A new role for research in achieving prosperity in the Middle East

The Authors

James Ruscoe, INSEAD – Abu Dhabi Centre, Abu Dhabi, United Arab Emirates

Abstract

Purpose – The purpose of this paper is to assert a mainstream role for focused R&D as a service activity for the economy and for society in a prosperous and harmonious Middle East.

Design/methodology/approach – Comparative review of science policy options in the context of today's Middle Eastern economies and societies, their competitiveness, needs, aspirations.

Findings – A clear case for a university-based R&D policy targeting the needs and potential of each nation so as to stimulate entrepreneurship, job creation and renewal of traditional sectors and small firms.

Practical implications – Priority allocation of resources to targeted R&D together with associated policy changes to achieve an open socio-economic climate conducive to innovation and birth of new activities.

Originality/value – To remind policymakers of recent international experience and thus help identify a Middle Eastern R&D focus also in the context of Islam's historic appreciation of the value of knowledge and learning.

Article Type:


Keyword(s):

Research and development; Competitive strategy; Employment; Middle East; Government policy; Economic growth.

Journal:

Education, Business and Society: Contemporary Middle Eastern Issues

Volume:

1

Number:

1

Year:

2008

pp:

6-11

Copyright ©

Emerald Group Publishing Limited

ISSN:

1753-7983

The launch of a new journal targeting education, business and society in their relation to contemporary developments in the Middle East is timely and significant. The region's social, economic and political terrain is littered with half-formulated or unimplemented ideas, in stark contrast with the reality of often small populations, remarkably abundant natural resources, stagnant labor markets, traditional antipathies and newer enmities, set against the global backdrop of geopolitical tensions originating in the Middle East and now shaping our world. Education, business and society are not merely interlinked; they are contiguous, interactive, self-forming and nowhere is this more apparent than in the research arena. Research, academic or – as R&D – also business-driven, is now a prime determinant of society. In the end, it is education's gift to society.

The message regarding the role of research today is clear. It is studied, analyzed, assessed. There are no secrets. The policy ideas and options are out there, though largely unheeded. That is why the basic message is worth repeating. All governments in advanced countries support research. Which of the many forms of intervention is adopted can depend on national policy preferences or be determined by the make up of an existing national research base. Support can be substantial or merely supplementary. It can be targeted to identified areas of scientific inquiry or be spread across the whole spectrum of disciplines. It can sustain R&D carried out by public or private industry, by public or private universities, by publicly or privately funded research institutes. The scale of support also varies. But all OECD member states actively encourage research and development and this reveals a fundamental consensus:

Consensus regarding the benefits of knowledge is hardly new, but there have been times in history when it failed. Europe's neglect of its knowledge base after the end of the Classical Era nearly proved fatal for its civilization. Without the respect for learning displayed by Arabic culture, even more would have been lost. When Islamic science inspired and led innovation, Arab economies and societies enjoyed pre-eminence. It was the great scientific thinkers such as Ali Ben Isa, Ibn Al-Baitar, Ibn al-Haytham, Al-Jazari, Ibn Khaldun and Al-Zarqali during the Islamic Golden Age and beyond who provided Europe with the building blocks for the early modern era – empiricism, observation, controlled experiment and record keeping. Modern scientific inquiry derives to a considerable extent from development of the scientific method in the Islamic world. That was the path trodden then and it led to prosperity: it can be followed again. As in the USA so in the Middle East, there are fundamentalist currents at work seeking to diminish or even deny the value to mankind of accumulated knowledge. As before, these can be resisted. It is time to reassert the role of research in the Middle East, to expand its horizons and bring it into the mainstream.

R&D stimulates economic growth, but for countries which are establishing their research base, it is vital to understand that growth comes from the commercial application of research acting on competitiveness, employment and the creation of new firms, and not from research itself. The hard benefits of R&D are only realized through successful innovation and commercialization – the “D” – and these require complementary inputs in the form of management skills, investment ability, marketing, etc. in an overall socio-economic climate conducive to innovation. The latter is crucial in deciding whether a particular R&D policy is worthwhile in a given context.

Research and development is investment and, as such, its justification should ultimately rest on the economics. But research can also be viewed in softer terms – as social investment, giving returns in terms of improved education, better health, social harmony, our environment, and so on. Both justifications face difficulties in evaluating and measuring return, not least because of time scales and cause-and-effect. Where R&D funding is not targeted properly, or is undertaken by people insufficiently qualified to produce the desired result at acceptable cost, it is just one more element in expenditure. In public policy terms, an abstract contribution to the sum total of human knowledge is insufficient motive to alter that judgment. Social investment, on the other hand, is open to inflated valuations of social return and can lead to the notion of R&D as social policy. If rarely cost effective when compared to direct intervention, social investment in academic research nevertheless prepares the ground, the humus, to enable a broader range of human talent to find expression. It explores our world, ourselves, our universe. It challenges and it inspires.

