Education and economic success: How Covid-19 could have saved us

Originally appeared on The Morning

By Dhananath Fernando

It’s been over a year since the Covid-19 pandemic hit Sri Lanka. The pandemic entered our nation at a time when all Sri Lankans, regardless of their party politics, had very high hopes about a change in the political economic system – a “system change”. While Covid has posed a real challenge for any system change, it could have been interpreted as a blessing if we were to shift our gears from “needing a system change” to working on “implementing a system change”. In my mind, education reforms are probably the best place to start.

We tried to restrict Covid to being a healthcare crisis without letting it spill over to become an economic crisis, but to no avail. Now there is another crisis brewing in the corner, which hasn’t been given much attention – the “education crisis”, which has been exacerbated by the Covid pandemic and its economic aftermath.

Let’s understand the crisis first.

Even before Covid, it was not a secret that our education system was not supporting our economic aspirations. Starting from preschool to tertiary and vocational education, the education reforms have been mere promises; they have been limited to the pages of election manifestos, without any real work happening on the ground. This education crisis is far more complicated than ever before. There are significant flaws in the education structure as well as in the content taught.

Sri Lanka’s inability to produce complicated products and services is a good case study to evaluate our education system. What we have been taught over the years does not satisfy the areas of knowledge that are in demand. People who have had the talent and acquired the skills that meet global demand have been offered citizenship and very attractive opportunities all over the world, and Sri Lanka has not even thought of attracting them back.

The more serious problem is that we have not been taught the things that are important for the present and future. From my experiences, we haven’t been provided with the opportunity to really learn by ourselves, even if we wanted to. Most content and many curriculums are outdated and so we have been made incompetent and unable to meet global competition. From 2000- 2015, Sri Lanka has introduced only seven HS codes to our export basket. Our competitor Vietnam has introduced 48 and Thailand has introduced 70 HS codes to its export basket. Therefore, one of the main contributors to our ailing economy is education.

As a result, even after 70 years of independence, we are finding it difficult to compete, and our inability to compete and understand the market dimensions have pushed us into a corner. In order to counter our own lack of competitiveness, we are building walls of protectionism against a far more competitive world, which has further isolated us as a nation in a fast accelerating world.

It is not only about our knowledge of technical subjects; human values and qualities such as empathy, equality, caring, taking responsibility, self-discipline, and many other soft skills have not been developed to levels at which they should have been. The way our senior educated officials and some trade union leaders, who have had a science and technology-focused tertiary education, are attempting to manage a global-scale pandemic, is a classic case study to understanding the gaps in our education system.

With all these flaws we have continued on the same journey without making improvements. With the pandemic, our preschools, universities, and most of the tertiary education institutes have been closed or operating virtually for more than a year; some have adopted online teaching methods but some of the students who do not have internet or device access have been completely left out. Some students and families have been completely left out due to being unable to afford the internet (even though Sri Lanka is one country with comparatively low data charges), and for practical reasons such as a few kids requiring to study online at the same time. Additionally, learning how to learn online is the first step for a productive online learning experience, rather than just sharing the same notes online and delivering the same content in front of a camera.

Education reforms are complicated, but it is one area that can bring us significant economic benefits in the future – if done right, and in line with global education standards. To do this, reforms sacrifices in terms of political capital will have to be made.

Implementing such reforms will bring in newer opportunities.

First, the tertiary and university education system could have expanded through a new online platform. One of the main complaints has been the capacity of our universities. An online mechanism with proper online examinations could significantly increase the numbers getting enrolled at our universities. A parallel curriculum change could have been done with industry consultations, as the post-Covid economy in the world has opened more opportunities for hundreds of new subject streams. Even world-reputed universities such as Harvard and MIT are now offering new courses with the same credibility online at a very reasonable price.

Secondly, the teachers are at home, and this time, they should have been better utilised for teacher training and curriculum changes to uplift education standards.

To overcome the current crisis, ideally a special curriculum could have been made for primary and secondary schools with special focus on the critical content from the existing curriculum. That would have helped students focus on the important subjects and themes and catch up for time they already lost due to Covid. The same special curriculum should be the gateway for updating our education system and curriculum.

