Friday, July 13, 2018

Have we lost sight of the key ingredient to draw FDI after improving the ease of doing business indicators?

Its the 21st Century Education Stupid

When Samsung decided to invest heavily in Vietnam, they looked first at the labor force, not its cost, but its flexibility in turning out their smart phones in the manner they wanted. They were able to motivate and get productivity and consistency out of the labor force. 

In 2016 Samsung alone accounted for US$40B of exports per annum from Vietnam, all within a period of 15 years, when Sri Lanka's total exports per annum of all products is only US$10B. Further Samsung brand accounts for 23% of total exports from Vietnam. This is HUGE. In 2018 this would have grown further no doubt. So what should Sri Lanka do to try and even attempt at attracting such a manufacturer, as Textiles have limited upside potential?

For Sri Lanka the key in TOTAL FACTOR PRODUCTIVITY, (the essential for an economy to grow, especially with exports), is labor productivity, the most difficult and the only area we have room for improvement if we are to grow, export, and improve the quality of life of even the labor force, both public and private.

A reminder that in the export market, you have to compete on price with the rest of the world, and unless you are competitive, you cannot export if others in other countries can produce for less. So efficiency is the key there and labor productivity is vital, as the capital and financial inputs are the same for all.

I will only concentrate on Education in this essay that is a key component of labor productivity, and we place too little emphasis on this point.

I will give an example to make the point. We all know about baases and how difficult it is to find one, how much their daily rate is, and how they play hookie never turning up when you expect them, because they for some insane reason known only to them, they take on 10 jobs at a time and try to juggle between them, thereby delaying 10 projects by their own folly. We are stuck because of the shortage of baases, while everyone knows that baases are highly paid.

So why are there NO BAASES to supply the demand? Whose fault is it? Why have we not placed more emphasis of putting Baases at the top of the Professional Elite, when they can earn more than Doctors?

These are all societal questions that have not yet been tackled, but MUST be tackled and the answer is Education and Apprenticeship, as the earning potential is for 18 year old to earn a decent daily wage, upon which he can build a skill which will allow him independence in life.

So the answer is taking the easy route. I know personally of the Baas who built a shop for me, who is now driving a three wheeler, which he feels is less juggling and easy money in comparison, despite the higher daily rate. This is very surprising and upon further investigation, this outdoor work at Rs3,000 per day is frowned upon to driving a three wheeler for a net Rs2,000 a day sure and easy money.

So what is the key? Education, a qualification that is recognized. Working in overalls as a mark of high standard all count. We only have to look at Builders in other countries who have to have a certificate of competence before they can undertake such work. They then take pride in their profession and adhere to the standards of the industry in order to build their reputation, part of which will be in taking up assignments and completing them on time for reward, bonus for on time completion etc.
As you may know the past few blog entries have concentrated on the need for Education Institutions to train people, especially people already in the workforce who have not undergone training in the past, which results in poor productivity, which with training has a chance of increasing the productivity soon thereafter.

So both on the job training in the form of apprenticeship schemes, and qualifications that are necessary to take on work will go hand in hand in improving the appalling level of labor productivity that is a massive drag on growth in Sri Lanka.

Back to the paucity of an educated workforce. Instead of by rote learning, our education should concentrate on application oriented learning to meet industry and workplace requirements.

What the private sector requires is people with integrity, who can think and solve problems. Teamwork is an essential part of it as work is done in teams to finish projects to client expectations. The present education system is NOT geared to meeting those requirements and only tests an individuals ability to accumulate knowledge, not problem solving, given a set of challenges.

The private sector do what they can, (limited though to resources available to improve the thinking skills of their staff) however there must be a commitment on the part of the state to change the thrust of education overall to meet these demands.

The fact that education was historically geared to filling government sector jobs, it has not created the workforce needed for the Private Sector. As a result the demand of school leavers is for stable, safe and secure Public Sector jobs. That is what they are trained for, their demands being very limited and their output similarly so. Society is also at fault for encouraging this form of employment and changing this mindset is another challenge, I will not address here.

Unless we turn the whole system on its head, and only train people for Private Sector jobs, the Public Sector can then absorb the benefits of this thinking to make it more efficient, from the new approach. It’s a win win solution for the economy. The sooner we can adopt it the sooner we will see the positive results.


We can only move forward if we have a determined, leadership that changes the emphasis of learning to meet tomorrow’s workforce, and for that, Education has to be turned on its head literally, and a new culture developed. Can we do it? If we cannot, then stop talking about matching the global marketplace for our citizens. 


Anonymous said...

The donkeys in the BOI from the top man downwards don't get it. Foreign investors look at quality and availability of labor as a pre requisite for FDI and they have done their own calculations and realized that the SL workforce, as much as they can even find any to work are not motivated sufficiently as they still look at public service, no work job as their gold standard to aspire to.

Remember capital, logistics and location are available elsewhere, so that is not even a consideration these days.

So forget it, unless a Tsunami attitude change takes place, and that will not happen anytime soon, with current thinking

Anonymous said...

it's an age-old problem and this is why the Brits imported Tamils from India to do their hard work of plucking tea bushes because the locals were not up to the task of working hard. The locals were content with their rice, fish and coconuts, with some toddy shots as dessert, and didn't have an attitude to work to accumulate more wealth. The problem persists today.

If we look at our investors today, the Chinese are the most suitable because they bring their capital and labor, produce wealth, and then export it out of the country. The wealth of real estate is exported in the form of finance and the resources are out as themselves to be consumed in China. Once the land and sea are stripped of their low hanging fruits the Chinese will move to the next place, as they're unlikely to become involved with locals and create families given their thoughts about race. Africa calling!

Anonymous said...

Singapore has a very good model to continuously upgrade their human capital. Each citizen receives a small annual subsidy which they can use to take any class they want on any subject -- language, computer programming, etc. -- to upgrade their skills to make them able to find work more easily. companies greatly benefit from this scheme because they get a more motivated and trained workforce that is always improving, and workforce training companies are incentivized to proliferate and provide more offerings given the big new market that was created for them -- a very elegant solution, and easy to implement in Sri Lanka.