Economic development concepts
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The document discusses best practices for using science, technology, and innovation (STI) to support economic development and transition from a low-income to middle-income country. It recommends focusing STI investments on strategic industries, improving agricultural productivity, and developing human capital through education and health interventions. Countries should also promote technology diffusion through trade and foreign direct investment, build national innovation networks, and initially focus on incremental improvements before attempting cutting-edge research.
Economic development concepts
- 1. © InnoAction Advisory Services, All Rights Reserved, No Further Distribution, Confidential, Proprietary There are many critical levers that support sustainable development across emerging countries 1 Property Rights (land, IP, business ownership etc.) Market Economy (trade, markets, FDI, SME’s, financing, etc.) Rule of Law (regulation, policy, judiciary, etc.) Good Governance (macroeconomics, corruption, etc.) Infrastructure (health, ED, roads, telecoms, etc.) Science & Tech Absorption (talent, private sector capacity, etc.) Social Justice/ Equality (women, minorities, poverty, etc.) Human Capital Development (education policy, curriculums, etc.)
- 2. © InnoAction Advisory Services, All Rights Reserved, No Further Distribution, Confidential, Proprietary STI & the Internet can have significant economic & social impact across Africa in six key sectors moving forward … 2
- 3. © InnoAction Advisory Services, All Rights Reserved, No Further Distribution, Confidential, Proprietary … Resulting in productivity gains of up to $300 billion 3
- 4. © InnoAction Advisory Services, All Rights Reserved, No Further Distribution, Confidential, Proprietary Diversifying economic growth and increasing exports is an important feature of growth in emerging economies 4
- 5. © InnoAction Advisory Services, All Rights Reserved, No Further Distribution, Confidential, Proprietary A study of Korea’s growth over the last 50 years shows strategic investments in STI, new industries, and exports 5 In the 54 years since 1960, R&D spend in South Korea has increased from $4M/ year to over $65B/ year in 2014, most of it driven by the private sector Source: Science & Technology Policy Institute
- 6. © InnoAction Advisory Services, All Rights Reserved, No Further Distribution, Confidential, Proprietary And general lessons from Asian Tigers suggest a sequential investment & development of key industries over time 6 Mature indigenous industries + labor intensive industries (copy!) Attract FDI in strategic tech industries important to national interests & economic growth (copy & innovate!) Invest in basic research and next-generation technology and knowledge industries (innovate!) 15 years 20 years 20+ years … • Agriculture • Manufacturing • Natural Resources • Health • Education • Water • Energy • Fishing • Tourism • Basic ICT • Advanced ICT • Electronics • Heavy Engineering • Transportation • Chemicals • Aerospace • Defense • Alternative Energy • Biotech • Computational Systems • Networks & Sensors • Artificial Intelligence • Robotics • Digital Manufacturing • Medicine • Nanotechnology Develop/CommercializeAppliedResearchBasicResearch
- 7. © InnoAction Advisory Services, All Rights Reserved, No Further Distribution, Confidential, Proprietary For low-income countries an acute focus on STI in strategic industries can enable economic transformation 7 Sustaining Transformative Disruptive Basic Research Applied Research Development Commercialization Asian Tigers (1960’s – 1990’s) DARPA NIH XXX CDC 1: Sustaining = process improvement, efficiency, existing product/ service enhancements 2: Transformative = new value proposition, novel experience, rethinking existing categories 3: Disruptive = brand new technology/ product/ service, new industry, no existing competition
- 8. © InnoAction Advisory Services, All Rights Reserved, No Further Distribution, Confidential, Proprietary Governments can facilitate economic development & growth through Science, Technology & Innovation • Implicit policies are created to facilitate a supportive environment for investments in STI – much like policies that build climate for investment, jobs, sustainable growth and generally empower the poor – Set priorities for public sector financing – Directly finance some parts of the system – Governing, regulating and partially managing the system – Incorporating results of research into public policy decisions – Monitor and evaluate the system to ensure accountability and relevance • Basic macroeconomic stability for continuity needed for the finance of research and commercialization • Openness to trade and FDI: some countries have improved STI performance just domestically. But there are more cases in which trade and FDI were the critical outlets for technology transfer that spurred growth • Credit policies: industrial development can be stifled if finance instruments like loans, equity, financing and venture capital don’t evolve with tech capacity increases • Intellectual Property Rights protection: assign rights through judicial process that are efficient, transparent, and predictable (which can be overridden when deemed useful for greater social good) • Competition policy: create a level playing field and facilitate entry/exit of firms into new markets to stimulate innovation and commercialization of new technologies • Provision of industrial standards: government creates and maintains standards that permit tech-based commerce, or simply create an atmosphere in which firms themselves agree on such standards to facilitate open exchange • Promote ICT Infrastructure to ensure access to global stock of knowledge and information 8
