21May, 2007 1

In the Name of Allah the Most Beneficent and the Most Merciful

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IMPORTANCE OF THE INDUSTRIAL SECTOR IN ECONOMIC DEVELOPMENT – ROLE OF CCIs, FPCCIby

DR. AYUB MEHAR

DIRECTOR GENERAL (R & D)FPCCI

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Contents

Transformation of knowledge creation into economic development: Process, correlation and Modeling

Missing Links in Pakistan Role of Trade Bodies

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Modeling the Economic Development

Economic growth is considered as the blackest of the many black boxes in economics. However, the common ingredient for the higher growth is the innovations and new technology.

In fact, the sources of competitive strength are never constant for long. The sustainability in knowledge creating activities leads the economic development through inventions and technological advancement. America's success has been sustained because of the harmonization between academia, industrial management and macro economic policy making.

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Innovation’s Phases

Wave Period Inventions

First Wave 1785-1845 Water Power; Textiles; Iron

Second Wave 1845-1900 Steam Rail, Steel.

Third Wave 1900-1950 Electricity, Chemicals, Internal combustion Engine

Fourth Wave 1950-1990 Petrochemicals, Electronics, Aviation

Fifth Wave 1990-2020 Digital Networks, Software,New Media.

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Share of Knowledge-based Products in Global Trade

TYPE OF COMMODITY 1985s 2005s

High Technology 11% 22%

Medium Technology 22% 32%

Low Technology 21% 18%

Resource Based 11% 11%

Other Primary Goods 34% 13%

Miscellaneous 1% 4%

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Share of Knowledge-based Products in Global Trade (Cont..)

Knowledge-based technology has the largest share in world trade basket.

Scientific development is an outcome of the knowledge-creating activities in the universities. This scientific development produces innovations, inventions and technological advancements. If a country wants to achieve the higher growth targets, it will have to create the links between academic institutions, industrial units, and economic planning.

Innovation is the final output of academic research. The most important step in creating a research and innovation environment is to promote higher education and research activities in academia.

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Transformation of Knowledge

into Economic Profits Economic growth, technological advancement,

scientific development, knowledge creating activities and academic research are jointly determined factors. The academic research is ultimately transformed into economic growth.

If we want to achieve the higher growth targets, we will to develop the linkages between the academic institutions, industrial units and economic planning.

The dependency of economic development on academic research, innovations and technological advancement has multi dimensional linkages and inter-dependency between the availability of fiscal resources and accelerated marketable technological advancement.

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Transformation of Knowledge into Economic Profits (Cont..)

Average return on successful innovations was 56 % as compared to the 7 % average return on normal business activities all over the world during the last 30 years. (Ref: Stanford University)

The creation and utilization of knowledge is the key element to promote the technological advancement and as well economic development.

First, the ideas are submitted in the universities, where scientists, researchers, or economists test and verify the originality and usefulness of those ideas. Out of 300 submitted ideas, one hundred are converted only into small projects at the research institutes of the universities and only eight ideas are reached at the stage of large projects. The industrialists and large business organizations provide funds for research for those projects to get the research outcomes for commercialization.

(Ref: Economic Intelligence Unit, London)

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From Ideas to Marketing

STAGE ACTIVITY QUANTUM OF ACTIVITIES

1st Step Unwritten Raw Ideas 3000

2nd Step Ideas Submitted for Publications

300

3rd Step Small projects 100

4th Step Large Developments 8

5th Step Major Developments 4

6th Step Launches 2

7th Step Success 1

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Economic Development and Knowledge Based Activities

Country GDP

($Billn)

Exports ($

Billion)

Expenditure for R & D (% of GDP)

Researchers in R & D

per million people

Scientific & Techni

cal Journa

ls Article

s

Royalties Received ($ Million)

Egypt 90 4 0.19 493 1,198 38

France 1,431 332 2.2 2718 27,374 3,241

Germany 1,984 613 2.5 3153 37,308 3,765

India 510 49 NA 157 9,217 12

Israel 104 30 4.96 1563 5,025 389

Japan 3,993 417 3.09 5321 47,826 10,422

Malaysia 95 93 0.4 160 416 12

Pakistan 59 10 NA 69 277 2

Turkey 184 35 0.64 306 2,761 0

United Kingm 1,566 280 1.9

266639,711 7,701

United States 10,383 694 2.8

4099163,526 44,142

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Final Equation of the Knowledge

Based-Growth Model

To accelerate the economic growth and to develop the meaningful relations with the industry, university faculties have to find the new technologies. They have to create new ideas; they have to formulate new theories and procedures. All of those are the parts and elements of the knowledge creating activities.

