AKP Phnom Penh, February 24, 2021 --

Innovation is critical to productivity growth and economic progress in developing East Asia including Cambodia, China, Indonesia, Lao PDR, Malaysia, Mongolia, Myanmar, the Philippines, Thailand, and Vietnam in a rapidly changing world, according to a new World Bank report launched today.
 
Those countries have an impressive record of sustained growth and poverty reduction. But slowing productivity growth, uncertainties in global trade, and technological advances are increasing the need to transition to new and better modes of production to sustain economic performance.

To support policy makers in meeting this challenge, The Innovation Imperative for Developing East Asia examines the state of innovation in the region, analyses the key constraints firms face in innovating, and lays out an agenda for action to spur innovation-led growth.
 
“A large body of evidence links innovation to higher productivity,” said Mr. Victoria Kwakwa, World Bank Vice President for East Asia and Pacific. “The COVID-19 pandemic, climate change, along with the fast-evolving global environment, have raised urgency for governments in the region to promote greater innovation through better policies.” 

The report identifies several factors that impede innovation in the region, including inadequate information on new technologies, uncertainty about returns to innovation projects, weak firm capabilities, insufficient staff skills, and limited financing options. Moreover, countries’ innovation policies and institutions are often not aligned with firms’ capabilities and needs. 

To spur innovation, the report argues that countries need to reorient policy to promote diffusion of existing technologies, not just invention; support innovation in the services sectors, not just manufacturing; and strengthen firms’ innovation capabilities. Taking this broader view of innovation policy with be critical to enabling productivity grains among a broader swath of firms in the region. 

“It is important for governments in the region to support innovation in services, given their rising importance in these economies – not only for better service quality but increasingly as key inputs for manufacturing,” said Mr. Andrew Mason, also a lead author of the report.
 
Countries also need to strengthen key complementary factors for innovation, including workers’ skills and instruments to finance innovation projects. Building stronger links between national research institutions and firms will also be critical to fostering innovation-led growth in the region.

By Heng Panha