Towards Knowledge-Based Economy

Developed nations invariably depend on knowledge-based economy. Whatever they do in business, they add unrelentingly the more value to goods and services. The secret has been revealed. To be rich, every nation needs only to mine ideas inside its citizens’ craniums, rather than to mine oil inside earth. Natural resource-starved lands could barely hamper Japan, Korea or Singapore coming out as world’s top-notch nations.

Once under Habibie’s influence, mastering technology was an up-and-coming way to develop this nation. Technology is instilled in country’s development. The zeitgeist gave us short-lived confidence of ability to make sophisticated products. Now it seems to peter out.

The Habibie’s strategic industries and science development centers come out as the powerhouse of high tech products. The apex of achievement is N250 turboprop carrier’s maiden flight in August 1995 which claimed as the brainchild of Indonesian engineers. Besides aircraft industry, Indonesia operates several cutting edge industries such as PT PAL for shipbuilding, PT Pindad for arms producing, PT Inka for train manufacturing. However, after decades experiences, they are still the world’s second or third class manufacturers due chiefly to post-Habibie government’s lack of attention. Their products are not the first choice in this country, let alone in the world.

Since the knowledge-based economy prevails, the government should prepare this nation for the harsh completion in the future. Both government and people must understand that world has changed, so has the rule.

I notice there are at least 3 (three) insights affecting every country’s economy. These ideas must be fervently grasped by Indonesia’s policy makers to pave the way for the next Indonesia’s economic engines.

Stan Shih’s Smiling Curve

Stan Shih, the founder of Acer, proposed idea of smiling curve which particularly regulate the IT-related industry. He observed that the most value added to products goes to the downstream (research and development activities) and the upstream (marketing), while the least value goes to manufacturing which lies in the middle of value chain. It makes the curve is like smiling. The curve indicates the company focusing on R & D and marketing will be more prosperous than manufacturing company.

Recently Indonesia’s government is upbeat with its economy because of footware manufacturing in China will relocate their factory to Indonesia. Should the government grasp the smiling curve, it will soon realize that Indonesia’s workers only gain the smallest value of the footware’s value chain. Nike, Adidas, Mizuno, etc who undertake the research will take the most profit.

Accordingly, start grooming Indonesia’s R&D-oriented companies, nurturing them by giving them finance or even government’s contract.

Jeremy Rifkin’s End of Work

The gist is robots kill the jobs. Automation not only overwhelms the developed countries’ factories but the developing one as well. The western’s flummoxed politicians might point their fingers at China’s factories for the lost of their people’s jobs. Outsourcing becomes the scapegoat of high unemployment. However, according to Jeremy Rifkin, China itself has lost 15% of jobs forever. Many politicians merely don’t know what kind of new economy dictates.

The trend eventually exacerbate Indonesia’s economy. The government should not be complacent with country’s status as the source of cheap, unskilled workers. The government should have known the automation trend disappearing traditional jobs. The idea of manufacturer-can- absorb-much-workers has been obsolete. In the future economic zones likely boost the economy, but not workers hiring.

Disruptive Technology: Fledgling Samsung beats Seasoned Sony

Despite the Indonesia’s staggering future, we can still see light at the end of the tunnel. Fortunately, the new trend of technology provides the developing countries big opportunities to compete, even outcompete the developed ones.

The reason why Samsung can outperform Sony lies in the prevailing structure of technology. In analog device Sony is the king, but in digital device Sony is the ousted king. In digital era there is no significant advantage of the experienced companies to the new ones, because the process to create product is totally different with the past. Now most products are built by components producing from different companies.

To exemplify, think about computer. Nowadays, in theory anyone can assembly a computer. Certainly, we can’t still make processor or memory, but those parts are ubiquitous in the market. The needed skill is to assembly. It leads the successful companies don’t need tremendous skill in technology as in the past.

Likewise, America’s inexperienced Dell rivals the juggernauts, HP and IBM merely because they have great expertise in assembling and marketing rather than technology invention.

Those are three insights which rule the knowledge-based economy included challenges and opportunities. Indonesia’s economy must move shrewdly in sync with the new trend.

To play in knowledge-based economy league, the apt policies are needed. People’s education must be the highest priority. Only the smart people with great initiatives and creativity can survive in the future economy. The state-owned enterprise must spearhead the shift to knowledge-based economy. In many cases, the assured demands of government can nurture the skill improvement of company prior to compete worldwide.

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