A Política de Ciência, Tecnologia e Inovação no Brasil – perspectivas e necessidades de avaliação

1. A Política de Ciência, Tecnologia e Inovação no Brasil – perspectivas e necessidades de avaliação José Eduardo Cassiolato Seminário Internacional sobre Avaliação de Políticas de Ciência, Tecnologia e Inovação Diálogo entre as Experiências Internacionais e Brasileiras Rio de Janeiro, 03 Dezembro 2007

2. Some data • The Policy Evolution • Evaluating what?

3. 1 - Some data

4. Number of PhD Graduates – 1980-2005

5. Brazil – Number of MSc and PhD courses – 1960-2005

6. Brazil – Articles published in international journals (indexed at ISI) Total and World percentage – 1981-2004

7. Brazil Number of graduates by region – 1988-2002

8. Brazil – Higher Education by Region - 2001 * Enrolled students ** São Paulo and R de Janeiro cities with 15.5 % and 11.7% Of MScs and 27.0% and 12.3% of PhDs respectively

9. Brazil – Post-grad (MSc & PhD) students by region and scientific areas (– 1999 (%)

10. Brazilian Innovating Firms - R&D/Sales – Selected Sectors – 2000/2003/2005

11. Innovation Rate (New Products to the Market)

12. Brazilian Innovating Firms – Expenditures on training over sales – 2000/2003/2005

13. % of Innovating Firms that Cooperate with University and Res. Institutes/Total Innovating Firms – 2000-2003-2005

14. Government Support to Firms: Firms that Received Support/Total Innovators Firms that received R&D incentives/Total Innovators

15. Structure of GDP: the increasing role of services

16. And finally --- an indecent income distribution

17. 2 - Evolution of S&T policies

18. Evolution of Brazilian Industrial and S&T policies Industrial Policies Market Organizes Based on Foreign Technology Recent Changes S&T Policy Funtec/ BNDES CNPq Capes FNDCT FINEP MS&T 1950 1960 1970 1980 1990 2000 Individual Support Institutucionalization of Research & pos-grad Market Friendly policies

19. From the 1950s to the mid 1960s • ISI – based on foreign investment ....and technology • CNPq and Capes – Support to individuals • Failed attempt to create MS&T • New institutions in some important areas (air space, for example) that led in the long run to important capabilities

20. From the mid 1960s to the late 1970s • Under ditactorship: ISI based on foreign technology BUT strategic role of S&T • Transformation of CNPq into an agency to set up and implement a S&T policy • Setting up of FUNTEC at BNDES and Finep (financial arm of S&T policy) • Small tensions with foreign capital (the setting up of National Institute for Industrial Property to control remittances for technology)

21. Capital and tech flows of some MNCs in Brazil up to 1975 (US$ million)

22. From the mid 1960s to the late 1970s • Embrapa and technology in the agro-industrial sector

23. Important achievements of the period • A rapid increase in S&T capabilities • Setting up of Postgrad and Research • Initial attempts to foster technology in industry • Incentives (negative real interest rates) • Using procurement as a policy tool • Some programmes with long run effects (eg ethanol) • First program on U/I linkages in 1974 • 1st and 2nd National Plans for S&T (organizing S&T activities)

24. The 1980s – Macroeconomic Crisis and Return to Democracy • The ealy 1980s - Budgetary Crisis – rapid decrease of Federal Resources • The mid 1980s - Democratization and the setting up of the Ministry of S&T • Recovery of level of expenditures • Policies for HiTech and Human Resources • The late 1980s Deepening of crisis – high inflation and several institutional changes in S&T policy

25. Crisis in Funding Disbursements of FNDCT (National S&T Fund)1970 - 2006 Sectoral Funds

26. The 1980s • The World Bank loans and changes in management of resources – introduction of public tenders

27. From the1990s – Macroeconomic policies determine S&T policies • The Collor Government and the abandonment of active policies • Changes in Regulatory Framework (New Industrial Property Code, etc.) • The Real Plan – controlling the inflation

28. Macroeconomic Context 1994 – implementation of Real Plan 1995-1998 – After the success of Real Plan, government maintained the macroeconomic austerity policy, based on restrictive fiscal and monetary policies, with an exchange rate anchor. Imports assumed an important function as one of the mechanisms to regulate national prices. The implementation of this exchange rate policy meant that imports increased more than exports, making current account deficits – the balance was increasingly negative after 1995. This choice of economic policy resulted in a increasing vulnerability to the global economy and a very low real growth rate of Gross Domestic Product (GDP). 1999-2002 – Successive international crisis (Mexican, Asian, Russian, etc.) and the increasing fragility of the trade balance and of the Balance of Payments resulted in the transformation of exchange rate regime in January of 1999, towards a floating exchange rate regime. The macroeconomic policy adopted the inflation-targeting regime having, again, as the main mechanisms the (high) interest rates and the rigorous fiscal adjustment. 2003-2006 – continuation (or deepening) of the same macroeconomic policy, establishing even more rigorous fiscal adjustment, now under more favourable external conditions (The China effect and consequent surplus in Trade Balance).

