Fostering a knowledge economy

With the change of government imminent after today’s elections, we can look ahead to a new and prosperous Pakistan where justice will be swift and efficient, and where Pakistan can tap into its real potential – the 100 million young men and women below the age of 20.

For this to happen, we need a visionary leader who can lift the country out of the huge mess that we have created over the last 10 years of so-called democracy. Building a new Pakistan will require a government of technocrats and not of ignorant politicians who haven’t the faintest understanding of the 4th Industrial Revolution that is now upon us. We need to give the highest national priority to education, with at least four percent of GDP being allocated to this vitally important sector, and with at least 25 percent of this (one percent of GDP) being allocated to higher education.

However, funds alone are not the answer. A major problem affecting the education sector is that of quality, and this is primarily associated with the calibre of the teaching and research staff. All government schools and colleges need to be revamped by the induction of qualified teachers, who should be appointed after being selected through a national and not a provincial test. In the higher education sector too we could consider following the Turkish model where teaching and research position applicants for universities are centrally selected through a rigorous testing system held at the federal level.

College education needs to be a major focus for reforms as the present situation of our colleges is pathetic, to say the least. The provincial higher education commissions should be disbanded and transformed into higher education departments, which have the primary mandate to uplift college education.

The demographic advantage that Pakistan has with over 100 million people below the age of 20 will soon be converted into a huge burden unless we start unleashing our youth’s massive creative potential. It is only through a vigorous and enlightened policy of transforming our country from a low-value agricultural economy to a strong knowledge economy can we hope to emerge from the abyss that the last two governments have brought us into.

Industrial and social development is dependent on a clear long-term vision. A coordinated economic vision with a clear development strategy needs to be supported by a committed, honest and technologically competent leadership, and a transparent bureaucracy selected and promoted on merit. The implementation of the vision requires complete synergy between different ministries at the federal and regional levels.

Industrial policy, although considered irrelevant in the market economy, remains relevant for developing countries. The policy’s focus has to shift from protection to enhancing competition, increasing investment for high-quality training of scientists, engineers and technicians. Most importantly, we need to promote a culture of learning in private firms, for innovation.

In order to migrate to a strong knowledge economy, we need to access and absorb external knowledge, particularly knowledge about technology, which then needs to be adapted to local conditions. Simultaneously, we need to build strong centres of excellence so that we can be world leaders of research and its transformation into new products and processes. This will lead to value addition, industrial diversification and competitiveness.

Research & Development (R&D) expenditure, both public and private, is essential not only for generating new knowledge, but also for absorption, adaptation and diffusion of external knowledge. It is the quality and quantum of R&D that directly determines the levels of innovation, national competitiveness and economic growth.

In Pakistan, we witnessed a significant improvement in the higher education sector due to the policies initiated and implemented by the HEC in 2002. However, while public R&D expenditure is important for supporting university research in both basic and applied fields, it is the private sector (business) R&D expenditure that is critical. It is only then that we can bring about a major economic change. R&D in the private sector in Pakistan is negligible, and this has been one major cause of why we have lagged behind as a weak economy.

However, internationally, countries which have a high level of private sector R&D invariable forge ahead through development, manufacturing and export of innovative products. Indeed, globally the share of business R&D expenditure has risen much faster than public R&D expenditure. The total global R&D expenditure is estimated at around $1.5 trillion, 65 percent of which is the share of private companies and 35 percent of the government.

In most Organisation for Economic Co-operation Development (OECD) countries, the share of the public R&D expenditure has declined, but private-sector R&D spending has been rising and now accounts for about 70 percent of the total R&D spending in China, 68 percent in the US, 75 percent in Korea and Japan and 70 percent in Germany. Pakistan’s R&D expenditure, 0.3 percent of GDP, is very low, as compared to India’s 0.9 percent, China’s 1.6 percent and South Korea’s 3.4 percent of much larger GDPs.

Moreover, in Pakistan, the share of private sector R&D is estimated at less than one percent of our total R&D expenditure and has remained stagnant for many years. Therefore, the problem is two-fold: first, we are spending far too little on research and development; and second, only a minute fraction of this total R&D is spent by the private sector. This is partly because of our government’s lack of clear strategy to lead in certain new and emerging sectors such as biotechnology, nanotechnology, artificial intelligence, high-speed transportation and genomics.

There is hardly any financial allocation in Pakistan for new and innovative developments – conversion of research results into novel, high-quality products and processes – or for creating world-recognised brands. In contrast, in countries such as China and South Korea, about 80 percent of R&D expenditure is spent on development and branding.

The problem with Pakistan is the myopic approach adopted by its governments towards socio-economic development. Their policies failed to stimulate private R&D by giving the private-sector suitable incentives, such as tax allowance, tax credits, innovation grants, manpower training, access to venture capital, or establishment of science parks or university – industry linkages. As a result, contractual R&D between industry and university is very limited due to absence of incentives and bridging institutions such as incubators and technology parks.

A comprehensive 320-page document was developed under my supervision to help the country transition into a knowledge economy; the document was approved by the cabinet in August 2007. The document clearly lays down what needs to be done in each sector in order to create jobs and trigger a major reduction in poverty levels. Thousands of experts from our industrial sector, government and our diaspora abroad as well as universities and key national institutions were involved in its preparation. The sectors covered included agriculture, biotechnology, information technology, telecommunications, engineering, pharmaceuticals, textiles and many more.

The coming government must take this document as its major policy cornerstone and implement it so that we can transition into a strong knowledge economy.

The writer is the former chairman of the HEC, and president of NASIC.

Email: ibne_sina@hotmail.com