The three ‘I’s’ of economic growth: Industry, Innovation and Infrastructure (part II)

In a similar standpoint, target 9.5 is geared to ‘enhancing scientific research and upgrading the technological capabilities of industrial sectors in all countries, encouraging innovation, substantially increasing the number of research and development workers and public and private research and development spending’. In vision of this, for indicator 9.5.1, which looks at the research and development expenditure as a proportion of GDP – we see a decrease from 0.63 percent in 2007 to 0.24 percent in 2017. But on similar notes, it can be observed for indicator 9.5.2 – which addresses the researchers (in full-time equivalent) per million inhabitants – that this number doubled over a decade, i.e., an increase from 156.95 in 2007 to 335.58 in 2017. Keeping such statistics under consideration and while moving along the trajectory of recovery – scientific research can help us diversify our existing products and increase exports. Simultaneously, we can work on researching and innovating new products that will be helpful in the coming testing times. The importance of innovation can be seen from Schumpeterian growth theory, which postulates that innovation and the process of creative destruction drives economic growth. The proactive role of the current ministry of science and technology also affirms Pakistan’s potential.

Lastly, to curtail the digital divide and keep up with the modern technology in the world, target 9.c covers, ‘significantly increasing the access to information and communications technology and striving to provide universal and affordable access to the internet in least developed countries by 2020’. According to the Digital 2020 report of Pakistan, internet users account to 35 percent of the total population. The annual growth rate in the number of internet users is 17 percent. Similarly, out of the total percentage of the population aged above 15 years, only 18 percent have an account with a financial institution and 6.9 percent reported as having a mobile money account. Correspondingly, according to GSMA’s report in 2020, for low and medium consumption baskets of our country, the bottom 20% and 40% income groups have a total cost of mobile ownership above the UN target which requires 1 GB of data costing less than 2% of monthly income.

This digital divide coupled with vicious circles of incremental innovation leads to a deteriorating industry. We need to keep at par with whatever technological progress is happening in the frontier countries. The current pandemic is an unwanted reminder of our failure at educating the population equally on technological knowhow – thus addressing the digital inequality. Obviously the pronounced structural change in the foreseeable future will be with regards to how technology and nations coexist. The future relies on inventing new technologies to keep up with challenges ahead as we still have no vaccine for coronavirus, despite a few promising leads. We can invest in adopting the latest technologies in cell therapy and regenerative medicines, and educate our youth in these emerging fields in universities. It might be uncanny to not recollect on how increased telephone usage coincided with the time of the Spanish flu. Well, more than a century later, we are at the same brink of events – where technology’s importance cannot be stressed enough. In a bid to bring in foreign firms to set up shop in Pakistan, the government should mandate them to do R&D within the country and commercialize it here.

The current pandemic is an unwanted reminder of our failure at educating the population equally on technological knowhow – thus addressing the digital inequality

Investments in infrastructure can ease social mobility, create equality, improved standards of living – and ultimately lead economic growth. Public private partnerships as well our annual development budget can be utilized to cater to proper infrastructure. International cooperation, in the form of assistance from Asian Infrastructure Investment Bank can help us in this regard too. Our internet infrastructure, in particular, that of digital payment can be upgraded. Adopting international payment systems and creating the space for international logistics and delivery based businesses will also go a long way – think of PayPal and Amazon, for example.

Manufacturing has an imperative role in economic growth. There is evidence that each job in manufacturing 2.2 jobs in other sectors is created. Accordingly, we can focus on the promotion of industrial clusters, which can aid in enhancing production capabilities because of their backward and forward linkages. Our Central Bank can aid in solving liquidity constraints – for instance by credit conditions to promote SMEs and industrial clusters – which will help in the process of recovery and economic growth. We can also give increased bailouts to failing industries. Also, a new kind of insurance for global pandemics can be introduced. The ideology of neoliberalism which has made its way into the policies of the IMF should be reconsidered and governments can adopt strategies by a hit and trial method to find the best suited mechanism for our recovery process. Tax exemptions can be given for the promotion of special economic zones (SEZs) where combined with a good infrastructure – we can work on facilitating innovations. In this regard, we can learn from the example of China, which is a success story in this regard. Similarly, international cooperation is needed to remove trade barriers and implement certain new export protocols through which certain essential industries can start producing and exporting. Nevertheless, we still have a long way to go to go up the ladder and reach the level of economies that created success stories through their entrepreneurial examples. Whilst discontent is taking roots, we can aim at solidarity and start thinking on the terms of short term stimulus packages and a medium term growth strategy to come out of this stronger.

Dr. Izza Aftab is the chairperson of the Economics Department at Information Technology University, Lahore. She is also the Director of the SDG Tech Lab and the Program Director of Safer Society for Children. She tweets @izzaaftab

Noor Ul Islam is currently working as a Research Associate at the SDG Tech Lab established in collaboration with Information Technology University, Lahore, UNDP and UNFPA. She tweets @Noor_Ul_Islam20