THIS week, under beautiful clear blue skies in Beijing, the Fifth Plenum in China is
being held to discuss the forthcoming 13th Five-Year Plan for the period 2016 to
2020.
It is a critical five years in which China seeks to break through the middle-income
barrier and seek advanced country status (an income per capita of more US$13,000)
by 2020-2024.
By coincidence, India has its own 12th Five-Year Plan (2012-2016) but Prime
Minister Narendra Modi abolished the old Planning Commission and replaced it with
the NITI Aayog or National Institute for Transforming India, a think tank for the Indian
Government.
The NITI Aayog is also different from the Planning Commission in that it comprises
members from the regional governments, so that it has good feedback from the states
within the Indian Union on developmental issues.
In China, each province and city has its own five-year plan that fits into national
planning indicators, coordinated through the National Development and Reform
Commission, a powerful arm of the State Council.
Malaysia will also be launching its 11th Five-Year Plan (2016-2020) to transform the
nation into advanced country status by 2020.
The Chinese 13th Five Year Plan will have huge implications for the global economy
because China today accounts for roughly one third of global growth. Thus, any
slowdown in Chinese growth would impact on commodity prices and global trade,
particularly for emerging market commodity producers.
There are suggestions that the Chinese planners are shifting the target GDP growth
rate to around 6 to 7% per annum, rather than the average of 8% achieved during the
current 12th Five Year Plan.
If so, during this period, the Indian economy is likely to grow faster than the Chinese
economy, although its current scale is still smaller.
All three countries share three common policy challenges.
The first is that rapid urbanisation will be both an opportunity and a challenge. With
Asian urbanisation moving past the 50% of population point, urban centres can either
become smart cities of innovation and creativity, or slums that pollute, congest and
waste energy and resources.
The second is the rapid rise of the service sector, also creating half the value added
and certainly the fastest areas in job creation. How to improve the quality of service
sector job creation is a major challenge.
The third is the serious attention that all three countries are paying towards
innovation as a driver of growth.
McKinsey has just produced an eye-opening report on Innovation in China,
suggesting that the Chinese have comparative advantages in two out of four areas of
innovation, namely customer-focused and efficiency-driven aspects.
On the other hand, there is considerable catch-up needed in science-based and
engineering-based innovation compared with advanced economies like Japan and
Germany.
McKinsey estimated that properly nurtured, innovation could contribute up to 2 to 3%
to China’s gross domestic product (GDP) growth by 2025, equivalent to 35-50% of
total GDP growth.
Using a different approach and instead of looking for development in the traditional
sectors of agriculture, industry and services, NITI recognised that the common
element that can kickstart growth in India is innovation and entrepreneurship.
In order to produce up to 115 million non-farm jobs in the next decade, and
recognising that planners cannot pick the winners for India, NITI sought to uplift the
entrepreneurship and innovation game. NITI’s expert group produced an AIM (Atal
Innovation Mission) pyramid, which identifies a short, medium and long-term
framework to boost innovation and entrepreneurship to generate faster growth.
At the top of the pyramid, there are quick wins such as competition with prizes for
innovative ideas and startups; encouraging companies to use universities for
research and development; improving business incubators and fostering a national
entrepreneurship and innovation movement.
In the middle and over the next five to seven years, the report suggests using digital
platforms to encourage innovation, reforming the educational system to encourage
creativity and upskilling workers, improving the ease of doing business, and
strengthening intellectual property rights.
The long game involves generational changes to the cultural biases against
entrepreneurship, embedding entrepreneurship within the government’s economic
and social programmes, and fostering a culture of coordination and collaboration
between government and entrepreneurs, including tying entrepreneurship with the
social inclusion agenda.
The Indian experiment is refreshing because it draws the expertise from the market to
drive innovation and entrepreneurship, recognising that public servants and
academics do not have first-hand experience in actually making business work.
The common challenge that India, China and Malaysia faces is that rural people who
move to the cities do not possess the knowledge and skills for innovation and
entrepreneurship that city dwellers have from living in packed conditions. More often
than not, the rural and urban divide defines the inequality in income and wealth.
You cannot expect a rice farmer to become an Internet startup overnight. Hence,
changing the culture of farming into a culture of innovation and entrepreneurship is a
generational change. It cannot be done overnight.
Even cities do not find it that easy to innovate and change.
Although Hong Kong does not have a tradition of five-year planning, it accepts that as
part of China, the Special Administrative Region (SAR) must learn to thrive within the
framework of China’s five year plans.
The SAR Government knows that Hong Kong’s competitive future depends on its
ability to lift the game in science and technology, but so far it has not been possible to
get the proposed Innovation and Science Bureau established.
In short, plans are only as good as their implementation. In the 20th century, the
development mindset was all about investments in hardware. But in the 21st century,
advancement is largely in software, because software is all about the quality of
people and the quality in people.
In other words, the old way of development was investment in things, but the New
Economy is about investing in people. If you want a family to succeed, do you invest
in the house or the children?
If you want the nation to succeed, invest in the next generation.
Andrew Sheng writes on global issues from an Asian perspective.
A version of this article appeared in The Star Online, 31 October 2015
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