Transcript Towards the Knowledge Economy Concepts and Actions

Knowledge, Science & Technology for
Development: A General Framework
and an Application to China
Carl J. Dahlman*
Columbia University
April 12, 2001
*World Bank Institute
The World Bank
Structure of Presentation
•
•
•
•
•
Knowledge and Development
Knowledge Revolution
Implications for Developing Countries
Challenges to China’s Growth
Strategic Components for the
Knowledge-Based Economy in China
• Implementation of the Strategy
© Knowledge for Development , WBI
Knowledge makes the
Difference between Poverty
and Wealth...
Thousands of 1985
international dollars
8
Rep. of Korea
Difference
attributed to
knowledge
6
4
2
Ghana
0
Difference due to
physical and
human capital
1958 1962 1966 1970 1974 1978 1982 1986 1990
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The Knowledge Revolution
• Increased Codification of Knowledge and
Development of New Technologies
– Information processing, storage and transmission
– Biotechnology and new materials
• Closer Links with Science Base/Increased Rate of
Innovation/Shorter Product Life Cycles
• Increased importance of education & up-skilling of
labor force
• Innovation and productivity increase more
important in competitiveness & GDP growth
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The Knowledge Revolution -2
• Investment in Intangibles (R&D,education,
software) greater than Investments in
plant and equipment in OECD)
• Increased Globalization and Competition
– Trade/GDP from 38% in 1990 to 52% in 1999
– Value added by TNCs 27% of global GDP
• Bottom Line: Constant Change and
Competition Implies Need for Constant
Restructuring and Upgrading
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Implications for Developing
Countries
• Risk of Knowledge Divide with Developed
countries and within countries
• Need to develop strategies to use existing
and new knowledge to
– Improve performance in traditional sectors
– Exploit opportunities for leapfrogging
– Develop competitive new sectors
• Need to
– Learn from other countries
– Develop strategies for own situation and
current context
© Knowledge for Development , WBI
Strategy of Using Knowledge
for Development
• Strategy not just about high tech or
Information and communication tech.
• Is about making effective use of
knowledge across economy and society
• Requires better interaction between
policies, institutions, technology, people,
and government
• Is about getting knowledge to mothers,
farmers, workers, enterprises, and
government to improve lives
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Framework for Using K 4 D:
Four Key Functional Areas
• Economic incentive and institutional
regime that provides incentives for the
efficient use of existing and new
knowledge and the flourishing of
entrepreneurship
• Educated, creative and skilled people
• Dynamic information infrastructure
• Effective national innovation system
© Knowledge for Development , WBI
Knowledge Assessment
Methodology: Country Scorecards
• Benchmarking tool to help countries
assess how well they are positioned to
use knowledge for their development
• Tool is flexible so that a country can
compare itself to its neighbors,
competitors or others it wishes to emulate
• Helps to identify opportunities/challenges
and where countries may need to focus
policy attention or future investments
© Knowledge for Development , WBI
Knowledge Assessment Matrix
• KAM consists of 61 structural and qualitative
variables representing four pillars of the
knowledge economy, plus variables that show
the overall performance of economy
• Sources: WDI, UNDP, WEF, IMD, etc.
• Comparison is undertaken for 75 countries of
which (in income levels):
low: 17; lower
middle: 26; upper middle: 15; high: 17
• Interactive KAM:
http://www1.worldbank.org/gdln/kam.htm
© Knowledge for Development , WBI
Data for the KAM: 61 variables
1
2.
3.
4.
5.
6.
Performance: 7 variables
Economic Incentive: 8 variables;
Institutional Regime: 7 variables
Human Resources: 14 variables
Innovation System: 12 variables
Information Infrastructure: 13
variables
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Score Card Indicators
• As large set of variables is unwieldy, reduced
score cards with fifteen variables representing
four pillars of the knowledge economy, as well
as performance
• Chose variables for which data is widely
available (WDI, UNDP etc.)
