Every economic decline we face reminds us that mineral resources must not be solely relied upon to achieve a prosperous livelihood. Although the discussion around transitioning from a traditional, resource-based economy to a knowledge based economy has long been on the table, there has not been enough work done. Firstly, the opportunity and capability to acquire, use, share, and advance knowledge must be created. It will allow us to gradually become a nation that produces and uses knowledge, and to have a knowledge economy.
Nevertheless, the current debate and heated discussions are around digging up depletable resources rather than using non-depletable resources, such as knowledge. Why is that? How can we bring about this much needed innovation? These questions were discussed last week during a national conference on innovation, which took place at Government Palace. The conference was attended by senior officials from universities, professors and scholars.
Mongolia now has a science and education system, and dozens of public and private universities that are turning money into knowledge to some extent. However, we are yet to have an innovation system that transforms this knowledge into wealth and value.
FIRST STEP – GIVING FREEDOM TO SCIENTISTS
Today knowledge is globally viewed as an economic resource and a tool for production. The main driving forces of development for the last 20 years were information technology, manufacturing technology, resource technology and health technology. Due to historical advancements in science and technology, the existing driving forces have been supplemented by biotechnology, nanotechnology, and power, culture and model technology. The scientists note that a new, flourishing era full of development opportunities has come before mankind.
What about Mongolia? Where did we get lost in this historical change? Who is seeking out and seizing these opportunities? We could talk about some trivial inventions such as having rainproof covers on our gers or manufacturing certain products, but the real question is around what goods Mongolians have produced that are in strong demand on the international market. If we are turning money into knowledge by certifying diplomas, why can’t we transform that knowledge into money, value and businesses?
This question can be best answered by the fact that, despite lacking capabilities, the government has had too much involvement in economy, society, science and business. The government has been obstructing scientists, scholars and businessmen from turning their knowledge into value. If the government had done everything they promised to do to bring about innovation, Mongolia would have had dozens of new businesses and billionaires born from our science sector.
The authorities passed a law on science and technology in 2006, which defined ‘innovation’ as “a comprehensive activity to turn outcomes of research work into end products to be introduced into market, production and service.” What have they done since passing the law? Why do the Mongolian Academy of Sciences (MAS) and other research institutions still fall short of clients? The answer is that the MAS, research institutions, and universities do not possess the financial right and freedom to sell their research work, set up a business, and start making money. There would be a substantial change if they started making profits, which would then be invested into the institution rather than shared amongst themselves. The performance of the director or the institution should be measured by how much value they create.
The board of directors of research institutions should be given the freedom to select a director by reviewing talent and skill, establishing a labor contract, with the right to dismiss the person or extend his service, based on performance. In order to do so, decision makers must get rid of their mentality of prioritising political party affiliation and serving personal interests.
If this step is taken, management will be wiser and will find a way to sell research works to businesses. In turn, companies will be happy to buy their innovative work and aspire to enter the global market. When that happens, the government should not stand in their way, demanding bribes and enforcing legislations, making the process more difficult.
In 2012, a law on innovation was passed and ‘innovation’ was again defined as a comprehensive activity to turn knowledge into value. However, nothing has changed since. Where is the innovation fund that they said they would establish? Why bother making decisions if they are never implemented? So far, not a single penny has gone into the fund and even though it was discussed that funding would be provided to promising start-up research works, the final decision will come from government officials, not scientists. Those who practice in the profession have a better understanding as to where funding should be invested, and how the investment will yield its return. Yet again, research works without a client are being commissioned.
If this goes on, Mongolia will always be Minegolia – only a supplier of natural resources to foreign countries.
SECOND STEP – CREATING FREE COMPETITION
Mongolia offers a lot of opportunities to make money out of knowledge. Our advantages, emphasised by the participants at the conference on innovation, included natural resources, a strategic location, a good education system, openness of thinking, a capable and young population and a small, dynamic economy that has good maneuvering.
Some participants stressed the importance of making unique products, adding value and focus on small, unoccupied parts of the market. A university director said that the government is not providing any funds and it would be far better to direct at least half of the small and medium enterprises fund to research works. All participants shared a common sentiment that the intellectual property is currently locked without being put into market circulation, thus knowledge is not being turned into value.
The products that have the most potential to be competitive, are software and applications customised for clients in the information technology industry. The next best potentials can be found in the tourism industry, whilst organic products including meat, animal skin, wool, cashmere, and plants also have a good chance. If these products are advertised as coming from Mongolia’s vast steppes and beautiful reserves, they can be unique products branded ‘Made in Mongolia’. Our private sector already has the capability to do this.
Nothing will be done if we wait for the government to do something about it. The private sector should be encouraged to take part in innovation, and be exempt from taxes on its investment in innovative works. Free, transparent competition should be promoted. If politicians, ministers and former officials stopped becoming involved in profitable businesses, everything would be regulated by the market and achieve success. Mongolia will not be able to develop if ministers and officials keep doing business in industries they are in charge of.
Industry clusters are formed only when they are in a good location and there are many companies in one industry with free competition. It not only allows but also prompts businesses to share their knowledge, information and skilled workforce.
Furthermore, each company would have the need to work with universities and research institutions, procure their service, and provide funding. Our science industry must get rid of its communist mentality. A policy to turn knowledge into value and encourage companies to compete on the international market should be pursued.
Supporting fair competition will establish a good synergy between private and public funds. Furthermore, it will create infrastructure elements that support innovation, and improve the environment for preparing a skilled workforce. It will also develop the information network that promotes innovation. The market will naturally demand technology that is environmentally friendly and advanced. The government must provide support by ensuring transparency and swiftness in protecting intellectual property, transfer of technology and use of licenses. In addition, the government should waive tax on investment in shared research centres for multiple companies, open laboratories, and technological incubators.
If we manage to ensure fair competition, Mongolia will be able to have a competitive knowledge economy. Only then, Mongolia can become Mindgolia. Mongolia may be landlocked, but we are not knowledge-locked.
2015.05.20