Bridging The Knowledge Gap in Developing Societies

Bridging the Knowledge Gap in Developing Societies:
A field study of Indonesia, Vietnam and Myanmar
Ravi S. Sharma, Arista Wirawan, Samuel Goh Chia Foong, and Ye Min Win
Wee Kim Wee School of Communication & Information
Nanyang Technological University
Republic of Singapore
ABSTRACT
This article examines the current conceptualizations of knowledge societies in three Asia Pacific
countries, and to further contribute to the development of a framework by way of a systematic
empirical investigation using data collated from the World Bank, UNDP and UNESCO. A variety of
implications are offered based on the paper. Firstly, there are implications for the framework. This is
followed by implications for practice in the areas of policy formulation. Also, it is recognized that
there are limitations to our approach, such as the reliance on secondary data instead of primary
sources. Ironically, the complex nature of policy formulation makes the accurate transferability to
other countries unlikely. Moreover, it is possible that the findings of our research will have relevance
for other settings and contexts. This study will serve its academic contribution in that it will provide
comprehensive data relating to implications in the following three areas: framework development,
research and policy development. We firmly believe that the last contribution is particularly valuable
as it allows one to reflect on and analyze how political decisions have influenced the formulation of
current and future policies.
AUTHOR KEYWORDS
National Intellectual Capital, Knowledge Society, Knowledge Based Economy, Knowledge Policy.
1. INTRODUCTION
Knowledge has been widely recognized as the most important factor of production instead of capital
and labour assets. For instance, our earlier societies had largely depended on the know-hows of
farming, construction and manufacturing. The capacities of electronic devices to process store and
transmit data have increased exponentially at much cheaper prices. The emergence of Information and
Communication Technologies (ICTs) which includes the internet, computers, interactive multimedia
systems, and digital telecommunications have dramatically changed our lifestyles and work life. ICTs
facilitate a new intensity in the application of knowledge to economic activity, to the extent that it has
become the predominant factor in the creation of wealth (ISC, 2002). Undoubtedly, the global
influence of information and communication technologies is transforming our economy and society.
Wealth-creating activities need not be limited to the allocation of capital to productive uses or labor
(Drunker, 1994). According to Peter Drunker, value is created by productivity and innovation, and
refers to the application of knowledge to make things work. The term ―knowledge society‖ refers to
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any society where knowledge is the primary production resource instead of capital and labour. A
knowledge society creates, shares and uses knowledge for the prosperity and well-being of its people.
It stresses the fact that the most valuable asset is investment in intangible, human and social capital and
the key factors- knowledge and creativity.
Knowledge society presents great opportunities as it can mean more jobs available, more satisfying
business, new tools for education, easier access to public services, and increased inclusion of
disadvantaged individuals or areas. In a knowledge society, basic skills of Personal Computer (PC) use
and Internet access are fundamental and should be possessed by most people of different groups in
society.
Indian programmers located at Bangalore work with their Silicon Valley counterparts to develop new
software products for US Multinational companies. Some others companies have outsourced their
customers services calls function to Philippines companies. Their fluency in English, high levels of
computer literacy; combined with low labor costs and a reliable telecom network made it an extremely
attractive for developed countries to invest. Tourism industries have taken advantages from rapid
development of Internet technology. They‘re able to reach prospective tourists located thousand miles
away easily by utilizing their on-line websites and application; promoting travel destinations, arranging
travel timing, booking tickets and accommodation. Thus, many new jobs opportunities are constantly
created for skilled knowledge workers in these developing countries.
The new opportunities have reduced poverty and raised living standards across regions, classes,
communities, countries or even group of countries. The forces behind them have developed a
spectacular momentum that is challenging the global economy (World Bank, 2007).
Unfortunately, the increase of knowledge in society is not acquired evenly across all the members of
society: people with higher socioeconomic status tend to have better ability to acquire information.
This leads to a division of two groups: a group of better educated people who know more about most
things, and those with low education who know less (Weng, S.C. 2000). Economic development plays
a huge part in the reason behind the global disparity between richer and poorer societies. A knowledge
gap measures the properties of knowledge societies and denotes a significant difference between
indicators. These indicators usually measure ICT infrastructure, higher education rates, human
resources development, investments in research and development (R&D), government policies and
related fields. Knowledge gaps occur between countries or groups of countries and between regions,
classes or communities within countries. Bridging the knowledge gap within and between countries
has become a prime target of international development agencies, as well as of some national
governments (Evers & Hans-Dieter, 2002).
In general, a higher knowledge society is related to higher levels of Information and Communication
Technology (ICT) use – the greater the poverty in a country, the lower the access to ICT. Thus ICT is
an important tool for societies to increase economic growth and reduce poverty. The availability of
computers with multimedia capability and internet connection at affordable prices to access
information and knowledge bases is important. Without ICT, it is impossible to have an infrastructure
able to process automatically the huge flow of information that is required in knowledge societies.
Digitization is closely related to knowledge societies. The gap or unequal access by some members of
the society to the ICT is often referred to as the Digital Divide. The global digital divide refers to the
uneven distribution of ICT between and within countries. The components that contribute to digital
divide are socioeconomic status, income, educational level, gender, race, locations, politics and some
other factors. Pessimistic analysts argue that the digital divide as well as the knowledge gap is
widening; some regions within countries develop faster than others, some countries are on a faster
track towards a knowledge society.
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The World Information Society Report 2007 describes the digital divide in four major ICTs – fixed
lines, mobile cellular subscribers, Internet users and broadband subscribers. However, the report states
that the digital divide is shrinking in most technologies, especially mobile telephony, but the limitation
in the availability and affordability of broadband remains a cause for concern. Although broadband is
now available in 170 economies since the start of 2007, it remains at least ten times more expensive in
lower-income countries, and is often unavailable in rural areas.
According to UNESCO‘s World Summit of Information Societies, the concept of knowledge societies
is more embraced and conducive to empowerment than the concept of technology and connectivity.
While information is knowledge creation and generation, it itself is not the knowledge. The
simultaneous growth of internet, mobile and web technologies help the information flow between
communities, which creates the new conditions of emergence of knowledge societies. From as far as
several decades ago, people believed that knowledge in various aspects could allow them to acquire
the high quality of life that they desire. The new information and communication technology
development created the emergence of knowledge societies. Many of the nations achieved the ultimate
goal of creating knowledge societies and allow its citizens to live in affluent societies. A knowledge
society‘s ability to identify, process, transform, disseminate and use information to build and apply
knowledge for human development would hence determine its level of success.
How then can an information society foster the emergence of knowledge societies? How does
knowledge assist them to achieve their goal of high quality of life? Would the creation of knowledge
societies be able to achieve the eradication of poverty? How can economy be boosted by creating the
knowledge societies?
This series of questions have been answered by a plethora of surveys and studies of measuring a
nation‘s intellectual capital and indexes of the knowledge societies by numerous researchers.
Many researchers work on the strategies and frameworks in creating knowledge societies. They
discuss at great lengths on how the digital divide could create the knowledge gaps between regions
which are either geographically dispersed or closely located. Well known organizations such as World
Bank, UNESCO, UNDP conducted the study of knowledge societies to examine the wealth of nations.
Human development index and knowledge economy index created by UNDP and World Bank
respectively are the key indexes in measuring the strengths and weaknesses of knowledge societies.
In this paper, we seek to analyze the National Intellectual Capital status of 3 South East Asia countries,
namely Myanmar, Indonesia and Vietnam. We will then define the knowledge gap between those three
countries and other developing countries benchmark using database from the World Bank. The
conceptual framework is then constructed specifically by drawing out the strengths, weaknesses,
opportunities and threats of each Intellectual Capital value in order to analyze the state of knowledge
society of the three countries and its potential in forming a knowledge society.
2. LITERATURE REVIEW
Knowledge and innovation have played a crucial role in development from the beginnings of human
history. However, with globalization and technological revolution of the last few decades, knowledge
has become the clear driver of competitiveness and is now profoundly reshaping the patterns of the
world‘s economic growth and activity.
―Knowledge societies are about capabilities to identify, produce, process, transform, disseminate and
use information to build and apply knowledge for human development‖, UNESCO 2005. The
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Knowledge Society is characterized by knowledge being a key driver of productivity and economic
growth with aggressive investments in research and development, education and training, as well as
new managerial work (OECD, 1996).
Knowledge societies are not technology-driven or global in scope but rather based on distinct cultural,
political and economic traits that shape up specific ‗epistemic regimes‘ –regimes based on the cultural,
economic and societal role of information and knowledge in a given society. Information and
knowledge are resources that are essential as factors of competition, wealth and power at the global
level, though they also lead to growing disparities across the globe (Queau, 2002).
Table 1. Comparison of the characteristics of a knowledge society and a knowledge economy.
Characteristics of a Knowledge Society Characteristics of a Knowledge Economy (Houghton &

Sheehan, 1991)
(This section draws on work of the Research Group on
Knowledge Society, see Alatas et al 2000)
 Its members have attained a higher average standard  Knowledge as an important factor of production,
of education in comparison to other societies and a which changes the way organizations function; thereby
growing proportion of its labour force is employed as resources are factored into codifying knowledge as an
knowledge workers. asset and used as a competitive factor.
 Its industry produces products with integrated  Value of knowledge reforms typical organizational
artificial intelligence. structures to become more flat-based in responding
more rapidly to market changes and demands.
 Its organizations – private, government and civil  Technological advancements and deregulations are
society – are transformed into intelligent revolutionizing the ways markets trade; opens up
organizations. communication channels with free trade policies,
cross-border alliances or integrations, and constant
pressures to improve average time-to-markets.
 There are multiple centres of expertise and a poly-  Organizations are increasingly networked (with the
centric production of knowledge. onset of social networking tools such as internet
messengers, communities of practice, discussion
forums), and efforts are put in to integrate this
knowledge into the efficiencies of knowledge workers.
 There is a distinct epistemic culture of knowledge  Management styles are becoming more people-
production and knowledge utilization. focused; encouraging and facilitating knowledge
workers in daily work process improvements leading
to organizations‘ overall productivity levels.
The terms Knowledge Society and Knowledge Economy will be used synonymously in this paper.
Tenranian (1998) cites possess the following characteristics; a change from industry-based to
information-based economies; the move to flexible accumulation of goods and services; the transition
from national to global markets, and the growth of ―gated communities‖. Citing statistics from the
1996 UN Human Development Report, Tenranian documents the widening ―gap‖ between the ―haves‖
and the ―have nots‖ in the emerging global political economy.

