Columns - The Sunday Times Economic Analysis

Investing in social infrastructure: Education and technical skills

By Nimal Sanderatne

A country’s economic development is closely related to the levels of achievement in education, technology and skills. In as much as economic infrastructure has an important role in economic development, the improvement of social infrastructure is vital for economic progress. This is much less appreciated than the importance of economic infrastructure discussed last week.

The other constituent of social infrastructure is health. Health conditions also play a vital role in a country’s capacity for economic development. Many studies document the contribution of health and education to economic development.

The economic attainments of Europe, North America, Japan and East Asia are inconceivable without their attainments in education and skills. Improvements in education and health are so well recognised as contributing to economic development that they are considered investments in human capital that is comparable to the physical means of production such as factories and machines.

Investment in human capital through education, training, health and medical facilities is an investment that yields additional output and brings an economic return that is difficult to calculate but decisively significant. Economic growth theory sees human capital as an important source of economic growth. As the term implies, human capital is conceived as an input to development. Numerous studies have established the relationship between education, health and economic development. There is no doubt that improvements in health and education contribute to economic development. Therefore there is a strong justification for their improvement.

Education and skills development

An educated and skilled workforce is a driving force in an economy. Education is one of the pillars of the knowledge-based economy. Increasingly, comparative advantages among nations come less from natural resources or cheap labour and more from technical innovations and the competitive use of knowledge. Education and skills improve productivity that in turn leads to higher income and improvements in livelihoods. The benefits of good education are not confined to individual economic prosperity, it is vital for a country’s economic performance.

Education contributes to improvements in health, a more egalitarian society, awareness of environmental sustainability and democratization of society. Countries with higher primary schooling and smaller gender differences between boys’ and girls’ schooling tend to enjoy greater democracy. Countries with higher literacy rates and education levels are more likely to uphold democratic political institutions. It is also likely that education leads to dissatisfaction with dictatorial regimes and leads to political unrest and revolutions.

Literacy inadequate

Sri Lanka has been somewhat complacent regarding the development of education for some time as the country has achieved high levels of literacy and several health indicators too are good for a country with its level of per capita incomes. This complacency, together with the stringency of public funds, has led to less than optimum achievements in education and skills development. The attainment of a high level of basic literacy has made a contribution to economic development, as a literate labour force is more productive. However, literacy alone is inadequate for economic development at the present stage of economic development.

Modern society has been characterized as a “Knowledge society”. What this implies is that a country’s development is determined by its state of knowledge, scientific learning, skills and innovativeness. It is in these that the country has fallen back and is a constraint to higher levels of economic development. There is recognition of this inadequacy now but positive steps to enhance education and technical skills are inadequate. The funds allocated are too little and the required educational reforms are difficult to implement. Further, many of the best trained and educated personnel leave the country. Private sector firms complain of the inadequacy of trained personnel. Research institutes in the country are underfunded and find it difficult to attract scientists.

Scientific and technical knowledge

Progress in scientific and technical knowledge has vastly increased the potential productivity and development of an economy. Rapid advancement in computer technology and its applications have made it essential to have a large number of persons with high levels of computer literacy. Development of more powerful applications of information technology has led to its wide application in industry and services. The full utilization of this potential requires the capacity of the education system to produce high quality trained personnel in adequate numbers. Rapid economic growth requires scientists to develop improved varieties of food and cash crops. The dissemination and adoption of advanced technologies are the keys to economic development.

Investment in higher education

The economic relevance and quality of higher education has come into question in this regard. The educational bias, content and applicability of university education are serious concerns. A World Bank report on higher education observed that Sri Lanka’s university education is substantially lower than that of an average middle income country for a number of reasons. It said that the economic relevance and quality of higher education is considerably below the level required of a middle-income country. It made the pertinent point that Sri Lanka spends a substantially smaller portion of its national income on education than other middle income countries and that public investment on university teaching and research, and the alternative higher education institutions is low.

Sri Lanka’s investment in education, the World Bank report observes, is about 2.8 per cent of national income, whereas lower middle income countries invest an average 4.3 per cent of national income and upper middle income countries invest an average of 4.6 per cent of national income on education. The economic path to a prosperous middle-income Sri Lanka, it emphasizes will be based on knowledge-intensive activities such as information technology and software development, engineering, industrial processing, banking, finance and insurance. At present, the country’s capacity and position in these areas are well below the average for comparable developing and exemplar middle-income countries.
It is precisely in these areas that the country has failed to make adequate progress. The recognition of these needs have not been backed by adequate funds, needed reforms and implementation of policies. The difficulties to change outmoded priorities, institutional rigidities and politicization of higher education institutions have impeded progress.

Human Development Index (HDI)

Even performance in basic levels of human development has lagged behind the achievements of other countries. That the country’s relative achievements have been unsatisfactory is shown by the fact that although the position of the country on the Human Development Index (HDI) has improved to .759, it has fallen in its relative positioning in the world in recent years. It has fallen from the 89th position among 173 countries in 2000 to the 102nd position among 182 countries in 2008. Economic performance has much to do with this relative decline that has hardly been realized. It is also owing to other countries progressing more rapidly in economic and social development.


In as much as economic conditions and capacity have an important bearing on the attainment of social development and the quality of life, the levels of social infrastructure determine the pace of economic development. The attainment of higher levels of economic development would require higher investment in education and health, reforms in these sectors and far more effective implementation of education and health policies.

Top to the page  |  E-mail  |  views[1]
SocialTwist Tell-a-Friend
Other Columns
Political Column
How the revolt within the Grand Old Party ended
5th Column
Here’s wishing a strong Opposition!
The Economic Analysis
Investing in social infrastructure: Education and technical skills
A surprise visit amidst heat over Libya and sympathy for Japan
Focus on Rights
A question of national pride
Talk at the Cafe Spectator
Parliament discusses UN panel on Sri Lanka
From the sidelines
Libya, ‘R2P’ and the selective business of ‘accountability’


Reproduction of articles permitted when used without any alterations to contents and a link to the source page.
© Copyright 1996 - 2011 | Wijeya Newspapers Ltd.Colombo. Sri Lanka. All Rights Reserved | Site best viewed in IE ver 8.0 @ 1024 x 768 resolution