Innovation lag: No quick fix

Lag affect of innovation

Despite results showing the region is improving in areas such as institution building, human capital, infrastructure and market and business sophistication, many innovative activities in the Middle East are failing to translate into the wider economy. There is no quick fix, said Karim Sabbagh, senior partner at Booz & Company, a knowledge partner for the G11 2012. “We’re probably half way through these generational investments. Hopefully in next few years the gap between the inputs and outputs will narrow.”

In the broader Middle East, countries like Jordan and Lebanon, which outranked the richer GCC economies in terms of innovation efficiency, have been more open to entrepreneurship from a social and economic standpoint.

“They have an entrepreneurship culture, they started the trajectory sooner so the outputs were already there. In the GCC, this way of thinking started maybe 10 years ago so there is still a lag. For me this is a temporary result," said Sabbagh. “But innovation is not the monopoly of any specific region, country, company or individual, it’s open to everyone.
"The top 10 countries in the GII 2012 – the majority of which have populations of between 4 million and 9 million - demonstrate that even small countries can be at the forefront of innovation.”

GCC countries rank well on input pillars - a result of improvements in institutional frameworks, its skilled labour force (with an expanded tertiary education), and deeper integration with local and global investment and trade markets - but come up short on knowledge, technology and creative outputs. Businesses are slowly adopting innovative practices and there has been limited export of creative goods and services.

Innovation plans need action 

While many sectors within the region have innovation plans they are still at a nascent stage and yet to be put into actionable strategies. Funds are often limited, access to credit is difficult particularly for the private sector, and infrastructure levels are often not developed enough to support large-scale innovation acitivities. The region faces a limited supply of knowledge workers to support innovation plans.

IP is also a challenge with the current regulatory framework failing to adequately protect intellectual capital or innovation investments.

Networks between innovative businesses are limited due to insufficient operational support.

Holistic approach needed

GCC must develop an holistic and integrated approach to overcome common science, technology and innovation (STI) challenges. Activities in these areas should be “harmonised around common platforms” to maximise social and economic benefits, Sabbagh said.

Innovation vital to economic diversification

The resource-rich GCC economies have made significant investments in human capital over the last years, but have yet to reap the full innovation benefits from these actions. Weaknesses in knowledge and technology output such as lack of patents,  have impacted their performance, according to GII lead researcher and and Project Manager at INSEAD eLab, Daniela Benavente.

Potential to improve

Qatar, the United Arab Emirates, Saudi Arabia, Bahrain, Oman, and Kuwait rated 10 percent below the trend line and were among a host of resource-rich, high-income “innovation underperformers” when comparing GII performance against GDP per capita. Middle-income earners in this group include Iran, Syria, Algeria and Yemen. These economies all have the potential for improving their innovation systems on the basis of their income levels, said Benavente. "It's a trend in many resource rich countries., maybe there is some crowding out of innovative investments, or maybe its related to strong GDP." 

Economies start by getting inputs in place before really taking off, Benavente said, noting GCC countries rated very well in these areas. "You start by getting small pockets of excellence then there is a multiplier affect to pull the rest of the economy ."