M Jamsaz, Ph D, Consultant Economist
M Jamsaz, Ph D, Consultant Economist

Knowledge-Based Economy

In developed countries a great deal of importance is attached to R&D and enormous expenses are met and budgets allocated to this area, costs that amount to 3.0 to 3.5% of each of those countries' GDP. But in countries like Iran expenditures on R&D are relatively insignifi cant, below 0.5% in our country, and even this is entirely met by the state: the private sector in this country does not seem to be concerned with R&D. But our private sector has been shrinking in size alarmingly, in any case, ever since the Islamic Revolution took over the control of the country.

However, for some years now Iranian authorities seem to pay heed to our economists' cries for a strong private sector and a small government that keeps its interventions in the economy and trade to the minimum necessary as is the situation in most rapidly developing countries. This tendency is quite evident in Iran's Fourth Socio-Economic and Cultural Development Plan which aims to achieve economic, scientifi c, social and cultural development with fairness and justice in its dealings with the outside world.

Illustration To be effective, a development plan must deal adequately with R&D in addition to an educational infrastructure, and careful planning of academic programs in line with economic, industrial, social and legislative needs. R&D is necessary for discovering the appropriate modern methods of production based on adequate knowledge and specialization. Furthermore, universities must cooperate closely with the industry, put their knowledge at the service of the industry and at the same time learn from it.

Modernization of production processes and techniques in response to social, cultural and economic needs, is an absolutely necessary part of any development process, and it can only be achieved through R&D and scientifi c studies on the methods that are used in developed countries.

Just as fi nancial investment is required, so is investment of knowledge in a knowledgebased economy. In a research that was carried out by OECD (Organization for Economic Cooperation and Development) countries in October 1999, knowledge-based economy was identifi ed as one that relies on high tech industries such the computers industry, the telecommunications industry or other industries that demand high levels of knowledge and skill. Therefore, investment in R&D and software is considered to be as important as investment in education. This means that universities and other centers of higher education must accept to play an essential role in development and lay the proper foundations for development of sciences.

In the global economy, capital and technology move rapidly and goods and products are produced cheaply and of highest quality. The knowledge-based economy depends on intangible assets such as human skill and knowledge, effectiveness, productivity and copyrights which are factors that greatly improve companies and raise the value of their shares. Today, the share values of companies are not determined by their fi nancial and tangible assets but by assets that are not visible. The knowledge-based economy depends on explorations into modern production processes and methods that are productive and create competitive advantages.

But what are the elements that make a development strategy? These are undoubtedly skill, thought, and specialty, i.e. human assets which Amartiasen considers as the key to development projects. The presence of these assets alongside physical and natural assets make up national assets. These human assets are so effective that many countries - notably Japan - have made up for the lack of physical and natural assets or resources through them.

Illustration The development of human assets depends on the empowerment of human beings, according to Amartiasen, which can only be possible through investment on human beings, i.e. individuals. Lack of proper relationships between the educational system on the one hand, and production and employment on the other, has rendered the humans unproductive, turning them into a system that is simply a consuming body. Thus it is that the gifted young men and women in our country feel useless; and hence the brain-drain that is constantly on the rise. At the same time individual rights and copyrights are today considered as vital for development because they encourage innovation and hard work while the absence of these rights seriously discourage them.

So, we see that a knowledgebased economy and development demand considerable structural changes as well as the institutionalization of culture, economy, education and legislation. So long as the human being is not recognized as the primary aim of development and human resources are not properly developed, a knowledge-based economy will not come to exist and therefore its major aim - the enhancement of the quality of life - will not materialize.

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