R&D and competitiveness

Research &Development key to improving efficiency and competitiveness
Again we will have to acknowledge that the decade long recession has had far reaching implications on the economy because during this period companies could not invest in new technologies hence the inefficiencies and the poor quality products we see. Of course since the start of the dollarization era the business environment improved resulting in companies resuming operations though there is now a yawning efficiency gap between local producers and their foreign rivals. Now according to local producers protection or shielding of some sort is necessary to allow them to fully recover and compete with these. However historical evidence seem to suggest that calls for this form shielding is often motivated by other objectives like increased profits without a corresponding increase in quality or efficiency or something known as rent seeking. For instance now there are reports already that local producers in industries that recently got protection have effected price increases to match imports prices and ultimately it is the consumer who emerges the biggest loser. Now in a follow up to the last article I will try to explain what may be the missing link to attempts to unravel this problem; the role of research and development in improving efficiency and technologies and why this is an important function. Indeed a lot of people and companies are ignorant about the importance of research and development (hereafter R &D) however what may be interesting is the revealing statistics made available by organisations such as the UNESCO that tell quite a story around this R&D  function . We are all aware that the United States is the world’s largest economy yet not many people would be aware of the US’s R&D spending which is estimated to top $405billion in 2011 alone and that this constitutes about 2.7% of its GDP. These figures are quite staggering but also help people to understand how that country values R&D which inevitably gives it the edge in global trade and that is why sometimes and naively so we expect the US to produce the latest technologies, the latest computer software, or even movies. Japan another innovative trading nation is expected to top $144 billion and that roughly equals about 3.3% of its GDP and until recently Japan was the second largest economy in the world. In fact the top 10 list almost resembles the list of the world’s top 10 economies and thus clearly showing that R&D is essential in ensuring growth and sustaining it. One emerging economy that has really embraced R&D and whose results now prove this is China. China according to the same list now out ranks Japan with its spending expected to top $153 billion about 1.4% of its GDP and indeed China recently overtook Japan as the world’s second largest economy and again this simply highlights the co relationship between R&D spending and economic growth. Zimbabwean companies are constantly clamouring for protection from imports because they are inherently inefficient as they still use out-dated technologies and production methods. Evidently protecting or shielding them from competition is not the stimulus needed to change their attitude towards R & D as the tool necessary to gain a competitive edge. For instance American automakers lost ground to Japanese carmakers  some years ago due to the latter’s emphasise on new technologies and production methods and since there was no government protection the only way the former were going to compete was to spend more on R & D. Now it is the story of China’s growth that should help to realign the thinking and comprehension of R&D as the foundation of sustained economic growth by people, leaders and businesspersons in the developing economies. In Africa where most developing economies are including ours, R&D has not received its due attention because according to figures available R&D spending often falls short of the UNDP’s minimum threshold of at least 1%of a country’s GDP. According to the UNESCO R&D list South Africa ranks first on the continent with its spending estimated to reach $3.7 billion which translates to about 0.7% of its GDP on the other hand Egypt ranks second with its spending topping $910 million that’s about 0.23% of GDP and finally Morocco in third with its spending at $760 million which about 0.6% of its GDP. However none of these rank in the world’s top 30 with SA ranking 31^st, Egypt a distant 45^th and Morocco 47^th and there was no other African country on the list perhaps suggesting that there is little or next nothing being earmarked for R&D on the entire continent. Evidently these figures make a strong case for increased funding on research and development because it is exactly this sort of expenditure that ensures that our exports compete very well on the global market and help in import substitution efforts. Competitive exports and reduced dependence on imports not only helps to improve the balance of trade in our favour but in the long term it helps to reduce the balance of payments deficit something very much akin to African and developing economies. Now instead of adopting blatant protectionism measures the government could aid companies facing extreme competition by encouraging or sponsoring innovation, research and development as an alternative. It is this kind of route that will ensure local companies will eventually become competitive again and compete fairly without having to go the way of imposing duties something that flies in the face of the envisioned regional integration. Most importantly this will be done without harming or disadvantaging the consumer as is the case now after the government imposed tariffs on the certain food imports. Now what is probably needed is a new approach, investment in advanced research facilities, increased funding for R&D both in public and private sectors and most importantly a change in the mind-set or in the appreciation R&D. It is only this way that we can set the economy towards a path of sustained growth just like what other previously developing economies did a few decades ago and now they are major trading nations like South Korea.
Terence Zimwara feedback tem2ra@yahoo.com  temra-temra.blogspot.com