By Beatrice M. Laforga, Reporter
MOST developing economies in East Asia, including the Philippines, have underperformed in terms of adopting new technologies and discovering new ones due to limited information, weak capacity of companies, poor employee skills and lack of government support, the World Bank said.
In the “Innovation Imperative for Developing East Asia” report released on Wednesday, the World Bank said nearly all 10 developing East Asian economies, except China, innovate less than expected given their per capita income levels.
Many companies across the region are still far from adopting emerging technologies, and the entire region is lagging behind advanced economies in using technology.
The World Bank attributed the poor performance to insufficient information on new technologies, uncertainties in projects, weak firm capabilities, poor staff skills, limited funding options and the lack of government support, which are usually not aligned with the needs of the private sector.
“Countries in developing East Asia must find new and more effective ways to increase productivity growth as they seek to build on past economic success and move progressively from middle- to high-income status. Indeed, their high-income neighbors — Japan, the Republic of Korea and Singapore — have all used innovation as a vehicle to improve efficiency and boost their incomes with great success,” it said.
The report covered 10 middle-income countries in the region — Cambodia, China, Indonesia, Lao PDR, Malaysia, Mongolia, Myanmar, the Philippines, Thailand and Vietnam.
The World Bank noted the Philippines’ high performance in information and communication technology (ICT) services exports, given its global reach in business process outsourcing (BPO).
However, government support for research and development (R&D) and innovation has been small, mainly due to its focus on driving innovation by small and medium enterprises (SMEs).
A World Bank survey of researchers in the Philippines, Malaysia and Vietnam showed that governments have increased national research capacity, but the overall impact is not yet clear.
Only a small percentage of companies in the Philippines, Cambodia and Malaysia have invested and engaged in R&D, and the most intensive ones are still below Israel’s benchmark.
The World Bank said more than 50% of innovating companies in the Philippines, including Indonesia, Malaysia, Myanmar, Thailand, and Vietnam, are struggling to hire new workers due to the lack of managerial and leadership skills and poor basic education, as seen in the low scores in international education assessment tests.
The Philippines is lagging in terms of innovation because of the lack of investments in R&D, according to John Paolo R. Rivera, an economist at the Asian Institute of Management.
“We need more investments in research and development, may it be academic or applied research, to help our human resources and economic systems adapt to the ever changing demands of a volatile, uncertain, complex, ambiguous and disruptive world and the Fourth Industrial Revolution, which has changed the way people work and live. Low R&D, low innovation,” He said in a text message on Wednesday.
Providing startups easier access to funding should also boost innovation, said Terry L. Ridon, convenor of think tank InfraWatch PH.
“The country needs to do more in terms of facilitating investments in innovation. Conglomerate interest in innovation startups has been limited, with only around four major conglomerates starting their own venture capital shops,” Mr. Ridon said in a Viber message.
While the country has seen drastic improvement in financial technology through the rise of electronic wallets and online banking, the biggest publicly listed companies in the country are still dominated by brick-and-mortar, traditional sectors that heed little innovation to grow, he said.
“On the other hand, our neighbors in ASEAN have already produced billion-dollar unicorns through technology companies such as Grab, Go-Jek and Lazada,” he said.
“We have a notable absence of innovation hubs akin to Silicon Valley, in which engineers, investors and policy makers interact to chart the future of innovation,” he added.
Republic Act 11293 or the Philippine Innovation Act was signed in April 2019, acknowledging science and technology as “essential for national development” and encouraging research, innovation and invention.
It allotted a “revolving” P1-billion fund from the national budget to finance enterprises “developing innovative solutions.”