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Serving Sri Lanka

This web log is a news and views blog. The primary aim is to provide an avenue for the expression and collection of ideas on sustainable, fair, and just, grassroot level development. Some of the topics that the blog will specifically address are: poverty reduction, rural development, educational issues, social empowerment, post-Tsunami relief and reconstruction, livelihood development, environmental conservation and bio-diversity. 

Friday, November 18, 2005

The role of standards in economic development

Daily News: 14/11/2005" BY DR. LALITH Senaweera, Deputy Director General - Sri Lanka Standards Institution

CENTURIES AGO, crafts people made products on a highly individualized basis. Operating in cottage settings, they employed unique and highly personalized design norms.

These design norms were the 'Standards' used by the crafts people to produce their products. The strengths or weaknesses of these 'Standards' were obtained one-on-one basis and used those inputs to improve the said standards.

Standardization itself became pre-eminent with the dawn of the industrial age. The concepts of interchangeable parts and division of labour were first introduced in the United States.

Eli Whitney, inventor of the cotton gin, applied the concept to the production of flintlock military rifles. Eli Whitney's work on the development of interchangeable parts can be seen as the starting point for the movement away from craft system to the standardization.

Military applications such as those continued to drive the development and refinement of product standards and eventually quality standards as well.

Application of Standards

Today in the industrial world, most of the manufacturing and service organizations use standards in different areas.

For instance, production checks can be made easier by the introduction of testing standards. Better operating scheduling, reduction in idle time and set-up time and lowering scrap rates can be achieved by introducing a process standard.

Purchasing of materials can also be simplified, if a material standard is specified for the product to be manufactured.

Moreover the producer can introduce a quality standard for the product, which would streamline the operational functions of the company to achieve the expected level of quality. That would help the suppliers to supply items to meet the set quality standard.

Whenever goods and services are exchanged, standards present a 'common langauge' and criteria for the assessment of goods and services.

Standards play a vital role in making sound decisions in accepting or rejecting goods in the business and regulatory environment. Standards increase the transparency of the market. Make the co-ordination of operations planning easier and contribute to reducing costs.

Standardization particularly favours vertical specialization between small and large companies a situation which is generally less pronounced in developing than in industrialized countries.

This would contribute to small firms fully utilizing their often considerable potential for expansion. They can achieve economies of scale because they able to supply to large companies with standardized goods.

National and International Standards

Each country has its own National Standards Body. For instance we have Sri Lanka Standards Institution (SLSI) as our national standards body. National Standards are developed by the said bodies considering the needs of the country.

In Sri Lanka, Sri Lanka Standards Institution develops the national standards and at present over thousand standards have been published covering different industry sectors.

International Organisation for Standardization (ISO), International Electro-technical Commission (IEC) and International Telecommunication Union (ITU) develop international standards and those are available to use at the national and regional levels to meet societal, market and regulatory needs.

These international standards organizations assist in disseminating best practices and new technologies, while avoiding new barriers to trade.

Economic development

The level of a national economy's technical knowledge is an important measure of its state of development and rate of growth.

The one way of achieving the momentum for growth is by means of transfer of technology which is made possible through standards. One of the accepted facts is technological growth contributes of the growth of labour productivity.

One particular problem of developing countries lies in the fact that there is too little diffusion of technical knowledge amongst the small and medium-sized firms, which are key elements in the structure of the economy.

Traditional and intermediate production techniques predominate in such firms. Standards represent a compilation of technical and technological knowledge and data, often bearing the results of many years of research and development work.

Therefore standards can fulfil the functions of technology transfer to the industry and in turn to the society.

Beyond the primary objectives of standards like rationalization, specialization and quality assurance, the passing on of know-how to achieve conformity with standards is becoming a side effect which should not be underestimated.

Therefore application of Standards can make a crucial contribution to relieving the problems of foreign trade for developing countries, and in further improving their potential for entering into international markets.

Benefits of standardization

Some of the benefits that can be achieved through standardization are as follows;

1. Direct network externalities

2. Market mediated effect: complementary goods become cheaper",

3. Thicker second-hand market;

4. Lower prices through competition of sellers.

5. Network Externalities in production.

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