“R&D will be the driving force of the Asian century”

Michael Alan Hamlin

Posted on June 18, 2011

Senator Edgardo J. Angara issued a statement recently asserting that research and development (R&D) “will be the driving force of the Asian century,” citing a European Commission study that predicts “the center of gravity of world production will swing towards Asia by 2025.” Angara argues that the Philippines can benefit from this shift, but that it must boost its science and technology capacity to do so.

The senator, a former president of the University of the Philippines, chairs the Senate Committtees on Education, Arts & Culture and Science and Technology. He also chairs the Congressional Commission on Science, Technology and Engineering (COMSTE). COMSTE was set up in 2007 with the mandate to review the “science, engineering, and technology research and development system of the country” and enhance its capability.

In his statement, Angara said, “The Philippines has just as much potential to be a major player in this Asian century as any of our neighboring countries if only the government makes substantial investments toward innovations in science and technology.” He argues that “the only way” the Philippines can transform itself from a developing nation to a developed nation “is if we harness available technologies and innovate to form a knowledge-based economy.”

However, very low levels of R&D investment by the Philippine government and private sector suggest that the chances of leveraging technology innovation to accelerate economic development are slim. In the 2009 World Competitiveness Yearbook, the Philippines ranks 54 in R&D spending at $123 million or 0.1 percent of gross domestic product (GDP). “This is half the amount of Thailand (0.2 percent GDP, $498 million), Dr. Giovanni Tapang, PhD, complained late last year.

Writing on the Advocates of Science and Technology for the People website—it’s a volunteer organization that promotes R&D in the Philippines—Tapang said the Philippines invests one fifth as much as Malaysia in R&D (0.64 percent GDP ($1.06 billion). It also invests far less than larger Asian competitors. India invested about 0.7 percent of GDP in 2007 and China invested about 1.5 percent.

Although the R&D investments of individual nations in Asia and elsewhere pale compared to that of the United States—it invests 2.67 percent of GDP or $369 billion—increasing R&D investment by Asian countries, particularly Japan and Korea which both spend about 3.5 percent of GDP, means that Asia collectively invests about as much as the United States annually on R&D. That’s about 40% more than all of the European Union.

But because of the size of its economy, China accounts for about half of all Asian R&D, or more than $150 billion. No one expects the Philippines to compete with China in R&D investment on dollar terms, but if it expects to match the impact of R&D on the economic welfare of its people, it must at least match China’s investment in R&D as a percentage of GDP. Doing so is not a matter as simple as government budgeting the funds, which isn’t a simple matter in the first place in the Philippines.

The private sector “finances the majority of R&D investment spending, both in the United States and Japan as well as across many growth markets,” according to a report by Goldman Sachs’ Global Markets Institute entitled, “The new geography of global innovation.” The reports says, “Industry finances 70% of total R&D spending in China, up sharply from 58% in 2000. Industry finances 65% of total R&D spending in the United States and approximately 75% of total R&D spending in Korea and Japan.”

Although India is an exception to this rule—the Indian government funds 80% of total R&D expenditure and large conglomerates prefer to buy intellectual property rather than create it—these figures suggest that if the Philippines is to become a real innovation champion, we shouldn’t be looking to government to take the lead. Data from the Department of Science & Technology suggests that about 60% of Philippine investment in R&D already comes from the private sector.

But as we have seen, the level of investment is small in both raw dollar terms and as a percentage of GDP, and the total number of people working in R&D is tiny, less than 10,000. While R&D investment has been inching up in dollar terms, the number of scientists and engineers at work on innovation projects has been decreasing for decades. From 1996 to 2002 alone, the decrease was 45%. With attractive jobs and research budgets available elsewhere, the Philippines’ capacity for delivering innovation is crippled by emigration.

Tens of thousands of Philippine engineers and scientists are engaged in R&D around the world. If Angara’s vision is to be realized, someone will have to find a way to put these people to work at home. They can be the driving force, right?

(Michael Alan Hamlin is the managing director of TeamAsia and a Manila-based author. His latest book is High Visibility: Transforming Your Personal and Professional Brand. Write him at mahamlin@teamasia.com and follow him on TwitterFacebook and LinkedIn.). Copyright © 2011 Michael Alan Hamlin. All Rights Reserved.)

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