Investing in research is the smart way to the knowledge economy

Even at a time of tightened budgets, Masdar Institute interim provost Behjat AlYousuf says in research and development is worthwhile

With increased R&D funding, the Masdar Institute will be able to better pursue its mission of developing the innovative human and intellectual capital required for the UAE’s future knowledge economy, says Behjat AlYousuf. Fatima Al Marzooqi / The NationalShow less

Some people were surprised by the announcement last June by Sheikh Mohammed bin Rashid, Vice President and Ruler of Dubai, that the UAE would triple its spending on research and development (R&D) over the next six years and boost the national workforce by 185,000.

Even with the prevailing low oil prices and government budget reductions, this decision should not have been a surprise. Investing in R&D to fuel the transformation into a knowledge economy is a true investment in our future.

Knowledge is perhaps one of the few truly renewable resources because there will always be more to learn and understand – and ways to capitalise on that. The products, services and systems that result from that knowledge have a near infinite capacity to grow and develop. That is why our leadership’s stated goal is to transition from a hydrocarbon-based economy to one based on knowledge.

The fuel that powers a knowledge economy is intellectual capital, which the OECD defines as a range of assets that create future benefits, but unlike machines, equipment, vehicles and structures, they do not have a physical or financial embodiment. This form of capital is a key contributor to growth in advanced economies – a fact recognised by our leadership’s announcement of the new National Innovation Strategy. This requires all government entities to reduce their spending by 1 per cent and commit the savings to research and innovation projects.

In economic terms, knowledge-capital that is innovative – meaning it modifies or develops more effective processes, products and ideas – is the most valuable. Innovative products, services or systems have the potential to completely displace the previous status quo to create a whole new system/market.

Just think of how mobile phones completely changed the way we communicate, do business and learn. Their existence has led to thousands of new businesses, technologies and applications being created, with the holders of the patent or rights to this kind of disruptive innovation receiving a secure flow of profits and that helps further development.

Yet how to produce innovative knowledge capital is a global challenge that does not have a simple solution. However, there are two general sources of R&D investment that are key to producing innovation – state funding and private investment.

In the US, research by the National Science Foundation found that the government provided 53 per cent of all basic research funding, compared to 22 per cent in the business sector.

Of the two, state funding is considered to have a more successful track record of producing disruptive innovation, because it tends to have more of a focus on the basic research that produces transformation innovation while private funding looks largely at development research, producing incremental innovation. It is estimated that investments in basic research can result in annual returns of 20 per cent to 60 per cent.

The NSF identified government investment in basic research as creating “the building blocks for innovation by creating a transformative knowledge base upon which the private sector can draw”.

As provost of the Masdar Institute of Science and Technology, it is my earnest hope that the increased R&D spend announced by the leadership will include a significant focus on basic research. This is, after all, considered to be the backbone of advanced higher education.

The OECD has even estimated that increasing public R&D spending can increase multifactor productivity by 0.17 per cent, reflecting the extent to which GDP can grow from a certain level of labour and capital. With increased R&D funding, the Masdar Institute will be able to better pursue its mission of developing the innovative human and intellectual capital required for the UAE’s future knowledge economy. The funding can provide equipment, materials and collaborations to help lead to novel products and services in the competitive high-tech sectors targeted by Masdar Institute, including water desalination, renewable energy, semiconductors, water treatment, energy storage, microgrids and space systems.

Additionally, increasing funding for basic research will give Masdar Institute the chance to achieve new breakthroughs that cannot only provide our country with competitive advantage, but also change the world.

We welcome this visionary move from the UAE's leaders. It is a fitting addition to the many achievements of our Year of Innovation and promises to produce national and economic benefits for years to come. With this decision and others, the UAE will continue to be a leader in the development of intellectual and human capital.

Dr Behjat AlYousuf is the Interim Provost of Masdar Institute of Science and Technology in Abu Dhabi