While we work on long-term curriculum changes and online education methods, teachers and the school administrations should be identified as frontline workers and vaccination drives should prioritise them so that schools can be reopened faster.

There have been attempts to utilise the current television network for education purposes, but it seems to have not been done in an organised manner. In the third wave, we are back to square one in facing our educational challenges and it is obvious that we have not learnt anything from the first and second waves of the pandemic.

We have to remember that reviving the economy from an education crisis is far more difficult than recovering from a healthcare crisis. If our people’s brains don’t work at the right speed and in the right direction, there is no way that we can drive the economic engine in the right direction.

That may be why former late South African President Nelson Madela eloquently said:

“Education is the most powerful weapon which you can use to change the world.”

The opinions expressed are the author’s own views. They may not necessarily reflect the views of the Advocata Institute or anyone affiliated with the institute.

Work Together or Die Alone

Originally appeared on The Morning

By Dhananath Fernando

How the pandemic highlighted the greatest benefit of globalisation – co-operation

The provision of Covid-19 vaccines has become a serious issue, not only in Sri Lanka, but in all parts of the world, but governments could have faced this issue better if they had understood the economics behind it – especially because it is the science of managing scarce resources by making the right choices in resource allocation.

Understanding this is much more important today because Covid-19 vaccines have become a limited and scarce resource globally. Sri Lankans who got the first jab of the Oxford AstraZeneca vaccine is now in a stage of confusion, as they have lost access to the second jab. This is mostly due to the unfortunate Covid uptick in India, which is globally the main manufacturer of vaccines.

Let’s rewind to about a year ago. This was when Sri Lanka managed the first wave of Covid-19, with a strict lockdown, active contact tracing, and effective quarantine mechanism. The number of infections and fatality cases in the USA, Italy, and some other European countries were very high during the same period. But things have changed. 

Economically, this was the time Sri Lanka embraced self-sufficiency. Many argued that globalisation and global convergence have come to a standstill, and that we have to go for self-sufficiency, and even for a homemade recipe for Covid-19 pandemic management. 

After one year, the entire world – and even the Sri Lankan authorities – has unanimously agreed that the best solution to manage the pandemic is vaccination. At one point, some policymakers even questioned and argued, saying: “Why are we making our people guinea pigs for vaccination testing of the products developed by other countries?” However in just one year, it was proven that global cooperation is needed for us to prosper; and the main vaccines currently in use in Sri Lanka, namely Oxford AstraZeneca, the Russian-developed Sputnik V and Chinese-developed Sinopharm are the result of global cooperation. 

The vaccines Sri Lanka received as a result of Covax are part of a global co-operation programme, where many countries and international donors contributed to developing the vaccines at a rapid pace. The US invested about $ 4 billion in Covax, as did the Bill and Melinda Gates Foundation. The Coax programme is a global mechanism, where countries and donors donate money to the programme, similar to the Paris agreement, for the vaccinations of middle and low-income countries. 

However, it is true that as usual, the countries with deep pockets received an additional advantage of securing more doses than middle-income countries. It is a classic case of “higher the investment, higher the return”. In this case, the higher return is in the number of doses for countries that invested billions of dollars for vaccine development and manufacturing. 

First world countries including Canada, the USA, Japan, and the UK have made multiple bilateral deals with many pharmaceutical companies, and have managed to secure doses more than they require for the entire population. Those countries made the risk of investing in multiple companies in case of the failure of certain vaccines during the development process. As a result, some countries like Canada have now reserved enough vaccines to vaccinate 8.7 times the doses required by their population. The UK and USA have reserved vaccination doses for about 7.7 and 4.0 times the sizes of their population. 

Globally, this has created a debate on the waiver of patent rights for vaccines. Some economists and policymakers have requested a waiving-off of these globally so that  the developing world will be able to produce its own vaccines – thereby increasing the supply of vaccines and bringing the pandemic to an end. 