For the Middle East, where resources are often scarce in human terms even where abundant in others, simple consolidation of academic excellence and provision of opportunities for individual genius cannot be the prime basis of research policy. The great centers of Arabic learning were not ivory towers insulated from their world. Yet nor can R&D be placed squarely in an industrial policy context: value is rightly placed in the Middle East on the cultural content of development. In the region, research can therefore be conceived as a service activity for the economy and for society. It is here that its real justification lies.

Hence, trends matter. Specifically, globalization redefines research policy. The workings of comparative advantage in R&D have long been evident. Home grown national capability is one thing: the vitality of a country's R&D system is also determined by its attractiveness to outsiders as a place to conduct research. In line with foreign direct investment, research capability in specific disciplines is concentrating in certain countries. This is neither by chance nor by accumulation of academic excellence. We see similar – or complementary – areas of specialization emerge in academic and business R&D. Geographic concentration in part reflects the cost of R&D, but the climate for research – indeed the social and career climate for the researchers themselves – has a big influence. The best research environment is not one with just the best facilities; it is one which encourages intellectual and social exchange between similarly gifted individuals and facilitates putting their ideas into practice. Critical mass takes on added meaning: even in an online world, face-to-face interaction generates added value in insights and connections, networks and feedback loops. Establishing a research community is one of the first objectives of sound policy.

Where R&D is starting to become a significant element in a national economy as in much of today's Middle East, specialization in research fields of specific interest is as important as straightforward capacity building. Research management is a key activity, we can say a discipline in itself, and evolving fast. Both the tax regime governing R&D expenditure and the effectiveness of protection of intellectual property rights require careful consideration. The value of intangible investment represented by R&D and its results is enormous. Strong IPR boosts the attractiveness of a research site; where IPR is weak, the economic threat to innovative companies is considerable. Note though that in the global economy the financial worth of ideas can be unlocked in a variety of ways, despite IPR provisions designed to limit this for fear of reducing the global return on R&D risk.

Countries with the reputation of being poor R&D locations suffer long-term consequences: besides reduced inward investment, they generate fewer opportunities for national researchers, fewer opportunities for international contacts. To counter this, R&D policy can be designed to link with education and tax policies to foster R&D intensive activities which, in turn, act as a magnet for talent, imported or home-grown. The Irish Republic is a good example. For success, incentives have to operate in a context conducive to intellectual effort and be assured of long-term government support. In the Irish case, once the rising numbers of young people entering the labor market was identified as a potential problem, a long-term policy was formulated based on use of EU funds to make very substantial investment in education and training, coupled with incentives to FDI targeting high tech, high R&D, sectors. This turned an economic backwater into Europe's most dynamic small economy in just 20 years. Ireland demonstrates that money is more wisely spent on preparing the population for the new working environment than anywhere else – be it infrastructure, transport systems, even housing. In the Middle East with its booming population and skewed demographics, this is a key insight. Classic examples of planned economic growth, such as Singapore, also show how a reservoir of well-trained young people is a strong contributory factor in achieving prosperity.

If the justification for R&D is economic, what is its actual contribution to a nation's competitiveness? Competitiveness is a comparative term. It stems from and strengthens human capital formation; it depends on the ability to invest in intangibles like knowledge, skills and creativity: key non-basic factors of production which attract and stabilize economic activity and employment. The ability to accumulate and improve human capital, to bring all the talent available in a society into play, is thus central to the sustainability of competitiveness. While most R&D can do this, to meet the Middle East's needs R&D must be more specifically defined. If in a few advanced countries national scientific and technological performance is a key factor in competitiveness, for most S&T capability makes too limited a contribution to prosperity. To avoid dispersion of resources and focus, a starter country's R&D targets must therefore reflect its needs and its potential, not some abstract “academic” notion of what a national R&D program should look like.

Given this background, the options facing Middle Eastern countries vary. The region's nations might, for instance, consider a sharply focused, R&D-based strategy for growth and competitiveness, such as that which created today's South Korean economy. Seoul followed a step-function strategy based exclusively on pre-identified, technologically inspired, benchmarks pursued relentlessly over time. South Korea illustrates what can be achieved by quite a small economy, if driven by a clear vision, few objectives and a near-obsessive political will to achieve them. To be fair, in most places, the Middle East included, it can be far more difficult to set the requisite few achievable goals – and above all to guarantee these absolute priority over time – than to draw up a “Grand Plan” costing much more money, involving a higher risk of failure and only a random contribution to competitiveness. The former however works; the latter only rarely.

