Philippines found wanting in innovation

September 15, 2014 at 11:02

THE PHILIPPINES found itself in the lower fourth of a list of 24 economies ranked according to “progress in fostering creativity and innovation”.

“This index aims to give policymakers a unique tool to measure progress in fostering creativity and innovation in 22 Asian economies, with the United States and Finland included for comparative purposes,” ADB explained on its Web site.

The index reflects how efficiently countries turn their creative “inputs” (consisting of capacity to innovate, incentives to innovate and environment conducive to innovation) into innovation “outputs” (covering “conventional indicators” like number of patents filed “as well as a broader set of measures of knowledge creation”). There are 36 “input” and eight “output” indicators.

Economies were then ranked according to “input” where the Philippines ranked 17^th, and “output” in which the country placed 18^th.

Overall, the top 10 economies were led by Japan, which was followed by Finland, South Korea, United States, Taiwan, New Zealand, Hong Kong, Australia, Laos and Singapore.

Southeast Asian economies that did better than the Philippines were: Laos (9^th), Singapore (10^th), Indonesia (12^th), Malaysia (13^th), Thailand (15^th) and Vietnam (16^th).

Faring worse than the Philippines overall were, in descending order towards the bottom: Sri Lanka (19^th), Bangladesh (20^th), Fiji (21^st), Myanmar (22^nd), Pakistan (23^rd), and Cambodia (24^th).

The report, titled: “Creative Productivity Index — Analyzing Creativity and Innovation in Asia”, bared three general findings, namely:

• Fostering innovation, entrepreneurship and creativity translates into direct, intangible economic outcomes;

• As low-income economies approach middle-income status, traditional models of growth will have to be re-examined; and

• Sustaining growth through innovation is an important area of focus for policymakers to overcome the middle-income trap that prevents such economies from achieving high-income status.

“Many Asian developing economies face a challenge to avoid being stuck in the middle-income trap. They need to transition from an imitation-driven economy to an innovation-based growth model more commonly found in developed countries,” according to highlights of the report.

“Richer economies are clearly able to invest more in physical infrastructure such as transport networks, communications, and power generation, which are key underlying factors in economic creativity and innovation,” it added.

“A poorer country may not be able to muster the same level of creative inputs as a richer country, but can still benefit by using what resources it does have efficiently.”

A statement accompanying the report quoted Bindu N. Lohani, ADB vice-president for Knowledge Management and Sustainable Development, as saying: “As countries seek to innovate to avoid middle-income traps, all governments — especially those with limited resources — need to be sure that their investments boost both efficiency and productivity, benefiting their economies and people …”

On the Philippines itself, the report noted that the country “has a medium level of creative productivity”.

“On the ‘input’ side, the country’s performance is average in most dimensions,” the report said, clarifying, however, that it falls behind in “firm dynamics” (23^rd) — a measure of “flexibility and vitality” of the work force — due to “rigid labor markets and financial institutions which prevent firms from accessing credit”.

The Philippines’ best scores are in competition (12^th) and human capital (16^th), the report noted.

“Despite the fact that policymakers are broadly in favor of private enterprise and competition, concerns linger over the sanctity of contracts and the influence of the country’s family-owned conglomerates,” it said.

“On the labor side, the Philippines scores relatively well for the enrollment ratio of students in technical and vocational programs, and of tertiary students in science,” it added.

“However, this masks the fact that the country suffers from brain drain, with many technically skilled Filipinos emigrating to work in countries where wages are higher.”

Moreover, in the “output” dimension, the report noted that the Philippines has a relatively low level of patents and scientific publications.

“This, combined with the large numbers of technically skilled Filipinos who take up employment abroad — including medical professionals — suggests that more investment is needed domestically to retain these workers, so that the benefits are felt at home.”

‘WAKEUP CALL’
Noting “[t]he ADB rating should be seen as a wake-up call”, Henry J. Schumacher, executive director of the European Chamber of Commerce of the Philippines, said in a text message: “Creative industries can be another sunrise industry bigger than BPM (business process management), but more support in various forms by government are needed badly”.

Mr. Schumacher, whose group has been at the forefront of prodding development of the country’s “creative industries” — a sector that includes advertising, animation, architecture, broadcast arts, culinary arts, cultural/heritage activities, design, film, literature, music, new media, performing arts, publishing, and visual arts — cited the need for subsidized participation in trade fairs abroad, trade missions to developed markets, as well as financial support and incubation packages for entrepreneurs in these fields.

Asked on what the Philippines needs to improve, Shanti Jagannathan, education specialist with ADB’s Regional and Sustainable Development Department, zeroed in on investment in research and development (R&D).

“The Philippines ranks around mid level among the 22 Asian countries [sic] assessed, largely because both its innovation and creative investments and its innovation outputs are fairly low,” Ms. Jagannathan said in an e-mail.

“The Philippines has done well to attract and develop its IT-BPO (information technology-business process outsourcing) industry in particular. However, it has a large and labor-intensive agricultural sector and investment in science and technology has been weak,” she added.

“Investment in R&D overall is below the 1.5% of GDP that is typically associated with a move to a knowledge economy,” she stressed, adding that such outlay should be boosted “to closer to or above 1.5% of GDP (gross domestic product)”.

Ms. Jagannathan said further that, “like many other countries”, the Philippines should improve the quality of tertiary education and skills pool “to match the needs of the labor market”.

“Widespread Internet and broadband connectivity would help provide more opportunities for e-commerce and digital enterprises which are the industries of the future,” she said.

“This would also increase employment opportunities as well as make it easier to provide e-services like health and education to far-flung populations, helping to reduce inequalities.”