Increasing competitiveness, along with the frequently occurring technological changes in the global
age, raises the importance of human capital in the organization. This eventually leads to it obtaining a
competitive advantage.
Perez (2003) presents the human capital as one of the most complex resources for obtaining control
over organizations. This belief has led managers in the past to base their competitive edge in the
markets and in resource recruitment on product-related capitals, work processes, or technology.
Human capital in an organization is one of the organization‘s sources for obtaining a competitive
advantage (Ulrich & Lake, 1991), and its importance and contribution for creating knowledge in the
organization are great (Collis & Montgomery, 1995).
Perez (2003) identifies four knowledge types characteristic of human capital in the organization,
divided according to strategic value and uniqueness to the organization:
1. Idiosyncratic Human Capital: A form of human capital unique to the specific organization and
having a low strategic value, thus preventing the organization from investing in its
development.
2. Ancillary Human Capital: A more common form of human capital, having a low strategic value
to the organization. It is created during daily activities taking place in the organization.
3. Core Human Capital: A unique human capital, essential for the organization to obtain a
strategic advantage. Organizations need to develop the human capital in this category by
implementing systems based on skill and on the creation of systems for long-term relationships.
4. Compulsory Human Capital: A general and essential form of human capital, but one that is not
specific to a certain organization; therefore employees are allowed to distribute it between
organizations according to alternatives existing in other workplaces.
Globalization and the knowledge revolution present both challenges and opportunities to developing
countries. On one hand, there is the threat of a widening in the existing knowledge gap with
industrialized countries. Research and innovation capabilities tend to be more concentrated in
industrialized countries.
On the other hand, the digital gap – differences in telephone and Internet use – is being gradually
reduced. For developing countries, easier access to global knowledge and technology is crucial.
Knowledge has always played a determining role in the development of societies. In the last two
decades, a distinct Knowledge Economy (KE) model and process have been observable in successful
economies worldwide, and among both industrialized and developing countries. Globalization and the
fast-moving digital age open new opportunities to developing countries to the extent that those
countries follow successful economic models. It is imperative that developing countries proceed with
investments and reforms required to build knowledge-based economies.
A knowledge-based economy does not depend solely on high-technology industries for growth and
wealth production, but requires industries to be knowledge-intensive (Sharma et al, 2008).
To analyze the status of a knowledge society, the measurement of a country‘s economy plays a pivotal
role. In view of research in the areas of the wealth of the nation in retrospect, a nation‘s economic
value consists of traditional economic value as well as its KE. Traditional measurement of a nation‘s
economy is dependent on the accounting and financial aspects, in terms of traditional factors of
production, land, labour and capital. Despite the importance of knowledge in calculating the nation‘s

economy, some countries still use the traditional measures of production. Since the measurement of
intangible knowledge assets became more important, measurement of institutional or organizational
value in the current business environment using traditional accounting methods is increasingly
inadequate and often irrelevant to real value in today‘s economy. Knowledge assets or intellectual
capital may be described as the ―hidden‖ assets of a country that underpin its growth, fuel its growth
and drive stakeholder value (Malhota, 2000). A nation‘s intellectual capital value is derived from the
key assets in forming a knowledge society. Researchers have introduced the framework and measured
the nation‘s economic value with the intellectual capital value. Edvisson (2003) showed that the
National Intellectual Capital value can be easily derived from the well- known Scandia navigator‘s
focus, comprising of financial focus, process focus, human focus, customer focus, process focus,
renewal and development focus. Naphiet and Ghosel (1998) suggest how knowledge societies organize
themselves within the three components of intellectual capital – structural capital, human capital and
relational capital.
In a nation‘s knowledge society, infrastructure and governance involvement as structural capital and
culture of the nation can be transformed to relational capital. Sharma (2008) proposed the 4 pillar
framework and 13 dimensions as functional framework of the knowledge societies. Infrastructure,
Governance, Human capital and Culture constitute the 4 pillar framework for the knowledge societies
and relevant proxy indicators were used for each of the 13 dimension in measuring the state of a
nation‘s knowledge society. The 13 Dimensions used to measure the state of the knowledge societies
are
(1) Geographic proximity to markets, (2) Net knowledge inflows, (3) ICT accessibility, (4) Rule of law
favorable of international norms, (5) IP regime, (6) Political vision and strategy, (7) Business
environment that rewards innovation, (8) High education, (9) Research and development, (10) Human
rights and freedom, (11) Role of mass media, (12) Shared BA (physical and virtual), and (12)
Knowledge sub networks. Sharma (2008) postulated that each dimension contributed to more than one
pillar in the knowledge societies. This meant that the relationship between the individual dimensions
and pillars are not one to one, but rather, several dimensions mapping onto the 4 pillars framework.
The 13 dimensions framework is comprehensive in analyzing the state of the knowledge societies
whilst reflecting the value of national intellectual capital and other factors which can influence the
knowledge society, such as shared BA, knowledge sub networks and the role of mass media. Nick
Bontis (2002) pointed out the wealth of the nation by calculating the national intellectual value.
According to Bontis (2002), the calculation of the national intellectual capital index corresponds to the
knowledge asset of the nation. The intellectual capital of the nation includes the hidden value of
individuals, enterprises, institutions, communities and the region, which include the current and
potential sources for wealth creation. According to Stewart (1997), knowledge assets or intellectual
capital are like money or equipment, existing and worth cultivating only in the context of strategic
behaviour.

National
Wealth
Financial Intellectual
Capital Capital
Human Structural Relational

Capital Capital Capital
Market Capital Renewable Process Culture

Capital Capital
Gross National
Happiness
Figure 1. A Framework for National Wealth.

adapted from Edvinnsson and Malone (1997) and Bontis (2002)
The proposed measurement for the wealth of the nation by Nick Bontis (2002) is not only derived from
the perspectives of financial and accounting, but also from a nation‘s intelligible assets such as human
capital, structural capital and organizational capital. Figure 1 illustrates the modified framework of
Edvinsson & Malone (1997) in calculating the Intellectual Capital Indexes. Two of the main capital
values are financial capital and intellectual capital (IC). According to the well known Skandia
navigator, human capital, structural capital and relational capital are required in order to calculate the
IC. Figure 1 shows the human capital and structural capital components used to calculate the nation‘s
IC value. Market capital, renewal capital and process capital are specific components of structural
capital. Human capital is the key component in determining the nation‘s IC value.
Culture is another tangible asset of a nation and is a key pillar used to calculate the Intellectual Capital
(IC) of the nation. According to Sharma (2008), culture is the competitive factor that makes the
knowledge societies unique. According to United Nation (2005), all societies have not always been
and continue to be knowledge society. At some level, however, every society is a knowledge society.
Many policy researchers believe that extra attention is required in developing the human quality of life
beyond the economic issue. In 1972, King Kigme Singye Wangchuck of the Himalayan Kingdom of
Bhutan first coined the philosophy of gross national happiness (GNH). This concept was reflected in
his speech in 1980:
―Bhutan’s development in pursuit of values were consonant with Bhutan’s culture, institutions and
spiritual values, rather than values that were defined by factors external to Bhutanese society and
culture.”

GNH components as proposed by Faris (2003) include economic development; human development;
environment; culture/heritage; and good governance. Potential positive and negative impacts are also
considered in one of the metrics in the calculation of GNH. Measuring the GNH will reflect the
nation‘s culture. It can balance against other capital values to form a unit knowledge society where
people are not only physically wealthy, but also spiritually so. GNH is an ongoing project and due to
the constraints of the proxy indicators, GNH will not be considered in this paper as a main indicator in
calculating the wealth of the nation.
The World Bank Institute developed the ‗knowledge for development‘ (K4D) program to help and
build the capacity of client countries to access and use knowledge to become more competitive and
improve growth and welfare. The World Bank introduced the knowledge assessment methodology
framework to analyze the country‘s knowledge index and knowledge economy index. It focuses on the
knowledge economy and it has 4 pillars of framework, namely (1) economic and institutional regime,
(2) education and skills, (3) information and communication infrastructure and (4) innovation system.
According to the K4D program, the pillar of economic and institutional regime provides incentives for
the efficient use of existing and new knowledge, as well as the flourish of entrepreneurship. The pillar
of education and skills refers to the needs of education and skills for its people to create the
knowledge, to share knowledge, and use it well. The pillar of information and communication refers to
the needs of a country in facilitating the effective communication, dissemination and processing of
information. The final pillar of innovation systems is the capability of a country to tap the growing
stock of global knowledge, assimilating and adapting it to local needs and creating new technology.
Pillar 1 Pillar 2 Pillar 3 Pillar 4

Education and Innovation System Information and Economic and
skills communication Institutional regime
infrastructure
The country‘s The country‘s innovation A dynamic The country‘s economic
people need system firms, research information and institutional regime
education and centers, universities, think infrastructure is must provide incentives
skills that enable tanks, consultant, and needed to facilitate the for the efficient use of
them to create other organizations must effective existing and new
and share, and to be capable of tapping the communication, knowledge and the
use it well growing stock of global dissemination and flourishing of
knowledge, assimilating processing of entrepreneurship
and adapting it to local information.
needs, and creating new
technology.
Figure 2. Four Pillars of Knowledge Economy.

