Vol. 10 No. 1 Tahun 2012

ISSN : 1907-9753

Vol. 10 No. 1 Tahun 2012 COPING WITH LOW R&D INVESTMENT IN INDONESIA: POLICY INSIGHTS FROM SYSTEM DYNAMICS MODEL Erman Aminullah PENGARUH INOVASI TERHADAP EKSPOR DI 105 NEGARA PERIODE 2009-2010 Karlina Sari KEMAMPUAN INOVASI DAN DAYA SAING PERUSAHAAN: RELASINYA DENGAN MODAL ORGANISASI DAN SDM DI INDUSTRI MANUFAKTUR Kusnandar, Nani Grace, Trina Fizzanty, Erman Aminullah, Irene M. Nadhiroh, L.T. Handoko, Nur Laili, Riska Rahmaida, Rini Wijayanti, dan Tri Handayani POLA PENYEBARAN DAN PEMANFAATAN TEKNOLOGI DALAM MENANGGULANGI KEMISKINAN PENDUDUK DI KABUPATEN SUBANG Rachmini Saparita, Savitri Dyah, dan Akmadi Abbas MENINGKATKAN PEMANFAATAN HASIL-HASIL RISET KEBIJAKAN DALAM PROSES PEMBUATAN KEBIJAKAN IPTEK DI INDONESIA (PEMBELAJARAN DARI PEMANFAATAN SCIENCE DALAM PROSES PEMBUATAN KEBIJAKAN LINGKUNGAN HIDUP DI INGGRIS) Anugerah Yuka Asmara

WKIML

Vol. 10

No. 1

Hlm. 1 — 66

Jakarta, Juli 2012

ISSN : 1907-9753

Vol. 10 No. 1 / Juli / 2012

ISSN : 1907-9753

DAFTAR ISI

i

PENGANTAR REDAKSI

ii

Coping with Low R&D Investment in Indonesia: Policy Insights from System Dynamics Model

1 -10

Erman Aminullah

Pengaruh Inovasi Terhadap Ekspor di 105 Negara Periode 2009-2010

11 - 24

Karlina Sari

Kemampuan Inovasi dan Daya Saing Perusahaan: Relasinya dengan Modal Organisasi dan SDM di Industri Manufaktur

25 - 38

Kusnandar, Nani Grace, Trina Fizzanty, Erman Aminullah, Irene M.Nadhiroh, L.T. Handoko, Nur Laili, Rizka Rahmaida, Rini Wijayanti, dan Tri Handayani

Pola Penyebaran dan Pemanfaatan Teknologi Dalam Menanggulangi Kemiskinan Penduduk di Kabupaten Subang

39 - 48

Rachmini Saparita, Savitri Dyah, dan Akmadi Abbas

Meningkatkan Pemanfaatan Hasil-Hasil Riset Kebijakan Dalam Proses Pembuatan Kebijakan Iptek di Indonesia (Pembelajaran dari Proses Pembuatan Kebijakan Lingkungan Hidup di Inggris)

49 - 60

Anugerah Yuka Asmara TENTANG PENULIS

61

INDEKS

63

KETENTUAN PENULISAN

64

ISSN: 1907-9753 © Warta KIML Vol. 10 N0. 1 Tahun 2012, Pusat Penelitian Perkembangan Iptek, LIPI

i

PENGANTAR REDAKSI

M

emasuki pertengahan tahun 2012, Warta KIML Vol. 10 No 1 Juli 2012 hadir dengan lima tulisan di bidang Kebijakan Iptek dan Manajemen Inovasi. Warta kali ini menyajikan tulisan dengan tema yang lebih beragam dari hasil penelitian dan kajian peneliti sosial dan kebijakan iptek.

teknologi yang digunakan, menyebabkan tingkat produktivitas menjadi rendah dan kemiskinan tetap terjadi di masyarakat petani. Peneliti sendiri mengusulkan adanya pelatihan peningkatan ketrampilan pengolahan hasil pertanian dengan kerjasama dengan pemerintah daerah dan penyedia teknologi tepat guna.

