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| Thursday, 18 November 2004 |
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Knowledge-based economy: The new world economic order by Dr. Mangala De Zoysa - Senior Lecture, Department of Agricultural Economics University of Ruhuna In the 21st century the critical challenges that face human society are, to attain full employment, social development and sustained economic growth in a global economy. Rapid globalization has given rise to both opportunities and threats for sustainable development.
On the economic front, the world economy has become more complex and inter-related. The challenge has become even more complicated for different countries. The economic, social and technological changes are accelerating at a rapid pace, which call for continuous policy and institutional adaptation to meet the new demands and opportunities that are opening in an increasingly integrating global economy. Regional trade groupings at both bilateral and multi-lateral levels are increasing. Hence, the knowledge-based economy, a new world economic order has arisen, which is leading to new agreements on global trade and investment. At present the world economy is significantly more knowledge-based and technology-driven than in past. Knowledge is a key competitive edge of business enterprises and nations facing the competitive world of globalization. The production, dissemination and use of knowledge have become the main driver for enhancing economic growth, job creation, competitiveness and welfare. Therefore, knowledge work is considered as a primary source of wealth creation and competitive advantage. Knowledge work is recognized as the sector of the economy both in terms of economic output and political power. Knowledge work creates new ideas, engages in disseminating knowledge and uses knowledge, mental modelling, decision-making, and communication. The productivity of knowledge work is influenced by factors such as motivation and cognitive skills, which have become critical to such competitive attributes as customization, quality and expansion of scope. Knowledge Society In the "Knowledge Society", the basic economic resource is no longer capital, natural resources or labour but "is and will be knowledge". The knowledge in society is most strongly focused on aspects, which are related to the economy, either as inputs or outcomes. However, the knowledge-based society is wider than purely technological knowledge; for example, it includes cultural, social and managerial knowledge. The whole technology, law, skills, values, etc. form the architecture of the Knowledge Society. Knowledge workers play a central role in the knowledge-based society. They are ever increasing both in numerical strength and job varieties. They are able to convert all industries in the economy to be knowledge intensive, even 'old economy' industries like agriculture and fishing. Information Society Technologies (IST) are critical for the majority of science, research and engineering disciplines of the Knowledge Society. Information and Communication Technologies (ICT) have played a leading role in the process of economic and social change. A large part of the productivity acceleration is from changes in production processes and managerial innovation, often enabled by ICT. On the one hand, the ICT industry has accounted for strong investment and employment growth. However, a stable and open macro-economic environment with effectively functioning markets is required for the diffusion of ICT, fostering innovation, investing in human capital, and stimulating firm creation. Generally, Foreign Direct Investment (FDI) has been recognized as a means of importing innovation. Knowledge-based economy The trends towards knowledge work have been accelerated in the recent past due to the dramatic and rapid advances in science and technology as well as fast pace of economic globalization. The new technology has profoundly impacted the life and work of individuals, society and the economy, and the way in which business and industry are organized and conducted. Hence, many authors link as increasing level of knowledge in society with economic growth. The knowledge-based economy has emerged in the latter part of the 20th century and has been rapidly evolving ever since, bringing visible economic benefits in terms of productivity growth, economic efficiency and wealth-generation opportunities. Over the years, business processes have gradually shifted from mechanistic-based to practice-based and now information-based. Different nations are beginning to re-invent themselves to respond to the new competition. In developed countries, the production, use and distribution of knowledge, as embedded in people and technology have become central in creating wealth and sustaining economic growth. The pace of development of the knowledge-based economy has been, however, very uneven throughout the world, between the countries, and also within the country. All the developed and countries in transition are presently making their maximum effort to become the world's most competitive and dynamic knowledge-based economies, capable of sustainable economic growth with more and better jobs and greater social welfare. With the transition of economies from production-based to knowledge-based the new world of business has more room for creativity than ever before. The basic conditions for a knowledge-based economy to emerge and further progress comprise of: (i) the information system, (ii) the innovation system, (iii) the institutional regime, and (iv) human resources, which are qualitatively distinct from those of the traditional ones. The ICT has built a new symbolic relationship between man, machine and information. Globalization and information technologies are bringing about major restructuring at the national and corporate levels. Increased openness of the world economy leads to increases in trade especially in knowledge-intensive exports, foreign direct investment (FDI) and knowledge transfer, large-scale mergers and acquisitions, massive reduction of expenditure by multinational corporations, shortening product lifecycles, and new knowledge-intensive industries are some examples of new economic landscape. Further, companies are restructuring, downsizing, and relocating to make the best use of global resources and re-engineering job processor to harness new technologies. Preparedness Country-wise, the pace of knowledge-based economy expansion is varied. Hence, the assessments of a country's preparedness provide valuable information to its policy-makers on a relative advancement of their country in the areas that are most critical for the creation of a knowledge-based economy. Such assessments would allow policy-makers to identify and / or adjust a country's strategic priorities, to make sound strategic decisions with regards to institutions, information and innovation systems, and human resources development. In a number of countries, essential conditions and elements of the knowledge-based economy are either missing or at their early stage of development. Even in advanced countries some conditions are critical for ensuring the expansion of the knowledge-based economy. The main conditions are: a) The availability and accessibility of information and communication technologies, an information infrastructure and ICT service provision; b) a regulatory framework, which is conducive to acquisition, generation and effective utilization of knowledge and information; c) The active role of the Government in promoting a community-wide use of the knowledge and information and ensuring their effective utilization and universal access of the population; and d) The availability of scientific capacities and capabilities and their effective and efficient utilization. The overall preparedness of a country in the context of a knowledge economy is evaluated using several measures. Knowledge-based Economy Development Index (KDI) measures how countries progress towards the new economy. The KDI is derived from selected key factors required to drive a knowledge-based economy. Computer infrastructure, infrastructure, education and training as well as research and development and technology are considered as the main factors to derive KDI. In knowledge-based economies the governments take a highly visible role in drawing national roadmaps, which delineate the important roles of the business sector. Despite the population crossing 1,000 million India's share is nearly 5% of world's income. In the 50 years of independence, India has sent satellites, constructed nuclear power plants and has one of the largest pools of skilled manpower in the developing |
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