In order for Pakistan to emerge from its present quagmire of poverty, hunger, deprivation, joblessness and foreign debt, it needs to migrate to a knowledge economy. About 90 million persons are below the age of 19, which is about 56 per cent of the population of our country. If we are to develop a knowledge economy, it must be through unleashing the huge creative potential that lies hidden in these young men and women. The release of this potential can only be achieved through investing in a high quality education system and linking the process of education with socio-economic development plans. This will allow us to prepare the required number of high quality professionals in areas of national need and utilise them in national projects geared towards achieving self-reliance and enhanced exports, particularly of high technology products.
The government has a pivotal role to play in ensuring universal literacy, establishing good technical and vocational schools and setting up world class universities with centres of excellence in selected fields. It is also necessary to establish technology parks to allow new technologies to be promoted through business and technology incubators, set up venture capital funds to promote innovation and entrepreneurship through new start-up companies and establish industrial clusters in key fields, such as biotechnology, engineering goods, electronics, pharmaceuticals and other high-tech areas.
However, it is largely the responsibility of the private sector to invest in focused research and development (R&D). It is only through massive investments in R&D that nations can enhance innovation and entrepreneurship, increase global competitiveness and have a major impact on socio-economic development. Indeed, it is through private sector R&D that most companies in the US, Canada, Europe, Japan and Korea invent new products, improve the quality of existing products and enhance exports. This is where the Organisation of Islamic Countries (OIC) members have failed miserably, except for Malaysia, which remarkably contributes about 87 per cent of the total high tech exports of the 57 OIC members — the balance of 13 per cent being contributed by the remaining 56 OIC members.
The critically important role that private sector R&D is playing today is borne out by the fact that the global share of this type of R&D has been rising much faster than government R&D, particularly in rapidly developing countries such as Korea, Singapore, and Taiwan. During 2012, total R&D expenditure is estimated to be about $1.4 trillion of which companies and businesses contribute about 63 per cent, while governments contribute only 37 per cent. Private sector R&D amounts to about 70 per cent of the total R&D expenditure in China, 75 per cent in Korea and Japan, 70 per cent in Germany and 68 per cent in the US. Private sector R&D in Pakistan and most other OIC member states, by contrast, is less than five per cent. This disparity between the West and OIC members is also reflected in the availability of trained scientific manpower. There are 10,563 scientists and engineers per million population (pmp) in Finland, 9,222 in Norway, 8,846 in Denmark and an average of 4,481 in EU countries. However, there are only an average of 451 scientists and engineers in OIC member countries and about 300 pmp in Pakistan, highlighting how far we have fallen behind. Most OIC members have done little or nothing to stimulate private sector R&D through offering tax incentives, grants for promoting innovation and training of manpower, subsidies for establishing high-tech industries or establishing bridging institutions, such as technology parks and incubators. The legal instruments needed to protect the rights of inventors (such as the US Bayh-Dole Act) are missing in most OIC member countries.
In order to gain a competitive edge, countries such as Korea, Japan, Singapore, and Taiwan have focused on selected industries, like automobiles, engineering goods, ship-building, electronics and computer manufacturing. The governments stimulated the development of these industries by giving incentives and helping companies to develop capabilities in design and engineering. To help private industries to enhance their capabilities, semi-government bridging institutions were established including engineering centres, technology parks, industrial parks and incubation centers. Incentives were also granted to establish links with the overseas diaspora that also contributed to the transfer of cutting edge technologies. In Pakistan, we have been oblivious of such initiatives.
It is important to have robust innovation policies as this is vital to ensure competitiveness, industrial development and growth of exports. National policies need to promote the capability for developing indigenous technologies and creating demand for innovation. The knowledge generated in universities and research centres needs to be commercialised and mechansims to make this happen need to be put in place. China, India and some East Asian countries have stimulated demand for innovation through promoting firm-level learning, giving incentives to private companies for hiring skilled engineers and researchers, giving tax incentives for the establishment of high-tech industries, promoting inter-firm collaboration in order to achieve economies of scale and establishing linkages with global production networks. Measures to promote innovation must be grounded on a strong legal infrastructure involving protection of intellectual property rights and backed by regulations that ensure the quality of products, minimum productivity standards and fast commercial courts for dispute resolution. The proper formulation and implementation of competition laws are necessary in order to foster innovation and encourage competition for both exports and import substitution programmes.
Innovation policies need to be directed to help the poor and lower middle classes of our society. We can learn from China in this respect. In 1998, China was producing only 56,000 motorcycles annually made by 12 manufacturers. There was a determined effort by the government to promote this sector in order to facilitate the lower strata of society. By 2010, the number of manufacturers of motorcycles had risen to over 2,000, which were manufacturing 30 million units annually that amounted to over 80 per cent for the domestic market.
Pakistan needs to have a dynamic innovation policy, strategy and implementation plan so that it can emerge from the poverty trap that engulfs it. For this it needs to focus on education as the key driver for socio-economic development. Presently, Pakistan is ranked among the bottom seven countries of the world in terms of expenditure on education as a percentage of GDP. The present government had decided in the education policy approved by it three years ago to allocate seven per cent of the GDP to education, a fifth of which would go to higher education. Alas, it was just an empty slogan as the reality is that we are still allocating only 1.8 per cent of our GDP to education. A knowledge economy requires highly skilled knowledge workers and professionals and only then can innovation and entrepreneurship flourish. This cannot happen with such a low national priority being given to education.
Published in The Express Tribune, November 23rd, 2012.