1. Technology Transfer and Development
2. Mainstream View on Technology and Technology Transfer
3. An Alternative View on Technology
4. Options for Africa

1. Technology Transfer and Development

Technology is generally accepted to mean “the practical application of science to commerce or industry”. The transfer of technology from rich to poor countries is often argued as a necessary condition for the poor to industrialise. Often this is also used to persuade Developing Countries to accept liberal rules to the flow of foreign capital – mainly in the form of foreign direct investments (FDIs) (See also Fact sheet on FDI). The reality is that very little technology transfer actually occurs, or if it does, it is in the form of Psuedo Transfer, (see below). There is, however, an alternative view on technology that puts the matter in a more realistic perspective. It says that an alternative technology approach must be based on three policy strategies, listed below in order of priority:
a) Creation of a home-based Domestic Scientific and Technology Capacity (DSTC), including capacity to undertake relevant research and development.
b) Purchase (as opposed to transfer) of appropriate technology from the open market.
c) Transfer of technology, preferably between South-South, only under certain conditions.

2. Mainstream View on Technology and Technology Transfer

Mainstream economic literature on technology falls into two main theories. One approximates a kind of technological determinism, which argues that with the “right” kind of policies, the developing countries can “attract” the right kind of technology, that would then surge them onwards on the road to development. The second looks primarily at the social, political and institutional aspects of technology.

Technology determinism is when technology is given a determinist role in production and in economic development. Very few development economists are out and out technology determinists, but many approximate the description when they give it a decisive role. A good example of this is the development economist, Sanjay Lall. He argues that integration into the process of globalisation offers the best prospect for the developing countries. “As embodiment of technological progress and more open markets,” argues Lall, “Globalisation offers enormous potential productive benefits to the developing countries.” The gap between rich and poor countries will diminish if the latter take “correct policy decisions”. For example, a country that wants to expand exports must upgrade its technology structure (the "market positioning” argument). They have to move into higher level manufacturing, design, development and regional service activities. In terms of market shares, primary products have been losing ground steadily since 1976. They must therefore get out of primary production, and aspire to get into medium or high technology based production for exports. He gives the examples of ten developing countries that have done well through this route – namely, China, Korea, Taiwan, Mexico, Singapore, Malaysia, Thailand, Brazil, the Philippines, and Indonesia.

Argentina has also been cited in the past as a success story of mainstream strategy, but with its demise in recent years it has dropped from the list. Six of the ten above listed countries - Korea, Mexico, Thailand, Brazil, the Philippines and Indonesia - are now experiencing serious reversals in terms of economic and social development, and should also be dropped from the list. In spite of this, there is such a seductive appeal to the mainstream argument that many developing countries buy into it. The New Economic Partnership for Africa’s Development (NEPAD) is one example (see also Fact Sheet on NEPAD), primarily because its authorship draws primarily from this genre of development economists. NEPAD lays an extraordinary emphasis on technology (especially Information Technology) as a means of Africa leapfrogging into a new era of development. In order for this to happen it prescribes the creation of the “right conditions” for attracting foreign direct investments (FDIs), which it argues will bring technology into Africa. This, it maintains, will create for Africa a niche in the global “value chain” in which it will have a competitive edge over other players.

A more discriminate theory within the mainstream looks at the social, political and institutional aspects of technology. A good example of this is Carlota Perez. She looks at the entire “meta-paradigm” of techno-economic change affecting the economy - including production systems, organisation, property regimes, social, political and managerial change, and interdependence between all these factors. In this gamut of relationships, Perez singles out the link between technology and finance capital. She argues that the full fruits of technological revolution occur roughly every 50 years, widely reaped with a time lag of 20-30 years of turbulent adaptation and assimilation. She explains why, in spite of the uniqueness of each period, there is a certain sequence of events that occurs every half century. This is at the global level. At the level of the developing countries, Perez identifies finance and debt as the decisive factors for technological innovation or technology “diffusion” (not transfer). Countries and regions vary in their capacity and desire to make required changes, depending on socio-political factors and historical circumstances. Old institutions have to be replaced by new ones because of mismatch (decoupling) between techno-economic change and socio-institutional development.