Isu pertama yang ditulis oleh Erman Aminullah diangkat sebagai tulisan dalam Warta berbicara mengenai rendahnya Investasi R&D di Indonesia dilihat dari perspektif kebijakan dengan menggunakan Model Sistem Dinamik. Berdasarkan penerapan "human metaphor" untuk membangun model sistem dinamik yang disebut Economic Dynamic Through Innovation (EDTI), tulisan ini menghasilkan dua hal penting yang dibutuhkan Indonesia dalam menghadapi kondisi investasi litbang yang “negligible” yaitu peningkatan kapasitas absorpsi dalam iptek dan inovasi (STI), dan pengkayaan penelitian ilmu hayati untuk pembangunan berkelanjutan.

Berbeda dari beberapa topik sebelumnya, tulisan terakhir dari Warta kali ini menyajikan kajian tentang pemanfaatan hasil-hasil riset kebijakan dalam proses pembuatan kebijakan iptek khususnya kebijakan lingkungan hidup. Berdasarkan studi pembelajaran (lesson learned) dari pengalaman Inggris. Penulis yakni Anugerah Yuka Asmara, berpendapat ada empat hal yang harus diperhatikan dalam proses penyusunan kebijakan iptek, antara lain: (i) peran kuat dari policy makers, (ii) akses yang mudah terhadap hasil penelitian dan penelitinya, (iii) adanya penguatan kapasitas science dan policy, (iv) pengembangan komunitas kebijakan yang cerdas. Lebih dari itu, untuk kondisi di Indonesia penulis menggarisbawahi perlu adanya peran aktif dari Kemenristek dan Dewan Riset Nasional dalam penyusunan kebijakan iptek dan pemanfaatan riset kebijakan.

Tulisan kedua mengambil isu mengenai pengaruh inovasi terhadap ekspor di 105 negara untuk periode 2009 – 2010. Tulisan yang ditulis oleh Karlina Sari ini mengkaji bagaimana pengaruh inovasi terhadap tingkat ekspor dengan menggunakan data panel. Dari analisis kuantitatif hasilnya terkonfirmasi bahwa inovasi berdampak positif terhadap peningkatan ekspor. Tulisan ketiga berbicara mengenai studi yang lebih mikro tentang kemampuan inovasi dan daya saing perusahaan dikaitkan dengan modal intelektual organisasi dan SDM di industri manufaktur. Tulisan ini disampaikan oleh Kusnandar, dkk. Berdasarkan survei inovasi di industri manufaktur, tulisan ini dilengkapi dengan pendekatan ekologi inovasi untuk menghasilkan berbagai alternatif kondisi yang perlu diciptakan dalam meningkatkan kapasitas modal intelektual sebagai driver inovasi.

Demikian sari kata dari redaksi. Semoga tulisan dari hasil penelitian dan kajian dalam Warta Edisi ini bisa bermanfaat untuk pembaca. Jakarta, Juli 2012 Salam Redaksi

Masih terkait dengan topik inovasi, tulisan selanjutnya yang ditulis oleh Rachmini Saparita, dkk berisi kajian pola penyebaran dan pemanfaatan teknologi dalam menanggulangi kemiskinan penduduk di Kabupaten Subang. Tulisan ini merupakan hasil kajian mengenai penyebab rendahnya pemanfaatan teknologi di masyarakat dilihat dari kapasitas masyarakat dan pola penyebaran teknologinya. Hasil penelitian ini menemukan bahwa rendahnya tingkat ii


COPING WITH LOW R&D INVESTMENT IN INDONESIA: POLICY INSIGHTS FROM SYSTEM DYNAMICS MODEL¹ MENGATASI RENDAHNYA INVESTASI LITBANG DI INDONESIA: WAWASAN KEBIJAKAN DARI MODEL SISTEM DINAMIK

Erman Aminullah Center for Science and Technology Development Studies, the Indonesian Institute of Sciences

INFO ARTIKEL Naskah Masuk 7/11/2012 Naskah Direvisi Sejak 9/11/2012 Naskah Diterima 20/11/2012

