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Openness to trade keys to trigger innovation

Update: June, 01/2017 - 10:53
John Drummond.

Innovation is a driver of economic growth, especially in the context of the fourth Industrial Revolution, known as Revolution 4.0.

Viet Nam News reporter Mai Hương speaks with John Drummond, Head of Trade in Services Division, Trade and Agriculture Directorate of the Organisation for Economic Co-operation and Development (OECD) about trade and innovation.

In the era of innovation-led economic growth, how can a developing country with lower technology development like Việt Nam benefit from this trend?

The OECD innovation strategy has thought about how innovation can contribute to economic growth. One of the lessons of OECD on innovation is a framework condition for innovation which facilitates openness for international trade and investment.

Việt Nam has set a good example in terms of participation in the Trans-Pacific Partnership (TPP) and embracing trade-driven growth which has contributed to innovation in the country.

Việt Nam’s leadership of the APEC Forum and the decision by the Việt Nam APEC presidency to focus attention on the relationship between trade and innovation is very important. In 2017, there is increasing pressure in multilateral trading systems to direct importance among policymakers to the benefits of open markets, innovation and creating jobs and economic growth.

Free trade promotes technology transfer but this process is limited in Việt Nam. How can trade policy trigger innovation in developing countries?

One important concept is how to find an innovative way to commercialise innovation and another one is recognising the importance of services.

Services can be very important for a country like Việt Nam because services contribute a lot to manufacturing competitiveness. Services are also important for participating in the digital economy. Digital trade and the digital economy are important for small- and medium-sized enterprises to participate in global value chains.

Financial services and professional services are also very important to entrepreneurship. Countries open to international competition in services tend to have a higher rate of business startups, which is associated with innovation.

What are key elements for businesses in developing countries to raise their competitiveness in the context of Revolution 4.0?

I mention again the importance of services. For some years, developing countries have thought that services trade is mostly for developed countries. But in recent years, China and other developing countries have focused on services-led growth.

Services are rising proportional in gross domestic products (GDP), even in developing and emerging economies. They create jobs and create conditions for competition. Openness in services can help developing countries advance growth and their participation in global economy and innovation in terms of technology.

In terms of competition, there’s strong link between manufacturing and services. For the manufacturing export to be competitive, you need to have design, engineering and professional services. Transportation services (logistics) are also very important to manufacturing. Developing countries can improve their competitiveness by developing services.

At the same time, the OECD does some work to measure value-added trade in global value chains. You can see that of the value of manufacturing export, 25-30 per cent comes from services inputs. Automobile and electronics export items depend on services. That’s why OECD is systematic in proving that to develop the competitiveness of the manufacturing sector and innovation, one important solution is to focus on services.

What should the Vietnamese government do to support micro-, small- and medium-sized businesses in promoting innovation and competitiveness?

Creating strong framework conditions in terms of intellectual property rights, openness to trade and investment in goods and services will lay good foundation for innovation.

Việt Nam is on a good direction in terms of policies and leadership shown in APEC by having a focus on trade and innovation. – VNS

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