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Pakistan was one the 162 countries which contributed less than 2 percent of the research papers in total (0.08 percent). Japan was in the fourth rank and India was 22nd. The deterioration in economics and technology is a natural consequence of this

phenomenon.

Missing Links in Pakistani Scenario

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Pakistan’s Competitiveness in the World (Ranking)

Country Technology Index

Public Institutions

Index

Global Competitiveness

Index

Business Competitive

Index

Pakistan 87 74 91 73

China 62 55 46 47

India 63 53 55 30

Korea 9 41 29 24

Malaysia 27 38 31 23

Thailand 43 45 34 37

Brazil 42 50 57 38

Turkey 52 63 66 52

Finland 3 3 1 2

USA 1 21 2 1

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•

Academia in Pakistan has failed to develop linkages with the industry and there is no sign of creativity of knowledge to develop the industrial and trade activities.

One can find at least three missing links in the system of

higher education in Pakistan:

1. First missing link can be observed between the strategy for promotion of research culture and the curriculum. The policy for the development of academic research and the system of examinations work in opposite directions. The system emphasizes the memorization of texts and mechanical use of the concepts and formulas. This problem was created because of the stereotype lectures and the extensive use of the study

guides and short notes.

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Cont..

The second missing link is the disconnection of research degrees with knowledge creation. The system checks only the ritual requirements. It cannot verify the objectivity, originality and acceptability of research work. Such degrees will increase the number of PhD degree holders only. They cannot create knowledge for economic development.

Third missing link is between the academic research and economic development. To convert the knowledge into economic development, universities lead (do not follow) the industry. It is a notable difference between the role of higher education and vocational education that higher education institutions lead the industries because they work for future. They innovate, invent and develop the new products, process and systems with the help of new ideas and knowledge advancement. While, vocational education supplies the workers and qualified professionals for the existing system.

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Role of Trade Bodies, FPCCI

The industry in Pakistan has always been contributing in the promotion of higher education by granting funds, development of infrastructure, set up of new academic institutions, providing scholarships and creation of employment opportunities.

During the recent years the responsibility of economic development has largely been shifted to corporate sector from the governmental agencies. In the age of globalization the role of trade bodies become more important. The distribution of resources, level of poverty in a region, socio-economic status and the participation of the people in the social and economic development activities are depend on the economic structure and system of the country. The flow of investment, mobility of labor and capital, patterns of business financing and strength of business institutions determine the fortune of the society.

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Role of Trade Bodies, FPCCI (Cont..)

Now, trade bodies will have to play important and non-traditional role. They will be major catalyst of the economic development. They will not only contribute in the employment generating activities, participation in national revenues, building of foreign exchange reserves and the addition in the Gross Domestic Product (GDP), they will also become the part of economic planning and decision making. For this purpose they will have to enhance the research activities.

The FPCCI is currently restructuring and enhancing its research activities. Several type of research work including applied and policy research in the areas of business competitiveness, fiscal and monetary policies, and the globalization related issues are being carried out in the research department.

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Role of Trade Bodies, FPCCI (Cont..)

The federation research department is planning to launch indexes to measure the quality of life in the country and to measure the business performance.

To construct a macro model to study the patterns of industrial and trade development is also in consideration at FPCCI.

The federation is in a process to establish links with the institutions of higher education.

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Role of Trade Bodies, FPCCI (Cont..)

Two research projects were assigned to the Applied Economics Research Center, University of Karachi for the study on the Industrial Competitiveness and Protection in Free Trade Regime.

We are reactivating the FPCCI standing committee on Higher Education.

Our R & D cell is launching a research journal in collaboration with the academic institutions.

“Let us develop a knowledge-based economy’ is the FPCCI’ slogan for the year. This slogan describes the approach and vision of the present custodian of the apex body.

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Selected Indicators to Measure the Contribution in the Development of Knowledge-based Economy

Expenditure on R & D for the year (Rs) Exports of High Tech Products for the year ($) Royalties received for the year (Rs) Applied for new patents/ trade marks during the

year Number of Scientists and engineers serving full

time

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Cont..

Expenditures on information technology and communication

Projects assigned to research institutions for primary/ applied research

No. of employees participated in industry related international conferences

Investment for modernization of machinery, laboratories, and equipment

Number of national and international collaborations for research

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Conclusion

To develop the meaningful relations with the industry and to accelerate the economic growth, we should collaborate in several ways including industrial sector representation in curriculum development, identification of research projects, joint seminars and conferences etc. All those activities indicate that the FPCCI feels its responsibility in the social and economic development of the country. Inshallah, the FPCCI with the help of academia will be in a position to revolutionize the economic development of Pakistan.

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THANKS FOR YOUR PATIENCE

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