Innovation at the Frontier

A Reflection on a Decade of Economic Crisis :

Asian economic crisis started in the last quarter of 1997 has proven Krugman's insights (1994) that high economic growth of Asian tigers such as Korea, Thailand and Indonesia fueled mostly by capital investment would be vulnerable in the long run.

On a paper called 'The Myth of Asia's Miracles', Krugman was questioning the validity of such economic miracles really happened in Asian Tiger Countries. His doubt was principally based on the concept of Total Factor Productivity, in which the growth of output is the result of growth of input (labor and capital) and growth of output per input (productivity). Some studies had shown, that Asian Tigers economic growth was mostly input-driven oriented rather than productivity increase-driven resulted from innovation, technological advances, education, economies of scale or any means that keep optimizing the use of input factors more efficiently over time.

Paul Krugman, a noted economist now teaching in Princeton, consistently provoked the idea of driving the economic growth only through 'perspiration', he took example of Soviet Union era which had successfully droved economy through labor mobilization but failed to sustain it because of lack of factors in stimulating 'inspiration' in driving the economy more productively and efficiently. It is interesting enough if we remember Soviet Union was home to brilliant scientists and engineer. Soviet's case was because invention and innovation was not rewarded properly as there was no free market and business competition; practically there were no incentives to develop technology for better lives as all the efforts were oriented to serve military purposes.

While in South East Asian countries' cases, the environment was the opposite to Soviet Union because free market and business competition were present. However as capital input had been continuously injected without developing 'means' to utilize it efficiently, the law of diminishing return to capital applied where additional output rate became slower compared to given additional input rate. In this case we saw many Asian countries were void of such innovation and R&D centers, more miserably we even had seen much of the capital input poured into, not only non-productive but also, speculative sectors such as property though most of the capital was from the borrowings with high interest rates.

Now, exactly 10 years after such blowing economic crisis, ironically Indonesia has not taken serious steps in spurring economic growth through fostering a culture of innovative society. Global Competitiveness Report 2007-2008 finds out Indonesia's ranking in innovation is at 41st out of 131 countries. Comparing with the nearest neighbors, Indonesia's performance is very poor. Malaysia is ranked at 21^st, Singapore is ranked at 11^th. Even compared to Indonesia's competitors in export-oriented labor-intensive sectors, Indonesia's performance is still weak, such as India is ranked at 28th and China, is currently ranked at 38^th.

Though the wound has been healed, the pain is not gone yet. Unemployment is still very high and people under poverty line increasing day by day, signaling current economic growth at 5.5-6.5% is just not enough. Indonesia needs to be back on track of previous 7.5-8.5% economic growth. If productivity increase factors may include technological advance project, in fact we had had some state-funded high tech projects such as aircraft industry development. Unfortunately it was unable to become the motor to stabilize and maintain high economic growth. Some reasons may explain this such as project was owned and run by the Government for political purpose, which made it not possible to be run efficiently and profitably.

The so called strategic industry become meaningless if it was not a waste and Indonesia might benefited much more if invested heavily in oil-refinery industry to avoid today's big import of refined-oil or even better in developing alternative energy sources that would help businesses having decent options during today's skyrocketing oil prices.

For comparison, India performs better after a decade focusing in software engineering and development, while Singapore is approaching a developed-nation status after focusing in biotechnological R&D and in medical services. After aircraft industry failure, Indonesia needs to re-focus in an innovation area to achieve high economic growth, and sustain it, in the future.

The problem now is besides no strategic innovation focus of current economic development; Indonesia also lacks enthusiasm in bolstering spirit of the youngsters, academicians, researchers and businesses to induce innovation out of their mind.

We see Annual Indonesian Film Festival, strangely enough; we have not seen Annual Indonesian Innovation Competition. We ever had Visit Indonesia Year, surprisingly; we never had Innovate Indonesia Year.

If the atmosphere itself is not ready to support innovation, then it is just a dream to have economic growth driven by productivity increase, without this, we should pay attention on what Krugman explained," Productivity isn't everything, but in the long run it is almost everything. A country's ability to improve its living standards over time depends almost entirely on its ability to raise its output per worker." (The Age of Diminishing Expectations, MIT Press, Cambridge, Mass, 1990)

Written by Hery Kameswara, Grant Technical Advisor at SENADA Indonesia Competitiveness Program. This is personal opinion.

