TRANSFORMING ARAB ECONOMIES INTO KNOWLEDGE ECONOMIES

October 17, 2014 OPINION/NEWS

download

 

By

Anant Mishra

In order to familiarise with the topic, it is essential to understand what one means by knowledge economy.

It is an economy based on creating, evaluating, and trading knowledge. In a knowledge economy, labor costs become progressively less important and traditional economic concepts such as scarcity of resources and economies of scale cease to apply.

Transforming Arab Economies into knowledge economies:

This topic aims to show how an economy based on innovation and knowledge can help promote greater economic growth and spur competitiveness. A report was launched in Rabat at an event organized with the Islamic Educational, Scientific and Cultural Organization (ISESCO), underlines that greater investment in a knowledge-economy model will be needed to meet the job creation challenge common to the region.

I understand that the extent of change will depend in a good part on how well the knowledge economy takes hold throughout the region.

Creating jobs entails more investment in knowledge-related sectors and new emphasis on how to develop competitive, productive, and sustainable economies.

“If small countries like Finland and Singapore, medium-sized ones like Malaysia and the Republic of Korea, and large like Brazil, China, and India are able to harness the power of technical change, then countries in the Arab world can do so too,” said Mats Carlson, Director, Center for Mediterranean Integration (CMI).  “But patience and determination will be required, because the fruits of investments in knowledge may not begin to appear for a few years.”

Many Arab countries have made progress over the last decade in terms of rolling out education access and information and communication technologies (ICT), gradually improving the institutional environment for private-sector led growth. Morocco and Tunisia have worked to support innovation, especially through the creation of techno parks and industrial zones that have attracted foreign direct investment and advanced manufacturing operations.  Jordan has embarked on a major effort to transform the education system at the early childhood, basic, and secondary levels to produce graduates with the skills needed for the knowledge economy.  The Kingdom of Saudi Arabia has launched a host of education reforms and has invested in the development of new universities, especially to boost science and technology.

It is eminent to explain how engaging a knowledge-economy model can be, by involving the implementation of a number of key cross-sectoral reforms that can create an incentivizing environment for innovation and growth. This would require the adoption of a combination of policies, including developing more open and entrepreneurial economies, preparing a more skilled labor force, improving innovation and research capabilities, and expanding information and communication technologies (ICT) and their applications.

Knowledge transfer is another important piece of the knowledge-economy model, essential in organizing, creating and disseminating knowledge, especially through foreign direct investments and international trade in goods and services. Managing knowledge is a critical driver for enhancing productivity that in turn offers higher and sustainable economic growth. Regional integration can be a positive asset to develop a stronger knowledge-economy development model in MENA, helping to expand trade and develop more efficient labor markets.

In addition to structural reforms, it is recommended that the governments in the region should establish appropriate conditions for the development of specific promising sectors and sites that can generate new activities and jobs.

The development of dynamic “growth spots” would help to create trust and confidence in the new economic model and therefore attract investments, economic activities and enhance knowledge sharing and innovation.

 

Labor-related problems

Daunting challenges lie before the Arab-speaking workforce today. Forty million jobs must be created in the next decade to employ the region, home to the highest rate of youth unemployment – not to mention that many countries are still undergoing a period of political transition.

The fundamental question about job creation now is where these countries should be headed and how they are getting there.

World Banks “Moving to a knowledge and innovation-based economy is an idea whose time has come”. The links between knowledge and innovation (and by extension, to productivity) are undisputed. And in the same way that productivity is the enabler of an economy, education can be considered to be a fundamental pillar of the knowledge economy.

Despite the region’s clear commitment to education, returns in terms of average years of schooling – have been modest in the Middle East and North Africa (MENA). And although secondary and tertiary enrollment rates have doubled in MENA since 1990, they remain less than one third of the rate of university enrollment in the United States and Western Europe.

Another concern is what these students are studying. In more than half of the MENA countries, approximately two-thirds of secondary school students major in the social sciences or humanities. In a world where technological innovation plays a pivotal role, the overwhelming focus on social sciences or humanities raises the question of whether the region’s youth can remain competitive.

