Indonesia Lags in Innovative Thinking

Indonesia Lags in Innovative Thinking

By Basten Gokkon on 11:54 pm May 06, 2014

  1.  The World Bank announced Indonesia as the 10th largest economy in the world last week, jumping six ranks from its previous place, yet the country still lags in technological innovation, which is key to becoming a great nation, officials and experts say.

The country is home to seven state organizations in science and technology, including the Indonesian Institute of Sciences (LIPI); the Agency for the Assessment and Application of Technology (BPPT); the National Nuclear Energy Agency (Batan); the National Institute for Aeronautics and Space (Lapan); the National Geospatial Information Agency (BIG); the National Standardization Agency (BSN); and the Nuclear Energy Regulatory Agency (Bapeten).

However, experts believe that the nation’s technological innovations continue to fall far behind those made by its neighboring countries, such as Singapore and Malaysia. Government funding for research and development amounts to less than 1 percent of the annual state budget, or Rp 6.5 trillion ($564 million) per year, according to Ridwan Djamalludin, deputy chairman of the BBPT’S natural resources technology development unit.

Data from the World Bank showed that Indonesia spent the equivalent of 0.08 percent of its gross domestic product on research and development in 2009. Meanwhile, Malaysia and Singapore spent 1.01 percent and 2.43 respectively in the same period.

Indonesia, however, jumped 12 spots to stand at 64th place this year from 76th last year on the Networked Readiness Index, according to data from the World Economic Forum.  The index, which includes 148 countries, measures the propensity for countries to exploit the opportunities offered by information and communications technology (ICT) on a scale from 1 (worst) to 7.

Indonesia scored 4.04, while neighbors  Singapore claimed second place and Malaysia 30th with their respective scores of 5.97 and 4.83. “If we want to be a great nation we need to be innovative and creative,” said Idwan Suhardi, adviser at the Ministry of Research and Technology, alluding the importance of technological innovations for the country’s welfare.

Idwan went to greater lengths by saying that Indonesia could avoid the middle-income trap — when a country reaches a certain income level and gets stuck there — with the help of enhanced technological innovations that are yet to exist. Echoing those sentiments, Ridwan said innovative, technological advancements would also help the country in adding value to its rich natural resources and creating a better  system of education for the country’s human resources.

Ridwan pointed out that the development of our technology heavily depends on  its people, from the analytical minds of scientists to the physical brawn of laborers.  “Development requires a lot of people working together. And we have over 240 million people in this country,” he said.

With such a large population,  he added, the country has a big potential market for business communities wanting to make a profit from innovative products. According to the BPPT, only 0.24 percent of 53 million entrepreneurs in Indonesia are technopreneurs. With huge potential in the domestic market, local entrepreneurs should seize the opportunity.

“The future of Indonesia and the future of innovation goes hand in hand,” said Niclas Adler, president of Indonesia International Institute for Life Sciences. Adler emphasized a number of points supporting the importance of technological innovations to Indonesia’s welfare development, namely, both financial and innovative powers coming to Asia, especially to Indonesia, with its growing consumptive middle income class; the rich natural resources waiting to be capitalized; the need of a change in mindset by being open-minded to new approaches in technology; and also real actions from the government.

Consuming nation

Indonesia, according to experts, is still classified as a nation unable to contribute to developments in technology, though they are optimistic the country would be able to climb out of that box and become a world producer of innovative products.

“The items we use daily, such as handphones, zippers and so on, are the results of innovation, of innovative thinking. Our country, as of now, is still a consuming
nation,” Idwan said.

Both Ridwan and Idwan mentioned the country’s failure to utilize its natural resources in creating new technology; instead Indonesia exports raw materials at a low price to countries who will use them make interesting, coveted products, then ship them back to us at sky-high prices.

However, they remain optimistic on the country’s ability to become a producer of such items, not just a consumer.

“In terms of creativity and capacity, we are currently unable to do that. But, we have the potential to reach that level,” Ridwan said, adding that innovations should start from a very basic level, such as producing high-quality rice, instead of importing the staple from Thailand.
“If we are consistent on [enhancing innovation] and with a demographic bonus, I think we can start [producing our own innovations] in the next 10 to 15 years,” he said.

Ridwan went om to emphasize that the country needs to improve its supporting infrastructure and government policies in order to become a producer of innovative ideas and technology.

Triple-helix model

“Innovation is not only the responsibility of the government but also of the business communities and academia,” Ridwan said, adding that a joint venture would be needed in making significant advancements. The government budget for research and development, he said, is still inadequate to support the development of innovative technology, which is why the country needs to reach out and seek help from foreign, private sectors.

“Ideally, government spending on R&D [research and development] should be 3.5 percent of the country’s GDP. And because our government’s budget is not adequate enough, the remaining 2.5 percent could come from the private sector; that’s why the model should be like the triple helix,” Idwan said.

The triple-helix model, a trademark concept of the Swedish Innovation System, involves a close cooperation between three axes, namely academia, the private sector and the government, in finding and solving new innovation challenges. Swedish experts claimed that the concept, whose home country ranked third in the 2014 NRI and spends 3.6 percent of its GDP on research and development, could help Indonesia in the development of its technological innovations and research.

Adler said the triple-helix model needs a great level of trust between the private and public sectors of Indonesia. It also requires a working collaboration between all parties included in the triple helix.

The greatest obstacle to innovation, according Ridwan, is the industry’s mindset, which leans toward commerce and profit. “Indonesia can change the role it plays in the world; from a mere consumer of technology to a producer of quality, next generation products,” Adler said.

Swedish ambassador to Indonesia, Ewa Polano, said Indonesia has what it takes to become a world leader in developing new technology, with access to existing machinery, a large pool of human resources and a growing interest from the younger generation.

The Indonesian government, its private sectors and universities also possess the  ambition needed to raise current standards of technology, she said. “You have the necessary platform for educating people and improving the methods of learning across the country. With 20 percent of [the state’s] budget allocated toward education, you have a very promising platform,” she said.

 

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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