Tackling Indonesia’s innovation challenge

Authors: Nick Redfearn and Richard Litman

Many developing countries have resisted proposals to implement national innovation strategies, failing to recognize that innovation is a driver of sustainable growth and prosperity.

With Indonesia’s increasing international importance as a G20 country, President Joko “Jokowi” Widodo has the opportunity to embrace innovation based development as a catalyst for Indonesia’s future.

Why should Indonesia do this? The answer may lie in this simple statistic: 89.5 percent of all patent filings in the world are from inventors domiciled in one of ten countries in the following order of volume: Japan, United States, China, South Korea, Germany, France, Russia, United Kingdom, Switzerland and Italy. If you add the next five — Netherlands, Sweden, Canada, Australia and Finland — the percentage of the top 15 rises to 94.5 percent of the 185 member states of the World Intellectual Property Organization that reported statistics for 2011.

It is difficult to find another area of economic activity that is so concentrated in a small number of countries. This asymmetry in the global use of the patent system may explain the deficit of knowledge based economic growth found throughout the developing world. With the exception of China, these are all highly developed countries with a long history of technological innovation.

China, which now accounts for the largest number of patent applications of any nation, is very new to the list — a symbol of its explosive development and rise to the first rank among global economies.

China catapulted over just a couple decades to become the leading nation in the world because it has a national policy which aims to make China a global innovation leader by 2020. It prioritizes innovation in key sectors like clean energy as well as coordinating improved IP laws and enforcement.

Over 800,000 patent applications will be filed in China this year, with hundreds of thousands of these filed by Chinese applicants.

Like China, Vietnam, the Philippines and other Asian countries are implementing national policies to promote and facilitate their transformation to knowledge economies.

These efforts require a legal framework for the creation, protection, management and use of Intellectual Property (IP) as a strategic tool for economic, social, cultural and technological development.

The best national policies integrate with relevant areas of public policy such as health, trade, culture, environment, science and technology, and education.

Indonesia’s national policy should define the country’s vision and objectives, and align capacity-building activities with the objectives of the new administration.

Effective use of the global IP system can facilitate achieving concrete and tangible results, and provide a clear framework for cooperation with other countries.

Jokowi can make a lasting impact on the country if he challenges the people of Indonesia to become leaders in technology innovation like President Kennedy did in the United States when he took office over 50 years ago.

Research and development (R&D) spending is needed to accomplish these important objectives. Indonesia spent the least of any major Asia-Pacific Economic Cooperation (APEC) economy at only 0.05 percent, with at least half of the country’s R&D from the private sector.

National science institutes like Indonesia’s LIPI (Indonesia Institute of Sciences) needs a clear plan (national programs typically focus on ‘basic’ research) with properly funded R&D budgets.

University R&D should also be encouraged and funded. IP resulting from R&D is not an end in itself but a means to achieve public policy goals and development objectives for future generations.

Creating R&D policies around innovation and IP is complex — but then so is innovation itself! Government policy on innovation and IP can cover many areas. Both public and private innovation should be encouraged. Public-private partnerships as well as government procurement targeting local innovation are useful tools.

Government should not have a “shotgun” approach, spending billions on a wide range of unconnected initiatives.

Policies should support the transfer of technology from universities and national institutes to industry. There should be patent incentives and grants (widely used in China and Hong Kong) to encourage the formation and growth of technology companies.

Businesses need to be incentivized to support R&D and IP commercialization (an area Malaysia has focused on) with tax treatment for IP ownership (e.g. relief for R&D costs, capital expenditures, and IP ownership and investment).

Polices which encourage private investment and venture capital (VC) funding as well as lending programs will nurture the growth of the country’s knowledge economy.

Good IP laws and enforcement along with education programs are needed too, along with IP prizes, awards and events. Developing infrastructure such as clustering of technology businesses in tech hubs or science parks creates ecosystems to grow technology businesses (such as the Solo Techno Park which Jokowi encouraged).

Indonesia cannot rely on innovation relating to its technology industries alone. Innovation based enterprises in the consumer goods and creative sectors can represent at least half of the country’s knowledge economy.

An Organization for Economic Co-operation and Development (OECD) report in 2014, “National Intellectual Property Systems, Innovation and Economic Development,” specifically recommended that Indonesia focus support its existing domestic strengths, such as agriculture, foods, and creative industries.

Modeled on the UK’s Department of Culture, Media, and Creative Industries, Indonesia’s government made a good start with the Creative Economy Directorate under Mari Pangestu, aiming to develop a series of creative industries (e.g. design, fashion, film, software, gaming, and music where Indonesia is also potentially world leading).

Both consumer goods and creative sectors need policies relating to IP incentives, grants, IP tax treatment, VC funding, education, and better IP and law enforcement as well as the establishment of accelerators and incubators.

Small and Medium Enterprises (SMEs), especially software companies in today’s digital and smartphone era, need special support by the government.

For Indonesia to deliver these things effectively it needs, like its Asian neighbors, a National Innovation & IP Strategy, steered by the Coordinating Ministry for the Economy, working with several other ministries.


Nick Redfearn, an IP consultant and lawyer, is deputy chief executive of Rouse and Richard Litman, US patent attorney, is general counsel of the International IP Institute. This is their personal views.

The opinion piece appeared in the Jakarta Post.

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