Innovation Should Be Increased To Generate High Economic Growth

Innovation has an important role in economic growth. Most countries with better levels of innovation and technological development have better economic growth.

On the contrary, countries with low levels of innovation have worse economic growth. Human history wrote that technology and innovation encourage high economic growth for countries that had high innovation. The industrial revolution in England is an example.

It was begun from the use of steam power yarn spinning machines that spread from England to mainland Europe and America. Furthermore, the industrial revolution was followed by the use of machines in various productions.

The industrial revolution had an impact on the supply of goods. Goods were cheaper, more abundant. In addition, the industrial revolutionary made trade capacity widely available.

The effect of the industrial revolutionary was wider after the invention of the telegraph and telephone that connected Europe and America.

The success of countries such as England, America and Japan proves that innovation contributes to the growth of the economy. Through the Meiji Restoration that began in 1868, Japan opened their country from previous self-imposed isolation.

One of the policies of the Meiji government at the time was a massive adoption of technology from the European mainland.

Although Indonesia has had Law No. 18 of 2002 on the National System of Research, Development and Application of Science and Technology, the level of technological development and innovation in Indonesia is still low. This is one of the explanations as to why the Indonesian economy is still driven by consumption, rather than by production.

Levels of innovation in Indonesia can be measured from the proportion of total funding for research and development (public and private) to gross domestic product (GDP); the number of patents; the lack of reliable researchers; weak synergy between relevant institutions (government, universities, industries and institutions funding research) in the implementation of research.

Currently, Indonesia is one of the countries with a very small amount of funding for research, reaching only 0.1 percent of GDP in 2010. This amount did not change much from the estimated 0.2 percent (of GDP) spending in 2014.

The Japanese research budget between 2010 and 2014 averaged 3.4 percent of GDP, the US, 2.8 percent of GDP, Singapore ranging from 2.5 percent to 2.7 percent and Malaysia between 0.6 and 0.8 percent. (Source: Global R & D Funding Forecast 2011 and 2014).

The number of patents in Indonesia is also very low, totaling only 409 patents in 2010, compared with 50,990 in Japan and 1,361 in Malaysia. In the first ten months of this year, Indonesia recorded only 76 patents. (World Intellectual Property Organization).

In order to increase the power of innovation in Indonesia, the government must facilitate the flow of technology and the flow of public information needed by stakeholders consisting of technology developers (academia-A), technology users (business-B) who are also producers of goods and services, and the government (G).


The number of patents in Indonesia is very low, totaling only 409 patents in 2010, compared with 50,990 in Japan and 1,361 in Malaysia.
The government’s task is facilitation and regulation of relations between the developers and users of technology that can be more intensive and more mutual.

The flow of technology is the process of technology transfer from technology developers to technology users and producers of goods and services that is translated into a form of goods and services. Products and services, as a result of the application of technological inventions (process innovation), are then marketed to consumers.

Flow of technology also runs from the developer of technology to the government. This process is an effort by developers to obtain legality such as patents and certification based on the Indonesian National Standards (SNI).

The flow of technology does not run in a vacuum. It is the feedback from the flow of public information from the consumers and/or public. Producers of goods and services see a market opportunity that they then recommend to the developers of the technology to fill the gap.

The challenge for the administration of President Joko “Jokowi” Widodo is creating a good national innovation that accelerates the flow of technology between the stakeholders by first improving the capabilities of each stakeholder. There are some efforts that should be made to address these challenges.

First, the government should increase research funding as a stimulus for researchers. Second, the government must give incentives for researchers (technology developers).

It also is absolutely necessary to increase the flow of technology information from the developers of technology in the form of new discoveries. The absence of adequate incentives causes the technology developers to look to other places or countries that provide higher incentives. No wonder many technology developers do not return to Indonesia after completing their studies abroad.

Third, the educational curriculum should be oriented to create innovators not only workers. Currently, the orientation of education in Indonesia is mostly to prepare graduates to enter the labor market and not to become entrepreneurs.

Fourth, educating the public on the awareness of the importance of innovation and of the use of domestic products, especially products developed for technological innovation in the country. Fifth, providing tax incentives for products made from home-grown innovation.


This article was published by Jakarta Post at 2 nd January, 2015


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