2.2. Intangible capital and industrial policy

Finally, in 2016 the adopted 13th five-year plan provides another, latest list of technologies of strategic importance: gene industrialisation, green energy and nuclear power; integrated circuitry, advanced equipment and new materials; advanced manufacturing (ibid.).

Despite policy proclamations and substantial investments to promote industrial upgrading in China the results of the later, interventionist policy was mixed even if somewhat better than in the previous period. There were several sectors which seemed to progress more in terms of technological maturity and export capacity, most notably high-speed railways. The success in automotive sector was more limited, despite growing exports it seems lacking in adopting of frontier technologies, private capital investment and local brand development. As a sector with potentially least success in developing indigenous industrial capabilities beyond low-cost processing and assembly operations, semiconductor is exemplary for a very large negative trade balance versus rest of the world (ILO, 2014).

Chinese case would highlight the limitations and often an opportunistic nature of direct, large scale industrial policy interventions into frontier or emerging technology sectors. At the same time, China, while being a major economy globally, is at the same time characterised by large regional, sectoral and technological disparities going from the most backward subsistence agriculture activities to the most advanced fintech products. This provides plenty of opportunities for experimentation and selection of interventions that are best fit for the specific level of development in a particular sector or locality. At the same time, it is also difficult to provide a clear-cut macro-level overview of national level policy framework, which at the same time lacks coherence, seems to be frequently changing and result in various overlaps and massive duplication and local level – for examples with 300 cities launching photovoltaic industry and 100 developing infrastructure for it (OECD, 2017).

2.2.Intangible capital and industrial policy

For many of the developed, high-wage economies, largely including Singapore, economic growth in large part is generated from the particular capabilities in those economies to generate knowledge. This includes ICTs, innovation and development of firm-specific competencies, with important complementarities between different assets and spillovers, including from human capital (Corrado et. al., 2014). However investment in intangibles is also important for developing states to avoid middleincome trap that requires advanced capabilities in skills, technology and knowledge creation (IBRD/WB, 2017).

Nevertheless it is still early days in terms of capacity for the public sector to reliably monitor such knowledge generation activities and evaluate national capabilities – their strengths or weaknesses, inhibiting the development of effective policy response. Substantial work has been undertaken in the US and EU recently to improve the data availability and thus provide empirical evidence on the scale of investment in and the outcomes of intangible capital. A standardised taxonomy of intangible capital has been developed, indicating the extent to which such assets is included in national accounts and generating experimental data on areas where until now such data was missing. Other countries could build upon this work.

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Table 1. Intangible capital asset types (Corrado et. al., 2012).

Latest assessment of available data proves the importance of investment in intangible capital –particularly so for the US economy where investment in intangibles during the period 2000-2013 outpaced investment in tangible capital (Corrado et. al. 2016). The impact on economic growth of intangibles also became pronounced, particularly in the US and UK, where contribution to economic growth by intangibles is more than double as that of tangible capital investment (ibid.). Furthermore, decomposing the investment in intangibles using the taxonomy above would indicated that most important part of intangible capital formation is that of economic competencies, closely followed by innovative property intangibles (ibid.).

Finally, intangible assets are not only important from economic policy point of view to monitor and stimulate investment and growth, but also from taxation and competition policy. Recent work by the OECD highlights that in some cases companies inappropriately use intangible assets through transfer pricing for tax optimisation purposes (OECD, 2013). In any case, to the extent that data on intangibles is limited there are clear obstacles to monitor, evaluate and assess effectiveness of policy interventions in those areas.

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