Chapter 02
Chapter 02
LITERATURE REVIEW
2.1 Introduction
This chapter provides a description on the reviewed literature in Technology
Transfer (TT), International Technology Transfer (ITT) & ITT experience in
different situations.
As the first step of this study this literature review was carried out in order to gain a
better understanding of concepts, tools and models adopted by other researchers on
ITT and the experiences of other countries. Also the literature review provides the
basis which is essential in formulation of the conceptual model in order to review
the success and failures of the ITT project in Sir Lanka and to identify the factors
that affected the success of the project.
The past experiences in Sri Lanka and other developing counties in ITT have been
taken into consideration in framing the guidelines for future ITT project.
However, Offiri, (2001) indicates that the introduction of technology effectively into
the organization and reaping the benefits is more complex. It points out the need of
technology in the economic development of a country or a firm and
the needs for being vigilant in purchasing and implementing technology, specially
for the developing countries.
TECHNOLOGY COMPETITIVENESS
Technology Transfer (TT) is a crucial and dynamic factor in social and economic
development. Abbot (1985) defined TT as “the movement of the science from one
group to another, such movement involving its use”. Simkoko (1992) defined the
TT for construction industry as “the planned conveyance and acquisition of
technical knowledge and techniques of construction firms”. This implies that there is
no true TT until the technical knowledge received from the donor has been put into
effective use. Technology Transfer involves a two way process which can succeed
only when both the donor and the recipient work together in deciding what needs to
be transferred and implemented (Sridharan, 1994, Moavenzadeh and Hagopian,
1984) suggested that foreign contractors’ involvement is a key requirement for the
development of local construction industry and have shown that local contractors
progressively enhance their capability by working with foreign contractors, until
eventually they become able to export their services. It is evident with the Singapore
construction industry, that the local contractors’ capacity and ability have been
enhanced as a result of their involvement with foreign firms.
capacities are required for a particular firm with respect to their comparative
environment.
Sexton and Barrett, (2003) indicate that Technological Capability as the capacity to
gain an overview of the technological components on the market, assess their value,
select which specific technology is needed, use it, adapt and improve it and finally
develop technologies oneself. This is a skill possessed both by direct producers
(farmers, workers) and also decision-makers (in companies, in state agencies).
Technological capability is not only the prerequisite for independent technological
developments but also for successful technology transfer. For us the term technology
also involves organization and know-how, and a country's own independent
technological efforts and technology transfer are not alternative options but
complement each other. A common feature of both organization and know-how is
that they can only be partially transferred.
Further they pointed out that there are four pillars on which technological capability
is based:
The close interaction between these four pillars creates technological capability: If
framework conditions are not conducive to innovations, learning processes are very
arbitrary and take place with a time lag. Successful innovation systems are
characterized by close networking between producers, technology institutions and
training institutions.
It should be stated that every business does not require all these capabilities at the
highest level. Even though the capabilities have been there for the productive sector,
they can be applied to the technologies related to the infrastructure sector as well.
The marking system maintained in the ‘Technology assessment score sheet for
management to technological capabilities’ is used for the assessment of the
accumulation of capabilities of a firm. Similarly, the same method can be applied
with modification to assess the enhance capabilities of a firm after a particular TT
focus.
Purchasing hardware alone is not sufficient to gain these types of capacities, but the
different levels of capabilities need different technology components at different
levels. Also capabilities need different technology components at different levels.
knowledge and skills to people along with the hardware, but it depends on the
technological requirements of the recipient.
Some authors pointed out the need for acquiring all useful knowledge by the
recipient, because the technology can be refined and optimized only with the
understanding of the related science even though the technology can be developed
without the thorough knowledge of the related science. Understanding of the related
science is essential to refining and optimizing the acquired technology. This
indicates that knowledge is required for operation and maintenance. However the
different levels of knowledge required will have to be decided by the receiver,
according to capacities & expectations.
While Malik, (2002) stresses the need of transferring the knowledge along with
hardware, some authors indicates the importance of related scientific knowledge for
successful Technology Transfer.
As described by De Wit, (1988), there are two approaches for choosing technology
and can be mentioned as follows.
This is based on technical criteria and well established economic analyzers such as
cost benefit analyzers. Using this method one can select the technology that satisfies
the stipulated technical criteria and delivers the highest economic efficiency or
highest net benefits.
When the chosen technology is utilized in surroundings similar to the area in which
it was developed and then successfully commercialized for a similar purpose.
Contingency approach
Considers the other factors like technological capacity to the potential user, nature of
supertitle and raw material used when the surrey of the potential adopter of T & T
objective functions differs.
As described by Dissanayaka (2003) Sri Lanka technology can be divided into two
major periods.
One, pre – Independence period. In ancient times there existed advance knowledge
of technology, and practical geometry and astronomy were well known in Sri Lanka.
In the health sector, a number of hospitals were built by several kings, and therefore
most writers report that Sri Lanka was very advanced in respect to cotemporary
Aurvedic medicine technology. Some writers report that in the Sri Lankan 12th
century ancient technology was unique and such technology could not be seen in
the rest of the world till the 17th century (Goonathilaka, 1976; Mandis, 1974).