To rise to the challenge of global competition and rapid technological change, students must master a variety of so-called soft skills—problem solving, communication, teamwork­, as well as mastery of ICTs and foreign languages—that are essential for employability and productivity.

The last but most pressing area of concern is women’s participation in the labor force. The rate of female labor force participation in the MENA region (at 25 percent) is both half the global average and the lowest in the world.  This is a problem that requires a revised legal framework as well as changes in social and cultural norms. This also brings into question regulations that have so far restricted women’s entry into economic and political life.

All in all, if a move is to be made in the direction of a knowledge economy in MENA, investing in high quality education is essential. This is the key to creating good and decent jobs that are so needed in the region today.  The STEP meaning Skills toward Employment and Productivity approach provides a simple yet comprehensive way to look at skills development for more jobs and higher productivity. It also helps to orient the areas of action needed in the Arab world.

World Bank moving to a knowledge and innovation-based economy is an idea whose time has come. The links between knowledge and innovation (and by extension, to productivity) are undisputed. And in the same way that productivity is the enabler of an economy, education can be considered to be a fundamental pillar of the knowledge economy.

Despite the region’s clear commitment to education, returns in terms of average years of schooling – have been modest in the Middle East and North Africa (MENA). And although secondary and tertiary enrollment rates have doubled in MENA since 1990, they remain less than one third of the rate of university enrollment in the United States and Western Europe.

Another concern is what these students are studying. In more than half of the MENA countries, approximately two-thirds of secondary school students major in the social sciences or humanities. In a world where technological innovation plays a pivotal role, the overwhelming focus on social sciences or humanities raises the question of whether the region’s youth can remain competitive. To rise to the challenge of global competition and rapid technological change, students must master a variety of so-called soft skills—problem solving, communication, teamwork­, as well as mastery of ICTs and foreign languages—that are essential for employability and productivity.

The last but most pressing area of concern is women’s participation in the labor force. The rate of female labor force participation in the MENA region (at 25 percent) is both half the global average and the lowest in the world.  This is a problem that requires a revised legal framework as well as changes in social and cultural norms. This also brings into question regulations that have so far restricted women’s entry into economic and political life.

All in all, if a move is to be made in the direction of a knowledge economy in MENA, investing in high quality education is essential. This is the key to creating good and decent jobs that are so needed in the region today.  The STEP meaning Skills Toward Employment and Productivity approach provides a simple yet comprehensive way to look at skills development for more jobs and higher productivity. It also helps to orient the areas of action needed in the Arab world.

 

UAE’s successful model:

The UAE has more than doubled employment to 3.5 million in 2009 from 1.7 million in 2000 with jobs growing at a compound annual growth rate of 8.35 per cent, according to a report on knowledge economy published by the World Bank.

This is the highest growth rate in employment in the Middle East and North Africa (MENA), reflecting the country’s achievement in the knowledge economy, the report said.

“In the UAE, Dubai has based its development over two decades on a clear knowledge and innovation strategy. Its strategy of building a transport and logistics hub (centered on a world-class port) has spawned a successful tourism industry. In addition, the UAE has developed core competencies in technology, media, and telecommunications,” one report said.

Dubai had created the region’s first knowledge cluster – Dubai Internet City, Dubai Media City, Knowledge Village as part of its quest to transform the trading economy into a knowledge economy, as part of the government’s vision. Currently the emirate is helping set up two Smart Cities in India’s Kerala state and Malta.

This model can be deployed by the other Arab Countries to enhance their future prospects by boosting economic growth through, education, investment and technological changes, however not just limited to these three.

 

Innovation through education

National and global political discourse is increasingly making mention of the importance of developing ‘knowledge economies’, and placing the production of knowledge societies at the forefront of national development policy. Such development aims are being embraced by governments across the Arab world, and the Middle East as a region is seeking to embrace new ways of developing capacity through education.

