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Although Pakistan has been an economic blind spot for years, it has recently shown signs of increased innovation potential. Therefore, by taking crucial steps and adopting effective policies such as expanding the scope of R&D, encouraging entrepreneurship and commercialization investments, improving the STEM workforce, and providing access to venture capital, the government can strengthen Pakistan to become a booming tech economy and sustain long-term economic prosperity.
2-Importance of Technology-based Economic Development (TBED) for a country
3-What are the ways by which government can support TBED?
- ✓Increasing the scope of Research and Development (R&D)
- Case in point: America invested 3.45 per cent as R&D share of its GDP in FY2021; as a response, at least one-half of America’s economic growth can be attributed to scientific and technological innovation, Information Technology and Innovation Foundation (IFIF).
- ✓Improving STEM education and training the workforce
- Case in point: Every two out of three U.S. jobs and nearly 70 per cent of the country’s GDP can be attributed to STEM activities, The American Society of Mechanical Engineers (ASME).
- ✓ Encouraging entrepreneurship and commercialization investments
- Case in point: California’s Silicon Valley, serving as a blueprint for entrepreneurial success, generates an output worth $275 billion.
- ✓ Providing access to government-sponsored venture capital
- Case in point: A modest amount of government venture capital finance improves the performance of entrepreneurial ventures relative to ventures supported purely by private venture capitalists, National Bureau of Economic Research.
4- Critical Analysis
Answer to Question
Technology plays an indispensable role in the economic development of a country, helping it transcend unsurpassable achievements. Owing to expanding globalization and technological dependence, governments have become progressively reliant on digital and innovative economies that can help stimulate productivity and growth. While many developed countries like the United States, Japan, and the European Union are experiencing the zenith of the Fourth Industrial Revolution (4IR), the developing world is still laying the groundwork for the third and fourth revolutions. Pakistan is not an exception, having been an economic blind spot for years; however, the country has recently shown signs of increased innovation potential. According to the 2022 Global Innovation Index (GII), Pakistan has significantly improved its standing and outperformed expectations by ranking 87th out of 132 countries and entering the group of Innovation Achievers for the first time in its history. This accomplishment can be boosted with effective investment management and cooperation from the government. By taking crucial steps and adopting effective policies such as increasing the scope of research and development, encouraging entrepreneurship and commercialization investments, improving the STEM workforce, and providing access to venture capital, the government can strengthen Pakistan to become a booming tech economy and sustain long-term economic prosperity. Thus, the answer discusses the role of government in fostering technological progress and designing supportive frameworks to promote Technology-Based Economic Development in Pakistan.
“Technology and business are becoming inextricably interwoven. Nobody can talk meaningfully about one without talking about the other.”Bill Gates (American business magnate)
Importance of Technology-Based Economic Development (TBED) for a country
It is widely acknowledged that scientific advancement and technological innovation have become the new driving forces behind the economic growth of a country. One mutual characteristic shared by all the successful economies worldwide is their involvement in regional or national TBED. For example, America, the largest economy in the world, attributes a great deal of its success to its technological advancement. The U.S.’ economic hegemony is sufficient to understand the significance of TBED for a country. Hence, TBED not only brings an industrial revolution to the land but also provides a framework for economic prosperity and sustainability.
How the government can facilitate TBED in Pakistan
- Government Spending on Research and Development
Research and Development (R&D) is the fundamental contributor to economic growth, as it is the crucial determinant behind invention and innovation. R&D allows researchers to develop new ideas and technologies and positively impacts the Total Factor Productivity (TFP) in the long run. The importance of funding R&D can be highlighted by the fact that America, the economic superpower, is the leading investor in R&D spending of the GDP, with an expenditure of 3.45 per cent. Consequently, scientific and technological innovation contributes to at least one-half of America’s economic growth. Similarly, Pakistan can facilitate R&D by funding researchers, establishing laboratories, standardizing partnerships with private research firms, commercializing university-based research developments, etc. Thus, by investing in the R&D sector, the government indirectly paves the way for tomorrow’s industries, businesses, and technologies.
- Improving STEM Education and Training the Workforce
STEM education, a teaching approach that combines Science, Technology, Engineering, and Mathematics, is a crucial linchpin for building a technology-led economy. The case studies of developed countries demonstrate its significance for economic health. For example, a 2020 report prepared by the American Society of Mechanical Engineers (ASME) found that every two out of three U.S. jobs and nearly 70 per cent of the country’s GDP can be attributed to STEM activities. Unfortunately, Pakistan incurs an acute crisis in STEM training and workforce development. Therefore, the government’s real emphasis should be placed on the curriculum issued by educational institutions and providing training facilities to the workforce. Moreover, students should be encouraged to enter STEM fields by giving internship programs and technical training for workers. In short, the STEM education model is essential for development in a growing economy like Pakistan.
- Encouraging Entrepreneurship and Commercialization Investments
Entrepreneurs and small businesses are key players in economic activity, as they significantly contribute to innovation, job creation, boosted productivity, and community development. California’s Silicon Valley, one of the best global centres for high technology and innovation, is the blueprint for entrepreneurial success. According to the U.S. Bureau of Economic Analysis, Silicon Valley generates an output worth $275 billion higher than Finland. However, while entrepreneurship provides numerous benefits, many small and medium-sized enterprises (SMEs) and commercial businesses in Pakistan need help coming out of the gate. The government can generate supportive mechanisms for the entrepreneurial community by incentivizing innovative enterprises, reducing tax credits, providing regulatory framework and infrastructure, developing Information and Communication Technology (ICT) tools and services, and promoting cooperation between researchers and the private sector.
- Providing Access to Government-Sponsored Venture Capital
Lastly, the government can also facilitate TBED by operating as an influential venture capitalist to SMEs and other small businesses needing financial or managerial support. If the state promotes risk-taking startup ideas, more people are likely to try their entrepreneurial luck, which can significantly contribute to economic productivity. As per the study conducted by the National Bureau of Economic Research (NBER), a modest amount of government venture capital finance improves the performance of entrepreneurial ventures relative to ventures supported purely by private venture capitalists. This support usually comes in capital provision; however, other ways, such as directing grants and zero-interest loan policies, reducing subsidies, providing employment support schemes, etc., have also proved fruitful. Thus, if employed sagaciously, government-sponsored venture capital can reap extraordinary returns.
In the critical diagnosis, despite facing many challenges, Pakistan has finally started to demonstrate a TBED-inclined approach. Many e-commerce startups, ICT projects, and the establishment of the Special Technology Zones Authority (STZA) are a testament to this. The tech industry has tremendous potential to transform the flagging status of Pakistan’s economy. According to the McKinsey Global Institute, with a massive young, English-speaking population and a fast-growing, tech-savvy middle class, Pakistan has many ingredients for a thriving startup ecosystem. While Pakistan is headed in the right direction, a well-constructed tech sector development program might offer Pakistan the long-sought economic stability it aspires to.
To encapsulate the debate, innovation and technological advancements have become critical factors in improving economic activity and social well-being. Nevertheless, if a state wants to make the most out of it, an active involvement of its government becomes inevitable. The state actors must take on the role of facilitator, helping consumers and investors adapt to the new economy’s demands and opportunities. Pakistan can become a Silicon Valley of its own by implementing supportive mechanisms such as increasing the scope of R&D, enhancing quality education, and encouraging entrepreneurial activity.
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