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November 22, 2017



A smooth transition

In addition to being ranked as the sixth most populous country in the world, with a population of 206 million, we are ranked at the 147th position with respect to our GDP. We also fare very poorly in terms of poverty, education, investment in science, the ease of doing business, the environment and security.

This is a testimony of the consistent failure of various ‘pseudo-democracies’ that have come and gone in our country. Our democratic systems have been little more than licences for unbridled corruption. Some of our politicians have blamed the army for not allowing democracy to ‘evolve’. This is a flawed argument . Military interventions were forced upon us because of the rapidly declining economic situation.

Even the imposition of martial law has failed to enforce a quick and effective justice system. As a result, democratic systems have fallen prey to corrupt practices amid the almost complete failure of the legal system to take such elements to task.

I have, therefore, been advocating a presidential system of governance with all aspirants to power being screened by a committee of elders appointed by the Supreme Court. It is only through this drastic change that the country can unleash the true potential of the 100 million young people below the age of 20 who constitute our real wealth. We must single-mindedly concentrate on establishing a strong knowledge economy through massive investments in education, science, technology and innovation.

In the contemporary knowledge economy, the ability of nations to compete in a knowledge-intensive marketplace depends on their ability to access and absorb external knowledge – especially knowledge about technology. Technology must be adapted to local conditions. Moreover, new knowledge must be generated for value addition, industrial diversification and competitiveness. Research and development (R&D) expenditure – both public and private – is essential not only to generate new knowledge but also to absorb, adapt to and diffuse external knowledge. R&D is, therefore, positively correlated with innovation, national competitiveness and economic growth.

Government policies and accompanying R&D expenditure to support university research in basic and applied fields as well as for digital infrastructure improve the quality of teaching and research. However, the private sector’s R&D expenditure is critical for firm-level learning and building absorptive capacities for technical change. Globally, the share of the private sector’s R&D expenditure has risen much faster than public sector’s R&D expenditure.

In 2012, the total global R&D expenditure was estimated at about $1. 5 trillion. Of this, the share of private companies is about 65 percent while the share of the government is 35 percent. In most OECD countries, the share of the public sector’s R&D expenditure has declined while business sector R&D spending has been on the rise.

Private R&D accounts for 70 percent of the total R&D spending in China, 68 percent of spending in the US, 75 percent in Korea and Japan and 70 percent of the expenditure in Germany. Pakistan’s R&D expenditure has declined to about 0.26 percent of GDP after rising to 0.83 percent during the Musharraf era. It is quite low as compared with India’s one percent share of the GDP, China’s 1.6 percent and South Korea’s 3.4 percent of much. In India and China, the share of the private sector R&D has been rising. But in Pakistan, the share of private sector R&D is estimated at less than two percent of the total R&D expenditure and has remained stagnant for many years.

In Pakistan, 60 percent of the public R&D expenditure is spent on funding defence research while the rest is spent on funding research at universities and R&D organisations. There is hardly any expenditure allocated for development – the conversion of research results into products and processes. In China and South Korea, 80 percent of the total R&D expenditure is spent on development.

As compared with the policies in most developed and East Asian countries, Pakistan’s public policy has dismally failed to stimulate private sector R&D through incentives such as tax allowance, tax credits or innovation grants. This has been due to the government’s lack of vision and understanding of the need to promote private sector R&D for socioeconomic development. A contract for R&D between industries and universities is almost nonexistent due to the absence of incentives and bridging institutions, such as incubators and technology parks. Legal instruments that are akin to the Bayh-Dole Act in the US, which protects the intellectual property of inventors as a result of public funding, are also missing.

Transnational companies (TNCs) can be an important source of private sector R&D for developing countries. India and China are major recipients of R&D investments from TNCs. In Pakistan, the government has failed to negotiate technology transfers with TNCs or to encourage them to establish R&D facilities. The international network of researchers can be a major source of knowledge transfer to developing countries. Taiwan’s computer industry and India’s IT industry were greatly helped by their respective diaspora networks. In Pakistan, our diaspora networks are also not tapped for technology entrepreneurship.

Public policy has an important role in promoting business innovation through direct and indirect policy instruments. There are excellent examples of East Asian countries, including China, for stimulating business R&D. China introduced its economic and organisational reforms in the late 1970s. The public S&T and R&D organisations were subjected to three pillars of reforms: reforming the funding system, improving R&D management and strengthening linkages.

Applied research was encouraged through various incentives such as licensing technology developed by institutions, establishing manufacturing operations onsite or creating technology-based spinoffs. Improvements in R&D management included measures such as the decentralisation of decision-making, a change in the evaluation criteria towards measuring efficiency, fostering competition among organisations and diversifying their activities. The government established semi-government bridging institutions between public research institutions. These included engineering centres, technology markets, industrial parks and incubation centres to strengthen linkages between public research institutes and manufacturing organisations.

Almost all East Asian countries, including Japan, South Korea, Singapore and Taiwan, have focused on stimulating business R&D expenditure in selected industries to gain competitive advantage. Chris Freeman (1997) argues that Japan’s rapid economic growth after World War II was based on building the technology capabilities of private firms by promoting contract research in public R&D institutions. This led to an increase in private R&D expenditure. The relative concentration of business R&D in a few civil technologies provided the necessary competitive advantage to the Japanese industry in knowledge-intensive sectors.

Pakistan needs to have a cabinet that consists of top specialists in their respective fields to emerge from the vicious circle of illiteracy and poverty and make a transition towards a knowledge-based economy.

The writer is the former federal minister for science and technology and former chairman of the HEC, and president of the Network of Academies of Science of OIC Countries (NASIC).