Keywords : Human metaphor System dynamics STI policy Economic growth Innovation

ABSTRACT This article will discuss the application of human metaphor in building system dynamics model the so called Economic Dynamic Through Innovation (EDTI). The model was applied to explain the scenario of economic dynamic through innovation in Indonesia. The model has explained the Indonesian experiences in economic growth with negligible investment in R&D as well as its future possibilities namely persistent, moderate and optimist scenarios. The model has generated two policy insights to cope with persistenly low R&D investment suggest that Indonesia needs: (i). to increase “absorptive capacity” in Science, Technology and Innovation (STI); and (ii). to advance “life science research for sustainable development”. The needed policy measures to implement the insigths in the realworld are: (i). flexibility of intellectual capital mobility between intellectual pools (in research institutions, universities) and industrial cluster especially in Low and Medium Technology (LMT) industry; (ii). acceleration of innovative learning in the leading LMT industry; (iii). establishment of conducive innovation ecology; and (iv) a strong support to the development of life science-based R&D for sustainable development would be a leverage point for an optimist scenario in the future.

SARI KARANGAN

Kata kunci: Human metaphor Sistem dinamik Kebijakan iptek dan inovasi Pertumbuhan ekonomi Inovasi

Tulisan ini akan mendiskusikan penerapan "human metaphor" dalam membangun model sistem dinamik yang disebut Economic Dynamic Through Innovation (EDTI). Model tersebut digunakan untuk menjelaskan skenario dinamika ekonomi melalui kegiatan inovasi di Indonesia. Model yang dikaji menjelaskan pengalaman Indonesia dalam pertumbuhan ekonomi dengan investasi litbang yang terabaikan dan skenario kemungkinan/ peluangnya di masa depan yang bersifat terus-menerus (persisten), moderate dan optimis. Model tersebut juga mengemukakan dua wawasan kebijakan yang penting untuk menghadapi rendahnya investasi litbang, yaitu Indonesia membutuhkan (i). peningkatan kapasitas absorpsi dalam iptek dan inovasi (STI), dan (ii). pengkayaan penelitian ilmu hayati untuk pembangunan berkelanjutan. Langkah kebijakan yang diperlukan untuk mengimplementasikan kedua hal tersebut antara lain: (i). fleksibilitas dari mobilitas modal intelektual antara sumber-sumber pengetahuan (lembaga litbang, universitas) dan klaster industri khususnya industri berkandungan teknologi rendah dan menengah, (ii). akselerasi pembelajaran inovasi di industri rendah dan menengah yang maju, (iii). pembangunan ekologi inovasi yang kondusif, dan (iv). dukungan kuat terhadap pengembangan litbang berbasis ilmu hayati untuk pembangunan berkelanjutan akan menjadi titik tolak bagi skenario optimis di masa depan. © Warta KIML Vol. 10 N0. 1 Tahun 2012: 1—10

¹ This article essentially introduce the rediscovery of ‘modified’ model as the modification of previous model (Aminullah, 2007), while for the illustrations of modelling was mostly refered to my previous writting (Aminullah, 2011a). * Corresponding Author, Center for Science and Technology Development Studies, the Indonesian Institute of Sciences (PAPPIPTEK-LIPI), Widya Graha Building 8th floor, Jl. Gatot Subroto 10, Jakarta. Email : [email protected]

E. Aminullah (2012)

1. INTRODUCTION The Indonesian economy continued to growth despite its national R&D investment continued to decline for the period of 1990-2010. It was confirmed by GDP that rose 30 fold at nominal value, while the GDP at constant value grew 7% before the crisis and 5% after the crisis of 1997. On the other hand, national R&D intensity (R&D per GDP) felt from 0.13% in 1990 to 0.08% in 2010, whereas the government sector steadly account for around 85% of national R&D expenditure, (Pappiptek-LIPI, 2010). The positive trends of Indonesian economic growth has been irrelevant to be associated with R&D activities in Indonesia, as shown by: i. R&D intensity in private sector was constantly very low that was around 0.025% of GDP in 2010, and; ii. the government R&D activity was around 0.55% of GDP in 2010, it was having little or no meaning due to it rarely produced commercial innovation. These realities confirm that the increase of Indonesian economic capacity to grow came from the outcomes of innovative learning through “informal experiences” and not through “formal scientific activity” (Aminullah, 2011). The previous literatures such as Ricardo (2009), Riyanto (2009), and Aminullah (2011, 2011a, 2012) support that innovation in the real sectors of economy generally as the results of informal experiences, namely: (i).learning through working in the production floor as the learning by doing; (ii). learning through the use of machinery equipment and production systems as the learning by using; (iii). learning through interaction with users, suppliers, parent companies in the design and modification of product and production process as the learning by interacting; (iv) and learning from the succesfull of past experience as a role model for the future as the learning by modelling. Departing from the negligible position of R&D investment as shown by national R&D intensity continued to fall steadily in Indonesia for 30 years, which was falling from 0.13% in 1980 to 0.08% in 2010. First, it can be regarded as an “ordinariness” that means the steadily decline of R&D intensity is a normal phenomenon. The questions are: (i). what situations that has created the normal phenomenon?; (ii). and under the asumption of normal phenomenon continues to exist what would events be in the future?. Second, it can be also viewed as “abnormallity” that means the steadily decline of R&D intensity is a strange phenomenon. The questions are: (i). how to 2

