Innovation is key to economic recovery

The Thai economy is in deep trouble. For a quick recovery after the Covid-19 pandemic, the government must give research and development a chance and let innovations lead the way.

It goes without saying that the Thai economy is facing structural problems. For starters, it is overdependent on the tourism industry. Consequently, it has been hit hard by the Covid-19 pandemic which has put a halt on tourism worldwide.

Second is that Thailand is also now an ageing society. Worse yet, the shrinking workforce is happening when foreign direct investment is rapidly decreasing from the country’s declining competitiveness.

In short, the era of spectacular economic growth is far behind us, and it will be difficult for the Thai economy to get back on its feet without economic structural reform.

To regain economic health, research and development (R&D) is the key. Instead of pinning hopes and relying on cheap labour as before, the Thai economy and all sectors within – be they agriculture, industry, or services, must be driven by technology and innovations to increase productivity, efficiency, and values. But change is only possible with the government’s commitment to research and development.

For R&D to drive the economy with innovations, it must receive enough financial support from the government. The R&D projects must also serve the practical needs of the industries.

Having said that, the country’s R&D investment is depressingly low.

In 2018, Thailand’s gross expenditure on R&D from both the public and private sectors was only 1.11% of GDP, or about 182 billion baht. This expenditure was lower than other countries in the same upper-middle-income group, which was at 1.41% of GDP, according to Unesco. Meanwhile, the high-income countries’ gross expenditure on R&D is two times higher, or at 2.43% of GDP.

The government budget for R&D increased from 17 billion baht in 2017 to 26 billion baht in 2021. Sadly, it has been cut to only 15 billion baht for 2022, a 43% drop from the previous year.

This drastic cut may well stem from the country’s emergency needs to deal with the Covid-19 pandemic. However, the cut also shows that the government overlooks R&D in national development. This oversight may partially result from the lack of concrete impacts on the economy from past R&D projects.

The government’s lack of commitment to R&D is reflected in the declining state contribution to the country’s gross expenditure on R&D. In 2015, the ratio of public: private contribution in R&D expenditure was 28:72. In 2019, the ratio went down to 21:79.

Such dismal state support for R&D is not in line with the roles and aspirations of governments in industrialised nations. Since R&D is very costly and time consuming to bear fruit, governments in industrialised economies need to fill the gap by supporting the private sector’s R&D. Without enough financial support, the private sector does not have the incentives to invest in innovations.

Insufficient government financial support notwithstanding, there is also little collaboration between the public and private sectors.

According to the national survey on R&D expenditure and manpower during 2017-2019, nearly all public funding was allocated to government agencies. Out of the private sector’s total R&D investment, only 0.48-0.75% came from government support.

Consequently, the private sector has few incentives to invest in innovations. Without collaboration from the private sector, it is highly likely that the government will miss the target of increasing gross expenditure on R&D to 2% of GDP, or 370 billion baht.

In industrialised countries such as the United Kingdom and the United States, the governments play a crucial role in supporting R&D in the private sector to drive the economy with innovations.

As part of the United Kingdom’s goal to increase R&D expenditure to 2.4% of GDP by 2027, the government launched the Catapult Network to link research centres with industry for closer collaboration. The aim is to give SMEs access to technology and innovation as well as to make R&D commercially viable to serve industry and the economy. With the government’s support, the Catapult Network has propelled R&D in some strategic fields such as cell and gene therapy and high-value manufacturing. With seed money of 236 million pounds (10.5 billion baht) during 2019-2020, the private R&D investment leveraged by this network has risen two-fold to 508 million pounds.

In the United States, the government’s R&D agencies are required by law to support the Small Business Innovation Research (SBIR) programme which gives funding to SMEs to undertake their own R&D for commercially viable innovations. SBIR receives 3.2% of the total R&D budget in the public sector, or $3.2 billion (105 billion baht) of funding in 2019.

Many companies that take part in this programme are well-known worldwide for their innovations. For example, Qualcomm, one of the world’s biggest chip manufacturers; Illumina, a leading company in genetic variation analysis; Symantec, a leader in cyber security; and EnChroma, a manufacturer of glasses to reduce colour-blindness.

Thailand needs science, technology, and innovation to rescue its flagging economy. The government should take a leading role to drive R&D investment in all sectors and to support the private sector to create innovations, for SMEs in particular, to strengthen the backbone of the economy for a post-pandemic recovery.

There are already several state agencies working to support R&D. Among them are Program Management Unit for National Competitiveness Enhancement (PMU-C), the National Innovation Agency (NIA), and the National Science and Technology Development Agency (NSTDA) through the Innovation and Technology Assistance Program (iTAP). Mechanisms are there. What they need is more substantial state funding as well as more focus and less paperwork.

The government can accelerate and increase R&D funding through these organisations. Or it can set up a new public agency to focus solely on funding the private sector’s high-impact research programmes in the key industries of the Thai economy.

One thing to avoid, however, is developing another bureaucracy.

For a speedy economic recovery, the funding agencies must work fast. They must prioritise results, not bureaucratic routines. They must aim high, think big, and target R&D with high impacts. They must also have concrete goals with clear directions to tackle the challenges in society and the economy.

Article by Warakorn Awutpanyakul

Warakorn Awutpanyakul is a researcher at Thailand Development Research Institute (TDRI). Policy analyses from the TDRI appear in the Bangkok Post on alternate Wednesdays.

First Published: Bangkok Post on 26 JAN 2022 

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