Thursday, September 11, 2008

Knowledge economy 101

Seoul--When you give something a name, you empower it. And so, they’ve given it a name—knowledge economy or knowledge-based economy. In layman’s terms knowledge economy (KE) means using knowledge to create wealth. Wealth isn’t a bad word if it means quality life, not just for a few, but for all.

Representatives from six countries—Cambodia, Indonesia, Laos, Mongolia, Philippines and Vietnam—gathered in Seoul to learn more about knowledge economy and how it could be made to work in their respective countries. If you look at the list of countries that were invited, you would right away see that these are the economic laggards in Asia. In Pilipino, we say, the kulelat or in Ilonggo, kulihot.

The World Bank Institute and the Korean Institute of Development brought together individuals from these six countries, most of them educators from universities, government officials from the education bureaucracy, economic planners, information experts, plus a couple of media practitioners. Before we left for Seoul, we had to attend a teleconference and then go through some online learning about (KE) through—here’s a new word—moodling. Yes, in a classroom in cyberspace.

But nothing beats coming face to face with one another and with the gurus of KE who preach the gospel of KE. You bet, there was a lot of KE jargon flying around and a few times this journalist had to ask: What does that look like on the ground?

And what’s KE all about? Here are the ABCs I have lifted from notes.

Knowledge economy rests on four pillars: 1) improving the economic and institutional, 2) fostering innovation, 3) upgrading education, and 4) strengthening information and communication.

A sound economic and institutional regime (EIR) is of primary importance, we were told, for achieving better policy results in the functional knowledge pillars as well as for getting the most from related investments. Advanced economies have something to show for their success. They have well-established institutional frameworks based on democracy and free markets. But hand in hand with the development of a KE is an institutional framework that goes far beyond and into labor markets (employment flexibility, employability, mobility), sophisticated financial markets (microfinance, venture capital), products and services markets and effective protection of intellectual property.

What about the kulelats with mediocre economic and institutional regimes? They would require “a well-articulated, strategic set of steps focused on very specific problems and taking into account bureaucratic, political, social and economic interests.”

Innovation was a word that was mentioned so often. It is supposed to be the spearhead of the KE concept. Innovate or be left behind. Innovation is key to the developmental success of a number of countries, South Korea among them. Technological innovation, in particular, is crucial for dramatic growth, it enhances competitiveness and increases social well being.

Innovation can be defined as “the design, development and diffusion of something new to a given context, leading to a significant improvement in the economic, social or environmental conditions.”

Innovation occurs at three levels: 1) local improvements are made by adopting available technologies to satisfy basic needs or to upgrade products or services, 2) competitive industries to develop through adaptation of technologies initially produced in or by developed countries, 3) ultimately, new innovations of global significance are developed.

Innovation cannot be forced to happen. In developing countries an appropriate technical culture must first be built. Then there should be incentives to support and stimulate entrepreneurship.

And now the education pillar. Education is supposed to be the great leveler and enabler. It creates opportunities and reduces poverty. The educated individual is able to create, share, disseminate. An educated population, being more sophisticated, has higher demands, thus driving industries to innovate.

Strong information and communication technology (ICT) is the fourth pillar. It is the component that should fill the knowledge gaps in poor countries. ICT creates better efficiency and improves services. ICT creates advances in manufacturing, trade, governance, health care, agriculture and delivery of services. ICT also reduces costs, breaks down time and distance barriers and enables speedy mass production of goods.
Getting there, becoming a so-called knowledge economy does not happen overnight. Erecting the four pillars requires a long-term strategy. A country may be strong in one pillar but weak in another. Leaders and policy makers must be aware of the strengths and weaknesses of their people and resources.

For those interested, the World Bank Institute’s Knowledge for Development (K4D) has developed the Knowledge Assessment Methodology (KAM), an internet-based tool that provides a basic assessment of the KE readiness of a country or region. Log on to and find out.

KAM is meant to be a user-friendly interactive tool based on the KE framework. It was designed to help countries assess their strengths and weaknesses and compare themselves with their neighbors. KAM could help identify problems and opportunities for a given country, help direct its focus, say, in making policies and investments and how it could make a transition into a knowledge-based economy.

KAM is able to assess a country’s or a region’s comparative KE position on a global scale (compared with 140 countries), on a regional scale (compared with eight regional groupings), on the basic of human development and the basis of income levels.

KAM na.