However, intellectual property (IP) rights is a big component of pharma manufacturing. Companies and scientists embraced taking such a significant risk because of the large returns they could have made. Requesting a waive-off on these IP rights may affect the incentive of developing similar high-demand pharma products in the long run.

In this context, the question is what Sri Lanka can do to accelerate the vaccination programme. 

First, we have to realise we are already late to catch the train. The cost of the delay is a serious economic storm to an already ailing economy. Ordering vaccines and rolling out vaccinations could have started about six to seven months before. However, what we can do now is to open up the vaccine rollout to the private sector. With the global agent agreements, private sector companies may be able to secure some doses, so those individuals who could afford a vaccine may be able to get it by paying a higher price. 

Thereby, the most vulnerable sectors who can’t afford a vaccine could have access to the government programme. Big corporations and exporters in Sri Lanka most likely will pay the vaccinations for their employees. This is the same as PCR testing at the initial stage. The private sector was not allowed to conduct PCR testing. As a result, even someone who could afford a PCR test had to stretch out the resources of the Government, and as usual, it is the most influential people who got a preference in the government system. 

Most healthcare providers currently conduct PCR tests in collaboration with the private sector, which has helped immensely for active contact tracing and quarantining. The same actually happened for the vaccines as well. With the absence of a proper priority list, many who could afford to purchase a vaccine, and who could have survived without a vaccine for some time, got preference over someone who was deeply in need. 

We also have to admit that global co-operation in the modern world is a normal thing, and depending on each other is not a weakness, but a strength.

The opinions expressed are the author’s own views. They may not necessarily reflect the views of the Advocata Institute or anyone affiliated with the institute.

Budget 2021 : A good or bad kettle?

Originally appeared on The Morning

By Dhananath Fernando

Then school principal of my alma mater, late Rev. Fr. Bonnie Fernandopulle used to mentor students through the use of anecdotes and examples. One of his favourite questions for students he was mentoring was: “Do you know the difference between a ‘good kettle’ and a ‘bad kettle’? They both look the same. They both sound the same. They both serve the same purpose of boiling water. But only time will tell which one is which.” He used to say: “It is not the ‘term-end exams’ nor the ‘semester-end test’ that are the difficult tests of life. The ‘test of time’ is a test that you, as students, should train yourselves to face.” I hold this advice dear and remember it up to date.

One year into a global pandemic calls for a litmus test on the effectiveness of our economic policies and the presented “Budget 2021”. This will help one evaluate where Sri Lanka stands in the “test of time’ metric. 

The Annual Report of the Central Bank of Sri Lanka (CBSL) for 2020 provides some statistical insight for evaluation. Our economy has contracted by about 3.6%. Our debt-to-GDP ratio has increased above 101%. Government revenue has shrunk from about half a trillion rupees. Revenue as a percentage of GDP has shrunk to 9.3% from 12.6% in 2019. The present revenue-to-GDP ratio is among the lowest for countries at our level of development. This would induce us to print more money in the near future, while additionally we have printed about Rs. 650 billion. By contrast, in the year 2019, Sri Lanka printed only about Rs. 4 billion. The two lockdowns and the mounting economic woes that the island has been facing for decades have led us to where we stand now. These figures do not come as a surprise. The end of 2020 left all of us with severe concerns and reasonable estimations of the country’s sorrowful performance of the year.

The 2021 Budget presented Sri Lanka with a good opportunity to take necessary measures to curb the approaching economic downturn. Looking back at the Budget, five months later, it is somewhat evident that we could have done better in certain policy areas.

This column previously highlighted two main loopholes in the 2021 Budget. One was the inadequate allocation of resources and the lack of a solid plan for healthcare services to combat Covid-19. The second was a credible action plan on debt servicing challenges for Sri Lanka. It was evident that without combating Covid-19, mitigating the impact on the economy will be difficult. Some sentiments expressed by members in Parliament questioned the need for the resources for vaccines which were produced by some other countries and highlighted the need for making Sri Lankans guinea pigs for vaccines by multinational pharma corporations. It was personally alarming for me to watch business leaders speaking at budget discussion forums with excessive emphasis on their respective businesses with no regard extended to the larger economic adversity at hand.