change the situations that has created the strange phenomenon; (ii). and what would events be exist under the policy resolutions of changing the strange phenomenon in the future. The objective of this article is to discuss the application of human metaphor in building system dynamics model, the so called the model of Economic Dynamic Through Innovation (EDTI). The model is essentiallly the rediscovery of ‘modified’ model as the modification of previous model (Aminullah, 2007). The model has explained the scenarios of economic dynamic through innovation, particularly the Indonesian experience of positive economic growth parallel with negligible investment in R&D and its future possibilities. The discussion will also explain the policy insights to cope with constantly low national R&D investment in the Indonesian economy. 2. HUMAN METAPHOR IN DYNAMICS MODELLING 2.1.

SYSTEM

Human metaphor

The approach uses human metaphor in creating system dynamics model. The model explains the ability of complex economic system to evolve in the rapidly changing free market environment. It is a life of surfing at the edge of competition waves and cooperation movements. The secret of surfing on free market waves, which is closer to reality, is the adaptive ability for competition and, simultaneously for cooperation (Beinhocker, 1997; Pascale, 2000). In a free market, the competition is a matter of managing the power to gain self benefit; at the same time, the cooperation is a matter of power to manage the gains for mutual benefit. (Davis, 2004) The competitiveness is revealed by the strength of ‘genetic seed’ in the body of economy as a living system. It would be flourishing into large and healthy economy by interconnecting elements; i. the calory of investment financing; ii. the activities of economy; iii. the nutrition of technological innovation, and; iv) the strength of economic body to evolve in market competition (Witt, 1999; Baryam, 1997). The interaction of those elements was intially was developed into operational model the so-called Economic Dynamics Through Innovation (EDTI) (Aminullah, 2007). The previous model explained the stable economic growth is driven by technology innovation in long run, while in this modified model (2012) the technology innovation is also driven by



Graph 1. Application of human metaphor in developing EDTI model reinvesting the yields of economic activity in R&D investment for technology innnovation. The model explains the continuous enrichment of technology as the nutrition for living economic system to evolve in gaining the benefit of free market competition. This model explains that a large economy with lacking nutrition of technology may become a sick economy because of vulnerability against shock coming from the environment of free market competition, such as experienced by Indonesia during the 1997 economic crisis (Keller, 2002). Thus, innovation policy should be developed and formulated adaptively to softening the pressure of free market competition. Putting the model to work is as follows: first, the strong economy will be achieved by the sufficient calory of investment financing to increase the activities of economic actors. By increasing the economic activities will generate additional financing power (Arthur, 1990). However, such a positive feedback loop is balanced by the following negative feedback loop. The more expansive the economic activities, the fiercer the economic competition to evolve in a free market, the bigger the draining of calory for financing the investment. Second, the healthy economy is achieved by the sufficient nutrition of technological innovation in line with large economic body. The larger the economy,

the bigger the fund to finance the nutrition of technology, the more competitive the economy, again the bigger the financing power for enhancing economic activities. The whole structure of model has the following generic behaviors, namely: (i). a large economy with the sufficient calory of investment financing is attained by focusing largely on physical capital investment. It will bring the feedback of creating a weak economic due to low capital efficiency, then it will effect on producing an unstable economic growth in facing the pressure of economic competition, and; (ii). a large and healthy economy with the sufficient calory of investment financing as well as the nutrition of technological innovation that is achieved by balancing the physical investment and technology innnovation to create a stably high capital efficiency. Then, it will effect to produce a stable economic growth even under the pressure of economic competition. This modified model (2012) has been developed further by creating a postive feedback loop between economic activity and technology innovation. In this model the technology innovation is also driven by reinvesting the yields of economic activity in R&D investment for technology innnovation, beside it is embodied in physical capital investment program in the previous model (2007). See Graph 1.


