Passage 3

📖 READING PASSAGE 3: The Rise of East Asian Knowledge Economies

The global economy is currently experiencing a transition from being heavily focused on labour and capital, which characterised the industrial economy of the 20th century, to one based on knowledge and information. The successes of economies in the new millennium can be seen as being dependent on developing know-what, know-why, know-how and know-who. In other words, knowing the facts, principles, skills and people who can provide innovation will ultimately provide an economy with its competitive edge. Interest in the development of knowledge economies has grown ever since the advent of the Internet, globalisation and the fact that over 70 per cent of the workforce in developed economies is information workers.

While the US has been the leader in the field of scientific discovery over the past half a century, significant gains have been made by East Asian countries. The 21st century may very well see the current front-runner be surpassed by the likes of China, Japan and South Korea or other emerging East Asian economies. When comparing the key economic benchmarks in 4 essential areas, namely education, knowledge creation, Research & Development (R&D) and high tech economies, it is clear that although the US is still ahead of the pack in research and discovery, its advantage is rapidly eroding.

In terms of education, East Asian countries outperform or are significantly narrowing the gap with their US counterparts. South Korea awards 11 Science and Engineering (S&E) undergraduate degrees per 100 degrees conferred, Japan 8 per 100 while the US only awards 5.7 per 100. To put that into numbers, Asian universities saw 1.2 million S&E graduates in 2000, whereas the US saw less than half of that number and European institutions (including Eastern Europe and Russia) accounted for 850,000 of such degrees.

Interestingly, there are more foreign students graduating in S&E in the US than local students, but the number of Asian students studying in the US is spiralling downward. The 1990s saw Chinese and South Korean students preferring to stay at home to obtain their PhD in S&E fields. There were, for instance, over 3 times as many Chinese and South Korean students receiving such certification in their homeland as in the US. Even more surprising is the fact that post-doctoral positions in academic institutions in the US were more likely to be held by foreign-born scholars.

Knowledge creation has seen exponential growth in East Asian countries. The number of published S&E articles increased by 492 per cent between 1998 and 2001 in China, South Korea and Singapore. Japan's publishing shot up by 67 per cent while America's published works increased by a mere 13 per cent. Over the same period, patent applications by these East Asian countries experienced a similar boom with a 759 per cent improvement between 1998 and 2001. The US, however, only enjoyed a 116 per cent increase.

East Asian countries are also placing increasing importance on R&D, another key economic indicator, by boosting their gross R&D investments by 140 per cent from 1995 to 2001. During the same period, the US only strengthened its own investments by 34 per cent. China is particularly focused on this endeavour by doubling the percentage of its Gross Domestic Product (GDP) invested in R&D. European businesses only increased spending by 0.02 per cent while US spending declined by 0.13 per cent. 20 per cent of China's science budget will be dedicated to this field over the next 10 years, in stark contrast with the US, which has consistently reduced spending as a percentage of GDP in this area over the past 30 years.

China, India, Singapore and South Korea accounted for 25 per cent of high tech exports in 2001, up from 7 per cent in 1980. The US and Europe, on the other hand, saw exports diminish by 13 per cent and 9 per cent respectively during the same period. The US high tech output doubled between 1998 and 2001; however, China's output grew eight-fold. China was also the big winner in Foreign Direct Investment (FDI) in 2003 having $53.5 billion flow into the economy whereas the US only received $30 billion.

Businesses and governments need to understand the implications of these changes if they are to remain competitive over the next century. For private industry, the focus should no longer be on jobs created but rather looking to future knowledge-based industries and building the infrastructure for sustainable knowledge enhancement. The public sector is well-advised to take heed of these warnings by developing knowledge management programmes and appointing Chief Knowledge Officers (CKOs) to ensure a coordinated effort. The major obstacle to overcome for these two parties is their inability to measure the value of knowledge and information using traditional accounting methods, which encourages a reluctance to embrace a knowledge-based economy.