How emerging nations can position themselves in the knowledge economy

How emerging nations can position themselves in the knowledge economy

By Zakri Abdul Hamid

On the strong nexus between infrastructure, innovation, and competitiveness required for emerging nations to compete with the best both regionally and globally.

“Innovation and creativity must propel both public and private-sector performance if Malaysia is to achieve its goal of becoming a developed, high-income status nation.”

“Universities are a cornerstone of the innovation eco-system.”

In 1943, Sir Winston Churchill told a Harvard University audience that, “empires of the future will be empires of the mind,” that the value of intellectual capital would exceed all others. His wisdom was to be proven by countries such as Korea, Japan and other nations relatively lacking in natural resources, and of course it remains valid today. The success of leading nations is founded on intellectual capabilities and creative innovation. In the case of Malaysia, our economic history since independence has been a story of structural change. We have successfully transitioned from an agriculture based economy in the 1960s to a manufacturing based one in the 1980s and a service based economy at present, with ambitions of evolving into an “innovation” or “knowledge economy.”

A knowledge economy is defined as one where organisations and people acquire, create, disseminate, and use knowledge more effectively for greater economic and social development. It provides more efficient ways of producing goods and services, and delivers them more effectively, and at lower cost, to a greater number of people. It relies on institutions able and willing to change, on the transformative power of technology, and on the dynamism of entrepreneurs to generate growth. Innovation and creativity must propel both public and private-sector performance if Malaysia is to achieve its goal of becoming a developed, high-income status nation, able to compete with the best both regionally and globally.

For innovation to flourish, it is essential for government to help create a supportive environment, beginning with the education system. The early skills of innovation lie in an ability to think critically, analyse and reason. Thanks to the Internet and information technologies, there is now universal access to facts and information.  A person in Kuala Lumpur has online access to the same information as another person in New York or Beijing. When access to information is no longer a barrier, the ability to examine and critically analyse that information becomes the competitive edge. Also required is creative thinking ability and we had to nurture this in our education system. Universities are a cornerstone of the innovation eco-system. In developed countries, there is an active two-way flow of talent between universities and industry. Industry’s experience and lessons in innovation can help inform university research and students need to be conversant with the innovation requirements of employers.

A caveat regarding the move towards a knowledge economy is that we must make sure that no one is left behind when new ways displace the old. The state, firms and individuals must work collaboratively and creatively so that innovation is to the benefit of all.

The success of any innovation-driven growth strategy depends on an ability to attract a large community of creative individuals from different fields. Entrepreneurs, for example, need skills typically found in larger, often multinational corporations. The innovative know-how of such global giants as Nokia or Samsung or Apple needs to reach our small and medium-sized enterprises. Funding and government policies are also critical components in the innovation eco-system. The Malaysian Government takes a generous approach to research and development grants and risk capital relative to other emerging nations and has embarked on a Government Transformation Programme starting to bear results.  Moving forward, we need to bring innovation further into government and government into innovation, involving people at every level of the public sector decision making.

Malaysia has high quality infrastructure and its population enjoys good access to basic services such as electricity and water. Infrastructure is central to the government’s development policies and the bedrock of the economy, with the government allocating more funding to infrastructure than to any other sectors in each of its national development plans since 1966. The private sector has also played an active role in developing Malaysia’s infrastructure, providing USD 54 billion in investment between 1990 and 2011. Private investment has increased over time, thanks in part to the government’s efforts to liberalise the telecommunications, transport and electricity sectors.

Recently, Malaysia was ranked number two in terms of its attractiveness for infrastructure investment in Asia. It now sits in 5th place globally in the 3rd edition of the Global Infrastructure Investment Index report by Arcadis, a global design and consultancy firm. According to the report, Malaysia’s strong economic performance and continued long-term investment in infrastructure have made the market attractive for private/ inward investment.

The government’s 11th Malaysia Plan, published in May 2015, emphasised the importance of infrastructure in achieving Malaysia’s transformation into a fully developed nation by 2020. The plan sets out a continued focus on the strengthening of enabling infrastructure to boost productivity and support economic expansion. Major projects to be completed by 2020 include the Klang Valley MRT Line, the 2,000 km Pan Borneo Highway and the West Coast Expressway. Completed projects include 93,000km of new roads, increasing the road network by 68 percent, while investment in urban rail saw a 32 per cent increase. In the race to achieve the 2020 goals, a key challenge will be to ensure that the quality and sustainability of Malaysia’s new infrastructure are not compromised.

Moving forward, emerging nations must come to rely less on the traditional factors of production, to further innovate, to take intelligent risks, and to generate an inclusive future for all of us.

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