A good idea

The establishment of a $100 million research and development (R&D) facility for manufacturers is one of Government’s better ideas. Speaking at the closing session of an industrial innovation symposium last Friday, Trade Minister Ken Valley said that the facility “is imperative to strengthen the research capability of domestic firms, stimulate innovation, and generate further investments in the non-energy sector.” It is not clear, however, that the facility, as described by Mr Valley, will achieve these ends.

Funding research is a proper function of a government in a developing nation. The State has to put money into areas where the private sector cannot or will not, in order to aid the long-term development of the nation. Health, education and infrastructure are obvious areas where this must happen. The URP and CEPEP are equally obvious areas where it should not, as are the planned multi-million dollar outlays on a sporting complex and a government campus and so on, since these projects merely suck up resources with no matching benefits. A R&D facility, properly managed, would surely have long-term benefits. Improperly handled, however, such a facility would become a massive waste of money and even an avenue for fraud.

So, for this idea to work, the facility must function as a real R&D initiative. According to Mr Valley, the money will be disbursed as grants. These grants will be provided to meet certain criteria: development of business systems, processes, and operations. The core purpose is to help businesses upgrade their competitive skills. But it is not apparent that the criteria outlined by Mr Valley can be properly described as R&D. It is, after all, part of the normal function of any business to streamline and upgrade its business operations. More importantly, the research to achieve these ends is done more efficiently in the developed countries, and local companies can just buy their technological and managerial products. In this, as in all matters of trade, the law of comparative advantage holds: a country benefits economically by concentrating on what it does best.

In this way, each country can sell its products more cheaply and all countries — assuming that fair trade criteria are enforced — benefit. So this R&D initiative, as described by Mr Valley, does not seem the best way to make Trinidad and Tobago more competitive. A better approach to help local businesses become more competitive is by research into the actual manufacture of products. This could be a cooperative venture between the private sector and the Government.

As the Young Inventors competition has demonstrated in the past, this country certainly has individuals with the intellectual and creative abilities to do innovative research. But there exists no proper infrastructure to turn inventions to commercial uses. In the globalising world, a small economy like ours can only be competitive in niche markets.

We have not had to face this challenge because our economy has been buffered by our energy revenues. Using part of those revenues to fund R&D in the non-energy sector, however, will help the country prepare for the inevitable day when the oil and gas prices drop or when, also inevitably, these resources run out. If real research is carried out in areas like agro-processing, textiles and light manufacturing, this would prepare us for future economic challenges. Hopefully, this is what the Government has in mind in spending $100 million on R&D.