Sri Lanka’s next phase of economic development will depend less on whether it can produce ideas than whether it can convert those ideas into globally competitive businesses.
This is according to economists, scientists, technology specialists and legal scholars who addressed the inaugural Alumni Association of the University of Colombo Global Hybrid Alumni Knowledge-Sharing Seminar Series on ‘Technology and Innovation, Trade and Economics, and Law and Governance’.
Although approaching the subject from different disciplines, the speakers converged on a common conclusion: Sri Lanka’s principal challenge is no longer the absence of talent or innovation, but the inability of institutions, policies and markets to transform knowledge into sustained economic value.
They examined the broader architecture that underpins successful economies, trade openness, legal certainty, competitive markets, research commercialisation, digital infrastructure and institutional quality, and argued that these elements must reinforce one another than operate in isolation.
Beyond technology
International University of Japan Professor in Economics Prof. N.S. Cooray framed the discussion by arguing that successful economies have never developed through infrastructure-led economic growth alone.
Instead, he said they accumulated and integrated multiple forms of capital, including human, institutional, technological, financial, social, natural and cultural capital, which together created resilience and long-term competitiveness.
Drawing on the experience of Japan, Singapore and South Korea, Prof. Cooray argued that countries achieved sustained development by investing in different combinations of these assets according to their comparative advantages and not relying on physical investment alone.
For Sri Lanka, he said, future competitiveness would similarly depend on how effectively these different forms of capital could be integrated from households and communities through to national institutions.
He cautioned against measuring national wealth solely through conventional economic indicators.
‘The real wealth of a nation is not measured solely by its GDP, foreign reserves, or physical infrastructure,’ Prof. Cooray said.
Instead, he argued, it depended on the quality of people, the strength of institutions, the vitality of communities and the capacity to convert knowledge into shared prosperity.
Trade matters
World Bank Lead Economist Dr. Harsha Aturupane examined the issue from a macroeconomic perspective, arguing that innovation could not be separated from trade.
‘Innovation became commercially meaningful only when firms could access sufficiently large markets, while exposure to international competition itself encouraged innovation through quality improvements rather than price competition’, he said.
Drawing on decades of economic literature, Dr. Aturupane argued that trade expanded markets, encouraged specialisation, strengthened comparative advantage and facilitated international knowledge spillovers.
He contrasted East Asia’s export-led development with Sri Lanka’s own experience.
While Sri Lanka benefited from trade liberalisation beginning in 1977, he said later policy shifts introduced anti-export bias that weakened the country’s ability to participate in innovation-driven growth.
The consequences remain visible today.
Merchandise exports increased from $ 8.6 billion in 2010 to $ 12.8 billion in 2024, equivalent to average annual growth of only 3.4%, while the country’s export basket remained dominated by apparel, tea, coconut and rubber.
Sri Lanka’s integration into global value chains also remained limited at 8.1%, compared with 26% for India and 34% for Vietnam, he noted.
Although IT/BPO had become Sri Lanka’s second-largest export sector, Dr. Aturupane cautioned that parts of the industry faced increasing competition from artificial intelligence because many routine services could become automated.
His diagnosis extended beyond exports. Innovation policy alone could not compensate for structural weaknesses in the wider economy.
High domestic production costs, tariffs, non-tariff barriers, taxes, loss-making State-owned enterprises, administrative burdens, lengthy legal processes and weak intellectual property support collectively reduced competitiveness and discouraged investment, he argued.
Dr. Aturupane also warned that a country that waits for the Government to drive growth will not succeed. ‘The private sector needs to take the initiative.’
Fascinating paradox
CodeGen International Senior Scientist Dr. Yasun Kannangara shifted attention from macroeconomics to the innovation system itself.
His argument was that Sri Lanka’s principal weakness was not the quality of its researchers but the fragmented environment surrounding them.
He described a ‘fascinating paradox’.
Although Sri Lanka ranked poorly in global innovation indicators, its research outputs compared more favourably with its innovation inputs, suggesting researchers continued producing results despite limited funding and institutional support.