source World Bank Institute (2000)
The World Bank calculates the index value of knowledge economy (KEI) from the index value of
economic and institutional index, education index, information and infrastructure index; and
innovation system index. KEI is the broad measure of the overall preparedness of a country or region
for the knowledge economy. The KEI summarizes the country corresponding to the four knowledge
economy pillars. According to the KEI report 2008, Denmark is the world‘s most advanced knowledge

economy in 2008. The top position in KEI ranking reflects the strong performance of the four pillars.
According to the World Bank‘s calculation of KEI value and comparison between countries, it was
found that correlation between the accumulation of knowledge measured by KEI and levels of
economic development is around 87%. Countries with higher KEI value tend to have higher levels of
economic development, and vice versa. High income countries are more affluent, and are able to afford
more investments in knowledge. Moreover, KEI value calculated by KAM methodology does not
permit prediction with any degree of certainty that building up certain forms of knowledge in a poor
country would produce economic growth anytime. However, a country‘s econometric tests can reveal
the significant relationship between the level of knowledge accumulation from KEI and future
economic growth.
Apart from the 4 pillars value defined by the World Bank, UNESCO 2005 report pointed out the
dominant role human rights and freedom of expression play in knowledge societies. UNESCO states
that human development and empowerment centered approach exists implicitly in the concept of
knowledge societies. UNDP human development project also states that human development is the
development paradigm that is much more than the rise or fall of national incomes. The goal of human
development is freedom of human so that it shares the common vision of human rights. Human
development and human rights are mutually reinforcing, helping to secure the well-being and dignity
of all people, building self-respect and the respect of others, (www.undp.com). UNESCO 2005 report
calls for policy makers to implement fully on human rights and fundamental freedoms to make for a
greater effectiveness in the fight against poverty and framing of knowledge development policies. The
fundamental of building knowledge societies is the link between knowledge and development.
Development consists not only of economic needs, but also political and social dynamic factors.
Besides the human rights, freedom of expression must be given special prominence as the fundamental
premise of knowledge societies. Freedom of expression consists of censorship or control over
information, free circulation of data and information, pluralism of the media and freedom of the press
and fundamental rights of individuals to participate freely in knowledge societies. Freedom of
expression forms the links between individual or group or people and given society. While it is true
that knowledge can exist without freedom of expression, no knowledge society or any knowledge
sharing can be prevalent, UNESCO (2005).
3. METHODOLOGY AND CONCEPTUAL MODEL
The methodology in this study was derived from the World Bank Knowledge Assessment
Methodology (KAM) and modification of National Intellectual Capital indexes by Nick Bontis (1999).
This constitutes of the Human Capital Index, Renewal Capital Index, Process Capital Index, Financial
Capital Index and Market Capital Index. National Capital Indexes are factors that contribute as
dimensions towards to the knowledge society. The four pillars of KAM framework consists of
education and skilled workers, innovation systems, information infrastructure, economic and
institutional regime.
As this framework will be used to analyze the developing countries, Indonesia, Myanmar and Vietnam,
the calculation of indexes will show the country‘s potential towards the formation of a knowledge
society and knowledge based economy. The original KAM framework calculates the knowledge
economy index and knowledge index to identify the country‘s current status in the knowledge based
economy. In this framework, each dimension will contribute to each pillar of the knowledge society.
The research methodology comprised of 3 stages:

At the first stage, the conceptual framework was discussed with academics. Some limitations of the
conceptual framework will be the irrelevant matching of National Intellectual Capital index and the 4
Pillar frame work. The first pillar being the education and skilled workers in addressing the nation‘s
existing infrastructure within the context of knowledge workers, and the value of knowledge created
by citizens which foster the countries‘ economic to knowledge based economy. Due to the limitations
of data availability, some specific indicators such as average science graduates per year, average
university acceptance rate etc will not be calculated in the Human Capital Index. Important political
factors in measuring the present state of knowledge society like human right and freedom of
expression will be excluded from the calculations due to the limitations as well. Instead, basic
foundation data will be used to calculate the current status of the country.
In the second stage, collecting the data from reliable secondary data sources such as ITU, UNDP and
World Bank to calculate the capital indexes will be performed. Weighting of each proxy measurement
is assigned to calculate each capital index after discussion between the research team and academics.
For instance, in order to calculate the Human Capital Index, each data value will be multiplied with the
weighting value and the average sum value of proxy measures is calculated as capital index value.
Based on the capital indexes value calculated, the National Intellectual Capital value will be compared
across Asia pacific countries Myanmar, Vietnam, Thailand; and economic leading countries in the
Asia Pacific region.
Adult literacy rate (includes information literacy), 30%

as defined by the ability to read, write, seek and
apply
Net primary enrolment rate 10%
Gross Secondary Enrolment 10%
Gross Tertiary Enrolment 20%
Tertiary student in science, engineering, 20%
manufacturing and construction
Children reaching grade 5 (% of grade 1 students) 10%
In the Third Stage, the framework and National Intellectual Capital indexes value will be presented to
senior fellow researchers at the Institute of South East Asian Studies, who are working on research
papers for Myanmar, Indonesia and Vietnam. Using the comparison charts calculated at the second
stage, discussion sessions were carried out with countries experts to analyze the strengths, weaknesses,
opportunities and threats of each knowledge society in terms of knowledge. The senior fellow
researchers were also sought to provide the policy recommendations for each knowledge society.
10

Knowledge Society
Education and Innovation Information Economic &

skilled workers System Infrastructure Institutional
Regime
Human Capital Renewal Process Capital Financial Capital Index +

Index Capital Index Index Market Capital Index
Figure 3: Mapping National Intellectual Capital Index with the World Bank’s Four Pillars
Pillar 1: Education
Education pillars in this framework involves primary, secondary education, vocation training, higher
education and training and life long learning. Basic education system fosters the country development
by building the strong foundation system in its move to a knowledge revolution, which requires
constant adaptation of knowledge and know-how. Promoting the country‘s different segments of
education will help to improve the human development which involves human health, higher standards
of living, and eradication of poverty. From this education and skilled workers pillar, the Human
Capital Index can be calculated, and this will help reduce the technology and living standard gaps
among countries in the globalization era. Even when a country is doing well financially, the life of
citizens and their knowledge levels will still be lower if this pillar is not properly addressed.
Pillar 2: Innovation Systems

Effective innovation systems comprises of firms, research centres, universities, consultants and other
organizations that keep up with new knowledge and technology.
Innovation systems are required to diffuse the knowledge from basic technologies to research
activities. In fact, innovation systems involve two parts— the diffusion of basic knowledge and
technology; and creation of new knowledge. For most developing countries, most of the innovation
systems can originate from local talents and foreign sources entering the country through foreign direct
investments; import of equipment and other goods and licensing agreements; as well as its patents.
Pillar 3: Information Infrastructure

The effective communication, dissemination and processing of information and knowledge requires a
reliable information and communication infrastructure in knowledge society. ICT infrastructure
includes television, radio networks, telephone lines, mobile phone network, satellites network and
internet technologies. Developing the ICT infrastructure can narrow the digital gap among countries by
providing faster information flows for the information based economies. ICT policies and regulations
11

are required to build up the Information based economies thorough various ICT applications such as e-
government, e-business, e-learning, etc. Basic ICT infrastructure should be the focus for less
developed countries before promoting the technologies and applications.
Pillar 4: Economic and Institutional Regime

A country‘s economic and institutional regime also plays an important role in the creation of a
knowledge based economy. The country‘s institutional regime should allow for the efficient
mobilization and allocation of resources, stimulate entrepreneurship, and induce creation,
dissemination and efficient use of knowledge (World Bank 2007). A country‘s economic and
institutional regime includes rule of law, intellectual property rights, competition, openness to
international trade, financial market, labor markets and social safety nets, governance and
accountability, as well as corruption level.
Calculating the National Intellectual Capital Index

Using the four pillars framework by KAM, the National Intellectual Capital value is calculated by
matching each pillar with an index value, which is the modification of IC value postulated by Edvisson
& Malone 1997.
3.1 Human Capital Index.
The Human Capital Index is calculated in order to measure the value of the Education and Skilled
Workers pillar. According to Edvisson and Malone, human capital is defined as the knowledge,
education and competitions of individuals in realizing national tasks and goals. Education is the basic
building block of human capital (human development network 1999). Through effective education
systems, knowledge can be developed and it fosters the situation where skilled workers work for their
own knowledge society. Education from primary school to university level is used to measure the
different levels of education systems. Measuring human capital can be quite difficult, and care must be
exercised in setting the clear metrics value of the Human Capital Index.
The following are the selected indicators that measure the National Human Capital Index.
 Adult literacy rate
 Average years of schooling
 Gross secondary enrollments.
 Gross tertiary enrollments.
 Percentage of primary teachers with required qualifications
 Number of tertiary students per capita relative to highest value
 Cumulative tertiary graduates per capita relative to highest value
 Percentage of male grade 1 net intake
 Percentage of female grade 1 net intake
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3.2 Renewal Capital Index
To measure the second pillar of the framework of innovation system, the Renewal Capital Index of a
nation is being used as a dimension. Renewal Capital is defined as a nation‘s future wealth, which
includes capabilities and actual investments in the renewal of development for sustaining competitive
advantage. Research and development is the key parameter in the calculation of the Renewal Capital
Index. Patents, scientific publications represent the innovation system of the country as well. The
amount of research funding, basic education funding, output of research such as number of patents,
number of innovative products are also included in calculating the country‘s innovative index. In other
words, the ratio of investments and outcomes of the research have to be calculated to represent the
country‘s innovative system.
The selected indicators that measure the National Renewal Capital Indexes are
 Science and Engineering Enrolment Ratio (%), 2006
 Total Royalty Payments and receipts (US$/pop.) 2006
 Science Enrolment Ratio (%), 2006
 Researchers in R&D, 2006
 Researchers in R&D / Mil. People, 2006
 Scientific and Technical Journal Articles, 2005
 Patents Granted by USPTO / Mil. People, avg 2002-2006
 Book imports as a percentage of the GDP relative to highest value
 Periodical imports as a percentage of the GDP relative to highest value
 Total R&D expenditures as a percentage of the GDP relative to highest value
 Number of ministry employees in R&D per capita relative to highest value
 Number of university employees in R&D per capita relative to highest value
 Tertiary expenditures as a percentage of public education funding
3.3 Process Capital Index
Process capital index is defined as non human storehouses of knowledge in a nation which are
embedded in its information and communication infrastructure (Bontis, 2005). Building the
information society is the pre-stage in forming the knowledge society, as knowledge is required to
diffuse efficiently and effectively through the ICT infrastructure. The role of knowledge and ICT in
sustained development is increasing through the continuous development of science, communication
and computer technologies. ICT enables the country to process, store, and retrieve communication
information in any form regardless of distance, time and volume. Besides mobile phone and television
networks, internet usage is a significant measure in ICT infrastructure.
The selected indicators that measure the process capital index to represent the ICT infrastructure will
be
 Telephone main lines per 1000 people
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 Total telephone lines per 1000 people
 Mobile phones per 1000 people
 Computers per 1000 people
 Internet users per 1000 people
 Internet price 2005
 Daily news per 10000 users.
3.4 Financial Capital index + Market Capital Index
A country‘s economic and institutional regime involves both monetary value and relations with other
countries in the context of finance. Traditional financial capital and market capital can be represented
in the final pillar in the KAM framework. A nation‘s financial capital and market capital demonstrate
how successful the nation was in the past, and how the nation is moving forward in becoming a
knowledge based economy within the rules and regulations provided by the government. It also
includes a nation‘s openness to different cultures, international events in which nations participate, and
rules of law for ease of doing business.
The selected indicators that calculate financial capital index and market capital index will be
 Annual GDP growth percentage
 GDP per capital
 Poverty index
 Inflation
 External debt
 Gr. Capital Formation as % of GDP, 2002-2006
 Tariff & Nontariff Barriers, 2008
 Interest Rate Spread, 2006
 Domestic Credit to Private Sector as % of GDP, 2006
 High technology expors as a percentage of GDP relative to highest value
 Number of patents granted by USPTO per capita relative to highest value
 Number of meetings hosted per capita relative to highest value
4. FINDINGS
This section will describe the information obtained from the results of the surveys conducted and the
analysis that arose based on the data represented. Metrics value to calculation of capital indexes will be
collected from the World Bank KAM database‘s normalized value. Capital indexes value will be
calculated and compared with the East Asia & Pacific region‘s average value. East Asia & Pacific
14

