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1 THE NEEDS FOR ADAPTIVE INNOVATION POLICY Under Free Market Complexity: The Indonesian Experiences The Globelics Africa Conference, October 31 th - November 4 th 2005 Pretoria, South Africa fly Effect (Lorentz Curve) 0 0 tial Conditio By Erman Aminullah The Indonesian Institute of Sciences (LIPI)

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Page 1: 1 THE NEEDS FOR ADAPTIVE INNOVATION POLICY Under Free Market Complexity: The Indonesian Experiences The Globelics Africa Conference, October 31 th - November

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THE NEEDS FOR ADAPTIVE INNOVATION POLICY

Under Free Market Complexity: The Indonesian Experiences

The Globelics Africa Conference, October 31th - November 4th

2005

Pretoria, South Africa

The State of complexity

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By Erman Aminullah The Indonesian Institute of Sciences (LIPI)

Page 2: 1 THE NEEDS FOR ADAPTIVE INNOVATION POLICY Under Free Market Complexity: The Indonesian Experiences The Globelics Africa Conference, October 31 th - November

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POINTS OF PRESENTATION

INTRODUCTION POLICY MAKING UNDER

COMPLEXITY INNOVATION POLICY UNDER

FREE MARKET COMPLEXITY PAST EXPERIENCES AND

FUTURE POLICY NEEDS

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Introduction The reality of policy matters

1. Complexity2. Resistance

Dealing with complexity & resistance Policymaking process shift

from ‘rational’ to ‘learning’

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Introduction Current reality

1. Economic complexity 2. Some resistances toward free market

Economic complexity & policy resistance toward free market

Needs of ‘Learning’ to softening the pressure of free market

Innovation and Technology Learning

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POLICYMAKING UNDER COMPLEXITY

The emergence of unintended events and behaviors (butterfly effect)

Because…… Complex system

sensitivity against initial condition

(the rule of initial condition)Lorentz Curve

Complex sistem behavior

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Dealing with complexity Seeing the elements as

parts of the wholeness, containing:

-interconnection, -non-linearity, -uncertainty

Like…… Seeing the trees

viewing from the forest

POLICYMAKING UNDER COMPLEXITY

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THE WAYS OF THINKING (in solving a complex system)

• OUTPUT BOUNDED RATIONALITY

• PROCESS ORIENTED RATIONALITY

• UNDERSTANDING THE WHOLENESS BY LEARNING

CREATING RATIONAL POLICY TO PERFORM

CREATING ANTISIPATIVE AND ADAPTIVE POLICY TO EVOLVE

POLICYMAKING UNDER COMPLEXITY

PERFORMING CAN BE UNEVOLVING,

BUT EVOLVING CAN BE PERFORMING

Page 8: 1 THE NEEDS FOR ADAPTIVE INNOVATION POLICY Under Free Market Complexity: The Indonesian Experiences The Globelics Africa Conference, October 31 th - November

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Input-output model

PRECISE CALCULATION: Output processed from inputs

because …… Process is perfect (black box) Environment is stable

POLICYMAKING UNDER COMPLEXITY

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RATIONAL POLICYMAKING (in Input-Output model)

POLICYMAKING UNDER COMPLEXITY

SUCCESS !Because….. Process is

perfect, Environment is

stable, to: - running the inputs

- producing the output

Page 10: 1 THE NEEDS FOR ADAPTIVE INNOVATION POLICY Under Free Market Complexity: The Indonesian Experiences The Globelics Africa Conference, October 31 th - November

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Information feedback model

HIGH STABILITY: always seeking the reference

Process ……like orchestra Autonomous control Correcting the discrepancy Seeking the reference

POLICYMAKING UNDER COMPLEXITY

Page 11: 1 THE NEEDS FOR ADAPTIVE INNOVATION POLICY Under Free Market Complexity: The Indonesian Experiences The Globelics Africa Conference, October 31 th - November

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RATIONAL POLICYMAKING (in information feedback model)

SUCCESS !Because….. Capacity to control

the rhythms by design, to:

- producing the output

- maintaining the reference

POLICYMAKING UNDER COMPLEXITY

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Adaptive feedback model

CONTINOUS EVOLVING: by anticipative and adaptive capability

process……like surfing and herons flying responsive toward environment anticipative and adaptive toward environmental change

POLICYMAKING UNDER COMPLEXITY

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ANTICIPATIVE POLICYMAKING (in adaptive feedback model)

SUCCESS ! Because……. Capability

gained by learning to surf at the edge of wave

POLICYMAKING UNDER COMPLEXITY

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ADAPTIVE POLICYMAKING ( in adaptive feedback model)

SUCCESS !Because….. Capability gained

by learning to mutually maintaining the direction, distance and speed without design

POLICYMAKING UNDER COMPLEXITY

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INNOVATION POLICY UNDER FREE MARKET COMPLEXITY

EASINESS! to.. Escalating the competition Degrading the resources Creating the self interest

DIFFICULTIES ! To.. Anticipating and adapting the pressure of

disappointment of the common

Free market complexity

Page 16: 1 THE NEEDS FOR ADAPTIVE INNOVATION POLICY Under Free Market Complexity: The Indonesian Experiences The Globelics Africa Conference, October 31 th - November

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The pressures of disappointment of the common

FIVE TYPES...

Expectation differing from reality

Disputes arising from unfair practices

Acceleration creating deterioration

Solution creating problems

Resistance and delay

INNOVATION POLICY UNDER FREE MARKET COMPLEXITY

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INNOVATION POLICY UNDER FREE MARKET COMPLEXITY

The slowness of past recovery: Indonesian experience

The slowness of recovery can be arranged and displayed systematically

How to understand it…

1. What rules systemically underpinning the slowness of recovery

A systemic model

2. What basic structure determining the strategic change

A point of leverage

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INNOVATION POLICY UNDER FREE MARKET COMPLEXITYSystemic obstacles: Indonesian experience

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Paradigm sift from mechanism toward organism

INNOVATION POLICY UNDER FREE MARKET COMPLEXITY

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Adaptive Innovation policy model (organic perspective)

Strong body with high calorie but lack of nutrition, can be unhealthy (due to lack of antibody)Strong economy with high power of financing but lack of technological innovation, can be unhealthy economy (due to lack of competitiveness)

INNOVATION POLICY UNDER FREE MARKET COMPLEXITY

A simple rule in the model

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Adaptive innovation policy model (Indonesian case)

INNOVATION POLICY UNDER FREE MARKET COMPLEXITY

Increase in financing for innovation to: softening the competition pressure, and; cutting the protection

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Adaptive innovation policy (simulation results)

INNOVATION POLICY UNDER FREE MARKET COMPLEXITY

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PAST EXPERIENCES AND FUTURE POLICY

NEEDS

FIRST, innovation policy making in complex economic system needs an ‘adaptive innovation policy model’

SECOND, dealing with complexity of free market competition needs an adaptive strategy to apply free market along with to salvage the domestic interest.

THIRD, a possible future policy problem (in Indonesia) would be low domestic supply due to lack of competitiveness in the free market.

POLICY NEEDS, ‘innovation policy for equitable development’, in addition to implementing ‘growth policy by capital investment’

innovation policy instrument on HRD to create innovator in private sector, especially innovation-based SMEs.

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PHRASE(The nature is a wise

teacher)

THANK YOU

For the Sustainable future by equitable economic development