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2.2.

Model structure and equations

The interconnection among investment financing, technological innovation and economic competitiveness is the process of managing efficiency and expected demand in the economic activity, which can produce a stable growth in the long run. Capital efficiency is determined by capital-output ratio and influenced by technological innovation. The higher the capital-output ratio means the lower capital efficiency, while the more intensive the technological innovation will create the higher capital efficiency. The intensity of technological innovation is determined by the amount of technology investment in investment program. The larger the portion technology investment in the investment program, the higher the capital efficiency and finally the higher the consumption rate for high quality of product in the economy. The focus of physical capital investment that ignoring R&D investment for technology innnovation will depress the production growth due to lower capital efficiency. While, the balance of physical capital investment and technology innnovation will drive the increase of production growth supported by higher capital

efficiency and it will create a stable economic growth in the long run. The indirect linkages between technological innovation and economic activity in the model are bridged by: i. demand augmentation as the consumers preferences to consume for high quality of products, and; ii. the effect of economic productivity on technology innovation which is reflecting the patterns of absorptive capacity in digesting technology by R&D investment, the concept was incorporated in this modified model (2012). The system dynamics model equations are as follows: See Box 1. 3. PERSISTENT SCENARIO The persistent story of low R&D investment is regarded as a normal phenomenon that the story of the past can continue in the future. The following section will explain: (i). the determinant factors that has created the ordinariness of national R&D intensity fell persistently for 30 years (1980-2010); and, (ii). the persistent scenario would be in the future under the assumption of normal phenomenon will continue to exist in the way forward.

Box 1. The system dynamics model equations 4



3.1.

Determinant factors

There are three situations that have formed the persistent story of low R&D investment in Indonesia, namely: low private R&D investment, large portion of Low and Medium Technology (LMT) industry, and lack of the government attention. First, the private sector is generally not interested in reinvesting their production yields for R&D investment. The simulation results show that, in the period of 1990-2010 the increase of production did not effect to the increase of R&D investment. The objective of investment in private sector normally for productivity improvement through capacity enhancement, business expansion, distribution network and sales promotion those less need, even without, the support of R&D facility. In 2010, the industrial R&D expenditure was only 0.013 % of GDP or it was about US$ 90 million of the Indonesian GDP amount to US$ 650 billion. Second, the industrial sector in Indonesia is dominated by LMT industry. In general, industry that produces low technology products does not require R&D facility. In the period of 1998-2007, approximately 60-65% of industries produced low technology products, such as food products, beverages, shoes, textile products and articles of textiles, leather and leather articles, wood and paper products, rubber and plastic articles, metal and metal goods. Furthermore, around 20-25% of industries that produced medium technology products, only small portion of them performs R&D activity with low intensity. Even in the medium technology industry such as automotive industry did not do their own R&D as the source of innovation, because their R&D activities are generally performed by its parent company abroad. Third, the government attention towards the development of S&T has constantly decreased. It has been shown by putting S&T in the low priority of government budget since 1980. In the 1980s, S&T budget was about 2.5% of total government budget, furthermore in 1990s it dropped to around 0.5% then since the 2000s S&T budget has remained approximately 0.5% of total government budget. The continuous decline of the ever low S&T budget parallel with positive economic growth seems to be atypical phenomenon of Indonesia. For the comparison, the high attention on S&T has paired with high economic growth in China, with S&T budget amount to 4-5% of total government budget over last 30 years. (Zong-lay, 2010)

3.2.