region comprises of Australia, New Zealand, China, Korea, Hong Kong China, Taiwan China,
Singapore, Thailand, Malaysia, Philippines, Lao, Mongolia, Indonesia, Vietnam and Myanmar.
4.1 National Human Capital Index
A total of 4 metrics were available to calculate the National Human Capital Index. Besides the 3 focus
countries — Indonesia, Vietnam and Myanmar, data from East Asia & Pacific countries are also
calculated to facilitate the comparison between each country metric with the economic leaders of the
Asia region. Weighting of the metrics can be contradictory. However, the research team agreed to set
the weight equally for 4 metrics as the data available for the metrics is limited compared to the metrics
which are supposed to be presented for the Human Capital Indexes.
Table 2: The National Human Capital Index Calculation of Societies Studied.

source: www.Worldbank.com/kam
No Countries Adult literacy rate, Gross secondary Gross tertiary Life Expectancy at NHCI
(% aged 15 and enrollments, 2006 enrollments, 2006 Birth, 2005
older), 1995-2005
1 Indonesia 4.39 2.63 3.33 3.21 3.39

2 Myanmar 4.37 2.18 2.86 2.29 2.92
3 Vietnam 4.39 3.83 3.17 4.21 3.90
4 East Asia & Pacific 4.91 4.40 6.47 5.39 5.29
Weighting 25% 25% 25% 25%
According to the data analysis, Vietnam‘s Human Capital Index (HCI) is the highest amongst the three
countries, while Myanmar has the lowest value. However, the East Asia & Pacific HCI value is much
higher than any of the 3 focus countries. In the following section we will compare the individual
metrics value between the three countries with the East Asia & Pacific nations.
4.2 National Renewal Capital Index
For the National Renewal Capital Index, 4 metrics value are available. Indonesia‘s Renewal Capital
Index (RCI) value is surprisingly higher than the rest of the countries although her HCI value is lower
than that of Vietnam. Since the RCI can be defined as a country‘s level of innovation, Indonesia seems
to encourage innovation more rigorously than the other countries. Myanmar, on the other hand, has the
lowest value. This could be attributed to economic mismanagement by the Junta government, and
saddled not only by economic embargoes, but technical embargoes by the US and EU countries as
well.
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Table 3: The National Renewal Capital Index Calculation of Societies Studied.
No Countries Scientific and

Scientific and Patents Granted Patents Granted by
Technical Journal
Technical Journal by USPTO, avg USPTO / Mil. People, NRCI
Articles / Mil. People,
Articles, 2005 2002-2006 avg avg 2002-2006
2005
1 Indonesia 5.18 1.22 6.86 3.93 4.30
2 Myanmar 1.58 0.36 1.80 2.36 1.53
3 Vietnam 5.32 2.52 4.93 3.14 3.98
4 East Asia & Pacific 8.53 7.81 9.04 8.46 8.46
Weighting 25% 25% 25% 25%
4.3 National Process Capital Index
Table 4: The National Process Capital Index Calculation of Societies Studied.

Main telephone Price Basket for Daily

Total telephone Computers per Internet users
main lines per Internet (US$ newspaper per
No Countries lines per 1000 1000 people , per 1000 NPCI
1000 people , per month), 10000 users,
people , 2005 2005 people, 2005
2005 2005 2000
1 Indonesia 2.81 3.00 1.89 3.93 5.64 2.91 3.36

2 Myanmar 1.29 0.07 1.14 0.14 1.14 1.74 0.90
3 Vietnam 5.32 3.36 1.74 5.36 8.07 1.40 4.32
4 East Asia & Pac 6.44 6.11 7.61 7.39 6.04 6.36 6.68
Weighting 20% 15% 15% 20% 15% 15%
Six metrics values are available for the calculation of the National Process Capital Index. Since
process capital index is the country‘s Information and Communication infrastructure, the above table
will show how well each country‘s ICT infrastructure is constructed. Although Vietnam‘s capital index
value is relatively higher than the other two countries, there is still a noticeable gap in average values
between the three focus countries as compared to the East Asia & Pacific countries. Myanmar has to
try a huge leap in order to narrow the digital divide, which is the fundamental requirement to advance
to becoming a knowledge society/ knowledge based economy.
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4.4 National Financial + Market Capital Index
Table 5: The National Financial + Market Capital Index Calculation of Societies Studied.
Domestic
Gr. Capital Tariff &
Annual GDP Interest Rate Credit to Regulatory
Poverty Formation as Nontariff Rule of
No Countries growth (%), Spread, Private Quality, NFMCI
index, 2005 % of GDP, Barriers, Law, 2006
2002-2006 2006 Sector as % 2006
2002-2006 2008
of GDP
1 Indonesia 5.76 4.31 5.14 4.07 6.61 3.14 3.93 2.07 4.38
2 Myanmar 9.14 4.02 9.86 3.7 5.39 0.15 0.07 0.29 4.08
3 Vietnam 8.78 5.29 9.49 1.33 8.09 7.23 2.50 4.71 5.93
4 East Asia & Pac 7.45 5.2 8.22 4.85 4.91 7.3 5.96 6.32 6.28
Weighting 12.50% 12.50% 12.50% 12.50% 12.50% 12.50% 12.50% 12.50%
8 metrics are available in calculating the National Financial and Market Capital indexes. According to
the data, national financial and market capital indexes of the three focus countries are close to the
regional average value. From this data, a conclusion that the three focus countries are moving forward
quickly in financial and market capital sectors can be drawn. However, collectively they still need to
address the other pillars‘ weaknesses in order to acquire the status of a knowledge based economy.
4.5 Comparison of Capital Indexes
Table 6: Capital Indexes comparison between the countries.
NHCI NPCI NRCI NFMCI

Indonesia 3.39 3.36 4.3 4.38
Myanmar 2.92 0.9 1.53 4.08
Vietnam 3.90 4.32 3.98 5.93
East Asia & Pacific 5.29 6.68 8.46 6.28
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Figure 4. Comparison of National Intellectual Capital Index Values.
Acccording to the comparison chart, Vietnam‘s National Financial and Market Capital Index values
are comparable with the regional average value. Myanmar and Indonesia‘s NFMCI is still lagging
behind in the East Asia Pacific region. Other than the NFMCI, they also lag behind in terms of the
National Human Capital Index , National Process Capial Index and the National Renewal Capital
Index. Vietnam demonstrates good potential in becoming a knowledge based economy, while
Indonesia is moderately developing her Intellectual Capital Index values. Myanmar, however, needs to
address her very low values in the Renewal Capital Index, as well as Process Capital for any hope of
becoming a knowledge based economy. In the next section we will discuss in detail the strengths,
weaknesses, opportunites and threats of capital indexes by analyzing each metric value against the
regional average value.
18

5. KNOWLEDGE SWOT ANALYSIS
5.1 The SWOT framework

Performing a SWOT analysis involves ―describing and analyzing a firm‘s internal capabilities – its
strengths and weaknesses – relative to the opportunities and threats of its competitive environment.‖
(Zack, 1999:126) Hence, it is necessary that firms and nations ―strategically assess their knowledge
resources and capabilities…to address any gaps.‖ (Zack, 1999:142)
Strengths Weaknesses
What are the current core What are the current gaps in skills and
competencies and skills? assets with respect to advanced KBEs?
Opportunities Threats
Going forward, what are some What are some forecast inhibitors to
strategic development and growth development and growth?
areas?
Figure 5. Framework for Swot Analysis.
19

Table 7. World Bank KAM data for the Societies Studied.
No Dimension Proxy Indicators Countries/Region
Indonesia Myanmar Vietnam East Asia & Pac