‘Our infrastructures were lagging, funding or the policies are holding us back,’ he said.
According to Dr. Kannangara, this demonstrated that Sri Lanka already possessed many of the ingredients required for an innovation economy, talented researchers, internationally recognised scientists, competitive ICT capability and valuable natural resources, but lacked the institutional connections needed to translate those assets into commercial success.
He described the country’s innovation system as a ‘leaking pipeline’.
Universities generated research. Researchers published internationally. Private companies increasingly sought collaboration. Yet relatively little intellectual property became commercial products or globally competitive firms.
He attributed this less to scientific capability than to inconsistent policy, weak university-industry collaboration, limited venture capital and inadequate commercialisation mechanisms.
Graphite illustrated the problem. Sri Lanka possessed one of the world’s highest-quality graphite resources, yet remained largely absent from higher-value battery manufacturing while other countries imported raw graphite and captured the downstream economic value.
Dr. Kannangara argued that stable policy, greater research investment and stronger links between universities and industry represented ‘non-negotiable bridges’ if Sri Lanka hoped to expand high-technology exports beyond its traditional export base.
Digital convergence
Monash University Associate Professor Prof. Anuja Dharmaratne approached the discussion through technological transformation angle, arguing that artificial intelligence should not be viewed as an isolated technological breakthrough.
Instead, AI formed part of a broader convergence involving cloud computing, edge computing, biotechnology, green technologies, advanced connectivity and digital infrastructure.
Unlike previous technological revolutions, today’s technologies were evolving simultaneously and reinforcing one another.
Cloud infrastructure enabled AI. AI increasingly supported biotechnology. Green technologies relied upon digital optimisation. This convergence, she argued, created exponential change.
Countries recognising these interactions would build entirely new industries. Those that failed to adapt risked becoming increasingly dependent on technologies developed elsewhere.
Importantly, Prof. Dharmaratne argued that digital transformation itself was often misunderstood. It was not an information technology project. Instead, it represented a redesign of business models across finance, agriculture, tourism, healthcare, education and manufacturing.
Digital payments, telemedicine, AI-assisted diagnostics, personalised education and robotics-supported manufacturing illustrated how technological adoption was reshaping value creation not just simply improving operational efficiency.
Sri Lanka already possessed significant competitive advantages, she said, including English-speaking technology talent, a growing startup ecosystem, university STEM capacity and a large overseas professional network.
However, those strengths coexisted with accelerating brain drain, limited domestic venture capital, slow ICT policy reforms and digital exclusion affecting a significant share of the population. Technology itself was not the limiting factor. Institutional capacity remained the larger constraint.
Rules matter
If the economists argued that trade and markets create the conditions for innovation, University of Colombo Faculty of Law Dean Prof. Sampath Punchihewa focused on the legal architecture needed to transform ideas into commercially valuable assets.
His assessment concentrated less on the production of innovation than on the institutions responsible for protecting, regulating and commercialising it, arguing that Sri Lanka’s universities continued to generate research and inventions but too few progressed into viable businesses because the surrounding legal and regulatory framework remained inadequate.
‘We have not been able to commercialise most of them because of the regulatory framework [and] confusing legal infrastructure,’ he said.
Prof. Punchihewa questioned whether Sri Lanka was keeping pace with global developments in innovation governance, noting that the country ranked 93rd among 139 economies in the Global Innovation Index while R and D expenditure amounted to only 0.11% of GDP in 2022.
Although recent years had seen amendments to intellectual property legislation, the enactment of the Online Safety Act and Personal Data Protection Act and the establishment of the National Innovation Agency, he argued that implementation remained uneven, with several institutions still lacking the capacity and resources needed to support innovators effectively.
He also pointed to structural weaknesses within the National Intellectual Property Office, including shortages of patent examiners and inadequate digital infrastructure, and argued that Sri Lanka remained without a comprehensive competition law despite repeated concerns raised by investors.
As artificial intelligence continued to reshape questions surrounding authorship, inventions and liability, he said the country’s legal framework would also need to evolve if it was to keep pace with technological change rather than respond after the fact.