As a result of these poor policies and mitigating strategies, we are now in the midst of a raging third wave of the virus. This continues to affect the economy, proposed budget promises, and businesses adversely. Simultaneously, the global demand for vaccines has skyrocketed. Therefore, it is evident that Sri Lanka will have to wait for some time to receive the required amount of vaccines.

The 2021 Budget did not successfully address Sri Lanka’s problem of debt servicing. The only thing concealing the severity of this issue is the burden placed on the country’s healthcare sector at the moment. 

Moreover, Sri Lanka faced international pressure in terms of human rights violations coupled with geopolitical tensions which brings its own economic constraints and impact. As stated by the Central Bank Annual Report 2020, the destinations of more than 60% of our exports are the US, India, Japan, Australia, and the European Union (EU). All these nations have expressed concerns over Sri Lanka’s reconciliation efforts. 

Unlike the first-time shocker of the Covid-19 pandemic, after one year, some countries have made progress even with gigantic challenges. So from the perspective of investor sentiment and businesses, over time, the innovators and early adaptors, who are good to do business in the region and globally, are getting noticed. The attention and priority we received in the initial Covid-19 wave from investors, businesses, local donors, international donor agencies, and the rest of the world may not return during this new wave. Especially if our  policy decisions lack foresight and common sense. The current story published on PublicFinance.lk is that only 6% has been spent from the Yuthukama fund which was set up for Covid management and the availability of Rs. 1.7 billion remaining as the balance is just one example. The fund was supported by many Sri Lankans, and now, local and international companies may doubt the seriousness of our efforts.

We are between two hard choices which will have equally bad negative consequences. Minimising the mobility of people impacts our economic activity but increasing the mobility affects the Covid-19 spread which hits back again on the economy and people’s livelihoods. We need vaccines to control the spread of the virus but we should be able to get the vaccines first, while also balancing our foreign exchange. Economic policy formulation and execution is a team sport. It is not only the right policy but also the execution that matters. Even if we have a good execution team, if we are implementing the wrong policy prescription, the results won’t stand the test of the time. Unfortunately, five months after the Budget 2021 none of our policies nor our policy execution was able to stand the test of time. It is not only the Budget for 2021; the previous budgets and our economic policy over the years have failed to make a positive impact. We should pause for a moment and think about which sort of kettle we are. Are we a good one or a bad one? We should ask ourselves: “Have we been able to stand the ‘test of time’ with the economic policy we have been practicing?”

The opinions expressed are the author’s own views. They may not necessarily reflect the views of the Advocata Institute or anyone affiliated with the institute.

Understanding economics, understanding life

Originally appeared on The Morning

By Dhananath Fernando

Why Sri Lanka needs to comprehend economics to tackle its other problems

It is said that when John Lennon (the singer/songwriter) was five years old, his mother used to say that happiness was the key to life. When he went to school, the teacher asked him:  “What do you want to be when you grow up?” John replied: “To be happy.” The teacher told him: “You didn’t understand the question,” to which John responded: “You haven’t understood life.” 

John Lennon’s thinking is valid in economics as well. When we fail to understand economics, most of the time we just don’t understand life. 

It is a more serious problem for the common man’s life when our policymakers don’t understand economics. Asking the common man to pay for someone else’s decisions and choices is not the right way to think about economics. 

Sri Lanka’s continuous battle with Covid-19 is a good case study, not only in economics, but also in understanding what is happening to our quality of life. Especially with the risk of a Covid-19 third wave at hand. 

Public Health Inspectors (PHIs) have recommended another lockdown. A record number of patients have been reported per day, far exceeding our testing capacity. Newspapers have reported about a UK variant and asked the public to keep a two-metre physical distance, instead of one metre, to combat the new variant. 

As the nation went through a second lockdown, this column highlighted why Sri Lanka cannot afford another lockdown. 

Simply put, our government revenue is declining, our foreign currency debt repayments are mounting, our channels of foreign currency earnings have been interrupted negatively, and most of our economic challenges have reached a boiling point. 