3. An Alternative View on Technology

An alternative view comes closer to Perez rather than NEPAD-Lall analytical perspective. FDIs may or may not bring technology to their new areas of conquest. This depends on many factors - such as its cost, the availability of local technology and skills, the financial and institutional factors, and the degree of control the owners of technological knowledge retain over the technology. The degree to which an actual “transfer” takes place, also depends on many factors – crucially the host country’s domestic scientific and technological capacity (DSTC), and the terms of the negotiations between the owners of the technology and its “recipients”. The role of domestic policy in facilitating industrial clusters which benefit from each other’s technology, markets and skills, is well known by industrial thinkers and practitioners.

In other words, technology does not just come like that – with the drop of an FDI hat (or begging bowl). Technology, above all, is a means of control over both production and market. Technology is not neutral. It is embedded in capital, and it is controlled by whoever controls the capital. Capital and its embedded technology enable its owners to make policy on production, marketing, pricing and the distribution of income. It is an illusion to think that developing countries will secure this kind of embedded technology from the West and then out-compete the West. Countries such as Korea and Taiwan, as all other now advanced economies in history, were able to do it because they disembedded the technology from its capital base (by, for example, copying intellectual property, and through reverse engineering), and by creating a “national” base for capital. Some countries were able to do this during the cold war years when the West needed them to fight against the Communist threat coming from China and Vietnam. In countries like Korea and Taiwan the local entrepreneurs created their own national companies (national “champions”), generously supported by their governments (through credit facilities and trade barriers against foreign goods), that first secured the domestic market and then entered into competition with the Western companies in the global market.

Since the end of the cold war, this option is no longer available. Now that the cold war is over, even Korea cannot expect indulgence from the United States. The US, Europe and Japan took the first opportunity that availed itself with the financial crisis in Korea in 1997/98 to assert their control over the industrial and financial empire that Korea had so painstakingly created over thirty years of hard work of its workers and the skill of its entrepreneurs. Now, with intellectual property rights embedded in the World Trade Organization (WTO) under the Trade-Related Intellectual Property Rights (TRIPS), scientific knowledge has become monopolised in the hands of a few thousand multinational corporations that use this knowledge to control the economies of the third world. High technology has come in areas such as mining (especially oil, gas and strategic minerals) and services (banking, finance, etc.), only because these have given the foreign direct investors control over these sectors.

All the hype about creating the “enabling environment” for FDIs on the grounds that they would “bring” technology must be seriously discounted. China is often cited (as by Lall) as an example, but the Chinese case does not bear out the liberalisation paradigm. The Chinese know that the western corporations have to export capital (and therefore also technology) for their own reasons. They know that foreign capitalists will try to use technology to control production and market in China. So they negotiate hard, and play one Western or Japanese company against another, until they get what they want. They do not accept FDIs – which is a packet of money capital, technology, management, market access, and much else. They disaggregate the package, and take only what they need (for example, the Chinese eschew money capital; they have plenty of their own), and try to maintain control over domestic production and market. They also insist that the foreign investor transfer not just application end-use technology (for example, mobile phones) but also design technology and the knowledge that comes with it.

In this light, the alternative perspective makes a distinction between three kinds of technology transfer. Adaptive Transfer takes place where Foreign Technology (FT) supplied in year one is adapted by a domestic technological and scientific capacity (DTSC) before going into Production (P) in year two or three. Full Transfer takes place where FT is purchased in year one, is simultaneously used in production and made the subject of domestic Research and Development (R&D) and engineering design, and in the year 'N', the technology is renovated or upgraded so that local/national DTSC is able to deliver the renovated or so-called 'next generation' technology. And Pseudo Transfer takes place where FT functions only as an input into production, with no impact on DTSC.

The Chinese insist, as far as possible, on full transfer of technology, even if it goes through stages of adaptive transfers. In Africa, by contrast, most of so-called “technology transfer” is of the third kind. Pseudo-transfers of technology are essentially excuses for transnational corporations (TNCs) to take over local companies, or to carve out a share of the domestic markets.

The above typology is offered as an alternative to the taxonomy in mainstream development literature. Instead of breaking down technology in terms of the absorptive, adaptive or transformative capacity of the host country, it does so in terms the sophistication of the technology. Thus, for example, Sanjay Lall breaks it down into low, medium and high technology. He argues that the developing countries should shift from low level to either medium level or high level technology.

