Technology Transfer Challenges to Developing Countries like

Technology Transfer – Challenges to Developing Countries like Sri Lanka Vijaya Kumar Chairman, Industrial Technology Institute vkumar@pdn. ac. lk

Importance of Technology Schumpeterian Growth Increase of human knowledge Technological progress and changes in institutions Lead to sustained growth of a nation Real world per-capita GDP – effect of technology Grew by 5% per century during 15/16 th century Average of 17. 5% during 17 th/18 th century By 248% in 19 th century and 863% in 20 th century De Long, NBER Work Paper 7602, www. j-bradford-delong. net/TCEH/2000/TCEH_2(2000) Wide variation in per-capita income High income - Norway (>$ 68000), West, some oil states Sri Lanka ($ 1400) – Lower middle income Big variation after 18 th century and latter 20 th century

Exploitation of technology for development Newly Industrialised Economies – Korea, Taiwan Massive Investment in Science and Technology Transformed Agricultural Economy to Industrial Economy 1980 s – Development Model - many developing countries Is this model relevant today after WTO ? Import Substitution Industries impracticable Protection of domestic industry, Subsidies - Controlled Chaebols - “Crony capitalism”- Unacceptable Autocratic rule, No strikes, Low wages - Unacceptable Selective FDI - Most Favoured Nation Treatment Changes in IPR regime – TRIPS, no process patents Developed countries - tariff protection/subsidies

Sri Lanka and South Asia India, Pakistan – Both low income, Sri Lanka low middle GDP per capita of India, Pakistan $ 800 - $1000, SL $ 1400 Growth rates 2005 -6: India 9%, Pakistan 7%, Sri Lanka 6% % Industry in GDP – Around 28% % High technology exports: Sri Lanka 1%, India %% South East Asia Singapore high, Malaysia Upper middle, Thai low middle GDP per capita Malaysia $ 5. 5 k Singapore $ 30 k, Thai $ 3 k Growth rate 2005 -6: Malaysia, Thai 5%, Singapore 7. 5% % Industry in GDP: Around 46% High tech. exports Thai 27%, Malaysia, Singapore 55% South Asia – Restricted economy, Import substitution Sri Lanka liberalised in 1980, others in the 90 s South East Asia – Liberalised economy

Sources of technology Domestic production of technology Strong National Innovation System Human Resources, Expenditure on R & D (PERD) West, Korea, Taiwan Licensing of technology Strong economy and strong private sector Building of partnerships Malaysia, Singapore Foreign Direct Investment Greenfield, Privatisation Enabling environment – Infrastructure, Tax, large market Stable economy Technological learning, Spin offs South East Asia – Industrial exports, high tech exports

National Innovation System in Sri Lanka Human Resources in S & T % of 17 -24 age in Universities Sri Lanka 4%, Pakistan 4, India 10, S. E Asia 28 -44% Undergraduate age high in Sri Lanka. Admissions low. Quality of degree? % GDP on Education: Sri Lanka 2. 1, Pak 2. 3, India 3. 7, S. E Asia 4. 2 - 7. 4%. New Pakistan programme-Increase investment by 1500% Researchers in R & D per 1 million population Sri Lanka 208, Pak, India 120 -160, Thai/Mal 350 -500 Korea 2400, Singapore 7000 Human resources for successful technology transfer ?

Research and Development Gross Expenditure on R & D/GDP: Sri Lanka 0. 14, Pak-India 0. 6 -0. 9%, Thai 0. 24, Mal 0. 7, Singapore 2. 2, Korea 2. 6 Private Sector ERD/GDP (or Business ERD/GDP) Sri Lanka 0. 01, Pak 0. 02, India 0. 1, Thai 0. 09 Malaysia 0. 5, Singapore 1. 3, Korea 2. 0 High Military expenditure – 4% of GDP Domestic production of technology not facilitated Low technology innovations, No defence research Licensing of technology low Private sector not strong enough Foreign Direct Investment Mainly privatisations, Greenfield FDI in telecom sector Privatisations not very successful in technology transfer

Sri Lanka – Success stories (Resource intensive) Hayleys – Haycarb and Dipped Products Incorporated in 1970 s – restricted economy period Haycarb - 16% of world coconut shell activated carbon USD $30 m turnover, branches Thailand, Philippines Dipped Products 5% world demand-rubber based gloves 270 versions, 60 categories–domestic, industrial &medical USD $ 70 m turnover, manufacturing unit in Thailand Factors in success Incorporated before economic liberalisation Uses Sri Lankan natural resources Technology transfer Initial purchase of technology, technology production limited

Colombo Dockyard (technology intensive) State enterprise - 1974 – ship repairs in Colombo Port 1977 - barges, tugs for local market, 1982 SL Navy 1983 Exported barges to Myanmar, 1987 ship to Maldives Privatised 1983, 50% shares to Onomichi Dockyard 1993 Restructuring – heavy and offshore engineering Quality Management System, Ships for India, Middle east US $ 70 m turnover, unable to expand - space constraints Factors in success Partnership and technological learning from Onomichi Medium size shipbuilder needed expansion Onomichi partnership improved access to export markets

Loadstar (Resource intensive) 20% of world solid tyre production 1982 – 20% export duty on raw rubber Joint Venture with Belgian company Key Belgian personnel - new company with Jinasenas Pneumatic tyres and rubber wheels introduced Technology Technological learning at the beginning Small research units in Sri Lanka and Belgium Patent granted to Belgian partner

Success stories (Labour Intensive) MAS Holdings, Brandix – Post economic liberalisation Garment (intimate apparel, sportswear) manufacturer Developed comprehensive supply chain in Sri Lanka Family owned enterprises Strategic partnerships with market leaders- past few years Introduced its own brand of lingerie in India US $ 750 m turnover, 45, 000 employees, 5 countries Factors in success Exploited Multi Fibre Agreement (MFA) - Garment Quota Was already involved in textile/garment trade Technological learning through strategic partnerships Swimsuits Beneficiary of FTA with India

Conclusions Accepted attributes of NIS weak – Sri Lanka not likely to be able to exploit S&T for economic growth. SL firms have been able to innovate, contribute to growth Very few successful firms from “liberalisation” era MAS Holdings initially protected by MFA Haycarb, Dipped Products, Dockyard pre-1978 Natural Resources based firms have succeeded Technological learning from FDI – Onimichi, Loadstar Rapid expansion of absorptive capacity needed – increased human resources in S&T at Ph. D level Build infrastructure for commercialization of research