None of these problems have quick fixes. The only quick fix we can apply is to buy more time. All the above are symptoms of wrong economic thinking rather than problems that cannot be solved. The right economic thinking is more important than ever before, as we slowly drift towards the brink of a third Covid-19 wave.

Economics is the study of maximum utilisation of scarce resources that have alternative uses. On the health care front, our hospital beds, PCR testing capacity, ventilators, vaccines, and oxygen supplies have now become crucial, scarce resources. 

If we fail to utilise these scarce resources to their  maximum, as a country we will face a health care crisis. This is taking place in the backdrop of a grave economic crisis that has been multiplying over the years. Globally, vaccination is in high demand, and even the slightest delay to place an order could cost human lives. To get vaccines faster, we need foreign currency and a good working relationship with other countries to get the vaccines down. Unfortunately, things are a bit difficult at the moment.

When resources are scarce, the only way to maximise that resource is to prioritise them – this means removing barriers for more players to enter the market and allow market forces to work, thereby allowing new channels of supply to be established. 

On the demand side, we have to constantly build public awareness on action on better sanitisation and minimise the spread of the virus.

During the first lockdown, this column recommended a strategy of testing based on symptomatic cases and asymptomatic cases, with the ability to do contact tracing and random testing. Basically, to highly prioritise the symptomatic contact traces, and assign low priority to the asymptomatic cases that are difficult to contact trace. 

The column also recommended conducting regular testing for frequent commuters and touch points such as taxi drivers, bus conductors, and others who interact with many people. During the initial wave, the testing was only allowed to be conducted through government hospitals, while the private sector was not allowed to conduct PCR testing. That decision was later relaxed.

Similar restrictions and guidelines were available for health care and treatment by private hospitals. What economics teaches us is that when resources are scarce, the actual cost of utilising that particular resource is the cost that we have to forego for the usage of the same resource. 

When it comes to PCR testing, when everyone is attempting to get the test from the government system, we have to forego the opportunity cost of someone with the disease getting tested, and someone who could afford to get the test done with a payment. 

The more we overstretch the government system, it is the more affluent and politically connected who get the opportunity of obstructing the poor man’s opportunity. 

Now the context has changed. Our existing problems remain as they are, a similar situation has occurred on our hospital beds, oxygen, and vaccines. The solutions to these problems have to be evaluated in multiple facets, as there are many dimensions. What often takes place in Sri Lanka is considering all aspects except economics. 

Given the scarcity of hospital beds, we now have to consider all methods of increasing the number of beds, PCR testing, and getting vaccines on the supply side.

At the same time, we must restrict the spread by continuous public education to manage the demand side. After seeing news stories from India, we may have to look at opening our health system for more private sector involvement. This can be through requesting hotels and unoccupied tourism properties to convert to hospital wards based on their consent as a backup plan, and allowing regulatory relaxation to bring down life saving medication. 

That is just healthcare economics. Vaccines and all medical equipment require money to purchase and upscale. We need both local currency and foreign currency. We have to think about financial resources on the other hand. To save foreign currency, policymakers are running a marathon of banning some import product categories every week, without understanding the overall impact the public has to face. 

Last week, it was fertiliser, and the week before it was palm oil. There have been many on the list. All these controls have a ripple effect, and impact the economy and public life. 

The ban on tyre imports has created a new market for secondhand tyres, which is a serious road safety concern. The ban on palm oil adds additional risk of multiple usage of coconut oil, which also adds to health risks and increasing the smuggling of coconut oil. As a result, the little quality of life we have is diminishing everyday. 

According to John Lenon’s understanding of life, we should not misperceive economics only in monetary terms. Economics is the science of maximising scarce resources with alternative usage. It is everywhere in life. 

We see the importance in healthcare economics better now than ever before due to the pandemic. The objective of economics is to take more people out of poverty by utilising our resources. Controlling imports or defending our current account is not a form of economic governance. It is important to understand the problems and the symptoms of the problem. But we need to comprehend economics to understand the problems first. 

The opinions expressed are the author’s own views. They may not necessarily reflect the views of the Advocata Institute or anyone affiliated with the institute.