Human Capital Index Adult literacy rate , (% aged 15 and older), 1995-
1 (Education) 2005 4.39 4.37 4.39 4.91
Gross secondary enrollments, 2006 2.63 2.18 3.83 4.40
Gross tertiary enrollments, 2006 3.33 2.86 3.17 6.47
Life Expectancy at Birth, 2005 3.21 2.29 4.21 5.39
Renewal Capital Index
2 (Innovation) Scientific and Technical Journal Articles, 2005 5.18 1.58 5.32 8.53
Scientific and Technical Journal Articles / Mil.
People, 2005 1.22 0.36 2.52 7.81
Patents Granted by USPTO, avg 2002-2006 6.86 1.80 4.93 9.04
Patents Granted by USPTO / Mil. People, avg avg
2002-2006 3.93 2.36 3.14 8.46
Process Capital Index

3 (Infrastructure Information) Main telephone main lines per 1000 people , 2005 2.81 1.29 5.32 6.44
Total telephone lines per 1000 people , 2005 3.00 0.07 3.36 6.11
Computers per 1000 people , 2005 1.89 1.14 1.74 7.61
Internet users per 1000 people, 2005 3.93 0.14 5.36 7.39
Price Basket for Internet (US$ per month), 2005 5.64 1.14 8.07 6.04
Daily newspaper per 10000 users, 2000 2.91 1.74 1.40 6.36
Financial Capital index +
4 Market Capital Index Annual GDP growth (%), 2002-2006 5.76 9.14 8.78 7.45
(Economic & Institutional
Regime) Poverty index, 2005 4.31 4.02 5.29 5.20
Gr. Capital Formation as % of GDP, 2002-2006 5.14 9.86 9.49 8.22
Tariff & Nontariff Barriers, 2008 4.07 3.70 1.33 4.85
Interest Rate Spread, 2006 6.61 5.39 8.09 4.91
Domestic Credit to Private Sector as % of GDP 3.14 0.15 7.23 7.30
Regulatory Quality, 2006 3.93 0.07 2.50 5.96
Rule of Law, 2006 2.07 0.29 4.71 6.32
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5.2 MYANMAR
Figure 6. KAM comparison between Myanmar and East Asia Pacific
According to the KAM data, Myanmar‘s GDP growth rate is higher than the other countries of East
Asia. The rest of the indicators are much lower than the regional average value, especially in scientific
and technical journal publication, patents issued and ICT infrastructure. Life expectancy at birth is also
relatively low compared with the other two countries. Myanmar needs to address the health sector, ICT
sector and her innovation oriented policy. Since Myanmar is being ruled by a military government,
political influence on education, health, ICT and economic sectors are tremendous. According to data
collected by the World Bank, Myanmar is far lacking behind in becoming a knowledge based
economy. Dr Tin Maung Maung Than, a senior fellow researcher of the Institute of South East Asian
Studies, stressed that all Myanmar needs is a regime change, or a 180 degree change in position by the
military government. It is rather complicating to analyze the strengths, weaknesses, opportunities and
threats in terms of knowledge, just by using synthetic data provided by the government. However, the
potential opportunities and threats would still be discussed through analyzing the country‘s existing
strengths and weaknesses from a holistic view.
5.2.1 Education
Although indicators in contributing to the education pillar are insufficient from the World Bank
database, one can conclude that the education pillar is not growing well compared with the regional
countries. Gross secondary enrolment and gross tertiary enrolment rates are low compared with the
regional average value. Data from the World Bank indicates that adult literacy rate is close to the
regional value as a result of an increase in the number of technical universities and high school by the
military government. At 2002 Myanmar vowed a 30 year plan for promoting national education. The
number of basic education in high schools increased 20% from 1988 to 2006. The number of
universities has also increased from 32 to 153 in 2006. During 2002 to 2005, according to the
government report, public expenditure on education sector is 18.1% of the total government
expenditure. Many of the Myanmar analysts have doubts on the Myanmar education system as to
21

whether it is improving only in terms of quantity instead of quality. Many are concerned about the
quality of teachers, the curriculum, and skill level of graduates may not contribute much to the genuine
growth of the education pillar. Nevertheless, having a basic infrastructure such as buildings can be
considered a strength, which could become future opportunities in supporting the education pillar. The
other strength in Myanmar‘s education is its gender balance. Myanmar did not suffer from severe
gender imbalances in education. According to the UNDP report, Myanmar adult literacy rate (Ratio of
Man to Woman) is higher than other LDP countries. This strength is not significant at the moment but
when its education pillar is developed, it would become the support factor towards the knowledge
society. As explained earlier, unskilled graduates could be the main weakness in the education pillar,
but the related brain drain problem will be the threat of the country. Every year, Myanmar graduates
are going abroad for further studies and career advancements. The government is trying to breach this
gap with trained young military officers. However, whether the locally trained professional can be
replaced the brain drain problem will be debatable when the economy‘s growth gains momentum.
Skilled professionals are therefore needed.
Another thing to note is the controversy that could develop when Myanmar achieves ―brain gain‖ by
attracting skilled professionals from overseas. The research team considers the brain drain problem as
a threat to the country at the moment. Myanmar‘s vocational and professional universities are
currently controlled by the respective ministries. For instance, the Medical University is under the
administration of the Ministry of Health, while the Technological Universities are under the Ministry
of Science and Technology. This system of control could pose to be a form of weaknesses. Instead of a
centralized control by the Ministry of Education, the curriculum and subject applied are not defined by
the education board. Curriculum in research form is required in order to fit the country‘s situation.
5.2.2 Information and Communication Infrastructure
Computer usage, telephone usage and internet usage for 56 million peoples is still very low compared
to the regional countries. Myanmar has two internet service providers, namely Myanmar Post and
Telecom and Bagan Cyber Tech, providing wireless broadband, dialup and ADSL internet service.
Since the ICT usage is the fundamental factor in breaching the digital divide gap among countries,
Myanmar‘s ICT usage has a number of limitations for 56 million people. According to e-Asean
readiness assessment conducted in 2001, Myanmar was ranked ninth out of 10 ASEAN countries in
terms of e-infrastructure, e-government, e-commerce and e-society. Besides economic and technology
embargoes by the US and EU nations, the finances invested in ICT structures were also limited. MNC
companies such as HP, IBM and Microsoft are not allowed to invest in Myanmar although there are a
number of ICT professionals emerging every year through self learning. According to a survey
conducted by one of the private companies www.openinitiative.net, Myanmar is one of the countries
with the most restricted internet censorship. Limited access to the website and monitoring of web
contents and email are major constraints for internet users in Myanmar. Despite the lack of
infrastructure, lack of finance and technology investment, limited access and awareness of ICT, the
government has a Master plan to promote ICT, mainly in education sectors. The government formed a
Myanmar ICT development council in 2000 and implemented the e-government projects. Some of the
projects include smart cards in year 2000, e-passport and smart education in 2002 with the
collaboration with Malaysia MDC, e-procurement, e-visa and certification authority in 2004. ASOCIO,
Asia-Oceania‘s emerging role in global digital economy awarded the outstanding performance award
to Myanmar computer federation in 2003. However, Myanmar‘s process capital index calculated in our
findings turn out to be the lowest amongst other capitals, and is the lowest in comparative countries as
well. Although the government has set a Master Plan for ICT usage, people living in the country are
still far from getting easy access to the telephone, computer and internet. ICT usage is the main
22

weakness of Myanmar in building up the knowledge based economy, and it would be seen as a threat
for the knowledge society until the government reconsiders the internet restriction, high cost of using
internet and personal computer usage. The other factor is that it will still remain as a threat to the
country until the US and EU lifts their sanctions to invest in Myanmar, in the form of financial or
technology investments.
5.2.3 Innovation System
Since innovation system is ahead of the education pillar, Myanmar‘s innovation sector is not
completely formed yet because of poor administration of the education system and its inability to
develop the skillful professionals. Therefore the Myanmar Government formed the Ministry of Science
and Technology in 1996. Its objectives were to carry out the research and development work for
national economic and social development, to distribute the results of research, as well as to develop
industrial and agriculture sectors to enhance production. The Ministry formed the Myanmar Scientific
and Technology research department, Department of Technical and Vocational Training, Department
of Advanced Science and Technology, and Department of Atomic Energy. Myanmar‘s scientific and
technology research department is currently working on the research area of applied chemistry,
ceramics, food technology, metallurgy, pharmaceutical, physics and engineering. The Myanmar
Government has formed basic infrastructures for innovation sectors like the education. Although the
government had aimed to develop the R&D sector systematically, Myanmar analysts agree that R&D
sectors in Myanmar are not improving as well, due to the inadequate levels of technical and managerial
skills, financial investment on R&D sector, unqualified researchers and lack of knowledge and
technology transfer program with researchers from other countries. However, the strength of the
innovation system in Myanmar can be considered as relatively well structured for R&D focus, and it
could turn into opportunities of the country when the regime makes a move. The weakness lies in the
lack of skilled researchers, and this is related with the brain drain problem discussed earlier. This
weakness could become a threat of the country as time is required to train the students to become
skilled researchers. Unless skilled researchers from overseas return to Myanmar and (re)invest their
knowledge, this gap will always remain as a threat even when the country‘s economic growth is
obtained.
5.2.4 Economic and Institutional Regime
Myanmar derives its regular GDP growth mainly from mining, livestock and fisheries and oil and gas
sector. Mining and energy is the main foreign direct investment (FDI) in Myanmar. (Greater Mekong
Sub Region Business Forum). Data used at the economic and institutional regime pillar such as rule of
law, intellectual property rights, openness to international trade, financial market and labor market
were not available in the World Bank database. Hence, the current state of Myanmar economic status
and possible opportunities and threats were obtained from the discussion with a senior fellow
researcher. The World Bank data shows GDP growth in 2006 at 9.14%, while the inflation rate is 21%
in the same year. The Myanmar analyst mentioned that GDP growth does not necessarily translate into
the growth of the nation. Since the inflation rate is high, the income of citizens will be lesser.
Myanmar has a licensing system and the government is controlling the import and export licenses. The
licensing system controlled by the government will constitute a major barrier for the openness of the
trade system. Observers accept the country's immense economic potential, but also the problems to be
resolved. The move towards a market economy was formalized in 1989 when the 1965 Law was
repealed with the intention of liberalizing the economy through encouraging foreign investments,
expanding the private sector and lifting regulations. The Foreign Investment Law was central to this
policy and designed to increase exports, support capital investment, promote high technology, provide
employment, exploit natural resources, save energy and stimulate regional development. Restrictions
23

