Is too much government intervention good or bad for innovation in the Gulf?

Is the Gulf’s innovation being hindered by too much government intervention? (credit: techpionions.com)

There’s been a couple of news stories recently that caught my eye. One was an interview on Kipp Report with the managing director of an online website called Tejuri.com. The article, which you can reach here, focuses on how Tejuri.com positions itself as the official online distribution channel for retailers registered with the Emirate’s Department of Economic Development.

Aside from the wisdom of launching an online distribution channel that is government-supported in the year 2013, the piece got me thinking about other areas. One example is non-governmental work, which (surprise, surprise) is often not only regulated but led by government-related bodies. And then you’ve got the ultimate example of government intervention, which is the ownership of the upstream and downstream oil and petrochemical sectors, numerous financial institutions and other businesses. And then there’s the sovereign wealth funds.

My question to these and other government interventions is how much do these activities stunt growth and disrupt innovation? Here I’m going to refer to United Nations World Intellectual Property Organization and Insead that ranks the top ten most innovative countries. The original piece from Bloomberg is here.

Switzerland, Sweden and Singapore are the most innovative countries in the world, according to a study by the United Nations World Intellectual Property Organization and Insead that found a wide gap between rich and poor nations.

Innovation is an important engine of growth and new jobs, the Global Innovation Index 2012, which ranked 141 economies, showed. The index considered institutions, human capital and research, infrastructure and market and business sophistication as well as as the results of innovation such as patents and software in determining how countries fared.

Finland ranked fourth, followed by the U.K., the Netherlands, Denmark, Hong Kong, Ireland and the U.S.

Numerous surveys such as the above and this research one by the United Nations University show that governments help foster innovation most through investing in social capital (read education) and through financial funding – the irony in some parts of the Gulf is that education is in the hands of the private sector rather than the government. Governments then have to step back and then let individuals and businesses get on with it. The same can be said of the non-governmental sector, which, pretty obviously, works best without governmental support s groups and communities work to best pinpoint social issues and tackle them.

The argument often goes that entrepreneurs drive innovation and that governments need to reduce their interventions, reduce bureaucracy and increase financial support for small to medium sized firms to drive growth. However, is that what we are seeing in the Gulf? Or are we still not fulfilling our potential due to too much, rather than too little, government intervention?

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