Sri Lankan Issues and Practices Relating to

04 Productivity Improvement

MBA 6404
Managing for Productivity & Quality

Presented by Dr.Seshika Kariyapperuma 1

IN A PERIOD OF EXPECTED
ECONOMIC GROWTH
ACHIEVING PRODUCTIVITY
GAINS HAS ACQUIRED NEW
SENSE OF URGENCY

THIS IS TRUE FOR OUR COUNTRY

TOO
 ACCORDING TO MICHAEL
PORTER
• “…The wealthy nations they are the
productive nations…”

• “…Productivity makes you wealthy, it

allows you to support high wages, it
allows you to support high returns on
capital…”
• Michael Porter
Here we are

4
5
This is rich!
WHY PRODUCTIVITY IS
IMPORTANT
Higher standard of living

Higher GDP
per capita

Higher
Higher
Investment
Productivity
 Factors affecting low productivity
• Lack of Capital
• Shortage of skilled labor
• Inadequate technological progress
• Law R@ D
• Lack of Innovation
• Macro economic imbalances
• Problems with education system
 Factors affecting low productivity
at organizational level
• adopting and adapting available global
knowledge may not be learning sufficiently from
existing technologies that are better than what
they are currently using,
• and may not be adequately improving their own
products, processes, organizational and
management practices, and marketing methods
• spend fewer resources on R&D and apply for
novel patents less frequently
Factors affecting low productivity
at organisational level
• offer in-service training more rarely
• have lower levels of managerial skills and
training than firms in higher-income countries
• firm-level factors —such as managerial
education and practices, workforce skills, and
local spillovers
• business environment factors affecting
incentives and risk-return considerations
 PRODUCTIVITY IN SRI LANKA
• Productivity, innovation, and growth in Sri
Lanka through
• a cluster-level productivity analysis,
• a firm-level total factor productivity analysis,
• and a firm-level innovation analysis
 Sri Lankan Economy

• Per capita income, nearly double that of the average

across South Asia
• Outperforms other South Asian and lower-middle
income countries with respect to a range of social
indicators
• Growth rate - 2018 (January) 3.2%
Social Indicators
 Suggestions of Dutz and Connell
• As in many middle-income countries, much
of this hope lies with the potential for the
private sector to generate investment, spur
productivity and generate broader based,
more inclusive growth.
• It is more important than ever to identify and
assess existing constraints to investment,
productivity, innovation and growth in the
Sri Lankan economy.
• require structural reforms aimed at promoting
aggregate savings and private investment,
• and increasing connectedness to global knowledge
(including attracting more FDI) as a vehicle for
technological upgrading
• self-sustaining ‘endogenous growth’ as a result of
transformational entrepreneurship and investment by
firms in intangible or knowledge assets that drive
productivity and innovation in the private sector
• Aggregate output typically fails to grow as fast as it could
due to insufficient savings, insufficient investment in
physical and human capital, and insufficient increases in
TFP
• Countries are less developed not only
because they have less physical and human
capital per worker than developed
economies,
• but more importantly, because firms use
their tangible inputs of labor, capital and
raw materials less efficiently – and without
combining them with sufficient
complementary knowledge-intensive
intangible assets.
 (i) Sectorial misallocation
• Large proportion of the working population
remaining in lower-productivity sectors of the
economy, such as low capital-intensity and
low knowledge-intensity segments of
agriculture or informal jobs.
 ii) within-sector, across-firm
misallocation
• Less productive firms account for a
disproportionate demand for resources and
are not forced to exit and make room for
more productive existing firms or new
entrants by the selection mechanisms of
‘creative destruction’
 (iii) insufficient within-firm
productivity upgrading or innovation
• the commercialization by transformational
entrepreneurs of new-to-the-firm (and in a few
instances also new-to-the-world) process,
product, organization and marketing
technologies, literally turning ideas into higher
productivity and wealth at the firm level
• knowledge spillovers across firms
 Incentives for productive
entrepreneurship
• Competition.
• Extent of government ownership
• Enterprise regulations and corruption
• Crime and security
• Access to skills
Connectivity to global knowledge
• Access to knowledge and learning through
trade:
• Access to knowledge through other channels
 Access to finance

• Sources of financing for new investments

• Access to quality physical infrastructure
 The Need of the Hour

Massive Investment !
Massive increases in productivity !
 The Basic Approaches to
Productivity Improvement
• Investment in high output and modern
plant & equipment and new technology
- capital intensive approach
• Improving the efficiency and effectiveness
of existing resources
- better management approach