A similar argument probably holds against the superficial appeal of high-profile research institutes as an option. Typically such institutes operate at excessive cost – particularly in terms of overheads – with staff which rapidly develop corporative characteristics as a result of their quasi-state or state privileges of tenure, manning levels, access to power brokers, information and resources. All too frequently a political decision to maintain the two, divergent, facets of R&D – near-market applied R&D and long-term basic research – in the same institute compromises both. Moreover, the bureaucratic management style adopted by state institutes seemingly the world over discourages partnership and sharing, both of increasing value in R&D. After a well-trumpeted start, they decline rapidly into intellectual torpor.

A far better option for countries of the Middle East is surely a focused R&D effort embedded in a broader academic context, open to the outside world and welcoming interaction with the economy and society, and with international partners. Focused R&D policy aims to foster sectors of future market opportunity, in the hope of replicating their explosive dynamism. Yet how well can the state do this, when picking winners is the job of the entrepreneur? Potential success becomes actual success only with commitment of investment, true, but investment is determinant for success at the level of an individual idea or firm. In a national R&D-based strategy, someone has to identify where effort should be concentrated in order to maximize benefit to society. By accessing experience acquired elsewhere, policy can provide indications as to which sectors will be most important for a given country in the short-medium and long-term, and therefore which sectors to support. In the Middle East, target sectors surely include agriculture and the bio-sciences, the broader healthcare sector, water technologies, energy sciences and technologies, the renewal of traditional sectors in the economy, the socio-economics of rapid urbanization, to name but a few.

Overall then, in the broader perspective countries in the Middle East might best opt for the open, slimmed down, and aggressively focused, university R&D system which elsewhere has stimulated a much-needed flowering of entrepreneurship both among academics and researchers and among investors. The number of high-tech SME start ups and spin offs, and the number of jobs, should be significantly higher with this option, as it empowers talents otherwise destined to remain marginal and underperforming. Furthermore, the jobs created are well paid, well qualified and suitable for all: men and women, national and non. The caliber of the researchers becomes a draw in itself, in a feedback loop with the quality of facilities, the working environment, pay and career prospects – a big spur to maintain standards high, which in turn attract more top class researchers, who generate still more high-quality results.

In an aggressively focused, university-based R&D policy, actions are varied and contextual: fostering standards in the universities, facilitating mobility of researchers both between private and public sector projects and facilities and internationally, encouraging the acquisition and utilization of hard data, together with best practice actions and incentives for science parks, incubator centers, enterprise zones and the like – each of especial relevance in the Middle Eastern context. All can and should be supportive of the main thrust of local or national industry, yet they constitute an R&D policy which is neither industry-specific, nor tailored to compensate for, nor to offset, market failings.

Certainly, designing an appropriate R&D strategy to maximize comparative advantage in the Middle East involves policy changes in fields which may, at first sight, appear outside the realm of R&D policy per se. Greater academic participation in outside R&D, to radically alter the general climate for innovation. Joint ventures with local and international business, university start-ups, creation of consulting firms – specifically to boost the numbers of high-tech small firms (SMEs) and the related employment opportunities. High tech, high growth, SMEs are prime targets for a focused R&D policy as they are vital for a modern economy. They are the prime source of the next wave of wealth creation, doing things which large companies never do in niche markets which large companies do not see. Internationally aware, they respond to the needs of the local economy and society by filling gaps, performing new functions, introducing novel approaches tested elsewhere. They are thus critical on the road to another milestone: a national R&D system which can assume a leadership role in the sophisticated research services and consulting markets now emerging across the entire region as incomes rise and economic barriers weaken.

Renewal of the thousands of traditional small firms is another facet of the research policy equation. There is urgency across the entire Middle East to increase the competitiveness – and hence sustainability – of small companies operating in traditional and mature sectors of its economy, as well as to provide the R&D boost to the new high-tech SMEs. The two groups of small firms are radically different and the approach must reflect this. A policy supporting R&D for traditional small businesses aims at the here and now, as well as at their transition to a modern economy; that for the high-tech SMEs looks to the future. If for the traditional SME sector, strategy centers on diffusion of best practice, training and access to information, for the high-tech SMEs it seeks links with outside centers of excellence – academic and business; it has an international dimension; it requires access to expert advice and crucially to venture capital. Venture capitalists flourish where their skills are recognized and remunerated, as a result of favorable tax regimes and regulations. Reliable assessment procedures reduce the perceived risk of novel ideas and products to potential investors but they, in turn, require transparency in accounts, high standards of corporate and personal responsibility, enforceability of contracts, the rule of law. Again, context matters as much as content and context too has to be assured by policy.

Above all, any effective research policy should envisage speedy application of results obtained. Here, is another insight for Middle East economic reform: the health and flexibility of an economic system is shown by rapidity of response to needs and speed of penetration of new ideas. Both will require attention if the distance between the Middle Eastern nations and other wealthy countries is to diminish.

Corresponding author

James Ruscoe can be contacted at: jruscoe@gmail.com