Persistent scenario

The persistent story of low R&D investment would continue if the above three situations are enduring to the future. The possible economic dynamic and innovation are as follows. The average five years growth of national R&D expenditure would be 14%, 19%, and 8% respectively for the period of (2010-2015), (2020 -2025) and (2030-2035). Under this normal growth, the estimated value of R&D expenditure would amount to Rp 12 trillion (2015), Rp 133 trillion (2025) and Rp 383 trillion in 2035. Thus, the national R&D intensity would rise slowly from 0.08% of GDP in 2010 to 0.09% (2015), 0.3% (2025) and 0.38% of GDP in 2035. See Table 1. Furthermore, the average five years growth of private R&D expenditure would be 16%, 22%, and 11% respectively for the period of (20102015), (2020-2025) and (2030-2035). Under this growth, the estimated value of private R&D expenditure would amount to Rp 2.2 trillion (2015), Rp 12.5 trillion (2025) and Rp 129.2 trillion in 2035. Thus, the share of private R&D in national R&D expenditure would rise from 16% in 2010 to 18% (2015), 24% (2025) and 0.34% of national R&D expenditure in 2035. Despite the government and private attentions to STI remain as low as the prsesent situation, the economy would still grow significantly in the coming years. GDP per capita would increase from US$ 3,000 (2010) towards US$ 17,000 (2025) and around US$ 35,000 in 2035. At that time, Indonesia could be grouped as a newly developed country with estimated GDP amount to US$ 5,000 billion in 2025 snd US$ 11,000 billion in 2035. The source of economic growth would mainly come from large private consumption (62-64%) and slightly increase in export and others (16-17%). The scenario of continuous economic growth parallel with steadly negligible investment in R&D as it was shown by R&D intensity still less 0.5% of GDP; it would create the future possibility the so called large but unhealthy economy. A large size of economic capacity in term of GDP parallel with small innovation capacity in term of R&D intensity is vulnerable to crisis. This claim is derived from EDTI model’s explanation: even though the body (of economy) is large, but it lacks of nutrition (in form of technology innovation), the large body would be susceptible to diseases (in the forms of imbalance/inequality and crisis).


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Table 1. The simulation of R&D and Economic growth in Indonesia Persistent scenario (1990-2035)

Source: Simulation of EDTI model, 2012. Average Mean Error <5% (1990-2010)

4. ALTERNATIVE SCENARIOS The following section will discuss alternative scenarios based on policy interventions in STI needed by Indonesia, especially the policy resolutions to cope with the steadily declining of R&D intensity. There are two scenarios of events would be possible under the policy resolutions of changing the situations that has created the low R&D intensity in Indonesia. 4.1.

Moderate scenario

On the basis of seeing the long story of low investment in R&D as an abnormal phenomenon, it means that the corrective measures are needed to change the situations, which created the strange phenomenon in the past. Pushing the private R&D activity is an alternative solution to increase R&D investment in the future. It means that industries should reinvest its production gains into R&D activity that was negligible in 6

the past. By considering the facts that most domestic industrial establishment was LMT industry. In order to encourage private R&D investment, the LMT industries need to have enough absorptive capacity in digesting the technology through R&D activity. It is therefore the ways to increase the contribution of private R&D in the future, the LMT industries need to multiply its absoprtive capacity. In order to apply the concept of multiplying absorptive capacity, the LMT should have sufficient intellectual capital to proceed technological learning through R&D activity in a conducive innovation environment. Under the constraint of lacking intelectual capital in LMT industry, the flexibility of intelectual capital mobility from public research institutions/ universities to LMT industry and vice versa is an option. Furthermore, technological learning through R&D should be pushed in the leading LMT industries to accelerate the regional



