Building STI Capacity for Competitiveness

1. Building STI Capacityfor Competitiveness Alfred Watkins World Bank Science and Technology Program Coordinator Cairo, Egypt March 11, 2008

2. Two Roads • Ignorance, unskilled labor, low value added goods and services • Knowledge, skilled labor, value added-knowledge intensive goods and services Anubha: Let’s make this a picture with two roads. We can discuss on Monday

4. Underlying Philosophy • Investing in S&T capacity is not a luxury suitable only for developed countries; it is an absolute necessity for middle income countries that want to innovate, get richer, and avoid falling behind • In today’s rapidly changing global economy, the critical economic development issue is no longer whether to build STI capacity but what type of capacity to build and how to build it

5. Why Worry About All This?

6. Difference Attributable to Knowledge • What kind of knowledge? • Where do you get it? • How do you find it? • How do you learn to use it?

8. Competitiveness and Sustainable Development are the Objectives;Education, Innovation, and PSD Are The Means to Achieve These Objectives

9. PSD Innovation Education The Pieces Must Fit Together

10. Where Do You Start?: East Asia Capacity Building Model Creation Improvement Assimilation Acquisition STI Capacity Focus Imitation internalization generation Developing Country Newly-Industrializing Country Advanced Country Development Stages

11. Korea R&D (% of GDP) 1963-2003 Source: Korea Science and Technology Policy Institute; WDI, 2007

12. Korea Patent Trends (1965-2006) Source: United States Patent and Trademark Office (USPTO), 2007

13. A Good Business Climate Is Necessary But Not Sufficient Low Barriers High Capacity High Barriers High Capacity Capacity for technology absorption and diffusion Low Barriers Low Capacity High Barriers Low Capacity Sub Saharan Africa Barriers to technology absorption and diffusion Source: Adapted from RAND

14. High Tech Does Not Always Equal High Income Source: World Development Indicators, 2007

15. It’s Not What You Produce But How You Produce It That Determines Growth and Prosperity

16. Manufacturing Value-Added Per Capita (Constant US Dollar) Source: UNIDO, 2005

17. Agriculture Value-Added Per Worker (Constant US Dollar) Source: World Development Indicators, 2007

21. How can we help countries build the STI capacity they need to increase value added and generate wealth?Should countries focus on building capacity to create new knowledge or utilize existing knowledge?

22. Middle Income Countries:Challenges and Opportunities • Starting Point: MICs had an initial competitive advantage based on trade preferences, available natural resources, and prior abundance of low wage, unskilled labor • But rising wages and higher standards of living are leading to a loss of competitive advantage – need to move from (i) cheap labor to (ii) skilled labor and innovation (iii) producing higher value added, skill intensive goods and services • How can late-comers catch up? • Existing laws, institutions, business practices are not designed to address these issues

23. Moving from Ideas to Actions: IP Review • In collaboration with WIPO and other IP experts, (i) review IP legislation, rules, and regulations and (ii) recommend changes, based on international best practice, to ensure that they support innovation, economic development, and technology commercialization • Who owns IP generated by government research grants • Who has the right to commercialize this IP • How are proceeds divided between government, research institute, and scientists? • Do rules and regulations foster cooperation with industry and international partners (both industry and research institutes) • Do they foster SME start-ups and clusters, in line with EU proposals • Develop capacity to search for and exploit knowledge contained in national patent data bases – expired and current patents

24. Moving from Ideas to Actions:Governance of Research Institutes • Lessons of experience from Colciencias, Fundacion Chile, Malaysian Palm Oil Research Institute • How do they combine research excellence agenda with technology upgrading and international competitiveness objectives of industry? • How do they support the national innovation and competitiveness agenda by diffusing results of patent data base searches and research findings to local industry

25. Research Institute Governance Agenda (cont.) • Review rules, regulations, and current practices and recommend possible changes, based on international best practice, regarding ability of research institutes (and university-based researchers) to generate their own financial resources by entering into commercial contracts with industry, commercializing research results, etc. • Review government funding mechanisms and align them with relevant international best practice lessons of experience – change incentives by changing funding mechanisms

26. Moving from Ideas to Action:Need Assessment and Action Plan • Start with two or three sectors • Each Needs Assessment would ask the following three questions: • What is the country’s current capacity to meet the competitiveness and innovation needs of this sector (research institutes, technical and vocational training capacity, university research and teaching capacity, enterprise support programs, etc. • What capacity would the country need – immediately and in the medium term – to ensure the viable development of this sector and the creation of higher paying, more skill intensive jobs • What is a feasible and reasonable strategy for improving the existing capacity and building additional required capacity

27. Capacity building action plan programs might include proposals to… • Strengthen multi-disciplinary research teams in research institutes and universities addressing high priority problems in that sector • New funding mechanisms to encourage research in priority areas identified by the private sector and other stakeholders • Develop patent search capacity relevant to that sector • Establish programs to transfer research and patent search information to private sector, including new and existing SMEs • Proposals to encourage SME spin-offs resulting from patent search and R&D programs, leading to formation of clusters

28. Capacity Building Action Plan Proposals (2) • Support for SME spin-offs at all points along the value chain • Proposals for enhanced technical, vocational and university training programs relevant to the needs of that sector • Proposals to incorporate existing research, teaching and business assets into these activities • Visitingprofessors and researchers, including where appropriate, retired industrial experts to provide short-term, on-the-job training

29. Catch-up Vehicles • FDI • Attracting FDI is not enough: it is only a starting point. A country has two choices -- either to be a passive recipient and see enclaves emerge, or build local industrial and technological capacity • Some strategies that countries have used: • supplier development programs to help local SMEs become qualified suppliers to the multinationals • technology and knowledge transfer programs --encouraging TNCs to license technologies to local companies and train local workers.

30. Catch-up Vehicles • Public Research Systems • Public research systems can help local enterprises adapt and adopt the technology which they needed to become globally competitive. Example: GRIs in Korea, ERCs in China • They can give technical support to local companies by identifying foreign technologies, teaching local firms how to use them, negotiating technology licenses with foreign companies, providing testing services, training services • But often public research infrastructure is too inflexible and not designed to do this. They need reforms to make them more market-oriented, profitable, agile

31. Catch-up Vehicles • More specialized technology transfer institutions • Industry-focused research centers are good agents for technology transfer. Example: ICIPC, Colombia • They can attract private funding for technology transfer activities • Other (non-research) institutes can also be successful technology transfer institutions. They help local companies identify and acquire foreign technologies. example: Fundacion Chile

32. Catch-up Vehicles • Universities • University-industry linkage can accelerate technology upgrading in industry • Needs dedicated linkage programs; won't happen automatically • Needs industry associations to be successful • Benefits both industry and university (technology upgrading and curriculum upgrading)

33. Catch-up Vehicles • Innovation Funds • matching grants to help SMEs add value to their products and be more innovative (example from Nicaragua) • Gives incentives to SMEs to collaborate with research centers and especially with universities, this building university-industry linkages • Grants can support following activities by SMEs: 1) technological innovations 2) organizational innovations 3) market development activities • They also encourage university collaborators to establish technology service centers to provide training and consulting services to SMEs

34. THANK YOU Alfred Watkins Science and Technology Program Coordinator Awatkins@worldbank.org www.worldbank.org/sti