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The mind-boggling, meteoric rise of East Asia over the past five decades is well known to the entire world. Enviable track record of several economies of this region in sustaining rapid growth and alleviating poverty has been well documented by various multilateral organizations such as the World Bank, Asian Development Bank and the Organization for Economic Cooperation and Development.
Lesser developed states, like Pakistan, can learn many lessons from the success stories of East Asian countries. The major growth engine of the East Asian economies was export-oriented manufacturing. The productivity growth of these economies was based on scientific and technological advancements which resulted in innovative outputs for the global consumers, ergo premium for them in the international markets. Innovation-led growth has, in fact, played a pivotal role in the development of many states in East Asia such as South Korea and Singapore.
For low- and middle-income countries, like Pakistan, that have varied institutional, technological and firm-level capacities, “innovation” entails not only the invention of new products and processes at the Industry 4.0 frontier but also the diffusion and adoption of existing technologies or practices. These more basic forms of innovation can yield big payoffs in the relatively poorer countries.
Pakistan underperforms on several key measures of innovation such as government and business expenditure on research and development, grant of patents, number of full-time researchers in science and technology sectors and that of research articles published in quality journals in the fields of science, technology, engineering and mathematics. The number of firms in Pakistan engaging in any type of innovative activity is minuscule, to say it mildly.
There are several reasons for low technological and innovative capabilities of the Pakistani industry. Innovation is costly and risky, and the results of innovative activity may come with a long lag. All these factors act as prohibitive forces stifling innovation in Pakistan. Moreover, Pakistani firms lack requisite information on the technologies that may transform their productivity. They also face uncertainty regarding the returns the use of these technologies offers. The capacity of the Pakistani firms to innovate is also constrained due to inadequate management capabilities and low workforce skills. Besides this, businesses in Pakistan often lack access to external financing for technology adoption or carrying out broader innovation projects.
Pakistani policymakers need to reorient innovation policy to a focus on incentivizing and encouraging the local firms to simply start innovating. It is the broad adoption and diffusion of the existing technologies – not only invention of new ones – that will determine the pace of economic growth and productivity in Pakistan in the coming years. The industrial cooperation component of the China-Pakistan Economic Corridor (CPEC) has opened up an unprecedented window of opportunity for Pakistan to leapfrog and catch up technologically with China, the country that is now becoming a fast-growing innovative economy. Many Chinese companies are expected to relocate to the nine special economic zones being established in Pakistan under the CPEC project. Pakistani firms can learn from their Chinese counterparts and start innovating for producing competitive products for the international markets.
A technology- and innovation-oriented industrial policy will benefit Pakistan in many ways.
Firstly, the chronic current account deficit can be overcome. By selling innovative products in the foreign markets, Pakistan can earn a hefty amount of valuable foreign exchange through a substantial increase in its exports.
Secondly, the semi-skilled and skilled labour in the Pakistani economy will get employment which will enhance the overall growth of the country and will effect a fall in poverty levels.
Thirdly, the knowledge infrastructure of the country will redesign itself to produce cutting-edge research for the industrial needs, which will, in turn, improve the human capital in Pakistan that may allow entrepreneurship to flourish.
Finally, Pakistan can achieve sustainable economic growth that will help the country develop and improve the overall living standards of its population.
Innovation can surely lead Pakistan towards prosperity. To begin with, industries in traditionally strong sectors such as textiles and agriculture can be chosen for policy intervention from the state. Gradually, other sectors, such as medium-tech engineering and pharmaceuticals, can be brought under the scope of innovation, changing Pakistan’s economic structure and propelling the county towards prosperity and wealth creation.

The writer is a student at Aitchison College, Lahore.

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