'Innovation is the currency of tomorrow, but it is a currency we need to start investing in today,' says Dubai-based Marios Maratheftis, Standard Chartered’s Global Chief Economist. As the emirate focuses on building a knowledge-based economy, Maratheftis provides insight on opportunities for a city that, he says, is ripe for innovation
It is said that ‘innovation is the currency of tomorrow’. How is innovation becoming a measure of wealth in the financial landscape?
It is the currency of tomorrow, but it is a currency we need to immediately start investing in today. From an economist’s point of view, it is useful to begin with the question of how an economy and a society grows.
What do we need to input into a country to have economic activity? We need capital, labour and land. If a country desires growth, and by that I mean its residents become wealthy and their living standards rise, it historically will look to increase its capital, labour, or land – or all three.
This is not sustainable. Sustainable growth is from making your economy, the engine, much more efficient so that it continues to grow without increasing your inputs. This is where innovation matters. It is innovation that will make us more productive, and the growth of our economies more sustainable.
Have you seen this transition in Dubai?
This is where Dubai is heading now. We have seen big innovations such as Dubai Creek or Jebel Ali port – the city has shown it is world class when it comes to logistics – as well as in tourism and air travel. Now, Dubai is now extensively focusing on innovation and on building a knowledge-based economy. The focus should not be on building and expanding more, but rather on what the city has, and how it can be made more efficient.
There was a very interesting study a few years ago from the Dubai Economic Council, which found that Dubai freezones had the highest rate of productivity out of any areas in the city. Can this productivity be extrapolated out beyond those zoned areas? And how will the city encourage a ‘stickier’ skilled labour force? This requires policy, and I believe we are heading in the right direction.
Many emerging economies don’t really have to innovate: they can just apply technologies from elsewhere that will lead to a massive boom in economic activity
How have external factors such as technology changed the nature of innovation?
The internet has been changing things. It makes us more productive, but we’ve also introduced factors that can be uncomfortable for some people. The Industrial Revolution in the 1800s was an extreme period of innovation, but it also meant that salaries remained stagnant for 40 years.
What we are seeing in the world today is that productivity is decelerating, and some technological innovations – while inventive – are not making us as productive. You can take pictures and put it on your Instagram, but that doesn’t make you a more productive or efficient member of society or the economy. There are big challenges in the world economy, especially in the US and the West, when it comes to productivity.
What are the relative opportunities and challenges for emerging versus developed economies?
Many emerging economies don’t really have to innovate. They can just apply technologies from elsewhere that will lead to a massive boom in economic activity, from which point they can eventually start to innovate as well. That’s what Japan did – and it is now at the epicentre of innovation. South Korea was poorer than sub-Saharan African fifty years ago, but now is an industrial giant.
In fact, the whole of Asia was poorer than many parts of Sub Saharan Africa fifty years ago, and today generates two thirds of economic growth globally, excluding Japan. Innovation is not necessary at the early stages of development but it needs to follow afterwards and this is what is going to push countries from low, to middle and then high incomes.
What is the right ratio between pragmatism and imagination when it comes to innovation?
I would give a much bigger weight to imagination. You need a lot of imagination and without it you limit the possibilities of success. Pragmatism is based on what we know, whereas innovation is something that we have no concept of at this moment. In fact, pragmatism might actually be a hindrance when it comes innovation. Companies that have a very long history usually do so because the people employed by them have innovated during that time. It’s not an option, it’s a necessity. You innovate, you adapt – or you become extinct.