Good governance and accountability in the rapidly emerging world of Knowledge Economies
By Anwar Ibrahim
Remarks by Anwar Ibrahim at the SAGIA Noor 2008 Forum, Madinah, 23rd June, 2008
Ladies and Gentleman.
While it would be superfluous to harp on the importance of research and development in knowledge based industries (KBIs), the issues of focus cannot be overstated. We know that the market is indeed hungry for the entire spectrum of knowledge based products ranging from aerospace and ICT products to precision and scientific tools. The more intensive the use of high technology, the greater reliance will be placed on R&D advances. We would imagine that from the vantage point of strategic policy the state’s focus will be on sustainable development.
As they say, in a knowledge economy, the trajectory of R&D cuts across every spectrum and becomes not only a key driver but the main fulcrum for economic advancement. We know that the development of KBIs is now springing up as a catch all phrase sometimes employed without serious consideration of its implications. From another vantage point we are really referring to enhancing market competition, which is not just a question of breaking down protective barriers and opening tenders for contracts to the best bidders. That is of course absolutely necessary for transparency and accountability. But the principle also entails the fostering of entrepreneurship and creativity so as to remove crutches and enable indigenous enterprises to grow into significant entities able to hold their own.
This is all subsumed under the rubric of a humane economy where corporate governance, transparency and accountability are active indices of responsible government. And these will remain elusive sound bites without an advanced information infrastructure. From the material standpoint, we need this infrastructure to keep abreast with the speed of industrial and economic development on a global scale. But perhaps even of more profound significance, open and responsible governments cannot actualize their ideals without this fundamental platform. That is why we see a correlation between the levels of knowledge, information infrastructure and the state of the economy. Intra economy correlations can also be noted where the disparities are reflective in the GINI coefficient. Where these disparities are not checked, the risk of a digital divide increases manifold, quite apart from the obvious growing chasm between the rich and the poor.
The competitive advantage of nations may be attributed to a host of R&D factors. For one, the need to attain critical mass and maintain a gene pool of expertise may be a prerequisite for staying ahead of the curve. Traditionally, the United States and Japan as pioneers and innovators in this regard, enjoyed first mover. This is where nations like Saudi Arabia and those in the region with substantive capital cushions can blaze the trail in carving a niche in strategic R&D investments. China and India for example have already embarked on this road trying to strike the right balance between the private and public sector driven initiatives.
It has been said that R&D will count for nothing if it does not enable the establishment of responsive knowledge-creating institutions so that firms may tap into and enhance their innovation capabilities. Cutting-edge IT universities for instance would indeed be one of the most salient indicators of R&D investment. This advanced infrastructure must be supported and nurtured by the strength of the human capital behind it. This is just to amplify what I said earlier about the need to shore up a critical mass of talent and this would include scientific, technological, entrepreneurial and managerial expertise.
A more comprehensive framework must be considered encompassing core economic policy imperatives. The key to advancing the economy will be the streamlining of the bureaucracy to make it more conducive to foreign entry and to strengthen investment protection laws. Building a symbiotic relationship between the respective stakeholders is crucial. Once we get past the gates of these imperatives, we need to consider the political, ethical and cultural factors that can enhance the Kingdom’s role as an innovator in the region.
We also need a holistic concept of development which aims at balanced growth and an improved quality of life. Economic objectives, environmental protection, gender equality and social goals must be welded into a seamless whole. We cannot overemphasize the primacy of growth which promotes distributive justice instead of wealth accumulation by the few.
There is no question that companies ought to be more accountable to their stakeholders but history tells us that gargantuan corporations are fundamentally averse to doing business in uncharted waters. The lure of maximizing profits remains ever so appealing. We are told that the classic Prisoner’s Dilemma phenomenon means that market forces tend to dissuade individuals from taking steps towards a greater good unless there is reassurance that the rest of the market will follow suit. Are we to fold our arms and luxuriate in the hope that the invisible hand will always appear at the right time to correct all these externalities?
In the wake of the IT explosion in the late 90s, an intense search for the answer that would benefit society as a whole was answered by a system of “e-governance” which streamlines and reduces costs in the delivery of public services and, more significantly, provides the maximum level of transparency and disclosure. This is quite apart from what I have alluded earlier, that a sound IT infrastructure is essential for global corporations to conduct their business operations seamlessly.
Again, we cannot overstress the importance of the issues of corporate governance, corporate social responsibility and ethical business practices. Similarly, a culture of transparency in the KBIs is an imperative but this transparency cannot be expected without transparency in political governance. There is also the overriding issue of accountability and corruption. But if we agree that corruption is the greatest impediment to development in the Muslim world, then key areas such as judicial reform, the media and civil liberties must also be addressed.