Although Sri Lankan technology was bit an advance in the 16th century it was a dark
clement that came after Portuguese incursion from the 16th century. Portuguese
introduced their own technology neglecting Sri Lankan unique technology. The
Roman Dutch too introduced some technologies. Technological era began from the
19th century with the British colonization. In order to facilitate their agricultural base
market they developed irrigation, road sector, Colombo seaport and the rail sector
etc. Consequently, Ceylon the Government Railways (CGR), Public Works
Department (PWD) were developed. This had created various implications for
construction technology transfer.
Two, post- independence period. In order to develop Sri Lankan Science &
technology, Ceylon Institute of Science and Industrial Research (CISIR) was the
first of such kinds of institutions. But this institution failed to deliver its objectives
as reported by many publications (Wijesekera, 1976).
Not ever the above brief history Sri Lanka of Research & Development (R&D)
shows that it was successful. Most of the significant reasons for the failure were lack
of high level political commitment and support for the R&D activities. But after the
post – war in 2009, reconstruction and rehabilitation efforts and the general
economic revival are expected to trigger a construction sector boom in Sri Lanka
over the next 5 years. Figure1 exhibits Sri Lankan construction industry growth. It is
indicate that the construction industry drastically increased from 2009 to 2013.
12
8.9% 9.2% 9% 9.3%
10
7.8%
8 6.6% FY
5.5% 5.6%
6
4 2.4%
2
0
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Year
Some of the key areas, which are expected to generate significant demand in the
budget 2013 for construction, include power, roads, ports, water supply, sanitation,
tourism, and health sector. The budget proposal 2013, the government of Sri Lank
has introduced several schemes targeted at the construction industry. This significant
demand for construction it will need significant technology and skill, either from
foreign or local contractors.
Considering the outlook for the present Sri Lankan construction industry, it is
expected that the value of construction projects awarded to local contractors,
including sub constructors, will increases annually be approximately 50-60 per cent
over the next three years.
According to the Ministry of Finance and Planning, over LKR 700 billion worth of
construction related projects have been planned by the Government between 2010
and 2015. Considering massive completed projects such as express ways,
Hambantota port further development, Mattala Air port, Norochcolai power plants
etc., Government plan has being successes. Although the projects where successful,
Government has not measured how much technology was transferred to the Sri
Lankan Construction industry or what gained through these projects.
Sri Lanka’s construction sector professionals recently called to cut down the number
of foreign contractors, consultancies, and labour employed in mega infrastructure
projects taking place in the country, stressing the practice has proved harmful to the
local construction industry. Unfortunately, it has not happened and as a result, most
of the infrastructure projects are handled by the foreign counterparts at a huge cost
to the government. The neglect of this matter is that when we check with the donor
countries or multilateral development banks, they maintain that it is not their fault
but that of the Treasury for not negotiating for the involvement of the local
construction industry when funding is sourced for projects.
In the proposed construction and development scenario, developing the road and rail
way network takes precedence. The Government is now seriously looking at
improving the railway network in addition to roads
From the above outlook once again can say that there will be a significant demand
for construction and it should be provide significant technology and skill either
from foreign or local contractors.
Less than 5 per cent workers in Sri Lanka have been systematically trained and carry
certificates that are indicative of their skill. Due to the high demand for professionals
in many countries and the low level of salaries in Sri Lanka, has resulted in a flight
of skills. If the construction sector aspires to grow at the rate of 9 per cent in coming
years it would require thousands of skilled workers. According to the Industry of
Construction, Engineering Servile Housing and Common Amenities the number of
skilled construction workers in Sri Lanka is 300,000. It is imperative that the
Government and the industry join hands and initiate a skills development
programme.
2.8 The role of the technology transfer in innovation within the construction
industry.
Income tax holidays of 6-15 years for large –scale infrastructure projects.
Land acquisition facilities for foreign investors
land available on lease for 35-50 years, the National Housing
Development Authority (NHDA) to provide planning and technical
assistance for low-income households to build or improve quality housing
State banking facilities and internally generated income of NHDA to be
used to promote low- income housing.
A construction technology power to be established to popularize skills and
low cost housing technology.
Training skills for construction as well and research and development to
bring down the cost of construction to be treated as an allowed
expenditure against income tax.
Encouraging foreign contractors to establish working partnerships with
local construction companies.
Customs duties on a few construction raw materials have been reduced.
The Sri Lankan government intends to develop stronger economic ties with other
countries such as Qatar, Singapore, Jamaica, and Spain. Indirectly, a part of these
investments will flow into the country’s construction sector. So that foreign
contractor’s involvement is high.
The exchange control relaxations effected by the central bank in November 2010
have facilitated foreign exchange transactions and business activities during the past
few months. The relaxation measures which enables companies to borrow foreign
loans. Resulted in 20 new foreign companies commencing business in Sri Lanka
year 2013.Sri Lanka’s entire mega projects business has been formed out of four
Chinese companies and seven Indian companies, with over 30,000 semi- skilled and
unskilled Chinese workers, throughout the country.