• Variables normalized with 10 for highest in
sample of 75 countries, and 0 for lowest
• Scorecards serve as a quick graphical way to
compare countries
© Knowledge for Development , WBI
USA
Annual GDP grow th
Internet hosts 10
Human Development Index
Computers
Gross Domestic Investment
5
Telephones
Tariff & Nontariff Barriers
0
Tertiary Enrollment
Rule of Law
Secondary Enrollment
Adult literacy rate
High-Technology products
Control of Corruption
Foreign Direct Investment
R&D expenditures
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Brazil
Annual GDP grow th
Internet hosts 10
Hum an Developm ent Index
Com puters
Gross Dom estic Investm ent
5
Telephones
Tariff & Nontariff Barriers
Tertiary Enrollm ent
Secondary Enrollm ent
Adult literacy rate
High-Technology products
0
Rule of Law
Control of Corruption
Foreign Direct Investm ent
R&D expenditures
© Knowledge for Development , WBI
China
Annual GDP grow th
Internet hosts 10
Human Development Index
Computers
Gross Domestic Investment
5
Telephones
Tariff & Nontariff Barriers
Tertiary Enrollment
Secondary Enrollment
Adult literacy rate
High-Technology products
0
Rule of Law
Control of Corruption
Foreign Direct Investment
R&D expenditures
© Knowledge for Development , WBI
India
Annual GDP grow th
Internet hosts 10
Human Development Index
Computers
Gross Domestic Investment
5
Telephones
Tariff & Nontariff Barriers
Tertiary Enrollment
Secondary Enrollment
Adult literacy rate
High-Technology products
0
Rule of Law
Control of Corruption
Foreign Direct Investment
R&D expenditures
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Total Population (1999)
Tertiary enrollment (net, %)
100
US
80
60
UK Germany
Russia
40
Japan
Philippines
Iran
Tailand
Egypt
Turkey
20
Iran
Mexico
Brazil
India
China Indonesia
Pakistan
Nigeria
0
Vietnam Bangladesh
0
5000
10000
15000
20000
25000
GDP per capita (PPP)
30000
35000
40000
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GDP (PPP, International Currency, 1998)
120
Tertiary enrollment (gross, %)
100
Canada
US
80
Australia
Korea
60
Italy
Spain
40
20
India
0
0
Russia
Argentina
South Africa
Turkey
Brazil
Mexico
China
Indonesia
5000
10000
France
Germany
UK
Japan
Taiwan
15000
20000
GDP per capita (PPP)
25000
30000
35000
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Human Development Index (1960-98)
Human Development
0 .9
0 .8
Brazil
0 .7
China
0 .6
0 .5
India
0 .4
0 .3
0 .2
0 .1
0
1960
1970
1980
1995
1998
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GNP Growth (Average, %)
%
12
China
10
8
India
6
4
Brazil
2
0
1967-75
1976-85
1986-95
1996-99
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Per Capita GDP (PPP)
Brazil
7,000
6,000
5,000
4,000
China
3,000
2,000
India
1,000
0
1975
1985
1995
1999
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Challenges to China’s Growth
• Sustaining high economic growth rates
• Widening personal and regional income
disparities
• Creating productive jobs in face of increasing
international competition
• Growing environmental constraints
• Making economic and political transition
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China's Overall International Competitiveness
(as ranked by IMD's World Competitiveness Yearbook)
1995
1996
1997
1998
1999
2000
0
10
20
30
26
31
27
24
29
31
40
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China's International Competitiveness in Selected
Areas (1) (ranked by the IMD)
1995 1996 1997 1998 1999 2000
0
2
6
10
5
6
9
12
20
14
20
16
18
16
18
Internationalizati
on
23
Government
29
30
40
Domestic Econ.
