Innovation nation … Atta-ur-Rahman

In today’s knowledge-driven economy, a nation’s ability to compete in a knowledge-intensive global marketplace hinges on its capacity to access and assimilate external knowledge, particularly technological knowledge, adapt it to local needs, and generate new knowledge to foster industrial diversification, value addition, and competitiveness.

Public R&D funding plays a crucial role in advancing university-based research in both basic and applied fields, enhancing teaching quality, and supporting digital infrastructure. Meanwhile, business R&D expenditure is vital for firm-level learning and developing the absorptive capacities necessary for technological transformation.

Globally, the share of business R&D expenditure has grown significantly compared to public R&D funding. For example, in 2012, the global R&D expenditure was estimated at $2.6 trillion, with private companies accounting for about two-thirds and governments about a third. In OECD countries, as well as in China and other fast-developing nations, business R&D represents a much larger share of total R&D spending as compared to government spending. In Pakistan, private sector R&D is almost zero.

Pakistan’s R&D expenditure today stands at a mere 0.16 per cent of GDP, far below India’s 0.8 per cent, China’s 2.65 per cent, and South Korea’s 5.2 per cent. Furthermore, business R&D in Pakistan constitutes only a small fraction of the total R&D expenditure and has remained stagnant for years. Approximately 60 per cent of public R&D funding in Pakistan is allocated to defence research, leaving minimal resources for university research and national R&D organisations. Critically, no funding is dedicated to the ‘development’ phase – transforming research outcomes into marketable products and processes – whereas in countries like China and South Korea, over 80 per cent of R&D expenditure focuses on development.

Pakistan also lacks public policies to incentivise private R&D through mechanisms such as tax allowances, tax credits, or innovation grants. Contractual R&D collaborations between industry and academia are rare, primarily due to the absence of bridging institutions such as incubators and technology parks. Moreover, there are no legal frameworks, like the US Bayh-Dole Act, to protect intellectual property resulting from publicly funded research.

Transnational corporations (TNCs) offer significant potential for advancing R&D in developing countries. Historically, TNCs limited their R&D in these regions to modifying products for local markets. However, this trend has shifted, with TNCs now establishing R&D centres in countries where they can hire skilled personnel at lower costs. India and China have capitalised on this trend, becoming major recipients of TNC-led R&D.

In Pakistan, however, the government has neither encouraged technology transfer from TNCs nor facilitated the establishment of TNC R&D facilities. Similarly, diaspora networks, which have significantly contributed to industries like Taiwan’s computer sector and India’s IT sector, remain untapped in Pakistan.

Public policy plays a pivotal role in fostering business innovation through direct and indirect instruments. East Asian countries, including China, provide excellent models for stimulating business R&D. Beginning in the late 1970s, China implemented comprehensive reforms in its public science, technology, and R&D sectors, focusing on three pillars: reforming funding systems, improving R&D management, and strengthening linkages between research institutions and industry. Public funding for institutions was reduced, compelling them to secure alternate funding through contract research or consultancy services. Incentives were introduced to promote applied research, such as licensing technologies, establishing on-site manufacturing, or launching technology-based spinoffs.

China’s efforts to enhance R&D management included decentralising decision-making, adopting performance-based evaluation criteria, fostering competition among institutions, and diversifying activities. Semi-governmental bridging institutions were established to link public research institutes with manufacturing organisations.

Other East Asian countries, such as Japan, South Korea, Singapore and Taiwan, have also prioritised business R&D investment in strategic industries to secure competitive advantages. For instance, Japan’s post-World War II economic growth was driven by enhancing the technological capabilities of private firms through public R&D institutions. This strategy significantly increased private R&D spending and focused investments on key civil technologies, enabling Japan to dominate knowledge-intensive sectors like transportation and electronics.

South Korea, Taiwan, and Singapore adopted ‘learning strategies’ to drive innovation. These governments encouraged firms to license foreign technology under Original Equipment Manufacturing (OEM) contracts, whereby local firms produced goods under TNC brand names with support in equipment selection, training, production, and management. This approach fostered firm-level learning and enabled local firms to develop independent design and engineering capabilities.

Substantial investment in human resource development – training scientists, engineers, and technicians and attracting diaspora talent – fueled these countries’ capacity for innovation. By the 1990s, large-scale R&D programmes supported incremental innovation and indigenous product development. Over time, these firms began selling products under their own brands, marking a significant shift toward self-reliance.

In most developed and East Asian nations, industrial and social development is guided by a long-term vision supported by grassroots research to identify critical needs and niches for growth. A coordinated economic vision must be backed by committed leadership, merit-based bureaucratic structures, and a focus on equitable development. Successful implementation requires seamless collaboration between federal and regional ministries, with industrial policy emphasising competition over protectionism, nurturing technology-based entrepreneurship, and prioritising investments in human capital.

For Pakistan, adopting such a comprehensive and forward-looking approach is crucial. Policies must incentivise private R&D, foster industry-academia linkages, and promote a culture of learning and innovation within firms. Strengthening public-private partnerships, leveraging diaspora networks, and embracing international collaboration can help Pakistan transition into a knowledge-driven economy capable of sustained growth and global competitiveness.

The million-dollar question is: who will make this happen? The feudal politicians are highly unlikely to bring such reforms as they threaten their very existence since a highly educated technologically savvy population will never elect them into power. This transformation will require bold decisions, sustained investments, and a collective commitment to building a future in which knowledge and creativity drive prosperity.

With the right focus and determination, Pakistan can emerge as a global leader in innovation and economic growth. A visionary technologically competent and honest leadership is the need of the hour.

Courtesy The News