The budgetary framework for development
Friday, 6 July 2007
Md. Abdul Jabbar
THE annual budget of the government is the most important fiscal event which has important implications for economic growth and stabilisation as well as the living conditions of the people.
But the existing process of budget preparation is not at all a simplified, efficient and transparent exercise. The organised richer groups of the society with better access to political power and the bureaucracy can sometime lobby for promoting their interests immediately before the finalization of the budget. But the unorganised as well as the organised poor do not have enough access to power and as such can hardly influence the actual mechanism of budget preparation. They do not have control over the changes in the macro-economic policies envisaged in the budget though these have profound implications for their living conditions.
Neither the rich nor the poor group intend to share their desires for the budgetary allocation for the sake of development through technology and innovation. But our prosperity would be no accident. Our economy would generate its strength in large measure according to its willingness to build innovation capacity through the creation and growth of a world-class science and technology research enterprise and a high-quality scientific and technical education infrastructure. The critical importance of human resources for development is widely recognised. A common denominator of the economic success of the various economies of East Asia is a strong emphasis on human capital. This applies directly to policies concerning research and development (R&D) internationalisation. Only budgetary allocation is not sufficient. But education policies also need to evolve over time as the demands from industry change.
The relationship between support for science and economic growth is well documented. Investments in basic research lead to knowledge breakthroughs that fuel innovation, drive productivity, grow the economy, and change the way we see the world. Economists estimate that approximately half of post-World War II economic growth is directly due to technological progress fueled by research and development (R&D). Economic payoffs of research come in the form of process and product innovations that reduce the costs of production, lower product prices, and result in new and better products and services. Consumers ultimately benefit from less expensive, higher quality and more useful products and services and of course from earnings accruing to innovative companies.
This is a common situation in African countries that the linkages between universities, public research institutes and enterprise R&D are often weak. The public R&D activities tend to be insufficiently oriented towards serving the needs of private-sector clients, and industrial stakeholders are often unaware of the new technologies developed. This failure has been explained by the lack of institutional base for innovation, a shortage of appropriate human capital, and the inability to tailor the activities of the institutes to the local context. The situation of ours is not the different than that of Africa.
Today's transforming technologies and most popular consumer items have deep roots in basic and applied research. By nearly every relevant standard, the US leads the world in science and technology. With only about five percent of the world's population, the US employs nearly one-third of all scientists and engineers and accounts for approximately one-third of global R&D spending (more than the rest of the G-8 nations combined), and US researchers publish 35 per cent of global science and engineering articles. To sustain the nation's economic competitiveness, President Bush has called for a long-term vision to strengthen federal support for the nation's innovation enterprise in an integrated package of investments and policies in the American Competitiveness Initiative.
Innovative activities and capabilities are essential for economic growth and development. A recent report identifies science, technology and innovation as essential to achieving the Millennium Development Goals (UN millennium project 2005, Sachs and McArthur 2005). This is true for the industrialised countries that are at the technology frontiers, as well as for developing countries that need to catch up in terms of technology.
Given the large gap between the developed and developing countries in terms of technological advancement, the latter continue to rely heavily on technology transfer from the former in their development process. It demands active, continuous technological effort by enterprises, along with government policies that help firms attract technologies, use them effectively and innovate. Technology requires efforts to absorb, adapt and bear tacit elements that cannot be embodied in equipment or codified in instructions or blueprints. Tacit knowledge can only be transferred effectively if the recipient develops capabilities to learn and incorporate the knowledge. It must seek new information, experiment with the technology, and find new ways of organising production and train its employees in new skills. It involves not just the enterprise itself but also interaction with other firms and institutions.
So, the R&D is critically important for keeping our nation economically competitive, and it will help solve the challenges we face in health, defense, energy, and the environment etc. Therefore, our yearly budget needs to emphasise the allocation for R&D and design operational methods for its proper utilisation as effectively as possible.
A budget should reflect continuation of efforts focusing on social issues of education, health and employment and economic sectors like agriculture, industry and services etc. Only expanding economic growth, increased employment opportunities, and increased labour productivity can translate into increased income. But productivity depends on how innovative we are in terms of management, science, technology, financial resources, planning, implementation etc. And it is the government to patronise the idea of innovation for the nation-building activities in both the public and private sectors.