The Chinese success, however, is not based on what the above taxonomy of mainstream development economics might suggest. Indeed, the Chinese are buying “low level” discarded machinery from Western countries at virtually the cost of scrap for the older industries, such as ginning, textiles, and a whole array of consumer goods. (A Capstain lathe machine, for example, that cost $100,000 some 15 years ago can now be purchased for as low a price as $100 in the auction floors in Europe). In the older industrialised countries, the cost of labour is so high that it is no longer economical to employ these machines, even though the quality it provides is fully comparable to the computerized products. They have moved on to semi-automatic, then automatic and now computerised technology in order to beat the wage cost. They have moved up the “technology ladder” in order to retain their competitiveness. The Chinese, on the other hand, can purchase the discarded machinery at very little cost, reassemble them at home, employ labour at the prevailing rate in the national market (disparagingly called “cheap labour” by the West), and then export quality products to the Western markets at prices that are one-tenth or one-twentieth of the production cost in the West. At the same time, the Chinese are developing their own DSTC. They send their young graduates to the US and other advanced countries in order to learn science and its application to production, and then ensure that they (or most of them) return to China. It is in this specific historical and institutional context that China crafts its policy on research and development.

4. Options for Africa

For Africa the Chinese experience provides a good lesson. However, Africa should not try to compete against China in the consumer goods export market. The wages in Africa are much higher than those in China. It is better for Africa to buy relevant technology off the shelf (or in auction markets), than to ask for technology “transfers”, especially since the transfer aspect is seized as an opportunity by Western enterprises to enter and control African production and markets. If any “transfers” are needed (and these cannot be excluded), then it is better for Africa to negotiate these with other developing industrialised countries than with the highly industrialised countries of the West. Africa should not use the latest technology for mass production. Africa needs labour-intensive, slow moving machines that can produce enough goods to satisfy the domestic and regional market. Even if Africa is able to mass produce using the latest say laser beam technology and computerised machinery, where will they sell the products? The domestic market is limited, and in the export market they cannot compete either in the labour-intensive products (in which China for example has a competitive edge) or in capital-intensive products. Besides, in order to produce using the latest technology, they will have to import all the necessary technical and managerial skills from outside, which make the whole enterprise non-viable. Indeed worse, because in the process it creates debt finance and an increasing burden on debt servicing.

It is in this context that Africa must develop its own DSTC, including a policy on relevant research and development. The R&D policy must be based on the production condition in the region, the need first to produce for the domestic/regional market (only secondarily for the export market), and Africa’s location within the global value chain. This can be done even if the country is as small as Cuba and has little by way of natural resources. Cuba has its own research and development strategies in the areas, for example of pharmaceuticals, and the sugar and tobacco industries. Investment in scientific education and engendering a culture of innovation based on indigenous knowledge, alongside policies which demand such development and domestic control over it is clearly the principal route to developing science and technology.

The above strategy is also recognised in the UNDP publication Making Global Trade Work For People. It says “ …the experience of industrial countries and successful developing countries provide two other important lessons. First , economic integration with the global economy is a result of successful growth and development – not a prerequisite for it. Second, domestic institutional innovations – many of them unorthodox and requiring considerable policy space and flexibility – have been integral to most successful development strategies.”

To their national efforts, it may be added in conclusion, the DCs and LDCs of the countries of the South can add regional efforts to pool resources to try and build regional DSTCs. In the SADC region for example, a country like Zambia or Mozambique can take advantage of the superior DSTC of South Africa, or the skills of Mauritius in niche sectors (for example, in the sugar industry), at the same time as they take advantage of their status as LDCs in international trade agreements.. SADC and/or COMESA should develop a protocol on the subject that identifies modes of technology transfers between member countries. They should also strategise on the building of a regional DSTC without having to depend on foreign TNCs or FDIs.

Sanjay Lall, “Industrial Success & Failure in a Globalizing World”, Paper presented at the Other Canon Meeting, Venice, January 2003.

Carlota Perez, Technological Revolutions & Financial Capital, USA: Edward Elgar, 2002.

UNDP, Making Global Trade Work for People, 2003