development. Then, establishment of conducive innovation climate by various incentives that will support the multiplying absorptive capacity should be applied. First, the flexibility of intelectual capital mobility from public research institution/ universities to LMT industry and vice versa. It will facilitate the knowledge exchange between them as a complimentary interaction. The goverment research institutions/universities will fill the lacking expertises for innovation based on R&D in LMT industries. On the other hand, LMT industries will share its experiences with government research institutions/universities on the real world of industrial complexity. The government sector will remain relevant to real world of industry and LMT indutries would evolve and develop with the support of R&D activity. So that, interaction between the two actors would mutually stimulate efficient and effective innovation network. Furthermore, in order to accelerate R&D activity, the domestic LMT industries should be pushed to become global LMT industry by providing fiscal and financial incentives. The global LMT industries will evolve in the fierce global competition by continuously maintaining its inovative activity. Second, upgrading the leading SMEs learning capacity in every districts of Indonesia. The initiative should facilitate the shifting of innovation orientation in the leading SMEs, from learning by informal experience in doing production activities towards learning from formal R&D results, which is transferred from government research institutions/universities. Interaction between the leading SMEs and government research institutions/universities should be a complementary relationship. Government R&D institution as the provider of inovation based on R&D for SMEs, on the other hand, innovation based on learning by experience in SMEs becomes the source of innovative ideas for government R&D institution to strengthen its formal R&D activity. Every district governments should facilitate to increase the production of innovative products from leading SMEs by involving thousands of cooperative units of economic activity in local goverment agencies. Furthermore, the district government should facilitate the distribution expansion of the innovative products of leading SMEs by inovolving the network of the Indonesian Districts Governmental Association (APKASI). Through such measures of “scaling up” the production and “scaling out” the distribution, the leading innovative SMEs will shift towards the

leading inovative MLEs (Medium and Large Enterprises) based on R&D in every districts. It is also the way of promoting the inclusive growth for national economy in the long run. Third, the establishment of conducive environment of innovation. The availability of competent scientific institution, efficient economic institution, reliable social instittution and supportive regulatory environment will facilitate the multiplying absortive capacity in real sectors of economy. The competent scientific institution should have sufficiently qualified scientists and engineers, adequate R&D facilities, profesional R&D management, and attractive incentives structure (recognition, career advancement, and financial compensation for scientist and engineers). The efficient economic institution should have good and clean governannce in managing economic affairs. The reliable social institutution should have social order and credible law enforcement in society. Then, the supportive regulatory environment should allow knowledge sharing through scientist exchange program between public and private sectors for scientific advancement, and; goverment assistance for hiring external expert should be facilitated to assist private sectors to upgrade innovation capacity. Those three mesures namely: i. the flexibility of intelectual capital mobility; ii. the upgrading of leading SMEs learning capacity in every disticts, and; iii. the establishment of conducive environment of innovation are expected to multiply absorptive capacity in STI. The national R&D intensity would reach 0.8% of GDP (2025), 1% of GDP (2030), and 1.2% of GDP by 2035. The increase of private R&D would happen after the year 2015 that the private R&D share would reach to 74% in 2025 and 81% in 2035. Based on increasing the government and private attentions to STI that would bring the economy to grow in moderate scenario in the future. GDP per capita would increase from US$ 3,000 (2010) towards US$ 19,000 (2025) and around US$ 40,000 in 2035. At that time, the Indonesian GDP would amount to US$ 5,400 billion in 2025 and US$ 12,700 billion in 2035. The source of economic growth would remain mainly come from large private consumption (61-65%) and slightly increase in export and others (16-18%) in the future. See Table 2 4.2. Optimist scenario In line with the above multiplying absorptive capacity, Indonesia will be regarded to develop


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Table 2. The simulation of R&D and Economic growth in Indonesia Moderate scenario (1990-2035)


R&D capacity in life science–based industry in the future. The promotion of life science R&D will have two advantages. First, the utilization of vast biological diversity in land and sea is the Indonesian comparative advantage, in term of R&D based on unique natural wealth. Second, life science R&D park (CSC) currently managed by the Indonesian institute of Sciences (LIPI) will develop towards progressive S&T infrastructure to support the development of leading industry in the future. The development of life science based industry for the future will not create a totally new industry, but by developing the existing industry that has strong potency to develop further. It is therefore, the life science R&D program and its implementation need to cooperate with related industries such as biomedical and biotechnology industries, etc. The government need to encourage publicprivate partnership through joint research by providing the long term-research grant for 5-10

8

years in sufficient quantity (rather than small research grant) to achieve the significant results. By taking the steps of developing life sciencebased industry would bring the incerase of R&D expenditure in life science based industries after 10 years in the future. The step is expected to increase the private R&D expenditure after year of 2025. The private R&D expenditure will reach 0.8% of GDP in 2030 and 1% of GDP in 2035. The increase of private attentions to STI will bring the economy to grow in optimist scenario in the future. GDP per capita would increase from US$ 3,000 (2010) towards US$ 19,000 (2025) and around US$ 40,000 in 2035. At that time, the Indonesia GDP would amount to US$ 5,400 billion in 2025 and US$ 12,700 billion in 2035. The sources of economic growth would remain mainly come from large private consumption (61-65%) and slightly increase in export and others (16-18%) in the future. See Table 3.



