What influences the transition to knowledge-based economy?


When the Kenya Vision 2030 was launched five years ago, it articulated the country’s strategic intent by painting a future scenario characterised by prosperity and sustained growth. The kind of socio-economic growth envisaged was premised on a number of crucial suppositions, prominent among which was the gradual transition into a knowledge-based economy.

Broadly, a knowledge-based economy is one which is exemplified by the rampant creation, diffusion and use of knowledge. The extent to which this is realised is generally based on the application of research, science, and technology, but also on the policies, institutions, and systems that have implications for the country’s productivity and competitiveness as they affect the overall business climate.

What are the factors that affect a country’s gradual transformation towards a knowledge-based economy and how precisely do they influence that transition?

First, technology and innovation are the bedrock of modern and knowledge-intensive economic activities. Initiating policies that establish a national innovation system; which implies the flow of information and knowledge among government institutions, universities and private enterprises,is one avenue to enhance a culture of continuous innovation. Components of such a system include industry clusters or conglomerations of related industries that are co-located in specific geographical settings and that share knowledge, skills, utilities, and other services; incubation of small and start-up businesses; innovation centres; and manufacturing that relies on high-level technology.

This creates an ecosystem that helps create a critical mass of companies and individual entrepreneurs that will help spur economic growth. These people and enterprises will engage in distinct yet mutually reinforcing activities and processes. Vision 2030 projects that serve as prime examples of such initiatives are the recently launched Konza Technology City and the Special Economic Zones.

Second, the centrality of Research and Development (R&D) cannot be overstated. The R&D budget of most middle-income economies is 1pc and above of the GDP while Kenya’s is about 0.5pc of the GDP. With research, the goal is twofold: to have a robust and effective management of patents and intellectual property rights; and, to encourage industry-relevant and applicable research outputs that will informthe different phases of the country’s development.

Third, a solid human capital base is a pre-condition for industrialisation and development. Indeed, human capital development forms an enduring theme in any discussion about the knowledge-based economy. The acquisition and management of knowledge, skills and expertise is a crucial component of Vision 2030. Consequently, key projects that have been recognised as necessary in enhancing the skills base in the country include the training of engineers, technicians, and various ICT cadres. To that end, the human capital audit to be, undertaken by the government will help highlight areas where there are skill gaps.

Fourth, economic development is a function of the extent to which the overall business climate is competitive. Elements of the business environment include the fundamentals of the economy that need to be sound; infrastructure networks, including ICT infrastructure; the speed with which new businesses are registered and licensed; the generation and transmission of energy, for there can possibly be no industrialisation without reliable and affordable energy supply.

Vision 2030 initiatives such as the construction and expansion of roads and the various energy projects are steps in the right direction while other interventions including special economic zones with their incentives and quick approval of business licensesand SME parks to be, established in the counties will help enterprises.

Finally, the aspiration to move Kenya towards the league of a knowledge-based society requires a robust financial system that is not only able to mobile resources and make start-up capital available to budding entrepreneurs, but can also structure development projects in a way that makes them attractive to potential investors.

(Dr Omar, is the Director, Economic Pillar at the Kenya Vision 2030 Delivery Secretariat. omar@vision2030.go.ke)

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