AI, power and legal protections
Curtin University Australia Lecturer Dr. Darshana Sumanadasa argued that the rapid advancement of artificial intelligence was exposing legal questions that existing intellectual property, liability and public health frameworks were not designed to answer.
Instead of focusing on AI as a technological development, he examined how legal systems were being forced to adapt to questions surrounding authorship, inventorship, accountability and public welfare.
Drawing on recent court decisions in the United States, the United Kingdom and Australia, Dr. Sumanadasa said courts had consistently held that copyright and patent protection could only be granted to human creators.
Referring to case law in the United Kingdom, he noted that attempts to recognise AI systems as authors or inventors had been rejected, reinforcing the principle that intellectual property rights remain attached to natural persons.
He argued, however, that the more significant legal challenge now lay elsewhere: determining the level of human contribution required for AI-assisted work to qualify for intellectual property protection.
The distinction, he said, was whether AI functioned as a tool assisting human creativity or whether humans merely observed machine-generated outputs.
‘There is no simple rule,’ he said, adding that greater human involvement in creating, editing and transforming AI-generated content increased the likelihood of copyright or patent protection.
Dr. Sumanadasa also examined the emerging question of liability when AI systems cause harm.
Unlike conventional software, he said, AI systems learn from large volumes of data and often operate as a ‘black box’, making it difficult even for developers to explain how particular decisions or outputs are reached.
That characteristic challenges traditional negligence principles, which generally assume that the causes of harm can be identified and attributed to individuals or organisations.
He pointed to developments in the European Union’s Product Liability Directive, which recognises software, including AI systems, as products for liability purposes, and referred to recent litigation in the United States involving AI chatbots and allegations that interactions with those systems contributed to self-harm.
While those cases remain legally unresolved or were settled without determining liability, he said they illustrate the questions courts and policymakers are increasingly being required to address.
Turning to intellectual property and public health, Dr. Sumanadasa said the World Health Organisation’s Pandemic Agreement adopted in 2025 addressed several intellectual property issues exposed during COVID-19 but left unresolved questions surrounding trade secrets and access to manufacturing know-how.
Using mRNA vaccines as an example, he noted that while patents disclosed aspects of the technology, critical manufacturing knowledge often remained protected as confidential trade secrets, limiting the ability of follow-on innovators to reproduce complex products.
He also argued that policymakers must strike an appropriate balance between encouraging innovation and protecting broader public interests.
‘It’s not innovation or public health, we need both, but we need to have a fine balance,’ he said.
Dr. Sumanadasa concluded by arguing that developing countries, including Sri Lanka, had played only a limited role in shaping emerging international rules governing artificial intelligence and intellectual property, leaving them largely as recipients and not architects of new legal frameworks.
As AI becomes increasingly embedded across the economy, he said lawmakers face a broader challenge than simply updating legislation.
‘Our question is can the law protect innovation while also protecting society from the power that innovation creates?’ he said.
Shared diagnosis
The subsequent panel discussion co-moderated by Dr. Malraj Kiriella, AAL and Daily FT Editor Nisthar Cassim extended well beyond technology policy, and several themes recurred throughout regardless of the speaker’s discipline.
Sri Lanka’s research and development expenditure remained low by international standards, its position in global innovation rankings had stagnated, brain drain continued to weaken returns on investments in education, venture capital markets remained underdeveloped and university research generated comparatively few commercial spin-offs.
Export concentration, limited participation in global value chains and uneven digital transformation were identified as additional constraints limiting the country’s ability to compete in higher-value industries.
Competitiveness increasingly depends on whether countries can build institutions capable of supporting innovation over the long term through predictable regulation, effective legal systems, protection of intellectual property, competitive markets, research capability, digital infrastructure and policy stability. Each of these elements reinforces the others, while weaknesses in one area reduce the returns generated by the rest.
The panel discussion presented innovation not as a standalone sector but as an enabler of economic development. Artificial intelligence, advanced manufacturing, biotechnology, digital government and research commercialisation were discussed not as isolated policy objectives but as outcomes that emerge when institutions, markets and public policy function together.