Editorial

There is no doubt about the critical role of schooling in the accumulation of human capital. (JG Photo/Safir Makki)

Editorial: To Foster Innovation, Support Education

Education, science and innovation are the three ingredients required for Indonesia to make the leap from emerging economy to full-fledged developed nation. In a broad-ranging speech on the subject, President Susilo Bambang Yudhoyono clearly put his government’s support behind the push to develop more scientists in this country and to use innovation to foster economic growth.

The president outlined 10 facets of technology that he would like to encourage: pro-poor technology, green technology, agricultural technology, industrial technology, health, maritime, defense, transportation, energy and nanotechnology. To back his words, he has committed to double the government’s budget for research and development to Rp 1.9 trillion ($205.2 million) this year.

His words and commitment to promote innovation and technology could not have been more timely. The challenges facing this country are immense, both in terms of external competition and internal drift, and only by being more technologically advanced can we overcome these challenges.

A perfect example is the uproar over the China-Asean Free Trade Agreement, where a number of local industries have lobbied the government to delay the implementation of the FTA for fear of losing out to cheaper Chinese imports. If we fight and compete merely on price, we will lose out to the likes of China and India, which have far bigger populations. Instead, we must fight with radical innovation, as championed by the late economist Joseph Schumpeter, whose ideas of “creative destruction” stressed new ideas over immediate profit.

The former Harvard economics professor argued that without innovation and infrastructure an economy, a company and an individual would stagnate. To promote innovation as a cornerstone of Indonesia’s economic development, we will need a strong educational system, a strong and well-functioning financial system and a government that supports and rewards risk.

The president is pushing the country in the right direction, but for his vision to become reality there needs to be a larger public-private partnership. This requires a strong government that believes in the private sector, a strong rupiah, less bureaucracy and lower taxes. Only then will the private sector invest in new technology and innovation and work with the government as partners.

To accelerate collaboration and national science and technology development, Yudhoyono also announced that he was going to form a national innovation committee with members of the National Research Council (DRN), to encourage and support innovation thorough the country.

But we must be careful not to add another layer of bureaucracy. Innovation is best left to companies and universities, as they have both the human capital and the right environment to foster creative destruction. The government can support them by providing money and staying out of the way.