BWorld 211, Intellectual property, innovation, and prosperity

* This is my column in BusinessWorld last May 10, 2018.

The BusinessWorld Economic Forum 2018 is fast approaching this coming May 18 and it has a timely theme, “Disruptor or Disrupted? The Philippines at the Crossroads.” Focus is on the challenges, risks and potentials of artificial intelligence (AI) and other technological advances.

Endless trial and error, research and development, intangible and intellectual creations, are at the heart of innovation and economic disruptions. The role of property rights protection in general and intellectual property rights (IPR) in particular cannot be overlooked.

Here are some numbers showing the degree of competition among countries and economies in encouraging and protecting innovation and IPR as shown by three data sources. These are the

(1) World Intellectual Property Organization (WIPO), INSEAD, and Cornel SC Johnson College of Business, “The Global Innovation Index 2017” (GII); (2) Property Rights Alliance (PRA) — International Property Rights Index 2017 (IPRI); and the (3) US Chamber of Commerce (USCC) — Global Innovation Policy Center (GIPC), International IP Index (IIPI) 2018.

WIPO’s methodology is interesting.

The overall GII score is computed by getting the simple average of the Input and Output Sub-Index scores. The Innovation Input Sub-Index is comprised of five pillars: (1) Institutions, (2) Human capital and research, (3) Infrastructure, (4) Market sophistication, and (5) Business sophistication. The Innovation Output Sub-Index is composed of two pillars: (6) Knowledge and technology outputs and (7) Creative outputs.

Each pillar is divided into three sub-pillars and each sub-pillar is composed of individual indicators, for a total of 81 indicators. Cool.

Data on GDP per capita income at purchasing power parity (PPP) $ values are from the International Monetary Fund (IMF), World Economic Outlook database, April 2018. The numbers in parenthesis of each report (WIPO-GII, IPRI, IIPI) represent the total number of countries included in their respective reports (see table).

  

These numbers show the following:

One, countries with high global rank and scores in innovation and IPR index are also those with high per capita income. Conversely, countries with low global rank in innovation also have low per capita income.

Two, the Philippines in particular exhibits this low ranking. Placing only 73rd out of 127 countries in WIPO-GII 2017 report, 64th out of 127 countries in PRA-IPRI 2017 report, and 38th out of 50 countries in the GIPC-IIPI 2018 report. Our GDP per capita income of only $8,300 at PPP values is low, and even lower if nominal GDP prices are used, less than $3,000.

Three, many East Asian economies are rising in ranking, landing in the top 25% in global ranks.

To further reiterate the importance of intellectual property (IP) and innovation, 70 independent and free market-oriented think tanks and institutes worldwide sent an open letter to WIPO Director General Dr. Francis Gurry, during the 2018 World IP Day last week, April 26.

The letter was spearheaded by the PRA in the US and Minimal Government Thinkers is among the 70 co-signatories. The letter was also sent to UN Secretary-General Antonio Guterres, and Director-General of the World Health Organization (WHO) Tedros Adhanom Ghebreyesus.

The letter highlighted some important facts, among them:

* In 2016, a record 3.1 million new patents were filed worldwide. These patents protected groundbreaking technological processes, helped cure devastating diseases, and modernized everyday conveniences.

* Copying is not the same as inventing and enforcement of IP rights helps prevent counterfeits that undermine innovation and help finance criminal organizations. This shadow economy of counterfeits is responsible for nearly 2.5% of global imports, amounting to nearly $461 billion.

* 10% of global pharmaceutical trade is thought to be counterfeit. These “medicines” have serious health consequences, including death. New medicines require research, trials, $2.8 billion, and up to 12 years. IP Rights incentivize commitment and collaboration.

* Removing trademarks through plain packaging has costly economic, health, and security consequences. $300 billion is the implied loss to the beverage industry if such packaging is applied to alcohol and sugary drinks.

Another global group, the Biotechnology Innovation Organization (BIO) is also promoting innovation in biotechnology of innovative health care, agricultural, industrial, and environmental products.

Governments, national and multilaterals like the UN and WHO, should help encourage and respect IPR and innovation. Some cases however show that they do otherwise.

For instance, the 2016 UN High-Level Panel on Access to Medicines, their report has portrayed patents and IP as harmful to global development and human rights. Backward thinking.

The enemy of public health and human rights are counterfeits and substandards — medicine, food, and drinks — and the criminal organizations that manufacture and sell these products.

Bienvenido S. Oplas, Jr. is President of Minimal Government Thinkers, a member-institute of Economic Freedom Network (EFN) Asia.

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See also:

BWorld 206, Intellectual property rights in East Asia, May 09, 2018

BWorld 208, Consumer choice in electricity supply and prices, May 11, 2018 

BWorld 209, Is the PCC a facilitator or a hindrance to business competition? May 15, 2018 

BWorld 210, Electricity competition, EPIRA, and WESM, May 16, 2018