Difficult for Indonesia to Become an Innovation-Driven Economy
A new report shows Indonesia lacks behind its regional peers in terms of innovation. This is a concern because it means Indonesia's workforce is not equipped with the skills, knowledge or health that are necessary to be innovation-driven. Therefore, the Indonesian government needs to remain focused on enhancing the quality of education and healthcare. Innovation is widely regarded as a driver of economic growth and development.
In the Global Innovation Index (GII) 2017, which is published by Cornell University, INSEAD, and the World Intellectual Property Organization (WIPO), Indonesia is ranked 87th (out a total of 127 economies around the world). Southeast Asia's largest economy only rose one spot compared to the preceding edition (that was published one year ago). What makes even a worse impression is that Indonesia lacks behind its ASEAN member nations in terms of innovation with the exception of Cambodia.
Singapore is among the world's most innovation-driven economies, being ranked 7th. Other ASEAN nations that outperform Indonesia in the ranking are Malaysia (37th), Vietnam (47th), Thailand (51st), Brunei (71st), and the Philippines (73rd).
GII, which aims to capture the multi-dimensional facets of innovation by providing a rich database of detailed metrics for 127 economies, has been tracking innovation across the globe for the past decade.
Based on the report Indonesia is having difficulty to tackle classic problems including government regulations, the low level of people's education, weak development of research and development (R&D) and the lack of awareness of utilizing patents.
Indonesia is regarded weak in terms of government and private institutions' ability to innovate (being ranked 120 and 130, respectively). Regarding three subcomponents - political climate, regulations, and business - Indonesia is ranked below 80 for all of them. M. Faisal, Director of Research at Core Indonesia, says these weak rankings reflect matters that heavily influence (negatively) the Indonesian economy. While, Indonesia's industries should have already reached an advanced level due to innovation-driven developments, the reality is that Indonesian industries are stuck somewhere in the middle.
Regarding the subcomponent 'regulations that encourage innovation' Indonesia is only ranked 126th. Faisal said it shows the difficulty to create a climate that is conducive for innovation.
Josua Pardede, Economist at Bank Permata, said the difficulty of boosting innovation in Indonesia is that it is highly related to local culture. It is not the culture of the Indonesian people to be innovative and this causes a big delay in innovation. Therefore, the GII report should be taken as an important warning.
A key reason that blocks innovation in Indonesia is the overall low level of education. Moreover, the government spends too little of its annual budget on research and development. While governments in countries like Singapore and Vietnam spend about 2.5 percent of their gross domestic product (GDP) on research and development, the figure for Indonesia is only 0.2 percent of GDP. This is partly to blame for the general weak skills and knowledge of Indonesian workers. Therefore, Bhima Yudistira, Economist at Indef, says the key solution would be government efforts to boost vocational education and training sector.