But it is our sad observation that all the above affairs have been dealt with in the budget in a form, not based on research. The govt. is there to accommodate the prescription of the pressure groups only. So, the ADP does not base on the findings of scientific research.
Economics works in integration. Strong macroeconomic indicators gather nothing but dissent from the general masses and the government should be aware of that. Despite its excellent and sustained economic growth, sound foreign reserves, and booming exports volumes, the unexpected turmoil of political arena goes to result in the general people miseries, living under the poverty line, and deprivation of basic necessities of life. It is recommended that economic reforms must be accompanied by active government intervention in creating human capital, infrastructure and health facilities so that more and more people are in a position to ride on the train of progress and prosperity.
A socio-economic equilibrium may save Bangladesh from falling into sea of poverty and unemployment. A balanced approach towards economic development ought to be adopted. The rapid growth in the service sector has to be accompanied by the unleashing of manufacturing as the only way to ensure mass employment, as well as the movement of labour away from agriculture. There has to be a proactive approach on the part of the government to ensure farmers' institutional credit, power and irrigation.
The political economy examines the political, economic, and social challenges associated with innovation, technological progress and sustainable economic development, especially for a developing country like ours. The ability of social actors, both public and private, to address challenges surrounding areas such as science and technology and research thereon determines whether the country has the capacity to create, adopt, assimilate, and disseminate technology within the local economy.
We know that economic policies can make or mar governments. No jugglery of figures on gross domestic product [GDP], fiscal deficits or inflation sways (especially in case of Pakistan and many developing countries) anyone unless there is a real change in living standards, jobs, incomes, infrastructure and much more. As such, the technological adoption as a developmental strategy turns important. We should begin by examining models of economic growth and development along with the role of innovation and technology within the budgetary frame-work.
.............................................................
The writer is Senior Vice President, Islami Bank Bangladesh Ltd., who can be reached at e-mail: [email protected]
THE annual budget of the government is the most important fiscal event which has important implications for economic growth and stabilisation as well as the living conditions of the people.
But the existing process of budget preparation is not at all a simplified, efficient and transparent exercise. The organised richer groups of the society with better access to political power and the bureaucracy can sometime lobby for promoting their interests immediately before the finalization of the budget. But the unorganised as well as the organised poor do not have enough access to power and as such can hardly influence the actual mechanism of budget preparation. They do not have control over the changes in the macro-economic policies envisaged in the budget though these have profound implications for their living conditions.
Neither the rich nor the poor group intend to share their desires for the budgetary allocation for the sake of development through technology and innovation. But our prosperity would be no accident. Our economy would generate its strength in large measure according to its willingness to build innovation capacity through the creation and growth of a world-class science and technology research enterprise and a high-quality scientific and technical education infrastructure. The critical importance of human resources for development is widely recognised. A common denominator of the economic success of the various economies of East Asia is a strong emphasis on human capital. This applies directly to policies concerning research and development (R&D) internationalisation. Only budgetary allocation is not sufficient. But education policies also need to evolve over time as the demands from industry change.
The relationship between support for science and economic growth is well documented. Investments in basic research lead to knowledge breakthroughs that fuel innovation, drive productivity, grow the economy, and change the way we see the world. Economists estimate that approximately half of post-World War II economic growth is directly due to technological progress fueled by research and development (R&D). Economic payoffs of research come in the form of process and product innovations that reduce the costs of production, lower product prices, and result in new and better products and services. Consumers ultimately benefit from less expensive, higher quality and more useful products and services and of course from earnings accruing to innovative companies.
This is a common situation in African countries that the linkages between universities, public research institutes and enterprise R&D are often weak. The public R&D activities tend to be insufficiently oriented towards serving the needs of private-sector clients, and industrial stakeholders are often unaware of the new technologies developed. This failure has been explained by the lack of institutional base for innovation, a shortage of appropriate human capital, and the inability to tailor the activities of the institutes to the local context. The situation of ours is not the different than that of Africa.
