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The endless immensity of innovation
Our last article, A Local Mittelstand, argued that we cannot leave the diversification of the economy to serendipity, to the expectation that the general public will come up with the ideas that will foster a myriad of SMEs. We spoke therefore, of the need for a foresighting exercise to choose the industries/technologies, set the vision, that we should exploit via innovation, in the creation of globally competitive companies.
The Economic Development Advisory Board (EDAB) under the chairmanship of Dr Terrence Farrell, undertook a roadmap exercise, supported by the Cambridge University Group, to select potential export (foreign exchange earnings) activities that should by 2030 deliver some 40 per cent of our foreign exchange. The EDAB foresees, for example, that by this date our fine cocoa could spawn a locally owned franchise selling cocoa drinks worldwide which are prized for their nutraceutical benefits.
Also, using the technologies developed by the Cocoa Research Centre invest in cocoa-growing orchard-based farming systems in Latin America and Africa; a T&T company as the best known marketer of coconut based products and another as the largest international distributor of sauces based on our hot peppers. T&T is also seen as a centre for business process outsourcing employing our accountants, lawyers, software programmers.
Further, our energy services business and professional supply of high level skills to Guyana, Suriname and Africa; transshipment of volumes of products through the new port of Port of Spain; facilitating Chinese plants in the free zone that assemble products for the region; local companies that hold multiple patents for energy efficient motors are all options for development (Reference- Terrence Farrell, “Diversification Strategy and Roadmap: Let’s Do It”).
The diversification of the economy requires public sector investment even of foreign exchange, in order to acquire the required infrastructure, knowledge, its implementation and creation, in the innovation for new companies, existing ones and their scale up to compete internationally. Hence the EDAB recommended, to ensure a secure and continuing source of funding, one that is not subject to the political vagaries of, say, the annual Budget or changes in political regimes, that a certain portion of the income earned by the HSF be assigned by legislation to the funding of the diversification and innovation.
Unfortunately, this did not meet with Cabinet’s approval. Instead the establishment of a hopelessly inadequate innovation fund of some $50million was approved—developed countries assign some 2 per cent of GDP to R&D for innovation which for T&T would be more like $2.8billion!
Let me quote from the Innovation Paradox by the World Bank Group 2017: “Policy consistency and predictability require systems that cultivate innovation policies and institutions over time, overcoming fluctuations in political economy and guaranteeing a predictable environment for long run innovation investing (funding). Instead (in developing countries) there is often limited national consensus on the importance of the innovation agenda and high level commitment, and policy, is subject to weak backing and frequent reversals.”
This says it all for our experience in T&T in trying to set up a national innovation system, though we all mouth the need to diversify the economy.
In general the choices of the EDAB roadmap target the areas in which we have either a comparative advantage and/or some current economic activity; e.g. cocoa, peppers, coconuts, agricultural R&D. Indeed as declared by the World Bank Group in its above publication:
“Firms and governments appear to be leaving billions of dollars on the table in foregone productivity growth and lost competitiveness. Indeed policy advice to move into production baskets thought to be more growth friendly raises the critical point that countries unable to innovate in their present industries are unlikely to do so in new industries”—gives some credibility to the EDAB roadmap that recommends in general incremental innovation/expansion in what we are doing at the moment as opposed to new industries.
The developed world, in the meantime, in carrying out to date the impressive socio-economic developments by the Schumpeter’s policy of creative destruction via the immensity of innovation, provides the knowledge/technology that is used by developing countries in their so-called Schumpeter-catchup growth via incremental innovation. Moreso, the return on investment in the endless innovation by the developed world is substantially higher than that of the developing countries in incremental innovation leading to Prof Anthony Clayton’s comment that incremental innovation is a high risk option for the region- we have to engage in disruptive innovation, we have to create new industries, we have to address global problems.
Yet developing countries lag behind in innovation driven development. As in T&T they lack certain complementaries that include adequate physical and human capital, R&D facilities, trained workers and engineers and adequate governance and managerial practices. However, the late Prof Celestous Juma told us that all it takes to get to the cutting edge of a technology is to send one or two graduates to the relevant research institutions.
In our thrust for diversification do not ask the people to grow peppers, teach them to long for the endless immensity of innovation and diversification becomes a by-product! (With apologies to Antoine de Saint-Exupery)
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