were removed on to private participation in domestic and foreign trade and financial incentives
provided for investors including tax exemptions and relief, approval for repatriation of profits,
guarantees against nationalization for overseas investors and streamlined licensing procedures (Union
of Myanmar, 2002a).
According to the World Bank (1995), partnership with state enterprises is preferred because of its
advantages in facilitating access to infrastructure and public services. The Myanmar analyst agreed
that the strength of the economic and institutional regime will be the country‘s natural resources, such
as mining, natural gas, teak and agricultural areas. The opportunities will lie in the economic ties with
ASEAN countries, China and India, as well as free trade zones with neighbouring countries. The
weakness in this pillar is a lack of political stability, strict licensing system, tariffs and no tariff
barriers. The looming threat will be less FDI value, because it could impact not only the economic
growth, but also knowledge and technology transfer from foreign countries.
5.3 INDONESIA
Figure 7: KAM comparison between Indonesia and East Asia Pacific.
In 1997, Indonesia was struggling to overcome the Asia financial Crisis and political transformation.
Before the crisis, the exchange rate between the rupiah and the dollar was approximately 2000 rupiah
to 1 USD. The rate had plunged to over 18000 rupiah to 1 USD at various points during the crisis.
Indonesia lost 13.5% of its GDP at the end of 1998.
The longest ever Asia serving President, Suharto, was forced to resign in mid-1998 and B. J. Habibie
became President. The inflation of the rupiah and the resulting steep hikes in the prices of food staples
led to rioting throughout the country. Ten years after the Asian Financial Crisis, Indonesia has made
significant advances in reducing poverty and deepening the roots of democracy. Indonesia has re-
emerged form low income country to a growing and confident middle-income country with increasing
24

regional and global standing. But going forward, there are remains unfinished challenges in the areas
of education, research and innovations, infrastructure, poverty reduction and governance.
5.3.1 Education
The Indonesian school system is immense and diverse. With over 50 million students and 2.6 million
teachers in more than 250,000 schools, it is the third largest education system in the Asia region and
the fourth largest in the world; behind the ranks of China, India and the United States
(www.worldbank.org/id/education).
Indonesia Law Number 20 of 2003 of the National Education System proclaims that every citizen aged
7 to 15 years must attend basic education. In order to sustain Indonesia‘s growth and competitiveness
in the region for the years to come, the country must achieve these enrolment targets in education,
along with investing in improving the quality of education. Efficient and effective education spending
will thus be a central element in Indonesia's poverty reduction strategy. Indonesia needs an effective
schooling institution, improve the qualities of the teachers, partial or full education grant subsidies for
the poor.
While the adult literacy rate faired pretty well, the secondary and higher education enrolment rate still
needs a lot of improvements. Moreover, the quality of education in Indonesia is low and declining
(World Bank, 2007).
Indonesia is home to over 1,500 universities, but the ―Times Higher Education Supplement, World
University Ranking‖ included only three of the country's higher learning institutions in its list of the
world's top 400 in 2007. Yogyakarta's Gadjah Mada University (UGM) ranked 360th in place, ITB,
369th and the University of Indonesia (UI) in Jakarta at 395th (The Jakarta Post, 2008). Poor research
funding and quality are the biggest constraints to turning the country's universities into world-class
institutions. Discussions about how to improve Indonesian higher education focused on issues of
ineffective education institutions and spending allocation, teacher quality and salaries, research
funding, and professor qualifications.
From the World Bank KAM data, the telephone lines per a thousand people are low. The telephone
and other telecommunications services for people located in villages and rural areas need more
attention. Recently, mobile phone users, especially among youngsters, increased tremendously because
of the liberalization and cost war among the cellular providers.
The computers and Internet users‘ percentage is still low even though the price basket of Internet is not
bad compared with the East Asia Countries. The World Summit on Information Society (WSIS) in
December 2003 has driven a significant impact at policy level to tune the policy and regulatory
framework of the country to meet the objectives of WSIS, such as connecting half of the country
population to the Internet by 2015. It would be a daunting task for Ministry of Information and
Communication to meet WSIS objectives.
Currently, ICT is on the top of the agenda for the Indonesian government. Technology can serve as a
critical enabler for poverty reduction, and for the achievement of Indonesia‘s Millennium
Development Goal. ICT has the potential to create earning opportunities and jobs for the country,
improve the delivery of and access to basic services in healthcare and education, facilitate information
sharing and knowledge creation, increase the transparency, accountability and effectiveness of
government, business, and civil society. The government strategic intent is to focus on ICT
Development Roadmaps such as the Palapa Ring Fibre Optic Domestic Backbone Project, e-
Procurement Implementation, National Single Window, e- Education Implementation, National
25

Identification Number (NIN), Affordable Computer, Legal Software Implementation, and Internet
Socialization Campaign.
We corresponded with Dr Onno W Purbo, a knowledge entrepreneur champion with his vision to see
knowledge based society in Indonesia. He shared knowledge freely on the various websites and
developed low-cost ICT with grassroots communities. His focus is to develop low cost Internet
Infrastructure, open source system such as Linux, Voice Over IP and Wireless Technology.
5.3.3 Innovation
The Patent granted by U.S. Patent and Trademark Office (USPTO) to Indonesia is low compared with
other East Asian and Pacific nations. The Indonesian Intellectual Property Office is run by the
Directorate General of Intellectual Property Rights, under Ministry Law and Human Rights. The
Indonesian Intellectual Property Office issues patents, trademarks, industry designs, electronics
integrated circuit designs, secret businesses and plant varieties.
Currently, the number of innovations achieved by Indonesian researchers is still relatively low. This is
reflected by the low number of patent applications submitted to the Indonesian Patent Office. There
may be something wrong with the current research management system in Indonesia. Research
duplications and re-inventing the wheels of research activities are often found. The low performance of
Indonesian researchers in producing product-oriented and patentable research could be due to unclear
research directions. Therefore, to direct the Indonesian researcher‘s research into the right track, it is
important to evaluate technology trends and development.
The scientific and technical journal articles published by Indonesian researchers are low compared
with other East Asian and Pacific countries. Citing figures from the World Bank Knowledge Economy
Index 2007, Indonesia produced only 0.8 technical journal articles per 1 million people. The figure is
far below, for example, India with 12 technical journal articles per 1 million people, and Malaysia with
21.3. The low output is due to poor research funding and ineffective education institutions.
Even though Indonesia has made progress in reducing the poor since the Asian Financial Crisis, World
Bank – KAM data shows the poverty in Indonesia still high. Over 110 million or 53% of Indonesians
live on less than US$2 a day. Indonesia is also doing poorly with regard to key social development
indicators, such as Life Expectancy at Birth relative to its East Asian peers. Indonesia‘s maternal
mortality rate is high. Almost half of Indonesians lack access to either safe water or sanitation
(www.worldbank.org/id).
The Regulatory Quality and Rule of Law score is quite low compared with East Asian counterparts.
Indonesian‘s legal system has suffered from severe and widespread deficiencies for decades. The
justice system is often suspected as corrupt and only protecting the private interests of elite groups,
rather than providing public service to the populace. Institutional reform is difficult. Earning the trust
of the many stakeholders in the justice sector – and most importantly that of Indonesia‘s citizens – will
take a sustained and determined effort for a long time. Indonesia is one of the countries in the world
where corruption is widespread and has become a significant contributor to the fragility of the
country's economy. The Reformasi era since 1998 blew a fresh wind of public voices against
corruption. In many places at the local level, citizens began to move to judge corrupt bureaucrats and
demand their resignation. On 27 December 2002, a state Commission to Combat Corruption (Komisi
Pemberantasan Korupsi, KPK) was established based on a national legislation to investigate past and
present corruption practices, provide protection to witnesses, recommend prosecution and make its
recommendations public (Hivos, 2008).
26

5.4 VIETNAM
Figure 8. KAM comparison between Myanmar and East Asia Pacific.
Vietnam has a population of 80 million people covering 54 ethnic groups of which the Kinh or Viet are
the predominant group consisting of 87% of the population. The population distribution is
approximately 80% rural and 20% urban-based.
Since 2001, the authorities implemented structural reforms to modernize the economy, and to produce
more competitive, export-driven industries. There are more semblances of economic liberalization and
international integration. US-Vietnam Bilateral Trade Agreement in Dec 2001 led to even more rapid
changes in its trade and economic regime. In years 2002 to 2003, exports to the US doubled.
It is noteworthy that in 1993, Vietnam‘s poverty rate was 83% of the population. Currently, it stands at
less than 15%.
Today, Vietnam is also the second largest coffee exporter in the world. Why does it see such
exponential growth? A possible explanation is its Physical and Social infrastructure, Rates,
Communication facilities and Education. They work hand in hand in a symbiotic relationship,
otherwise the economy will overheat. However, there is still a massive deficit in the provision of
education to the masses.
Dr Omkar Lal Shrestha, a visiting senior research fellow of the Institute of South East Asian Studies,
stressed that there are 1.6 million people entering the labour market every year. If there is insufficient
job creation, social problems will occur. According to him, Vietnam is undergoing multiple transitions,
which are planned, from Socialist to Market; Rural to Urban; Isolation to Global Integration. It aims to
elevate its status from a poor country to middle income country by 2010.
27

