Planning for Change

by **Cals** Mon 02 Nov 2015, 03:59

Planning for Change

BY ANDREW SHENG

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Development plan: Pedestrians holding umbrellas walk past buildings illuminated at night in Shanghai, China. The country will be discussing its forthcoming 13th Five Year Plan. – Bloomberg

THIS week, under beautiful clear blue skies in Beijing, the Fifth Plenum in China is being held to discuss the forthcoming 13th Five Year Plan for the period 2016 to 2020.
It is a critical five years in which China seeks to break through the middle-income barrier and seek advanced country status (an income per capita of more US$13,000) by 2020-2024.
By coincidence, India has its own 12th Year Plan (2012-2016) but Prime Minister Narendra Modi abolished the old Planning Commission and replaced it with the NITI Aayog or National Institute for Transforming India, a think tank for the Indian Government.
The NITI Aayog is also different from the Planning Commission in that it comprises members from the regional governments, so that it has good feedback from the states within the Indian Union on developmental issues.
In China, each province and city has its own five-year plan that fits into national planning indicators, coordinated through the National Development and Reform Commission, a powerful arm of the State Council.
Malaysia will also be launching its 11th Five Year Plan (2016-2020) to transform the nation into advanced country status by 2020.
The Chinese 13th Five Year Plan will have huge implications for the global economy because China today accounts for roughly one third of global growth. Thus, any slowdown in Chinese growth would impact on commodity prices and global trade, particularly for emerging market commodity producers.
There are suggestions that the Chinese planners are shifting the target GDP growth rate to around 6 to 7% per annum, rather than the average of 8% achieved during the current 12th Five Year Plan.
If so, during this period, the Indian economy is likely to grow faster than the Chinese economy, although its current scale is still smaller.
All three countries share three common policy challenges.
The first is that rapid urbanisation will be both an opportunity and a challenge. With Asian urbanisation moving past the 50% of population point, urban centres can either become smart cities of innovation and creativity, or slums that pollute, congest and waste energy and resources.
The second is the rapid rise of the service sector, also creating half the value added and certainly the fastest areas in job creation. How to improve the quality of service sector job creation is a major challenge.
The third is the serious attention that all three countries are paying towards innovation as a driver of growth.
McKinsey has just produced an eye-opening report on Innovation in China, suggesting that the Chinese have comparative advantages in two out of four areas of innovation, namely customer-focused and efficiency-driven aspects.
On the other hand, there is considerable catch-up needed in science-based and engineering-based innovation compared with advanced economies like Japan and Germany.
McKinsey estimated that properly nurtured, innovation could contribute up to 2 to 3% to China’s gross domestic product (GDP) growth by 2025, equivalent to 35-50% of total GDP growth.
Using a different approach and instead of looking for development in the traditional sectors of agriculture, industry and services, NITI recognised that the common element that can kickstart growth in India is innovation and entrepreneurship.
In order to produce up to 115 million non-farm jobs in the next decade, and recognising that planners cannot pick the winners for India, NITI sought to uplift the entrepreneurship and innovation game. NITI’s expert group produced an AIM (Atal Innovation Mission) pyramid, which identifies a short, medium and long-term framework to boost innovation and entrepreneurship to generate faster growth.
At the top of the pyramid, there are quick wins such as competition with prizes for innovative ideas and startups; encouraging companies to use universities for research and development; improving business incubators and fostering a national entrepreneurship and innovation movement.
In the middle and over the next five to seven years, the report suggests using digital platforms to encourage innovation, reforming the educational system to encourage creativity and upskilling workers, improving the ease of doing business, and strengthening intellectual property rights.
The long game involves generational changes to the cultural biases against entrepreneurship, embedding entrepreneurship within the government’s economic and social programmes, and fostering a culture of coordination and collaboration between government and entrepreneurs, including tying entrepreneurship with the social inclusion agenda.
The Indian experiment is refreshing because it draws the expertise from the market to drive innovation and entrepreneurship, recognising that public servants and academics do not have first-hand experience in actually making business work.
The common challenge that India, China and Malaysia faces is that rural people who move to the cities do not possess the knowledge and skills for innovation and entrepreneurship that city dwellers have from living in packed conditions. More often than not, the rural and urban divide defines the inequality in income and wealth.
You cannot expect a rice farmer to become an Internet startup overnight. Hence, changing the culture of farming into a culture of innovation and entrepreneurship is a generational change. It cannot be done overnight.
Even cities do not find it that easy to innovate and change.
Although Hong Kong does not have a tradition of five-year planning, it accepts that as part of China, the Special Administrative Region (SAR) must learn to thrive within the framework of China’s five year plans.
The SAR Government knows that Hong Kong’s competitive future depends on its ability to lift the game in science and technology, but so far it has not been possible to get the proposed Innovation and Science Bureau established.
In short, plans are only as good as their implementation. In the 20th century, the development mindset was all about investments in hardware. But in the 21st century, advancement is largely in software, because software is all about the quality of people and the quality in people.
In other words, the old way of development was investment in things, but the New Economy is about investing in people. If you want a family to succeed, do you invest in the house or the children?
If you want the nation to succeed, invest in the next generation.
Andrew Sheng writes on global issues from an Asian perspective.