Building a knowledge-based economy

"The more the Philippines sets aside today for research and development, the greater the returns we stand to reap in the future."

Three of the top ten best-performing companies in the world today began as technology startups: Apple, Microsoft and Amazon. Three other technology companies come in close: Alphabet at fourth, Facebook sixth, and Alibaba seventh. The business success of these startup companies is more than enough concrete proof of the economic value of innovation and the pivotal role of research in today’s knowledge economy. 

In a knowledge economy where products and services rely significantly on the amount of intellectual capital, fact-driven, data-based and empirical knowledge creation is of outmost importance. Innovation is critical to ensure long-term profitability and sustainability. It comes no surprise that most multinational companies these days spend more on research and development than advertising, allocating billions of dollars in product development than business marketing. 

I can only hope that the same can be said for the Philippines. The c) recommends that developing countries spend at least one percent of the GDP on research and development. However, research and development spending in the Philippines has consistently lagged at only 0.1 percent—in comparison that of its ASEAN neighbors, Singapore (2.4 percent) and Malaysia (1.3 percent) and even that of Thailand (0.5 percent) and Vietnam (0.2 percent). 

In fact, proposed budget appropriations for the country’s principal research agency, the National Research Council of the Philippines, in the 2020 General Appropriations Bill is a mere pittance compared to the other items in the proposed national budget, further highlighting the country’s lack of sustained support for research and development. This lack of support is further aggravated by the lukewarm or even hostile attitude of politicians and policymakers towards providing funding more funds for research and development, resulting in the worsening state of innovation and technology. 

If there is one thing that our country could learn from today’s business giants is for us to increase our investments in innovation and research, particularly in a country which is among the most literate in the Southeast Asian region. 

But the government needs to walk the talk. For future generations of Filipinos to take the lead in a knowledge-based economy, it is not only necessary that the right human capital investments should be made. It is important that the government provide not only sufficient funding but it must also guide research and development towards a direction that would benefit the country in the long-term. 

This requires three critical factors—to institutionalize a national science, technology and innovation policy, to create a well-coordinated research ecosystem and to ensure closer collaboration between the academe, industry, and the government. 

First, for the country to fully harness the economic value of innovation, government has to provide more leadership in fostering the direction of research and development. The experience of many countries such as Japan, Korea and Germany shows us that public policy can effectively shape innovation, and instituting a stronger policy for technology and innovation can be a stronger driver for economic growth. Putting in place a stronger a national science, technology and innovation policy would allow government to identify more attainable targets and respond more effectively to our research and development requirements. A national science, technology and innovation policy would identify research priorities—and the desired results so as to justify higher spending and increased resource allocation and mainstream innovation into other aspects of national growth—including social services, infrastructure and the economy, especially agriculture and MSME development. 

Second, setting a national science, technology and innovation policy necessitates a more coherent research ecosystem. It is time that we steer away from a discordant research environment and move towards closer collaboration and stronger linkages between research-grant agencies, including state colleges and universities. Research institutions must progress from competition to cooperation, allowing closer coordination on their research agenda and the sharing of research results. Particular emphasis should be given to indigenous technology and local knowledge, enriching further the social relevance of research projects. 

Third, stronger collaboration between the academe, industry, and the government in terms of research and development must be pursued, not only in terms of technology creation and innovation, but most importantly in the application of research results. Research institutions must always be in touch with industry needs, and attune their research outputs towards improving its commercial value. 

With these three factors in place, it is critical for government to increase allocations for research and development. However, the government must go beyond direct funding allocations, and instead create fiscal and economic policies that encourage research activities such as tax incentives that would allow companies to enjoy lower tax rates on profits generated through patents, research and innovation. 

The indubitable fact is that the future economic growth will move in the direction of increasing levels of technology and innovation, and the Philippines cannot afford to lag behind. While realistically, we cannot be at the frontline of technological innovation, a stronger commitment to science, technology and innovation must be a priority. A focused, sustained and marker-driven research environment is absolutely necessary in order to fully harness technology and innovation for the farm, the factory and the market. Research results can then be applied to business and industries to upgrade the quality and marketability of our products and services and enhance the capability of our human resources. 

Why spend on research? The logic is simple. Research and development allows us to create new knowledge, develop improved techniques, and upgrade current technology. Research fuels innovation. With these innovation, people can produce more with either the same amount or fewer resources, resulting in increased productivity. As productivity grows, so does the economy. The more the Philippines sets aside today for research and development, the greater the returns we stand to reap in the future.