Chinese companies are currently engaged in the Norokcholai power plant, Colombo
Katunayaka expressway, Kankasantura rail – line, Jaffna housing complex for the
army and a host of other projects. The entire Hambanthota project is expected to
cost about US$ 1.5 billion and a consortium of Chinese companies lead the project
construction.
China’s Huuichen investment will provide US$ 28 million and manage a special
economic zone at Mirigama for Chinese investors. In addition China has provided
US$ one billion as humanitarian aid and for internally displaced persons and
technical assistance for de-miming operations in Northern and Eastern province.
Some 332 km of road inclusive of the Kandy – Jaffna Highway will be developed
and modernized with Chinese funding of US$ 355 million India is also stepping into
Sri Lanka’s mega project business in a big way by entering into building
construction in the North and East. A Mumbai –Based Company will manage the
project to build 12,500 houses in the Kilinochchi district and similar number in the
Mullatitivu district, 10,000 houses in Vavuniya and 15,000 in Jaffna and Mannar,
under the supervision of the Government of India. Indian companies have won bids
in railway expansion projects in the North and the South as well as in the proposed
coal power project in Saampurni in Trincomalee. President of Chamber of
Construction Industry Sri Lanka (CCISL) has been appealing on a regular basis to
the Treasury to include in their contracts with donor funding organizations a
substantial portion of the work to the local construction industry. Unfortunately, the
Treasury is not thinking out of the box. The question is, why the local contractors
unable to do at least two or three story building projects?. Don’t they have the
technology? The treasury is still adopting old models of economic theory, which is
ineffective in today’s technology advanced world.
The Chinese influence is gradually changing the community in Hambanthota and the
agriculture industry in the area is providing Chinese – type green vegetables to
around 350 Chinese workers at the harbor construction site as these vegetables are
not available in the Sri Lankan market. The Project has been funded by the JICA
Livelihood improvement programme. It focused on agriculture and institutional
While generally the effect of FDI on growth has been viewed as positive with FDI
raising the welfare level of the recipient country,
Sri Lankan construction industry is in talks with a top Indian infrastructure finance
company on setting up a fund to support the Island’s post war construction activity,
said Surath Wikramasingha, president of the Chamber of Construction Industry.
This statement reveals that India and Sri Lanka attempt to start joint ventures in the
construction industry. It is the most popular foreign contractor’s entry mode in any
country.
Recently, several major projects, such as power plants, ports, express way, are
constructed by the foreign funds technology and contractors.
Most of the Sri Lankan firms do not have sufficient funds and expertise for such
projects. Table 1 exhibits how the foreign contractors are involved in the Sri Lankan
constriction industry. Development projects are heavily funded by international
entities, particularly originating from the People’s Republic of china.
The foreign firms are not keen on effectively transferring their technology since they
believe that it means they would be nurturing their future competitors. Both local
and foreign firms will benefit if systematic efforts are made by the latter to develop
the former.
Commercial
and Tourism and 2009- 2020 $375 million in Various suppliers
Residential Housing projects hotels and constriction
construction constriction
Source: Sri Lanka Commercial Construction Business opportunity 2006-2012- May, 2011
Thalgodapitiya says, Sri Lanka is deeply involved with the Chinese but they have a
particular system of work . They fund projects, and then recover all of that funding
in 4-5 months by selling machinery, consultant, systems and software etc. They
Also bill for the engineer who does not have the working knowledge of Sri Lankan
labourse. At the end, having to pay their salaries that are highly inflated. So it’s a bit
like double taxation, they recover their investment.
Projects which are large and complex are undertaken by foreign contractors but it is
the responsibility of the State to use available construction work to support the
growth and development of the indigenous contractors enabling eventual
replacement of foreign contractors.
The foreign firms are not keen on effectively transferring their technology since they
believe that it means they would be nurturing their competitors. Both local and
foreign firms will benefit if systematic efforts are made by the latter to develop the
former.
This comprehensive skill is often overlooked with the result that the transfer of skills
to individuals may be successful, but the receiving party may not be able to benefit
because of the failure of the local business unit. Accordingly, the strengthening of
the consulting industry should be an objective to enhance the survival rate of local
firms.
2.15 Impact of Globalization
Globalization of construction industry will greatly affect the Sri Lankan construction
industry and also improve the economy. Adaption of new equipment, infrastructure,
advent of Information technology and safety measures, will be the order of the day.
Experts in technology have come forth, with vision of the future growth and given
their views on the subject and construction vision 2020 from their futuristic eyes.
Recently, several major projects, such as Keraverapitiya power plant, Hambantota
port, are constructed by using foreign funds, technologies and contractors. Sri
Lankan construction firms have no funds or expertise in such projects, but direct
foreign investment in projects leads to increase in construction demand, creating
Even though it is argued that presence of a large number of international firms offers
scope for technology transfer, upgrading of the domestic industry and development
of local companies, more often than not in actual fact very little technology transfers
have taken place. Globalization should cause competition among overseas
contractors hopefully lowering the Project Cost, but it may result in curtailing
opportunities for growth of domestic companies. However, several authors have
mentioned the difficulties involved in technology transfer, including the technology
of foreign contractors to adopt strategies which do not support host countries, efforts
to develop their industries.