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Middle-income trap and patents
If we compare Indonesia with the Asian countries that escaped the middle-income trap, the differences are very stark.
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Slowing growth -- In this April 8, 2016 file photo, people are reflected on the electronic board of a securities firm in Tokyo. (AP/Shizuo Kambayashi)
W
hen opening the National Development Planning Conference in April this year, President Joko “Jokowi” Widodo told high-level national and local officials attending the event to strive for a culture of innovation like the one adopted by Tesla Motors, which acquired 864 patents on the path to producing its highly acclaimed electric car.
While preparing the National Mid-Term Development Plan (RPJMN) 2015 to 2019, thenminister of national planning and head of the National Development Planning Board (Bappenas) Armida Alisjahbana said one of its main goals was to push Indonesia out of the middle-income trap by 2030.
However, this will depend on how the Law and Human Rights Ministry implements the new Patent Law and ensures it will have a significant impact on achieving a high-innovation culture.
The term middle-income trap was coined by Gill and Kharas in 2007 when they reviewed the economic development of number of nations and discovered that a huge proportion of middle-income countries are stuck.
The trapped economies are squeezed on both ends — they can’t compete with lower-income countries for labor-intensive industries due to the rising wages of their own low-skilled workers. But these economies also have a hard time competing with more mature markets in high-tech and capital-intensive sectors. This “trap” sees many middle-income economies experience slower growth, flat wages and a shrinking formal sector.
In 2013, the World Bank conducted a follow-up study on the middle-income phenomenon and found that among 101 countries in the middle-income category in 1960, only 13 managed to continue in their development path to join the high-income ranks by 2008. While the World Bank numbers paint a daunting picture for aspiring middle-income countries, their study also uncovered a common element among the 13 countries that managed to break the barrier. They all have robust domestic innovative capability strengthened through systematic and comprehensive efforts.
In Asia, the break-out countries are Japan, South Korea and Taiwan that have shifted to electronic and high-tech innovation and the production of patented inventions discovered by private companies, universities and government research institutes.