5.4.1 Education
Vietnam has an extensive state-controlled network of schools, colleges and universities but the number
of privately-run and mixed public and private institutions is also growing. General education in
Vietnam is imparted in 5 categories: Kindergarten, elementary schools, middle schools, high schools,
and college/university. Courses are taught mainly in Vietnamese. A large number of public schools
have been organized across cities, towns and villages with the purpose of raising the national literacy
rate, which is already among the highest in the world. There are a large number of specialist colleges,
established to develop a diverse and skilled national workforce. A large number of Vietnam's most
acclaimed universities are based in Hanoi and Ho Chi Minh City. Facing serious crises, Vietnam's
education system is under a holistic reform launched by the government. In Vietnam, education from
age 6 to 11 is free and mandatory. Education above these ages is not free; therefore some poor families
may find it hard to come up with the tuition for their children without some forms of public or private
assistance. Regardless, school enrollment is among the highest in the world and the number of colleges
and universities increased quite dramatically in recent years, from 178 in 2000 to 299 in 2005.
4% of Vietnam‘s GDP is invested in education. This is considered not bad in the context of the Asia
Pacific countries.
However, in order to raise capital productivity, the country has to be more stringent in the selection of
projects, and not simply take up every available project. To illustrate the point, it is not practical to
have universities in all the states in Vietnam.
The basic structure of the communication apparatus in Vietnam is of a socialist design. The structure
has several hierarchical levels: the central government; provincial; district; commune; and village. At
each administrative level there are officials in charge of handling information and taking responsibility
for further dissemination. This structure is the common apparatus in the governmental and mass
organization sectors.
The main direction of interaction between the communication levels is top-down, however, formal
feedback mechanisms do exist from the commune and village levels through formal actors or officials.
One of the characteristics of this formal side of communication is its high degree of face-to-face
communication exchange at the administrative level. The out-reach capacity of the formal apparatus is
extensive with links from the national level to every one of the 100,000 villages in Vietnam. Pre-set
communication channels link the various levels via formal positions and thus link the hierarchical
levels. The challenge is to transform the formal apparatus into a more effective interactive and
participatory network at all levels.
The formal apparatus has been historically used to tell people ‗what to think rather than what to think
about‘ (Hayter, 1998), to disseminate information and to promote ideological policy. The structure was
built as an interpersonal channel to provide an interface between the state and the people. In Vietnam
there are few other channels for communication than those offered by the formal structure. Non-
Government Organisations (NGOs) and religious groups do not have an extensive community network
and the mass media is regulated by the government sector.
The efficacy of the formal structure has been criticized as being difficult to evaluate because it is not
clear how much information is disseminated and how effectively community members are reached.
However, there are distinct advantages to the formal apparatus. The formal structure is a main gateway
to accessing informal networks of communication (Blaettler, 2000) and has an extensive
communication system that uses the mass media and interpersonal communication.
28

The aim is to transform this apparatus from being top-down and didactic into becoming a more
responsive and community based bottom-up network and where community needs are derived from
feedback at each level of the apparatus.
In building the capacity and improving coordination of the key collaborators, a re-orientation of the
formal apparatus will require the capacity building of the collaborators so that they are able to use
participatory methods and materials in their everyday work. UNICEF can play a role by providing
training to its counterparts in the use of participatory materials, in communication skills, in facilitation
skills for workshop training and can support the strengthening of counterpart organisations in the areas
of human resource management, inter-sectoral coordination and monitoring and evaluation procedures.
The effectiveness of Information communication in Vietnam will be strengthened through a sharing of
experiences and the collaboration between the Government and private sectors. The private sector in
Vietnam has a great deal of experience in using social marketing approaches and the mass media in
advertising. The Government sector has a great deal of experience in managing an extensive
communications network. UNICEF can play a catalyst role by introducing the issue of sharing
experiences on communication through a series of seminars to bring together the Government and
private sectors.
5.4.3 Innovation
Innovation is something beyond the classroom. This is the most important, particularly more
pronounced as the country becomes more advanced. The encouragement of Entrepreneurship is one of
the aspects.
Vietnam‘s investment is very admirable, yet there comes a point where there is a need to increase
productivity, not just capital. Hence, there is a need to improve education. Improvements in education
would encompass aspects in English Language, Technology and Tertiary education.
Currently, Vietnam has only 12000 Mega Watts of electricity to work with. By 2010, there would be
an exponential increase to 25000 Mega Watts. Hence, they need to innovate quickly in order to
achieve that.
GDP cannot always go higher and higher. Correspondingly, productivity must also be raised in
tandem. As an emerging country, Vietnam‘s renewal capital is low. This could be attributed to low
awareness. Awareness is necessary, but not enough.
Vietnam invested 40% of the GDP in the tune of $40 billion dollars. In the initial phase, there were
high returns, but over time it‘s seeing lesser returns. There is an innate higher risk of inefficiencies.
With the current capital output ratio, the productivity is lower. This is the result of the lack of the
required skills and education.
The Vietnam War destroyed much of the economy of Vietnam. Upon taking power, the Government
created a planned economy for the nation. Collectivization of farms, factories and economic capital
was implemented, and millions of people were put to work in government programs. For a decade,
united Vietnam's economy was plagued with inefficiency and corruption in state programs, poor
quality and underproduction and restrictions on economic activities and trade. It also suffered from the
trade embargo from the United States and most of Europe after the Vietnam War. Subsequently, the
trade partners of the Communist blocs began to erode. In 1986, the Sixth Party Congress introduced
significant economic reforms with market economy elements as part of a broad economic reform
package. Private ownership was encouraged in industries, commerce and agriculture. Vietnam
29

achieved around 8% annual GDP growth from 1990 to 1997 and continued at around 7% from 2000 to
2005, making it the world's second-fastest growing economy. Simultaneously, foreign investments
grew threefold and domestic savings quintupled. Manufacturing, information technology and high-tech
industries form a large and fast-growing part of the national economy. Vietnam is a relative new-
comer to the oil business, but today it is the third-largest oil producer in Southeast Asia with output of
400,000 barrels per day (64,000 m³/d). Vietnam is one of Asia's most open economies: two-way trade
is around 160% of GDP, more than twice the ratio for China and over four times India's.
Vietnam is still a relatively poor country with an annual GDP of US$280.2 billion at purchasing power
parity (2006 estimate). This translates to a purchasing power of about US$3,300 per capita (or US$726
per capita at the market exchange rate). Inflation rate was estimated at 7.5% per year in 2006. Deep
poverty, defined as a percent of the population living under $1 per day, has declined significantly and
is now smaller than that of China, India, and the Philippines.
As a result of several land reform measures, Vietnam is now the largest producer of cashew nuts with a
one-third global share and second largest rice exporter in the world after Thailand. Besides rice, key
exports are coffee, tea, rubber, and fishery products. However, agriculture's share of economic output
has declined, falling as a share of GDP from 42% in 1989 to 20% in 2006, as production in other
sectors of the economy has risen.
Among other steps taken in the process of transitioning to a market economy, Vietnam in July 2006
updated its intellectual property legislation to comply with TRIPS. Vietnam was accepted into the
WTO on November 7, 2006. Vietnam's chief trading partners include Japan, Australia, ASEAN
countries, the U.S. and Western European countries.
Vietnam‘s macroeconomic policies have been prudent. Her fiscal debts, current trade accounts are
healthy and in good place. Ironically, she is a communist country who publicly announces to the world
that she needs the private sectors to be in the nation. As a result, there is an influx of private companies
being set up.
The current Vietnamese foreign policy is: "Implement consistently the foreign policy line of
independence, self-reliance, peace, cooperation and development; the foreign policy of openness and
diversification and multilateralization of international relations. Proactive and actively engaged in
international economic integration while expanding international cooperation in other fields, Vietnam
is a friend and reliable partner of all countries in the international community, actively taking part in
international and regional cooperation processes" (Extract from The Political Report of The Central
Committee - Vietnam Communist Party, 9th Tenure, at The Party‘s 10th National Congress. As of
December 2007, Vietnam has established diplomatic relations with 172 countries.
Challenges for Vietnam include promoting job creation to keep up with the country‘s high population
growth rate. There is also the issue of high inflation, with a need to tighten monetary and fiscal
policies. It must not repeat the mistake of 1989, whereby there was a tremendous shortage of food, and
prices sky-rocketed.
6. CONCLUSION
Knowledge societies develop through a combination of their historical antecedents and careful
planning. It requires a process of slow maturation and multiple inputs to develop the reasoning and
then the reflective capabilities that characterize a true knowledge society. It takes true knowledge to
understand that a knowledge society is never truly complete, for that in itself would be a contradiction
30

in terms. The journey is the reward and by-products of the quest for knowledge are often as valuable as
the attainment of true knowledge itself. Some societies are well on their way to become knowledge-
based. A new ―great transformation‖ (to use Polanyi‘s term) is taking place.
Table 8. Summary of policy recommendations for Myanmar, Indonesia and Vietnam.
Myanmar Indonesia Vietnam

Education  Review the curriculum of  Improve the secondary  Improve the secondary
University modules and and higher level education and higher level education
Basic Education High enrollment rates enrollment rates
School Modules
 Improve the quality of  Improve learning systems
 Promote scholarship teacher and professor
programs by government qualification  Promote life-long
to study at foreign learning
universities  Lower school fee, grants
and scholarship for the
 Create job opportunities of poor
graduate students and
control the brain drain
problem
Innovation System  Promote the joint program  Increase research funding  Attract private
with foreign universities investments and foster
in R&D project  Effective Research more Research and
institution coordination Development to attract
 Attract local talents to and direction to evaluate talents
participate in R&D area technology trend and
development in order to  Create alliances between
 Provide sufficient fund produce product-oriented universities and private
and equipment for R&D and patentable results firms to foster innovation
project and co-innovation
networks
 Increase ICT reach by
making it accessible to all
Information and  Reduce internet  Implement Low cost ICT,  Foster more innovation
Communication censorship example Open Source and creativity,
Linux (instead of Government encourage
Infrastructure  Reduce the cost of internet Microsoft), VoIP (instead spin-offs in organizations
usage of normal PSTN), and
 Government showing
 Open more internet public Wireless Technology
support for high-tech
access (instead of fiber cables)
firms in strategic alliances
 Reduce the mobile phone  Provide free Internet
With UNICEF as a
subscription fees access for students in the
facilitator, seminars can be
schools and Universities
organized to bring the
for education purpose
government and the private
sectors in collaboration
Economic and  Gain the political stability  Fight the poverty by  Creation of a variety of
Institutional Regime to attract Foreign Direct creating jobs for the poor jobs to cater for low
Investments income earners
 To reform law
 Reduce tariff value enforcement institutions  Keeping economy safe in
31