Today's transforming technologies and most popular consumer items have deep roots in basic and applied research. By nearly every relevant standard, the US leads the world in science and technology. With only about five percent of the world's population, the US employs nearly one-third of all scientists and engineers and accounts for approximately one-third of global R&D spending (more than the rest of the G-8 nations combined), and US researchers publish 35 per cent of global science and engineering articles. To sustain the nation's economic competitiveness, President Bush has called for a long-term vision to strengthen federal support for the nation's innovation enterprise in an integrated package of investments and policies in the American Competitiveness Initiative.
Innovative activities and capabilities are essential for economic growth and development. A recent report identifies science, technology and innovation as essential to achieving the Millennium Development Goals (UN millennium project 2005, Sachs and McArthur 2005). This is true for the industrialised countries that are at the technology frontiers, as well as for developing countries that need to catch up in terms of technology.
Given the large gap between the developed and developing countries in terms of technological advancement, the latter continue to rely heavily on technology transfer from the former in their development process. It demands active, continuous technological effort by enterprises, along with government policies that help firms attract technologies, use them effectively and innovate. Technology requires efforts to absorb, adapt and bear tacit elements that cannot be embodied in equipment or codified in instructions or blueprints. Tacit knowledge can only be transferred effectively if the recipient develops capabilities to learn and incorporate the knowledge. It must seek new information, experiment with the technology, and find new ways of organising production and train its employees in new skills. It involves not just the enterprise itself but also interaction with other firms and institutions.
So, the R&D is critically important for keeping our nation economically competitive, and it will help solve the challenges we face in health, defense, energy, and the environment etc. Therefore, our yearly budget needs to emphasise the allocation for R&D and design operational methods for its proper utilisation as effectively as possible.
A budget should reflect continuation of efforts focusing on social issues of education, health and employment and economic sectors like agriculture, industry and services etc. Only expanding economic growth, increased employment opportunities, and increased labour productivity can translate into increased income. But productivity depends on how innovative we are in terms of management, science, technology, financial resources, planning, implementation etc. And it is the government to patronise the idea of innovation for the nation-building activities in both the public and private sectors.
But it is our sad observation that all the above affairs have been dealt with in the budget in a form, not based on research. The govt. is there to accommodate the prescription of the pressure groups only. So, the ADP does not base on the findings of scientific research.
Economics works in integration. Strong macroeconomic indicators gather nothing but dissent from the general masses and the government should be aware of that. Despite its excellent and sustained economic growth, sound foreign reserves, and booming exports volumes, the unexpected turmoil of political arena goes to result in the general people miseries, living under the poverty line, and deprivation of basic necessities of life. It is recommended that economic reforms must be accompanied by active government intervention in creating human capital, infrastructure and health facilities so that more and more people are in a position to ride on the train of progress and prosperity.
A socio-economic equilibrium may save Bangladesh from falling into sea of poverty and unemployment. A balanced approach towards economic development ought to be adopted. The rapid growth in the service sector has to be accompanied by the unleashing of manufacturing as the only way to ensure mass employment, as well as the movement of labour away from agriculture. There has to be a proactive approach on the part of the government to ensure farmers' institutional credit, power and irrigation.
The political economy examines the political, economic, and social challenges associated with innovation, technological progress and sustainable economic development, especially for a developing country like ours. The ability of social actors, both public and private, to address challenges surrounding areas such as science and technology and research thereon determines whether the country has the capacity to create, adopt, assimilate, and disseminate technology within the local economy.
We know that economic policies can make or mar governments. No jugglery of figures on gross domestic product [GDP], fiscal deficits or inflation sways (especially in case of Pakistan and many developing countries) anyone unless there is a real change in living standards, jobs, incomes, infrastructure and much more. As such, the technological adoption as a developmental strategy turns important. We should begin by examining models of economic growth and development along with the role of innovation and technology within the budgetary frame-work.
.............................................................
The writer is Senior Vice President, Islami Bank Bangladesh Ltd., who can be reached at e-mail: [email protected]