking at Sri Lanka’s export product categories, not much has changed between 1990 and 2013, whereas in countries like Thailand there are dramatic shifts from basic exports to highly sophisticated exports.
Reforms to Open Up
We must change the orientation of the Sri Lankan economy, if the country is to succeed at achieving sustained high growth and boost prosperity for our people. When you measure along trade openness (exports + imports as % of GDP) and along public vs. private sector participation – the Sri Lankan economy in 2013/2014 looks more like 1970, according to analysis in a forthcoming World Bank publication.
But the positive news is that when Sri Lanka did undertake liberalization policies in the past, the economy saw positive results. In the years following waves of reforms – both in the early 1980s (after 1977) but most clearly in the late 1990s and early 2000s (after the 2nd wave of reforms in 1990) the economy was more export oriented and more private sector driven. In the last couple of decades, in the absence of critical next generation reforms, we have slid back.
President Maithripala Sirisena delivered a keynote address at the closing session of the Ceylon Chamber of Commerce ‘Sri Lanka Economic Summit 2015’ today, addressing over 500 of the country’s leading private sector representatives. Here are my 9 highlights from his remarks.
- The government must be transparent, accountable, clean, and fair in its dealings with the private sector.
- The private sector must have the freedom to thrive and the government should not unduly interfere or intrude on private enterprise.
- Although there are many of them, state institutions need to better focus and align themselves to private sector needs, especially in promoting exports.
- Economic growth in Sri Lanka should be inclusive across regions, should be sustainable, and should be solely aimed at improving living standards and increasing prosperity.
- In prioritizing and planning investments, political compulsions should not get in the way and only good economic sense should prevail. For instance, building of a new road or locating a new factory should not be based on political compulsions but based on whether that investment is the right one in the right place
- It is essential to align foreign policy with economic policy, and these two are intrinsically linked. A balanced and mid-ground foreign policy can help Sri Lankan businesses. He is keen to pursue good relations with all multilateral and regional institutions like World Bank, ADB, UN, SAARC, etc.
- Sri Lanka needs to make better use of its vast ocean resources – an area hitherto neglected. He envisages a 100% growth in incomes from the fisheries industry
- Sri Lanka needs to move away from traditional production and focus on innovation, as well as the human resources needed to support it.
- There needs to be a much closer working relationship between the private and public sectors, a better understanding based on trust and transparency.
I’ve uploaded the full audio of his speech to Soundcloud. You can listen to it via the embedded clip below, or visit it on Soundcloud here.
I saw this story about e-medi help and remote diagnosing and it reminded me of one of my first exposures to the power of ICTs in bridging the services gap for people. It was on a World Bank field visit during a summer project back in 2006, we were going around the country visiting project sites of the ‘e-Sri Lanka’ initiative funded by the Bank and implemented by the ICTAgency. We stopped at the Kurunegala teaching hospital to witness how doctors were using Skype to help patients get preliminary diagnoses for complicated illnesses from specialist doctors based in Colombo. This had transformed the time and cost incurred by people living in Kurunegala and beyond – they could avoid the full travel to Colombo and obtain initial diagnosis via Skype from the medi kiosk at the hospital, and also use it for more regular follow ups and checks up with specialists without travelling to Colombo and staying in long queues.
This article about how it’s playing out in the US is more about direct patient to doctor contact through Skype from home, especially in emergencies. Yet this has important implications for medical care contexts where demand services are severely tretched beyond the resources available and what can be offered and how quickly.
“She sat with her laptop on her living room couch, went online and requested a virtual consultation. She typed in her symptoms and credit card number, and within half an hour, a doctor appeared on her screen via Skype. He looked her over, asked some questions and agreed she had sinusitis. In minutes, Ms. DeVisser, a stay-at-home mother, had an antibiotics prescription called in to her pharmacy.
The same forces that have made instant messaging and video calls part of daily life for many Americans are now shaking up basic medical care. Health systems and insurers are rushing to offer video consultations for routine ailments, convinced they will save money and relieve pressure on overextended primary care systems in cities and rural areas alike. And more people like Ms. DeVisser, fluent in Skype and FaceTime and eager for cheaper, more convenient medical care, are trying them out.”