Table 3. The simulation of R&D and Economic growth in Indonesia Optimist scenario (1990-2035)


5. POLICY INSIGHTS The constantly low investment in national R&D was empirically caused by three situations: private R&D investment was very low; large portion of industries was low and medium technology (LMT) industries that did not require R&D, and; government attention to support the development of STI was constantly declining. If these situations persist to the future, a persistent scenario would occur. Starting from year 2025, Indonesia could be grouped as a newly developed economies and unfortunately with R&D intensity still less than 0.5% of GDP; it is called large but unhealthy economy. The policy insights from model simulation suggest that Indonesia needs to apply the concept of “multiplying absorptive capacity” in science technology and innovation (STI. governance. The results of this initiative would create a moderate scenario. Furthermore, an optimist

scenario is driven by multiplying absorptive capacity and levered by the support of “life science research for sustainable development”. By applying these policy resolutions, starting from 2025, Indonesia could be grouped as a developed economies with R&D intensity more than 1% of GDP; it is called large and healthy economy. Policy measures needed to govern the multiplying absorptive capacity in STI are: i. flexibility of intellectual capital mobility between intellectual pools (in research institutions, universities) and industrial cluster especially LMT industry; ii. accelleration of innovative learning in the leading LMT industry; and iii. establishment of conducive innovation ecology; Then, a strong support to the development of life science-based R&D for sustainable development would be a leverage for Indonesia to see an optimist scenario in the future.


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6. CONCLUSION The model of Economic Dynamic Through Innovation (EDTI) is usefull to explain the Indonesian experiences in economic growth with negligible investment in R&D as well as its future possibilities. The model has generated policy insights to cope with constantly low R&D investment in Indonesia. REFERENCE Aminullah, E. 2007. Long-term Forecasting of Technology and Economic Growth in Indonesia. Asian Journal of Technology Innovation 15 No.1, 1-20. Aminullah, E. and Ricardi, A. 2011. The role of Academia as External Resource of Innovation for Automotive Industry in Indonesia. Research Paper in GRIPS-ERIA Workshop, Tokyo, GRIPS. Aminullah, E. 2011a. Dynamic of Research Fund and Longterm Economic Growth in Indonesia.” Keynotes address in National Science and Technology Forum. Jakarta: the Indonesian Institute of Sciences (LIPI), (Proceedings, in Indonesian). Aminullah, E., P. Dian, M.N. Irene and C.S. Laksani. 2012. Wiring Innovation Networks: How Networks Upgrade Innovation Capacity: the Case Study of Capital Goods Industry in Indonesia. Research Paper in ERIA/IDEJETRO Workshop, Bangkok, JETRO. Arthur, W.B.; S.N. Durlauf and D.A. Lane (Ed.) . 1996. The Economy as an Evolving Complex System II. SantaFe: SanteFe Institute. Bar-Yam, Y. 1997. Dynamics of Complex Systems. Cambridge: MA: Perseus. Beinhocker, E. D. 1997. Strategy at the Edge of Chaos’ in The McKinsey quarterly No.1 . Central Bureau of Statistics (BPS). 2010. National Income: Indonesia. Jakarta: BPS, (and the back years). Coordinating Ministry for Economic Affairs. 2011. Master Plan for Ascceleration and Expansion of Indonesian Economic Deveopment (MP3EI). Jakarta: Coordinating ministry for Economic Affairs, (in Indonesian). Cowan, G. D. Pines and D. Meltzer (Ed.). 1999. Complexity: Metaphors, Models and Reality. Colorado: Westview Press. Davis, M. (ed.). 2004. Toward A New literacy of Cooperation in Business: Managing Dilemmas in the 21th Century. Institute for the Future, Technology Horizons Programs, Report SR-851-A.

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