2
34
38
36
37
40
42
35
42
Finance
50
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China's International Competitiveness in
Selected Areas (2) (ranked by IMD)
1995
1996
1997
1998
1999
2000
0
Infrastructure
10
13
20
30
40
50
27
37
41
43
28
30
35
40
Management
20
24
31
34
30
40
40
25
27
36
42
28
29
37
42
Science &
Technology
People
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Trade to GDP Ratio (% )
%
50
45
40
China
35
30
India
25
20
15
Brazil
10
5
0
1965
1975
1985
1995
1999
Knowledge for
for Development
Development,, WBI
©© Knowledge
Exports (constant 1995 US$, bill)
14.8
252.1
20
62.4
11.5
0
1980
China
Brazil
49
1
2
1999
India
3
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China Manufacturing Exports
100
90
% of total exports
Other manuf.
goods
80
70
60
Machinery
and transport
equipment
Chemical
products
50
40
30
20
10
0
1975
1985
1990
1995
Knowledge for
for Development
Development,, WBI
©© Knowledge
High-tech Exports as % of Manufactured
Exports
16
14
12
10
8
6
4
2
0
China
Brazil
India
1992
1995
1998
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From Factor-Based to
Knowledge-Based Growth
• China must increase the productivity of
capital and labor
• This will require more than just focusing on
high technology industries
• Need to increase productivity of all economic
activities
• Need to create jobs to cope with wrenching
restructuring
© Knowledge for Development , WBI
China
Annual GDP grow th
Internet hosts 10
Human Development Index
Computers
Gross Domestic Investment
5
Telephones
Tariff & Nontariff Barriers
Tertiary Enrollment
Secondary Enrollment
Adult literacy rate
High-Technology products
0
Rule of Law
Control of Corruption
Foreign Direct Investment
R&D expenditures
© Knowledge for Development , WBI
Updating the Economic and
Institutional Regime
•
•
•
•
•
•
•
Greater openness to international competition
Strengthening domestic competition
Restructuring/privatizing SOEs
Financial sector/corporate reform, including
strengthening of capital markets and
development of venture capital
Improving labor market flexibility
Increasing domestic competition
Strengthening rule of law
© Knowledge for Development , WBI
Specific Issues in the Economic and
Institutional Regime
• Dealing with risk of increasing inequality
– Social safety nets
– Growing regional inequality
• Improving regulatory framework
– Cleaning bureaucratic overload
– Enforcement of technical regulations (product quality,
safety...)
– Strengthening intellectual property
• Changing the Role of Government
– from main producer to developing markets and institutions
– providing key public goods good efficiently and dealing with
equity and social issues
– increasing the revenue base to be able to finance the
transition
© Knowledge for Development , WBI
Developing Human Resources for
the KBE
• Educated and skilled human resources = key
to success in the KBE
• China still has a high illiteracy rate (25%
female, 9% male 1998), and very low tertiary
enrollment (6%, 1997)
• Serious problems with access &quality
• Challenge: making the best use of limited
resources to increase access and quality
© Knowledge for Development , WBI
% 130
120
110
100
90
80
70
60
50
40
30
20
10
0
Secondary Enrollment
China
India
Brazil
1965
1975
1985
1995
1996
1997
© Knowledge for Development , WBI
Total number of pupils by level of education (mill., 1997)
30
25
1.9
5.8
6.1
Tertiary
20
15
158.5
6.4
68.9
10
5
34.3
140
Secondary
*
110.4
Primary
0
0
1
Brazil
2
China
3
India
4
* China’s secondary level includes both formal & informal education sectors.
© Knowledge for Development , WBI
Tertiary Enrollment Rate (% )
%
20
Brazil
15
10
India
5
China
0
1965
1975
1985
1994
1996
1999
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Number of people with higher education (population aged 25 and
above, mill., 1989-94)
90
76.5
80
70
60
50
40
30
26.9
20
11.4
12
China
Russia
10
0
India
US
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Specific Human Resource Issues
• Strong private demand for education not fully
tapped
• Over-regulation: quotas, testing, content
• Weak links between market needs and supply
• Need massive re-training programs for
displaced workers
• Serious internal and external brain drain
• Make use of well developed distance
education network
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Ensuring a Dynamic Information
Infrastructure
• A dynamic information infrastructure is critical
to take advantage of the knowledge and
information
• China has made big strides
• China can use an effective information
infrastructure to facilitate the industry
upgrading, to leapfrog and achieve
competitiveness and future success
© Knowledge for Development , WBI
Telephone mainlines (per 1,000 people)
140
120
100
80
60
40
20
0
Brazil
China
India
1975
1985
1995
1999
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Mobile Phones (per 1,000) people
50
Brazil
40
30
China
20
10
India
0
1995
1996
1997
1998
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Personal Computers (per 1,000
people)
35
30
25
20
15
10
5
0
Brazil
China
India
1990
1993
1995
1998
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Internet Hosts (Per million people, Log)
3.5
3
Brazil
2.5
2
China
1.5
1
India
0.5
0
1995
1996
1997
1998
1999
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Specific Issues in the Information
Infrastructure
• Deregulate telecom and allow private investment
and market competition at early stage
• Expand access, reduce price, relax Internet
control
• Go beyond use of internet for communications to
information resource and using it as a tool to
reduce business, government and social
transaction costs
• Will need legislation and regulation for electronic
commerce
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Improving the Innovation System
• Three key components of Innovation System
– Creating Knowledge
– Tapping global knowledge
– Disseminating and using knowledge
• China is focusing primarily on
– Developing high tech parks
– R&D
• Not enough effort on dissemination to increase
productivity
– agriculture
– traditional and new industry
– services
© Knowledge for Development , WBI
R&D Spending: Largest LDCs
(1996 est.)
