MANILA (Xinhua): Fostering greater innovation would bring faster and more inclusive economic growth in Asia and the Pacific, according to the theme chapter of the Asian Development Outlook (ADO) 2020 released by the Asian Development Bank (ADB) on Friday (April 3).
"Developing Asia invests 2.1 per cent of its gross domestic product in research and development, but there are wide variations across countries," ADB chief economist Yasuyuki Sawada said.
Sawada said "the five key drivers of innovation are sound education systems, innovative entrepreneurship, conducive institutions, deeper capital markets, and dynamic cities which bring together research universities and forward-thinking firms."
Over the last five decades, the report said that Asia and the Pacific region has become a major global innovation and knowledge hub, with the region's share of global research and development investment rising to 40 per cent in 2017 from 22 per cent in 1966.
According to the report, the region is also home to many of the world's most innovative economies, including China, Japan, South Korea, and Singapore.
Overall, however, innovation in the rest of the region still lags that in advanced economies, the report said.
The report showed that countries that innovate more tend to have faster economic growth.
Middle-income economies in Asia and the Pacific that have graduated to high income such as South Korea increased spending on innovation, which is vital for productivity growth. Investment in research and development in these economies are three times bigger than in their peers, the report said.
In addition, the report said innovations contribute to more inclusive and environmentally sustainable growth in the region. The auto-rickshaw Tuk-tuks in Thailand and Manila's jeepneys powered by electricity or liquefied petroleum gas or compressed natural gas are examples.
According to the report, sustained innovation requires an educated and skilled workforce.
For instance, it said that basic education systems need to provide a mix of hard and soft skills that combine the likes of science, technology, engineering, and mathematics with learning to promote critical thinking, problem-solving, and creativity.
On-the-job training is important too, said the report, adding that firms that trained their employees are more likely to innovate than firms that do not by as much as over 12 percentage points.
The report further said that innovative entrepreneurs and small firms can be supported through conducive institutions, including stronger property rights, competition policies, rule of law, and good information and communications technology.
Access to capital markets and notably equity markets are key to financing innovation. Governments can play a major role in financing research and development, said the report.
The report concluded that there are no shortcuts to achieving innovative societies in the region. Building them is a long-term commitment requiring a lot of hard work.
ADO is the annual flagship economic publication of the Manila-based bank. - Xinhua
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