By Muhammad Faizan Athar Lone
Technological innovation is closely linked with any nation’s human development, economic growth, industrialization, entrepreneurialism, and modernization. Not only these, but technological innovation is also essential for the defense of a country. Economic thought of the last several decades has, therefore, stressed upon all nations to indulge into an incessant quest for technological innovation.
There is a strong realization in most modern societies that technological innovation can play a pivotal role in improving their quality of life, national competitiveness, and internal and external security. Consequently, progress through technological innovation is idolized; even prescribed as the solution to many of the problems caused by technological innovation itself such as environmental issues, vehicular accidents, or industrial effluents. Resultantly, we see almost all countries of the world, irrespective of the stage of their economic development, dedicating at least some of their resources towards technological innovation.
The mind-boggling and meteoric rise of East Asia over the past five decades is well-known to the entire world. Enviable track records of several economies of this region in sustaining rapid growth and poverty reduction have been well documented by various multilateral organizations such as the World Bank, Asian Development Bank and the Organization for Economic Cooperation and Development.
Lesser developed states like Pakistan can learn many lessons from the success stories of East Asia. The major growth engine of the East Asian economies was export-oriented manufacturing. The productivity growth of these economies was based on scientific and technological advancements, which resulted in innovative outputs for the global consumers through which they fetched premium in the international markets. Innovation-led growth has in fact played a critical and pivotal role in the development of many states in East Asia such as South Korea and Singapore.
For low-middle income countries of the world like Pakistan with varied institutional, technological, and firm-level capacities, “innovation” entails not only the invention of new products and processes at the Industry 4.0 frontier but also the diffusion and adoption of existing technologies or practices. These more basic forms of innovation can have big payoffs in the relatively poorer countries. Pakistan however, underperforms on several key measures of innovation such as government and business expenditure on research and development; patents granted; number of researchers in full time employment in science and technology sectors; and number of research articles published in respectable journals in the fields of science, technology, engineering and mathematics. The number of firms in Pakistan engaging in any type of innovative activity is miniscule.
There are several reasons for the low technological and innovative capabilities of the Pakistani industry. Innovation is costly and risky and the results of innovative activity may come with a long lag. All these factors act as prohibitive forces stifling innovation in Pakistan. Moreover, Pakistani firms lack adequate information on the relevant technologies which may transform their productivity. They also face uncertainty about the returns to the use of these technologies. The capacity of the Pakistani firms to innovate is also constrained due to inadequate management capabilities and workforce skills. Besides this, businesses in Pakistan frequently lack access to external financing for technology adoption or broader innovation projects.
Pakistani policy makers need to reorient innovation policy to focus on incentivizing and encouraging a large mass of firms to simply start innovating. It is the broad adoption and diffusion of the existing technologies, not only invention of new ones, that will determine the pace of economic and productivity growth in Pakistan in the coming years. The industrial cooperation component of the China Pakistan Economic Corridor has opened an unprecedented window of opportunity for Pakistan to leapfrog and catch up technologically. China is now becoming a fast-growing innovative economy and many companies from there are expected to relocate to the special economic zones being established in Pakistan under the China-Pakistan Economic Corridor. Pakistani firms can learn from their Chinese partners and start innovating for producing competitive products for sales in the international markets.
A technology and innovation oriented industrial policy will benefit Pakistan in many ways. Firstly, the persistent trade account deficit the country is facing for a very long time can be overcome. By selling innovative products in the foreign markets, Pakistan can earn a lot of valuable foreign exchange through a substantial increase in its exports. Secondly, semi-skilled and skilled labor in the Pakistani economy will get employment which will enhance the overall growth of the country and alleviate poverty. Thirdly, the knowledge infrastructure of the country will redesign itself to produce cutting edge research for the industrial needs which will in turn improve the human capital in Pakistan which may allow entrepreneurship to flourish. Finally, Pakistan can achieve sustainable economic growth which can help the country develop and improve the overall living standards of its population.
Innovation can lead Pakistan towards prosperity. To begin with, industries in traditionally strong sectors such as textiles and agriculture can be chosen for policy intervention from the state. Gradually other sectors such as medium engineering and pharmaceuticals can be brought under the scope of innovation, changing Pakistan’s economic structure and propelling the county towards prosperity.
The writer is a student at Aitchison College, Lahore