Nepali Development Practices Humiliates R&D!

Research and Development section, commonly known as R&D or RD, is very important in an organization and stands as backbone to the organization. May it be in the engineering sector, medical sector, communication sector or the socio-economic sector, R&D is very important by its kind only. After few lines of praise for R&D, people must be eager enough to know what R&D is and what does it do?

Fig: Research and Development Expenditure (% of GDP)                                                                     Data Source:World Bank 

Initially, the concept of R&D was only limited to the Science and Technology but it has not been long that academicians, scholars and professionals have known the importance of R&D in other sectors of the work- management, social sciences, etc.

Frascati Manual (OECD 2002) defines R&D as “Research and experimental Development (R&D) comprise creative work undertaken on a systematic basis in order to increase the stock of knowledge to devise new application”. As rightly mentioned above, the R&D activities definitely help to increase the knowledge-base required to develop the new application but we should not forget mentioning the fact that they also help develop platforms for not just the new products but also new processes and services. The wide domain of the R&D could not be incorporated in the above mentioned definition, therefore the other dimension of the R&D suggests that it not only facilitates the organizational or the corporate side, instead it also capacitates the people involved and R&D establishes itself as an eminent culture in the organizations. No wonder, when it is about developing new sets of standardized products, processes and services, R&D, in many cases, keeps itself very far from the corporate objectives like immediate profits and overnight improvements in business situations. Researches can either be basic, applied, qualitative, quantitative, etc. but their outcomes show sustainable effects.

Not getting biased with the sector for the R&D - May it be technological, management or social sector; the importance of R&D as a whole always gets justified. It is very expensive and uninteresting business for the private sector to initiate the R&D activities in the situation where government does not show much of the interest. In the above figure, we can find the line chart of the R&D expenses approved in the Budget of the respective countries. Japan has shown remarkable results, it has usually spent more than 3 percent of its annual GDP. And this is shown by their perfect economic, social and technological development achieved after getting shattered during the Second World War. After Japan, comes the United States of America which has its R&D expenditure more than 2.5 percent of the annual GDP. This expenditure is the asset that has still saved USA from the scrap that it could receive during the financial crisis of 2007/2008. Currently, the data on R&D expense of USA is not available which can be due to the economic unrest going on in the country. The graph also depicts the R&D expense of Brazil, India, China, Canada, Mexico, UK, France and Nepal. In most of the cases, the growth of the countries can be related to their expense done in R&D but it is very discouraging and frustrating to see that Nepal has constantly been spending nil on its R&D and expects economic growth upto 7 percent. Is it a joke?

The development dream does not end here for Nepal. Nepal aims of higher growth rates in absence of proper R & D on project identification, priorities and implementation. The government has even closed eyes regarding the global trend of the importance of R&D expenses on development or the economic growth rates. A simple correlation carried out between the R&D Expenditures of the countries and the economic growth looks like this:

S. No.	Country	Coefficient of Correlation
1	Brazil	0.9920
2	Canada	0.9203
3	China	0.9847
4	France	0.9627
5	India	0.6587
6	Japan	0.9710
7	Mexico	1.0000
8	United Kingdom	0.9693
9	United States	0.9719
10	Nepal	-

Data Source:World Bank

I understand people might have several arguments to comment in finding the correlation like this but other things remaining constant (ceteris paribus), if the economic growth and the R&D Expenses are correlated, this is what we get. Looking into the vacant correlation coefficient for Nepal, each Nepali would feel bad but this unfortunately is the fact and we have to accept this. In case of India, the correlation coefficient looks quite low because of the socio-political tussles in the country. Besides that, the recent economic turmoil in the country has also decreased the specific sectoral budget due to which the coefficient might not seem encouraging. In United States, though the correlation coefficient looks higher, the budget allocation for the R&D has significantly gone down and the growth rate has followed. The US economy is very hopeful to revive soon. China usually has been criticized as being communist country but the economic freedom in the country is definitely commendable which has led to the growth of R&D expenses in the country and follows the economic growth rate. China is also one big example to reflect the importance of R&D in the economic growth of the country. And there is one thing that is to be understood well that it is not only the cheap labour that attracted the industrial development and outsourcing in China but also the economic freedom and the interest in the R&D.

In Nepal, Agriculture is always one such sector where the government tries to portray lot of hopes to the public. Recently, there are several projects being carried out like SAMARTH, PACT which have been established in order to facilitate the commercialization of agricultural trade. There are good signals for hope though the past was not that impressive.

Courtesy:Mr. Niraj K. Giri

The past of the Nepali economy with the agriculture does not look good. The most prioritized sector does not at all seem like contributing that effectively and efficiently to the economy. The expectations are way ahead than the actual output. From the above graph depicting the changing dimension in the economic sector in Nepal, we can easily see that the contribution of service sector is increasing which is definitely good but then looking into the agriculture sector, the prioritized sector for the country, the situation looks worsening despite the audibility of various plans, programs and policies which justifies the ineffectiveness of the traditionalist approaches in agriculture development. The hopes are high again with the development of Agriculture Development Strategy (ADS) which has already been receiving some criticism. The blast from the past also shows that the budget allocation of the government of Nepal in the agriculture sector decreased from 3.7% of the total national budget in 1997/98 to 2.4% of the same coming to 2008/09. Similarly, the budget for the Nepal Agriculture Research Council (NARC) has come down from 14.4% of the agricultural budget in 1997/98 to 7.1% of the same coming to 2008/09. The exemplary implication again is that Nepal wants its agricultural sector to develop without the significant role of R&D and I believe our policy makers know how that can happen.

The situation of R&D in each sector of our government is absolutely pathetic and we can only hope that the situation does not worsen further.

Note: This article is published in the MEX Nepal Year Book of 2013.

http://www.mexnepal.com/webimages/yearbook2013/yearbook2013.html