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.
National Leadership for Innovation
For a successful innovation policy to kick-in, it will need the firm backing of top leaders, such as the President or the Prime Minister. It gives credibility to the vision and facilitates the adoption of key measures for removing bureaucratic and regulatory barriers. Many state institutions that could, and should, support the innovation agenda are not oriented towards the new demands of an innovation-driven economy and the flexible and nimble approach required by firms and other actors in the innovation eco-system. It is also important to have efficient mechanisms that facilitate cross-departmental cooperation, as by its very nature, innovation policy concerns parts of government that usually work independently. The need for a National Innovation Council to drive this agenda at the highest level, then, is essential. It must be chaired by H.E. the President or Prime Minister and ensure that all relevant arms of government get in line to support innovation. The Council could consist of open-minded, dynamic, and future-oriented professionals from private sector, public sector, academia, both here and abroad. The Council should not shy away from inviting foreign experts to advise its work. In Singapore’s recent ‘Smart Singapore’ initiative using big data to support city planning, it has hired a former CEO with global management expertise. Similarly, Sri Lanka can seek support and guidance from countries that have already gone down this journey – Singapore, Malaysia, South Korea, Chile, for instance. The innovation agenda cannot and should not be left to just Ministries and departments tasked with science and technology or industrial development and SMEs. Fostering innovation across the economic spectrum necessarily means that government institutions, universities involved in everything from industries to SMEs, healthcare to agriculture, urban development to transport, need to be aligned to a national innovation programme. It is only with the highest-level sponsorship and leadership by the head of state or Prime Minister that all actors can truly be made to focus efforts to this national goal. A new National Innovation Policy would need to be forged, to take the current national Policy on Science and Technology and the National Strategy on Science, Technology and Innovation of the former Ministry of Technology and Research to the next level.
Agenda for Action
Policymakers must be careful in designing and calibrating supporting policies and strategies. While many countries have sought to enhance innovation through direct government support in the form of subsidies and grants, the results and effectiveness of such programs have been mixed. Following the adoption of a national policy, the proposed National Innovation Council can formulate a comprehensive action plan that sets out what state institutions can do, what they shouldn’t do, where they need to get in, and where they need to get out. Among the tasks of the Council could be to formulate incentive packages for spurring private sector investment in S&T and R&D; reorient education systems to gear youth mindsets towards innovation; ensure universities are better embedded in to innovation chains and have administrative flexibility to be more industry-facing; fix business climate and regulatory barriers that hurt innovation; enable new financing mechanisms to back start-ups and commercialization of inventions; and support the creation of ‘maker spaces’, innovation hubs, and incubation centres. No doubt, such an innovation programme is ambitious, but getting it right would mean the difference between an economy that gets caught in an inescapable trap, or an economy that boldly breaks out and becomes a highly competitive economy in Asia. For this, national leadership is needed. It is too large and too comprehensive an agenda to be left to one or two Ministries or Ministers alone.
This is the 20th article in the ‘Smart Future’ column that advances ideas on competitiveness, innovation, and economic reforms.