Country
S. Korea
Brazil
China
Russian Fed.
India
Poland
Amount in Millions
14,700
5,790
4,610
2,810
2,730
1,030
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Top R&D Performers in US
(1997 in millions)
Company
GM
Ford
IBM
Lucent
Hewlett-packard
Motorola
R&D Expenditures
8,200
6,327
4,307
3,101
3,078
2,748
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Royalty Receipts and Payments by
Country Groupings
(% out of $66 billion in 1999)
Country
Receipts % Payments%
Low Income
00.1
00.6
Lower Mdl Y
00.6
03.7
Higher Mdl Y
01.5
09.4
High Income
97.8
85.8
(US)
(55.5)
(20.2)
(Japan)
(12.5)
(15.0)
(EU)
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Share World Technical Articles & Patent
Apls by Residents (1998)
100
90
80
70
60
50
40
30
20
10
0
Tech. Artl
Patent Apl
LY
LMY UMY
HY
US
Jpn
EU
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Total R&D Expenditure (PPP, 1996)
Scientists & Engineers (per million people)
6000
5000
Japan
Russia
4000
US
Australia
Denmark
3000
Germany
Canada
UK
2000
Poland
1000
Switzerland
Finland
France
Netherland
Korea
Austria
Spain
Italy
China
Turkey
Brazil
0
India
0
0.5
1
1.5
2
2.5
3
3.5
R&D expenditure as % of GNP
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Scientists & Engineers in R&D (Total)
0
419847
China
32512
26712
Brazil
94058
138421
India
1982
1
2
1995
3
© Knowledge for Development , WBI
R&D Expenditure (US$, mill)
2570
2220
0
1988
4420
China
5310
Brazil
2270
1
2
1994
India
3
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Specific Issues in the Innovation System
• Put massive efforts into dissemination by expanding:
– Innovation sites (incubators)
– Engineering research centers
– Agricultural extension services and new Spark
program
• Improve links to global knowledge
– FDI
– Technology alliances, R&D collaboration
– Partnering abroad
• Improve internal efficiency of R&D effort
– Balance among basic/applied/development/
acquisition
– Maintain public good R&D efforts
– Evaluation of effectiveness of R&D effort
© Knowledge for Development , WBI
Disseminating Knowledge
• Growth of more efficient enterprises
• Sales (technical services, equipment,
inputs)
• Government agricultural and industrial
extension services, demonstration
projects
• Media, Technical Journals, Internet
• Links between universities, research
institutes, and firms, people,
© Knowledge for Development , WBI
Tapping into the
Global Knowledge Base
• Trade, foreign direct investment,
technology licensing
• Joint research/ business/ cooperation
• Technical assistance, foreign study,
overseas nationals, hiring foreigners
• Technical journals, databases, internet
© Knowledge for Development , WBI
FDI Inflows (US$, Bill)
50
45
China
40
35
30
Brazil
25
20
15
10
India
5
0
1980
1985
1990
1995
1998
© Knowledge for Development , WBI
FDI Inward Stock (Mill. US$, 1980 V. 1999)
30
6252
25
China
306003
20
17480
15
Brazil
164105
10
5
1177
0
0
1980 1
India
16416
1999
2
3
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Key Issues in Foreign Investment
• China has tapped primarily FDI in
manufacturing, little still in service sector
other than hotels
• China’s service sector is very
underdeveloped
• Opening up to FDI in services can help
improve productivity and develop sector
© Knowledge for Development , WBI
70 Increasing Share of Service Employment
60
50
Brazil
40
30
India
20
10
0
China
1965
1975
1985
1990
1997
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Managing R&D Effort
