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.
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.
Though we can find people who are really good technically many fall behind in terms of communication, understanding customer needs and articulating a solution. Most interestingly the individuals do not perceive that they need to improve on those in order to improve on their careers.
To overcome this we and many other similar companies I suppose; has to introduce people to handle the business management aspect of projects with project roles such as business analysts, account managers, etc. But for small firms like mine, who want to keep costs low and operate small this becomes big overhead.
Philippines can claim more than 40 years of history hosting not only ITES/BPO facilities but also providing many world class venues for business. The country commenced IT education lot earlier than other Asian countries and its IT success was aided by amicable but assertive people who followed a system, including a culture akin to US, its primary customer. To best of my knowledge, Philippines earned US$6B in IT services income in 2008. However, Philippines is aware of the aggressive Indian competition for its share of the market.
India headed by Tata Corporation entered the market in late 70’s with contracting-out specialists to countries like Australia and US and built-up a reputation for high quality and faster turn-around times for developing mainframe software. This was followed by billing/medical services data-entry for overseas countries during 80’s and commenced call centre and customer support services in the late 90’s. During the last decade, India has evolved to become the major ITES/BPO supplier.
Sri Lanka commenced software development services earlier than India but could not make a rapid progress due to lack of venture capital and marketing power.
India and Philippines have/had more sophisticated business structures, venture capitalists than in Sri Lanka and thus have a competive advantage in attracting overseas interests.
India has a large pool of highly educated, corporate power and a huge pool of venture capital to attract investors and customers. This is also aided by a large pool of expatriate Indian entrepreneurs.
India is truly a case of size does matter.
Considering these and other deterrent factors, Sri Lanka has done relatively well. Sri Lankan developed MillenniumIT trading platform now used in London Stock Exchange is an example of entrepreneurial skills exist in the country.
What opportunities are available for Sri Lanka to expand its wings?
Sri Lanka cannot produce the huge numbers of IT/Business specialists as India does. Neither it can raise venture capital nor does it have the corporate/marketing power as India does. However, the country has produced symbols of quality achievements in cases such as Millenium IT, existence of Kandy research and development center of Swedish ERP software vendor IFS, award winning IT education facilities such as at the University of Moratuwa. Promoting these achievements will help Sri Lanka to attract niche but quality projects in the same manner it did in the garments industry.
Yet, I think, in the main, working with Indians would bring more stable conditions for Sri Lankan IT/BPO industry. I am pleased that this has already begun.
However, one must be aware that the Indian success can be significantly deterred by the recent entry of East-Europeans to the market. East-Europeans too are cost effective and culturally more acceptable to the US and the West. Furthermore, most of them are members of EU.
Special note: This is for pessimists in Sri Lanka. In the 70’s Philippines enjoyed a PPI (Per Capita income) twice that of Sri Lanka. Despite all odds, Sri Lanka now can claim equals with Philippines. Sri Lanka also can boast better public services such as education, public transport and healthcare etc. You know all about India.
I have been involved thru my organisation in the ICT field and have seen many small BPOs come and go without even the knowledge of the BOI, SLASSCOM or the ICTA. All 3 have there own seperate agendas and try to find ways to impress the public with the number of press releases that would go in a month. Today if you ask ICTA a list of BPOs in Sri Lanka I bet not half of the actual list would be covered. The large BPOs will somehow run their operation, it is the small ones that needs to be encouraged and taken on the right path with proper advice.
The ICTA needs to wake up and look at the bigger picture than talking of what they have done and warm their chairs. They need to step into the market and see the issues the BPOs are going through and find solutions rather than pass the buck.
Our general knowledge and ability to research and find a solution to problems are really poor. I guess it's the education system. I can write about this for days. Unfortunately nothing will happen and it would be a waste of my time.
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