Information and communications technology has become increasingly more sophisticated, user-friendly and affordable.
Unfortunately, cheap alternatives to communication have been subjects of controversy over whether the use of these technologies is violating existing regulations. One of these is a technology called Voice over Internet Protocol (VoIP), which allows users to communicate by telephone through the Internet.
Fortunately, several groups of information technology lovers have been at the forefront of efforts to make telecommunications infrastructure available legally.
Ten years ago, Onno W. Purbo, a former lecturer at the Bandung Institute of Technology (ITB), pioneered the campaign by setting up “Freedom VoIP”. He used a protocol H.323-based VoIP technology developed by the International Telecommunication Union (ITU). In 2005, Information and Communication Technology (ICT) Center Jakarta developed “VoIP Rakyat“ (People’s VoIP) and Anton Raharja was the architect of the project. The technology used was based on Session Initiation Protocol (SIP) developed by the International Engineering Task Force (IETF).
VoIP Rakyat has done better than VoIP Merdeka (Freedom VoIP). While VoIP Merdeka users could communicate free of charge only with other VoIP users, now VoIP Rakyat users can be contacted through Telkom or cellular operators with valid numbers from the United States or the United Kingdom. They can also call regular landline numbers at only 105 rupiah per minute.
VoIP Rakyat has also developed an instant messenger similar to Yahoo Messenger (YM), American Online (AOL) and Microsoft Network (MSN). Using an open jabber as a basis, ICT Center Jakarta, which serves as the host of this new IM, provides messaging service using a domestic server. Fast, bandwidth efficient and not a waste of foreign reserves.
Contrary to fears expressed by many quarters, the legal use of VoIP will benefit all. Both companies and customers will gain from cheaper ways to communicate. Telkom will increase revenue from local calls, subscription fees, rented lines and so on and the state will enjoy increased tax collections.

The innovation enables more people--including the business community--to communicate with their counterparts in different parts of the world at a much more affordable cost, eliminating a significant barrier to small and medium companies in Indonesia. It is also inline with the government’s initiative to improve people’s access to information and communication technology, in keeping with improved IT infrastructure in the country.
As of the end of 2006, VoIP Rakyat has handled 100,000 minutes of VoIP telephone connections with 15,000 registered users, 4,000 of whom are active users.

Solar Energy
A new type of power plant harnesses the sun-and taxpayers

On February 22^nd, 2008, at an event featuring film stars, astronauts and technology gurus, Acciona, a Spanish conglomerate, is due to inaugurate a new power plant a few miles from Las Vegas. In fact, the plant has been running since last June 2007. But the technology it uses, known as "concentrating solar power" (CSP) is hot right now, as the Hollywood luminaries might put it.

Acciona's new plant, called "Nevada solar One", can generate up to 64 megawatts (MW)-enough, it says, to power more than 14,000 homes. The solar Energy Industries Association (SEIA) says that more CSP plants, with a total capacity of 4,000 MW, are in pipeline and have signed contracts to sell their future output. An 11 MW plant opened in Spain last year. New Energy finance, a research firm, estimates that 2,000 MW of capacity is in the works in Europe.

As their name suggests, CSP plants generate electricity by concerning the sun's rays, usually to boil water. The resulting steam drives turbines similar to those found at power plants that run on coal or natural gas. There are several different designs. The Nevada plant uses long curved mirrors to focus light on a tube of fluid running just above them. The Spanish plant uses a forest of smaller mirrors to focus light on a tower in their midst. Other concepts involve long flat mirrors and devices resembling satellite dishes.

Solar power, of course, does not produce climate-changing greenhouse gases. But it also excites utilities because it generates the most power just when it is needed: on hot, sunny days when people turn on air conditioners. And CSP provides a way around the main drawbacks of solar power from photovoltaic cells. Unlike them, it does not involve expensive silicon wafers. And some designs provide power round the clock, not just when the sun is shining, by storing energy in the form of molten salt.

Even so, CSP is still not as cheap as coal or gas fired plants. America's CSP boom is driven by state laws requiring utilities to generate a certain share of their power from renewable sources, and by generous federal tax breaks, which offset as much as 45% of development costs, according to SEIA. In Spain, meanwhile, utilities must pay an extra €0.25 ($0.37) per kilowatt-hour on top of the market price for power from CSP.

America's tax breaks are due to run out at the end of the year, and without them, says Rhone Resch of SEIA, no more CSP plants will be built there. But in the long run, he argues, costs should come down. And if fossil-fuel prices continue to increase and American power plants have to start paying for their greenhouse gas emissions, CSP might just achieve "grid parity" with the wholesale power price. That really would be an excuse for party.