Working hard is no longer enough to keep advancing economic growth. Similarly, having possession of natural resources is also not sufficient to remain prosperous.
Technology progression has been transforming opportunities for creating economic value from investments being made today. There is a possibility that demand for oil will disappear before the supply dries up.
Similarly, horsepower became redundant before the world suffered from the lack of supply of horses. In contrary to it, remote jungles of Congo have become very resourceful due the deposits of cobalt, which has been witnessing high demand to make lithium-ion batteries. The uprising of the electric vehicle is creating the demand for Congo's cobalt on the one hand, and eroding the demand of petroleum to fuel automobiles, and reducing the labor content to make them.
With the increasing role of technology and its transformational effect on industries, labor, and raw materials, it's far more important than ever before to remain in sync with technology progression. In the absence of it, investments made for producing economic outputs from labor, raw materials, and even technology ideas will end up in waste.
To address this critical challenge, technology progression should be cautiously monitored, and its likely implication on investment should be prudently predicted. Unfortunately, most of the developing countries have very little or no institutional capacity to perform this critical task to guide their investment planning.
Here are a few examples. Just a few years ago, Bangladesh was suffering from a frequent power outage, as demand was far more than the supply. Through different measures, Bangladesh stimulated private investment to rapidly increase power supply capacity, primarily by burning fossil fuel. It's now being reported that Bangladesh has now surplus power capacity, as demand is not picking up as per expectation.
On one hand, technology has been fueling energy saving. On the other hand, technology is lowering the demand for labor in manufacturing, consequentially slowing down the growth of the industry. For example, an LED light bulb consumes less than 15 percent energy than a tungsten filament lamp to produce the same amount of light. Similarly, Bangladesh needs less than 160 people to produce $1 million worth apparel export, as opposed to requiring over 500 people in the 1990s. As a result, Bangladesh has started counting unused power generation capacity loss, as opposed to productivity loss due to power shortage. For example, in 2018 alone, the Government of Bangladesh had to pay close to $1.0 billion to private operators for not using their capacities. This payment for capacity charge will likely keep increasing along with the commissioning of power plants, which are now under construction. Moreover, if Bangladesh decides to keep moving towards renewable energy sources to deal with pollution issues, such idle capacity charges for already installed fossil fuel power plants will keep growing. The recent trend indicates that the investment which is being made now to produce power from polluting sources will likely show up as a barrier to leveraging renewable, clean energy sources in the future.
Due to the technology prediction failure, Bangladesh suffered massive wastage in telecommunication equipment import. At the dawn of the 21st century, Bangladesh Telecom Regulatory Commission (BTRC) issued a license for local wireless loop-based operators. Upon importing equipment from foreign sources and laying the network, the operators found their services were less attractive as well as costlier than cellular services. Due to the prediction failure of cellular technology, the investment made for wireless local loop based telephone service suffered from massive wastage.
Unfortunately, it did not stop there. A few years later, BTRC issued a license for WiMAX based broadband wireless service providers. The growth of cellular technology in offering high-speed mobile Internet has turned the investment made for WiMax a waste. Similarly, Bangladesh suffered significant loss in investments made for jute mills, as jute products suffered loss from eroding demand due to the emergence of plastic technology.
Among developing countries, India has also been failing to remain in sync with technology progression. For example, over the last 70 years, since independence, India took diverse initiatives to develop the domestic automobile industry. Most of those measures, including protection, were to develop labor-based value addition capacity in automobile making. But, unfortunately, India failed to predict the uprising of the lithium-ion battery. Despite California's upstart's, Tesla's rolling out of the electric vehicle, India's automakers kept remaining busy in making gasoline-based vehicles. Due to the recent acceleration of the adoption of gasoline vehicles, major Indian cities have started suffering from acute air pollution issues. To counter it, India has opted for the electric vehicle, even by offering a subsidy.
But, unfortunately, requiring only 20 or so moving parts as opposed to 2000+ parts of gasoline cars, electric vehicle demands less than half labor to make. Moreover, as high as 75 per cent parts as opposed to 15 per cent, India needs to import to make EVs. Although the progress of EV did not take place overnight, India failed to predict and prepare for it. In contrary to India, upon making a prediction, Japan has not only positioned its industry to leverage it but also pursued the necessary research to advance it, which has culminated in winning Nobel Prize in 2019. Unfortunately, instead of drawing lesson from such disruptive effects of technology, developing countries like Bangladesh are opting for making investment for labor based value addition in automobile making.
There are many overlapping forms of technology forecasting techniques, including technology intelligence gathering, forecasting, road mapping, making assessment, and deriving foresight. Countries like Japan, South Korea or Germany have strong institutional capacities at different levels to perform this important task. For example, concerned ministries and even firms in Japan have been predicting the growth and maturity of technologies affecting business prospects over the next 25 to 30 years time horizon.
In South Korea, The Science and Technology Policy Institute (STEPI) has been making significant contributions to the national development as a leading policy think-tank specialized in researching science, technology, and innovation agenda. Over the last 30 years, more than 60 full-time researchers of STEPI have been monitoring global technology dynamics and accordingly advising the Government, research establishments, and firms to tune their interventions. Such forecasting based advising has been playing a vital role in the Korean industry for leveraging the unfolding future, which is being shaped by technology dynamics. STEPI's contribution appears to be pivotal in advancing Korea's national status from an underdeveloped country to a developing and, ultimately, to a developed country through science and technology.
Due to its complex nature, monitoring, environmental scanning, and technology watching for making one aware of changes on the horizon that could impact the penetration, acceptance of the technologies, and its transformational effects, often disruptive, in the marketplace should be continuously done.
Historically, developing countries like Bangladesh have focused on labor, infrastructure, capital machinery import, and raw material supply to expand the capacity of economic output. Often they also complain about the technology transfer issue. Their development and investment planning focuses on skill development for being a technology user, let alone making technology prediction and assessing implications of emerging technology cores on investment planning. As a result, these countries are failing to develop the capacity of producing economic outputs out of technology ideas. Their investment made to prepare for labor and raw material based industrial strategy based on technology import is also suffering from the failure in producing desired returns. It's high time for them to integrate economic panning with technology forecasting to remain in sync with global dynamics of technology transformation to avoid wasteful investment, consequentially moving forewords in making a smart investment. Otherwise, the dream of keep driving economic growth, reaching increasingly higher income status, will be lost in the oblivion.
M. Rokonuzzaman, Ph.D is an academic and researcher.
© 2020 - All Rights with The Financial Express