How a lack of innovation is crippling Pakistan’s economy

A continued investment in the technology sector often distinguishes developed nations from developing nations. An increased focus on this sector not only yields positive dividends on growth but also facilitates headway on the development front. This is why countries – like China – which house an overwhelming proportion of the competitive high-tech industry enjoy long-term economic prosperity in the wake of cost-efficient outputs that nimbly tap into both local and foreign markets.

However, technology is not an input that any country can code into its economy. It results from sustained investment in Research and Development (R&D), which opens the window for disruptive innovation. R&D  is simply a systemic way to augment the stock of knowledge over time. It transforms one into a knowledge-based economy that can reap the fruits of innovative goods and services. Innovation contributes to the economy by lessening the production cost (efficiency) or ameliorating the quality and quantum (productivity). These outputs are exported worldwide to earn meaningful foreign reserves and finance the import of capital goods.

Despite the guarantee of propitious returns, Pakistan has shown a baffling lack of interest in R&D spending over the years. From agriculture to industry to services, we pursue age-old techniques in the hope of a different outcome. The absence of the required will to enhance technological capabilities is why Pakistan stumbles to secure a firm-footing in the global business domain. However, Pakistan can benefit from increased productivity during the agricultural harvest, value-added industrial output, and state-of-the-art services if it embarks on the route of a knowledge-based economy. This also has a positive spill over impact on public health, education, and infrastructure. In this way, Pakistan will be able to narrow the economic gap with developed countries.

To illustrate this point, let us compare Pakistan with three other Asian countries: Singapore, Thailand, and India. R&D is the prime component of knowledge capital, which triggers innovation and leads to technological advancements. Yet, Pakistan’s R&D expenditure to GDP is less than all the three of the aforementioned countries. It averaged a meagre 0.38% from 2005 to 2017 compared to 0.76% of India, 0.44% of Thailand, and 2.1% of Singapore.

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