- 9. © InnoAction Advisory Services, All Rights Reserved, No Further Distribution, Confidential, Proprietary Best Practices: Moving from low to mid-income country (I) • Build broader capacity though industrial sectors like manufacturing, agriculture, and natural resources • Industrial Technology Development (ITD) projects are successful when there is a robust national strategy – Many fast growing countries like Korea and Singapore had well-crafted policy in place and experienced positive S&T led growth following subsequent investments in ITD • Technology sourcing is a key success factor not only for aspirational industries like manufacturing, textiles or BPO, but equally important for agriculture productivity & moving up that value-chain – East Asian “miracle countries” have become large scale exporters of manufactured goods with increasing sophistication and have become highly urbanized and well educated • High levels of savings, pro-business governments and mercantilist commercial policies add to this effort – Mobility of labor and capital (which is essential to industrial growth) is made possible due to social and economic improvement in agriculture – Successful land reforms in Korea and Taiwan were significant factors in subsequent growth and development performance in those countries • Bulk of benefits in the early stages of growth will likely accrue from thousands of small scale tech improvements in small and medium enterprises, not just from large corporate labs – Improved tech development at SME level creates income that can finance future investments – Focus on SME for painstaking 2-3 decades instead of supporting cutting edge R&D – Institutional innovations by state (including establishment of R&D institutes) have been helpful to smaller firms that cannot afford major organized R&D efforts. – Example: Taiwan’s Industrial Tech Research Institute follows a model where much of the R&D is carried out in the form of blue collar activities on factory floors and repairs shops, and “reverse engineering” (aka piracy) 9
- 10. © InnoAction Advisory Services, All Rights Reserved, No Further Distribution, Confidential, Proprietary Best Practices: Moving from low to mid-income country (II) • To develop STI what is also needed are favorable policies, sound fiscal and macroeconomic policies, accessible quality education, affordable/accessible health services, & good governance • Technology change is determined in large part by technology diffusion carried in traded goods as well as by FDI across borders – Trade with countries closer to the international technology frontier might be especially beneficial to developing countries without expending resources reinventing the wheel – FDI was central to the economic success of China, Malaysia, Chile, Thailand and Indonesia, for example – Trade liberalization is intended to increase wealth in industrial and developing countries by concentrating resources in most productive and competitive sectors to maximize comparative advantage • Entrepreneurial and successful developing countries in East Asia were intellectual property rights pirates before becoming concerned about their own intellectual property rights being infringed upon by the “next wave” – Developing countries can reap the benefits of investments and patents by rich countries without large costs – e.g. Energy services including simple motor driven systems for pumping water, sewer systems, efficient irrigation & pest-control technologies, auto collection & grinding of grain, etc. to improve agro productivity • Focus on agricultural productivity, health, sustainable use of natural resources, education, creation of economic opportunity (basic human needs – stabilizing population, alleviating poverty and sustaining natural resource base) – Household and government expenditures are heavily influenced by the role of technology in converting allocations into advances in education, health and other human development – African concerns include inability of productive systems like agriculture and economy keeping pace with rapid growth of population 10
- 11. © InnoAction Advisory Services, All Rights Reserved, No Further Distribution, Confidential, Proprietary Best Practices: Moving from low to mid-income country (III) • Human development must be strengthened before policy reforms and economic growth can be attained – Through basic science education to build a core base of scientifically literate citizens – one track for those with everyday skills, and another for those who are informed intellectuals … – … And health interventions • Stimulate interest among youth to pursue careers in science and technology. – Educate diverse labor force for skills of various purposes and sophistication; i.e. researchers, technicians, scientists, service force, etc. – Encourage research and advanced trainings for highly specialized (but strategic) industries to advance frontiers of knowledge to solve critical problems (specifically at research universities) • Develop national institutional infrastructure to make ties among member state institutions and enterprises that are capable of creating networks in order to generate knowledge – Rich countries spent decades on continuous investment in human capacity and institutions, built infrastructures to better allow for potential of STI flourishing – Once in place, infrastructure helps create wealth that funds future investment – Infrastructure acts as “global magnet”, attracting foreign talent 11