World Bank: Greater innovation critical for sustained recovery in East Asia

KUALA LUMPUR – Greater innovation is critical to productivity growth and economic progress in developing East Asia in a rapidly changing world, according to the latest World Bank report, reported Bernama.

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, the bank said in a statement on February 24.

Xavier Cirera, a lead author of the “The Innovation Imperative for Developing East Asia” report, said while developing East Asia is home to several high-profile innovators, data presented show that most countries in the region (except China) innovate less than would be expected given their per capita income levels.

Most firms operate far from the technological frontier and the region is falling behind the advanced economies in the breadth and intensity of new technology use, he said.

“Aside from some noteworthy examples, the vast majority of firms in developing East Asia are currently not innovating. A broad-based model of innovation is thus needed, that supports a large mass of firms in adopting new technologies, while also enabling more-sophisticated firms to undertake projects at cutting the edge,” he said.

The term “developing East Asia” refers to the 10 middle-income countries, covered in the study: Malaysia, Cambodia, China, Indonesia, Lao PDR, Mongolia, Myanmar, the Phillippines, Thailand and Vietnam.

Meanwhile, World Bank vise president for East Asia and Pacific, Victoria Kwakwa, said a large body of evidence linked innovation to higher productivity.

She said the COVID-19 pandemic, climate change and the fast-evolving global environment have raised the 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, it added.