 

Benefits of knowledge economy

  • Economic growth

  • Through revenues from new industries and goods

  • Global market reach, increased export revenues

  • Economic diversification, less dependence on specific market sectors

  • Wealth from sale of stakes in the new businesses

  • Enhanced productivity

  • Enhanced and new skills, more skilled labour force

  • High value jobs, more job satisfaction, longer term employment

  • Experience skills and talents for the next market wave

  • Socio-political stability and prosperity

  • Enhanced infrastructure through the implementation of these products and solutions in health, education, sustainability, security, lifestyle and so forth

  • Better quality of life

  • Stable economy (revenues & taxes system)

Innovation

  • Technological assimilation – Government negotiated large scale, long-term foreign loans for industries to massive import of capital goods, turnkey plants

– Creation of Government Research Institutes (GRIs) to compensate for     technological weakness of domestic industries

– Well-educated workforce – critical to technological assimilation strategy

 

Knowledge-based and highly productive economy

Innovation, research, science and technology will form the pillars of a knowledge-based, highly productive and competitive economy, driven by entrepreneurs in a business-friendly environment where public and private sectors form effective partnerships.

 

 First-rate education

All Emiratis will have equal opportunity and access to first-rate education that allows them to develop into well-rounded individuals, enhance their educational attainment, and achieve their true potential.

 

Why is a Knowledge economy a strategic priority for the UAE government?

  • Cohesive Society and Preserved Identity

  • First-Rate Education System

  • World-Class Healthcare

  • Competitive Knowledge Economy

  • Safe Public and Fair Judiciary

  • Sustainable Environment and Infrastructure

  • Strong Global Standing

  • Strategic Priorities of the UAE Government

  • Strategic Enablers of the UAE Government

  • Skilled Human Capital

  • Customer-Centric Service

  • Efficient Financial Management

  • Good Institutional Governance

  • Dynamic Government Networks

  • Effective Legislative Process and Integrated Policy-Making

  • Effective Government Communication

In the Arab world, the challenges facing sustainable development are of varied dimensions, including water scarcity, population growth, energy pollution, soil degradation, urbanization and poverty. Responding to these challenges will require the building of institutional infrastructure capable of applying, accessing, adapting and creating knowledge, disseminating information and diffusing technology, i.e., the future of development is linked to society’s ability to produce and use knowledge and information. The Arab world faces real environmental challenges due to energy production and use. Rapid economic growth in the region is also expected to increase consumption of energy, which may cause serious environmental problems.

Sustainable development is about the management and organization of local resources in both human and physical forms. In this regard, the knowledge of the environment as well as public involvement represents an important strategy for sustainable development. In particular, women must be given greater responsibilities to support sustainable development. Empowering women with knowledge and information will have considerable impact on conserving the environment.

Knowledge is among the important determinants for building capacity to sustain development. Environmental management and sustainable change requires a flexible, adaptable and creative innovative system capable of using resources in a productive way to foster growth and sustain development. For poor countries, knowledge has become an economic resource that can be exploited to compensate for physical resources. The dynamic process that drives sustainable development relies on information and learning as well as on investment in knowledge creation. Knowledge is about ideas and skills that need to be acquired and applied in order to enhance people’s capabilities, not only to become creative and innovative, but also to participate in decision making concerning the environment. Thus, investment in people and in technological learning empowers the ability of society to sustain development through the creation of new knowledge and the diffusion of appropriate technologies.

Tacit knowledge becomes extremely important for sustainable development because of the indigenous content concerning the productive system of the local economy. Tacit knowledge is about knowledge that local people have, including the skills, competences, shared beliefs and common experience that can be used to enhance the process of development. However, most tacit knowledge is not codified and thus making use of it will require converting it into explicit or codified knowledge. This can be done through sharing knowledge with others and through learning by doing.