 Create more privatization that are trusted by the order to attract external
for government controlled people and by those who investments
business want to do business with
or in Indonesia  Strategic alliances with
 Create labour market other countries
According to our field study of Indonesia, Myanmar and Vietnam, all three countries need to move
quickly in order to enter the realm of knowledge societies. All three countries share similar
backgrounds, but Vietnam managed to make a turn in economic development earlier than the other two
countries by changing her foreign policy. Although Vietnam is ruled by a communist party, she
manages to sustain her economic growth and achieve economic improvements. Vietnam has a greater
chance of becoming a knowledge society compared to Indonesia and Myanmar. Indonesia is in a
transitional state after Suharto‘s regime and she is still struggling to improve the economic sector. The
other sectors such as innovation, ICT and human development sectors are still lagging far behind in the
region. Myanmar was expected to be the first wealthy country at post colonial era because of her
inherent rich natural resources, but unfortunately became the LDP country ruled by the military
regime. Although the current government aspires to attain knowledge society status quickly in order to
develop multiple areas in the country, the results have not been satisfactory for its population of 56
million thus far.
In the knowledge society of the new millennium there will be no place for misunderstandings, no need
for doubt, distrust and suspicion - often the harbinger of unfortunate disputes and conflicts. While it
may be utopian to expect a total knowledge balance across individuals and communities, a shared
understanding of issues and solutions to minor and major problems can truly lead to the lessening of
political, communal and societal entropy and pave the way to global peace and harmony.
A strong commitment to knowledge management is essential amongst the powers – corporate
influencers, society leaders and national and international statesmen alike. Whether wiser counsel will
prevail among the many warring factions that exist in today‘s society and a true knowledge society
will emerge, only time will tell.
At several points in this report, we have indicated that the scope of our research into the impact of
policy recommendations was confined in a number of ways. Some topics which we investigated in
only a limited fashion could, we believe, form the focus of valuable research in the future, conducted
along similar lines to our own.
One of these topics is the impact of the four pillars in constructing a knowledge society.
A second possible topic for future research is the impact of policy and law makers. We did not focus
on any particular policy or law maker. Studies that sought systematically to explore the impact of such
figures in a national context could produce valuable conclusions.
Further empirical research into matters such as gender influence in knowledge societies and the
difficulties experienced by the different genders, may, we believe, be beneficial. It is capable of
serving at least two purposes. It can assist in establishing further what level of validity should be
attributed, and can bring to light information that is very valuable when measures are being considered
for practical improvements of the system in knowledge societies.
To draw conclusions from secondary data we unearthed is not a straightforward exercise. Isolated
interviews with senior fellows and researchers cannot reveal very much about likely patterns as a
whole, and secondary data may not be fully representative. We would strongly emphasize the need for
a consciously structured approach in any further research that is undertaken.
32

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36

APPENDIX - COUNTRY PROFILES
Myanmar
Myanmar located in the western portion of mainland Southeast Asia and second largest country in South East Asian
Country. Myanmar, a resource-rich country, suffers from pervasive government controls, inefficient economic policies, and
rural poverty. The junta took steps in the early 1990s to liberalize the economy after decades of failure under the "Burmese
Way to Socialism," but those efforts stalled, and some of the liberalization measures were rescinded. Myanmar does not
have monetary or fiscal stability, so the economy suffers from serious macroeconomic imbalances - including inflation,
multiple official exchange rates that overvalue the Myanmar kyat, and a distorted interest rate regime. Most overseas
development assistance ceased after the junta began to suppress the democracy movement in 1988 and subsequently
refused to honor the results of the 1990 legislative elections. In response to the government of Myanmar's attack in May
2003 on AUNG SAN SUU KYI and her convoy, the US imposed new economic sanctions against Myanmar - including a
ban on imports of Myanmar‘s products and a ban on provision of financial services by US persons. A poor investment
climate further slowed the inflow of foreign exchange. The most productive sectors will continue to be in extractive
industries, especially oil and gas, mining, and timber. Other areas, such as manufacturing and services, are struggling with
inadequate infrastructure, unpredictable import/export policies, deteriorating health and education systems, and corruption.
A major banking crisis in 2003 shuttered the country's 20 private banks and disrupted the economy. As of December 2005,
the largest private banks operate under tight restrictions limiting the private sector's access to formal credit. Official
statistics are inaccurate. Published statistics on foreign trade are greatly understated because of the size of the black market
and unofficial border trade - often estimated to be as large as the official economy. Myanmar‘s trade with Thailand, China,
and India is rising. Though the Myanmar government has good economic relations with its neighbors, better investment and
business climates and an improved political situation are needed to promote foreign investment, exports, and tourism.
Vietnam
Vietnam is located in the southeastern extremity of the Indochinese peninsula and occupies about 331,688 square
kilometers, of which about 25 percent was under cultivation in 1987. The S-shaped country has a north-to-south distance of
1,650 kilometers and is about 50 kilometers wide at the narrowest point. With a coastline of 3,260 kilometers, excluding
islands, Vietnam claims 12 nautical miles as the limit of its territorial waters, an additional 12 nautical miles as a
contiguous customs and security zone, and 200 nautical miles as an exclusive economic zone.
Vietnam is a densely-populated, developing country that in the last 30 years has had to recover from the ravages of war, the
loss of financial support from the old Soviet Bloc, and the rigidities of a centrally-planned economy. Substantial progress
was achieved from 1986 to 1997 in moving forward from an extremely low level of development and significantly reducing
poverty. Growth averaged around 9% per year from 1993 to 1997. The 1997 Asian financial crisis highlighted the problems
in the Vietnamese economy and temporarily allowed opponents of reform to slow progress toward a market-oriented
economy. GDP growth averaged 6.8% per year from 1997 to 2004 even against the background of the Asian financial crisis
and a global recession, and growth hit 8% in 2005. Since 2001, however, Vietnamese authorities have reaffirmed their
commitment to economic liberalization and international integration. They have moved to implement the structural reforms
needed to modernize the economy and to produce more competitive, export-driven industries. Vietnam's membership in the
ASEAN Free Trade Area (AFTA) and entry into force of the US-Vietnam Bilateral Trade Agreement in December 2001
have led to even more rapid changes in Vietnam's trade and economic regime. Vietnam's exports to the US doubled in 2002
and again in 2003. Vietnam became a member of the WTO in January 2007. Among other benefits, accession would allow
Vietnam to take advantage of the phase out of the Agreement on Textiles and Clothing, which eliminated quotas on textiles
and clothing for WTO partners on 1 January 2005. Vietnam is working to promote job creation to keep up with the
country's high population growth rate. However, high levels of inflation have prompted Vietnamese authorities to tighten
monetary and fiscal policies.
Indonesia
Indonesia‘s social and geographical environment is one of the most complex and varied in the world. By one count, at least
669 distinct languages and well over 1,100 different dialects are spoken in the archipelago. The nation encompasses some
13,667 islands; the landscape ranges from rain forests and steaming mangrove swamps to arid plains and snowcapped
mountains.
Indonesia, a vast polyglot nation, has struggled to overcome the Asian financial crisis, and still grapples with high
unemployment, a fragile banking sector, endemic corruption, inadequate infrastructure, a poor investment climate, and
unequal resource distribution among regions. Indonesia became a net oil importer in 2004 because of declining production
37

and lack of new exploration investment. The cost of subsidizing domestic fuel placed increasing strain on the budget in
2005, and combined with indecisive monetary policy, contributed to a run on the currency in August, prompting the
government to enact a 126% average fuel price hike in October. The resulting inflation and interest rate hikes will dampen
growth prospects. Keys to future growth remain internal reform, building up the confidence of international and domestic
investors, and strong global economic growth.
38

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Bridging the Knowledge Gap in Developing Societies:

A field study of Indonesia, Vietnam and Myanmar

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Table 1. Comparison of the characteristics of a knowledge society and a knowledge economy.

Characteristics of a Knowledge Society Characteristics of a Knowledge Economy (Houghton &

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Human Structural Relational

Market Capital Renewable Process Culture

Figure 1. A Framework for National Wealth.

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Pillar 1 Pillar 2 Pillar 3 Pillar 4

Figure 2. Four Pillars of Knowledge Economy.

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3. METHODOLOGY AND CONCEPTUAL MODEL

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Adult literacy rate (includes information literacy), 30%

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Education and Innovation Information Economic &

Human Capital Renewal Process Capital Financial Capital Index +

Pillar 2: Innovation Systems

Pillar 3: Information Infrastructure

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Pillar 4: Economic and Institutional Regime

Calculating the National Intellectual Capital Index

3.1 Human Capital Index.

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3.3 Process Capital Index

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3.4 Financial Capital index + Market Capital Index

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4.1 National Human Capital Index

Table 2: The National Human Capital Index Calculation of Societies Studied.

1 Indonesia 4.39 2.63 3.33 3.21 3.39

Weighting 25% 25% 25% 25%

4.2 National Renewal Capital Index

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No Countries Scientific and

Weighting 25% 25% 25% 25%

4.3 National Process Capital Index

Table 4: The National Process Capital Index Calculation of Societies Studied.

Main telephone Price Basket for Daily

1 Indonesia 2.81 3.00 1.89 3.93 5.64 2.91 3.36

Weighting 20% 15% 15% 20% 15% 15%

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Weighting 12.50% 12.50% 12.50% 12.50% 12.50% 12.50% 12.50% 12.50%

4.5 Comparison of Capital Indexes

Table 6: Capital Indexes comparison between the countries.

NHCI NPCI NRCI NFMCI

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5.1 The SWOT framework

Figure 5. Framework for Swot Analysis.

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No Dimension Proxy Indicators Countries/Region

Indonesia Myanmar Vietnam East Asia & Pac

Process Capital Index

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