• Improve efficiency/relevance of existing R&D
government programs; encourage private effort
• Link to the fast growing global knowledge system
– cooperative international public research programs an
exchanges of researchers
– strategic alliances, FDI, foreign research labs
• Clearly justify rationale for public intervention
– provide subsidies transparently
– in a non-discriminatory manner
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Patents in the US
0
1
99
754
China
24
98
1022
Brazil
4
114
612
1980 1
1999
2
India
(Total
by1999)
3
4
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Using Knowledge
• Effective use depends on perceived costs
and benefits of using it
– Links back to economic incentive regime
– Not just competitive pressures, but finance,
rule of law
• Also depends on education, skills, and
other absorptive capabilities of the
persons, organizations or firms
• Therefore links back to education &
broader institutional issues.
© Knowledge for Development , WBI
Annex: Standard 15-Variable
Score Card Indicators
Performance Indicators:
1.
Average Annual GDP growth 1990-98 (%)
(World Development Indicators (WDI), 2000)
2.
Human Development Index 1998
(index of literacy, life expectancy and income)
(Human Development Report 2000, UNDP)
© Knowledge for Development , WBI
Score Card Indicators
Economic Incentive Regime:
3.
Gross Domestic Investment as % of GDP
(annual average growth, 1990-98) (SIMA)
4.
Tariff & Non-tariff Barriers
(composite of average tariff rate, non-tariff
barriers and corruption in customs services)
(Heritage Foundation, 2000)
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Score Card Indicators
Institutional Regime (Governance):
5.
Rule of Law (World Bank, 1999)
6.
Control of Corruption (World Bank, 1999)
These measures capture the respect of citizens
and the state for the rules that govern them.
(Kaufmann, Kraay, and Zoido-Lobaton).
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Score Card Indicators
Human Resources:
7.
Adult Literacy Rate 1998 (% age 15 and above)
(UNDP, 2000)
8.
Secondary Enrollment, 1997
(WDI, 2000)
9.
Tertiary Enrollment, 1997
(WDI, 2000)
© Knowledge for Development , WBI
Score Card Indicators
Innovation System:
10.
FDI as % of GDP 1990-98
(SIMA)
11.
Total Expenditure for R&D as % of GNP 1987-97
(WDI, 2000)
12.
High Technology Exports as % of Manufactured
Exports 1998
(WDI, 2000)
Dahlman, WBI
© Knowledge ©
forCarl
Development
, WBI
Score Card Indicators
Information Infrastructure:
13.
Telephone per 1000 persons, 1998
(telephone mainlines + mobile phones)
(WDI, 2000)
14.
Computers per 1,000 persons, 1998
(WDI, 2000)
15.
Internet hosts per 10,000 persons, July 1999
(WDI, 2000)
© Knowledge for Development , WBI
UK
Annual GDP grow th
Internet hosts 10
Human Development Index
Computers
Gross Domestic Investment
Telephones
Tertiary Enrollment
Secondary Enrollment
Adult literacy rate
High-Technology products
5
0
Tariff & Nontariff Barriers
Rule of Law
Control of Corruption
Foreign Direct Investment
R&D expenditures
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Korea
Annual GDP grow th
Internet hosts 10
Human Development Index
Computers
Gross Domestic Investment
5
Telephones
Tariff & Nontariff Barriers
0
Tertiary Enrollment
Rule of Law
Secondary Enrollment
Adult literacy rate
High-Technology products
Control of Corruption
Foreign Direct Investment
R&D expenditures
© Knowledge for Development , WBI