To close the knowledge gap and reduce the risk of falling behind, the Arab countries can use the knowledge of others in order to enhance their capabilities to produce knowledge at home. The World Bank proposes three steps that developing countries can take to close the knowledge gap. These countries can acquire knowledge by adapting the knowledge available elsewhere; absorb knowledge through universal education and investment in lifelong learning; and communicate knowledge by taking advantage of the new information and communication technology to increase people’s access to knowledge. At this stage of their development, most Arab countries are consumers of knowledge. To speed up the process of development, they can tap global knowledge through international trade, liberalization and Foreign Direct Investment (FDI). Knowledge acquisition helps in expanding the national knowledge system as well as accelerating the ability of enterprises to create their own knowledge. In the case of large multinational corporations, the Arab countries can benefit from the dissemination of new technologies and also from the linkage effects of investment in various sectors of the economy.

Arab countries can also benefit from sharing knowledge with each other, given that they enjoy common environmental, geographical, climatic, cultural and social features. Governments in these countries should collectively create enabling environments suitable for knowledge sharing and technology diffusion. Sustainable development requires the creation of indigenous knowledge through the search for knowledge that can be easily adapted, applied and used in each particular country. Adapting global knowledge and selecting the most appropriate technologies to the local environment will require sharing information and conducting research to choose the best among alternatives. In this regard, research and development becomes necessary for adapting new technologies for long-term sustainability.

Knowledge absorption is another important means that facilitates knowledge creation and technology diffusion into the Arab countries. Building learning capacity and empowering people through education are important for enabling the society to absorb knowledge.among the young, will foster creativity and innovation through providing cognitive skills and promoting the use of technologies at home and in business. Unfortunately, most knowledge acquired in the school system in Arab countries is not technical or scientific, which hinders creativity and innovation. The level of teaching and research in a given country is largely associated with the production of knowledge in that country. This will require greater investment in universities and higher educational institutions in order to expand the country’s capabilities to absorb and create knowledge. Law to ensure that the poor in society are not denied the opportunity to acquire knowledge and participate in the economy should enforce the universality of education.

The other important feature of knowledge creation and innovation is communicating knowledge. The new economy depends on information dissemination and the knowledge of the public to make decisions and participate in the economy. In recent years, rapid advancement in modern communication technologies has increased the ability of the public to share knowledge, communicate ideas, exchange views and information. Thus, countries should invest in building ICT capacity in order to increase access to global knowledge and technologies. Digital technologies, including the internet, offer new opportunities for Arab countries to connect with the rest of the world. Connectivity enhances the country’s capabilities to acquire new ideas and apply new technologies for a variety of activities. Governments should give high priority to building digital capacity to facilitate global integration and increase access to knowledge and information, as well as allowing local enterprises to share knowledge with the rest of the world. The World Bank has developed four criteria for assessing countries knowledge development, including: 1) an economic and institutional regime that provides incentives for the use of existing knowledge; 2) a dynamic information infrastructure that facilities effective communication; 3) an educated and skilled population and; 4) an efficient innovation system.

 

Solutions and steps towards the transformation of the Arab Economies

Creating more decent jobs is a huge challenge the Arabic region is facing, particularly for the young, whose rates of job­lessness are among the worst in the world, reaching 25% for those between the ages of 15 and 25. Simply to maintain current unemployment levels, an estimated 200 million new jobs will have to be created in the Middle East and North Africa (MENA) by 2050, 75% of which will be for women.

To solve the youth employment issue, the private sector must get involved to help build an entrepreneurial culture that supports innovation and allows companies to scale. This is a point that has been made by Corporate Entrepreneurship Responsibility, and many others.

Yes, every country in the region wants to foster innovation, create jobs, and build a knowledge economy.  But how?

 Develop a better-educated and highly skilled population Improve innovation and research capabilities. Expand information and communication technologies and their applications.

 

 

 

Photo(3)

Anant Mishra

Anant Mishra is a former youth representative for United Nations. Almost 4 years of experience, he has served in number of committees including United Nations Conference for Trade and Development and United Nations General Assembly primarily focusing on international trade, education, finance, economics. food crisis And disputes. He is available on anantmishra92@gmail.com

0 Comments

No Comments Yet!

You can be first to comment this post!

Leave a Reply