Science and technology in economic development

This paper was prepared by the Philippine-based members of the Philippine-American Academy of Science and Engineering (PAASE), including Drs. Rhodora V. Azanza, Gisela P. Concepcion, Alvin Culaba, Fabian M. Dayrit, Ernesto M. Pernia, and Caesar Saloma. It was sent recently to President Arroyo, several members of Congress and the secretaries of the Department of Science and Technology, Department of Agriculture and Department of Health as part of PAASE’s campaign to increase the S&T budget of the government.

I. Science and Technology and Economic Growth

Increases in capital and labor are important to the growth of an economy. But that is only part of the real story. Robert M. Solow, Nobel laureate in economic science (1987), showed that capital and labor accounted for only a part of the long-term economic growth of the United States; a substantial part was attributed to advances in the general state of knowledge.

Numerous studies on the economic growth of nations ascribe a significant role to specific factors, such as education, improvements in efficiency, and shifts in the allocation of labor from less productive to more productive activities.

More recent studies – resulting in what is now known as endogenous growth theory – find that technological innovation and economic growth are mutually reinforcing; that is, economic growth can be best sustained through technological innovation, and technological innovation can come about from research and development (R&D).

But who is to lead R&D? In most of the highly developed countries today, the government led in R&D. That is because R&D has generally been regarded as a public good. The private sector in developing countries has neither the resources nor the incentive to generate an optimum level of R&D as it is a costly and risky undertaking. The private sector lacks the incentive to lead in R&D because it cannot fully own or exclude others from the ensuing benefits, and the private rate of return to R&D is typically lower than the social return.

The Philippines’ long neglect of science and technology (S&T), besides weak governance, has resulted in its poor economic performance for decades. Figure 1 shows that our Asian neighbors that have had high rates of capital formation, including R&D, have enjoyed higher productivity and economic growth. The clear laggard is the Philippines, where the government’s budget for S&T has been on the order of 0.12 percent of GDP on average in the last several years. By contrast, our Asian neighbors have been investing at least 0.5 percent in S&T.

Clearly, we need a substantial increase in our budget for S&T if we want to achieve rapid and sustained economic growth, increase job creation, dramatically reduce poverty, and significantly improve standards of living for all Filipinos.

We would, therefore, urge this administration and lawmakers to give serious attention to the development of S&T by providing the necessary budgetary allocation. The minimum targets (relative to GDP) should be as follows: 0.2 percent in 2007, 0.3 percent in 2008, 0.4 percent in 2009, and 0.5 percent in 2010. These are very modest targets that would not even bring us at par with our Asian neighbors. By 2020, the aim should be to allocate at least one percent of our GDP for S&T.

We propose that the increased budgetary support be invested in a massive, sustained program of capacity building where world-class S&T centers of excellence linked to regional R&D institutes can provide the right environment to attract the brightest young minds in the country to become PhDs – expert scientists and engineers. The priority R&D programs under the DOST’s National Science and Technology Plan would then be implemented by the most competent researchers in the country. We also propose a system of regular external peer review that will ensure optimum efficiency of this S&T investment.

II. Capacity Building in S&T

The building up of S&T capacity is urgently needed for increased productivity, competitiveness and problem-solving skills. There are many areas for capacity building.

S&T centers of excellence should be established and maintained in the various areas of need. At present, some core areas already exist, but they require completion and additional input of resources.

We need more focused manpower and institutional development programs, such as the Engineering and Science Education Program (ESEP). ESEP had prioritized the training of PhDs in science and engineering and provided needed facilities and equipment.

Regional centers of R&D should be established to support specific industries, but these should be closely linked with the S&T centers of excellence which will lead the country in different areas of R&D.

We need to establish S&T business centers, near the S&T centers of excellence, which will assist, advise and incubate technopreneurship ventures.

We need to invest more resources to strengthen science education at an early stage through the existing Philippine Science High School system.

We need to supplement science education in the primary and secondary levels with up-to-date learning strategies and materials that will encourage our youth to appreciate the value of science to life.

Specific proposals for capacity building in S&T have been prepared by PAASE members and are attached to this paper.

III. S&T Priorities

The DOST’s National Science and Technology Plan (NSTP) has identified priority areas of R&D that would enhance national productivity and competitiveness. This we support fully. PAASE members and other local researchers have prepared proposals for consideration by DOST and other government funding agencies in the following areas: agriculture and livestock, food and nutrition, fisheries and aquaculture, natural products, health and medicine, biodiversity and environment, ecotourism and livelihood, engineering, material science, energy and ICT. These proposals represent only a few of the many projects that Filipino scientists and engineers would like to pursue.

The NSTP further recognizes that in order to maximize its impact, S&T priorities should be tied to both national and local needs to create trust, linkages and services for the long term. The benefits from increased S&T support should reach the sectors, which the majority of our people depend on. Consider the following:

Over 70 percent of Filipinos depend on agriculture and aquaculture. The land and the sea provide the only sustainable sources of livelihood in the Philippine countryside. More support is needed for agricultural/aquaculture biotechnology which can produce innovative products and services with high technology input and reduced environmental risks.

About 95 percent of business enterprises in the Philippines are small and medium enterprises (SMEs). This sector is virtually bereft of scientific and technological advances because SMEs generally do not have the capability to undertake research and development. There is very little support for S&T that SMEs critically need.

Investments in R&D in agro/aqua-biotechnology and related areas in the various regions of the country have a significant multiplier effect because of their strong local linkages. Unfortunately, there are so many examples of opportunities that we are losing out on because we do not have sufficient S&T capabilities to initiate and support research and development.

Government commitment to fund S&T development can catalyze investments by overseas Filipinos and participation by expatriate Filipino scientists and engineers to help the country. In 2005, OFWs reportedly remitted over $10 billion to their families. Filipino S&T groups with expatriates such as PAASE stand ready to provide their expertise for worthwhile projects. We should intelligently harness these diffused but valuable opportunities into investments for the future. A clear commitment from the government to support key S&T development will serve as the catalyst for this unique opportunity for Filipinos from all over the world to come together to invest in their country’s development.

IV. Ensuring Effectiveness of Science and Technology R&D

Even while an increase in budgetary allocation for S&T is needed, we must institute a review process that will ensure the effectiveness of the R&D process based on internationally accepted measures of performance. We propose that the review process take the following form:

Regular review of scientific and technical output by a panel of internationally recognized experts. For this we can tap the expertise of expatriate Filipino scientists and engineers of PAASE. This panel can serve as an advisory group under the Legislative Committees on S&T.

The S&T output of our R&D institutes should be up to international standards. While the primary role of the R&D institutes is to support specific sectors, e.g., agriculture, health and industry, they are also expected to publish in reputable ISI-recognized journals. This will help ensure a high level of research, and it is also an important means of establishing the international reputation of Philippine scientists and Philippine products.

R&D targets should be clearly set through a process of consultation which should include the S&T community, national agencies and local governments, and the private sector (industry and local SMEs).