|
Innovation does not occur in a vacuum but in a dynamic
economic environment, an integral part of which is a
country’s financial system.
A sound
and stable financial system is a crucial ingredient to
any innovation formula. Adding together a culture of
innovation and a strong capital market triggers an
upward cycle of growth, where the two work hand in hand
in spurring sustainable economic expansion.
A strong
capital market provides the capital to jump-start
innovation which, in turn, would leak out profits and
resources for more investments.
Such is
the case in the
United States,
where Internet start-ups have risen from mere garages to
multibillion-dollar companies, thanks to ready
financing. To quote
Berkeley economics professor Hal Varian, “One of the great strengths
of American-style capitalism is its ability to finance
crazy ideas—because every now and then, those ideas have
a very, very big payoff.”
But this
garage-to-riches phenomenon is not limited to the US. In
Europe, the possibility of huge stock returns encourages
investments in venture capitals. In fact, its
high-technology sectors perform better in financial
systems with competitive banks, large stock markets and
quality accounting standards, as quantified by Thorsten
Block of the
University
of Maastricht in his econometric study of 17
Organisation for Economic Co-operation and Development
countries and 20 manufacturing industries.
Our
Southeast Asian neighbors are beginning to realize this,
especially since the Asian financial crisis revealed
that overregulated and chaebol-dominated financial
systems constrain, among other things, its innovation
systems. (A chaebol is a family-controlled industrial
conglomerate in South Korea.)
Since
2001 Singapore has been restructuring its financial
system to create a regulatory environment conducive to
fostering dynamism and innovation in its markets. Taiwan
is also treading a similar path.
While we
are often tagged as a laggard in adopting positive
trends, we hope to prove otherwise, especially when it
comes to restructuring our financial system to
accommodate innovation.
In the
Senate, our Committee on Banks and Financial
Institutions and our Committee on Science, Technology
and Engineering, which I both chair, have been
coordinating its agenda, so that financial reform and
efforts at strengthening science and technology both hit
the same target—and that is to enhance Philippine
competitiveness.
Through
legislating policies that strengthen both science and
innovation, on the one hand, and banks and financing
sector, on the other, we hope to be able to spark off a
sustainable, upward cycle of economic growth. |