29. Macroeconomic Context Sources: IBGE - Sistema de Contas Nacionais; Ipeadata.

30. Innovation Policy – main guidelines • 1995-1998 - Macroeconomic policy-makers were against ideas about industrial (and innovation) policy – a ‘radical neo-liberal agenda of development’. S&T policy continued to struggle (maintaining infrastructure alive); changes in IPR regime (new Patent Law, TRIPS, New Industrial Property Law) • 1999-2002 - Recognition of the importance of innovation by Ministry of Science and Technology ignited the process of setting up a new legal framework to stimulate R&D and innovation in firms. • Market failures justified the intervention of the State • Market failures led to underinvestment in innovation by firms enterprises and harmed possible partnerships between firms and scientific and technological organizations. • So State was justified to intervene creating new tax (and other) incentives for firms to innovate and specific funding and supporting instruments to stimulate partnerships between firms and universities and other S&T organizations. • 2003-2006 - two policies related to innovation were launched: the National Science, Technology and Innovation Policy, coordinated by the Ministry of Science and Technology, and the Industrial, Technological and Foreign Trade Policy. These policies preserved the main strategies developed during the last government creating new tax incentives to firms´ innovation, and grants to firms; also Innovation Law was introduced.

31. Innovation Policy – Institutional Framework ABDI MAPA MI FNO MF CODEVASF FCO CAIXA BB EMBRAPA FNE ADENE ADA FGE MCT MDIC FNDCT CNPq SUFRAMA INPI FINEP FGPC / FND Inmetro BNDES Enterprises and Organizations Ministry of Agricultural – MAPA Ministry of Science and Technology –MCT Ministry of Finance - MF Ministry of Interior – MI Ministry of Development, Industry and Trade – MDIC

32. Most important recent policy changes • Innovation becomes a priority • PITCE – Industrial, Technological and Foreign Trade Policy (2004) – • Sectoral Funds (since 1999): • Univ-Industry Links but possibility of “Across the Board” Actions (2004) • New regulatory and legal environment (2005): • Innovation Law, Bio-security Law; SME Law • Decentralisation of policy and support to local systems • In the last few months: • The role of BNDES (innovation and local systems) • Sectoral policies (health for example)

33. The 2 pillars of Recent policies • Fostering R&D expenditures in firms • Fostering University/Industry Linkages

34. Innovation Policy: Fostering R&D expenditures in firms • Tax Incentives (PDTI and now automatic) • Grants (a sectoral approach and a need to propose a “project” • Equalization of interest rates • Support to venture capital • Incubators, etc • The innovation Law

35. Innovation Policy – Tax Incentives to Few (most Large) FirmsWould they invest in R&D without the Incentives??? Number of PDTIs and PDTAs approved and Enterprises Source: Ministry of Science and Technology –MCT. Note: In 2006, the numbers are referred to January to July period.

36. Innovation Policy – Legal Framework

37. Innovation Policy – Fostering University/Industry Linkages (in R&D joint projects) • Programs to support research in hi-tech areas • The Sectoral Funds • The innovation Law

38. Sectoral Funds for Supporting Scientific and Technological Development • Set up in 1999 • Financial sources: contributions of firms’ earnings arising from the exploitation of natural resources belonging to the Federal Government • Aeronautics; Agro-business; Amazon Region; Biotechnology; Energy; Informatics; Infra-structure; Mineral; Oil & Gas; Transportation; Health; Space Activities; Telecom; University-Industry Cooperation; Water Resources; and Water Transportation and Ship Building.

39. Innovation Policy – Main mechanisms and Instruments Evolution of Sector Funds (As a % of GDP) Source: Ministry of Science and Technology –MCT and IBGE.

40. New regulatory and legal environment • Innovation Law (2005): strengthening the interaction between university and industry; promote the common use of S&T infrastructure by firms and S&T institutions (emphasis on MSMEs); stimulate the setting up of new technology based firms by researchers; create new financial mechanisms for grants to R&D and innovation in firms • “Lei do Bem” (2005): creates new financial mechanisms for grants to HR (M.Sc./Ph.D.) in innovation activities in firms • MSEs Law (2006): invest minimum of 20% in MSEs • Regulation of FNDCT (2007): resources flexibility and diversification of instruments

41. The Industrial, Technological, Foreign Trade Policy (PITCE) • Set up in 2004 • industrial and technological issues are re-introduced in Governmental Policy Agenda • Innovation is crucial for competitiveness • Pioneering convergence of industrial and technological policies • PITCE is one of the strategic axes of the ST&I Policy • FINEP: responsible for PITCE implementation • What about resources???

42. FNDCT - Disbursements 1970 - 2006 Sectoral Funds

43. FINEP investment in firms (innovation) (2003-2006)

44. Modality Programs Programs’ focuses Line 1 - Firms’ innovative activities Loans to firms and investment Pro inovação R&D projects, innovation and technological capability (Reimbursable funds) Juro Zero SMEs, production to commercialisation, under special conditions PPGFOR Consultancy engineering activities for the energy sector MDL Entre preneurial pre - investment and financial support to cooperative projects related to the reduction of pollution emission FINEPSUL Support to infrastructure projects of Brazilian firms of consultancy engineering within the context of South America countries Grants PAPPE R&D projects, business plans and market studies, focused on researchers and their activities within firms; (Non - reimbursable funds) creation of technologically intensive small and medium - sized firms by researchers Economic Subvention PAPPE Subvention - Firms’ innovative activities in line with the Industrial, Technological and Foreign Trade National Policy and strategic sectors (partnership with other regional and state agents) Subvention for Innovation - Firms’ innovative activities in li ne with the Industrial, Technological and Foreign Trade National Policy and strategic sectors. Incubator National Plan (PNI) Business incubators and Tech Parks FINEPs’ Programs – A wide range of mechanisms Investments Inovar (Incubator - Funds) Venture capital Inovar (Forum) Capitalization of tech nologically intensive small and medium - sized firms Inovar (Seed Money) Structuring of local seed money funds

45. Modality Programs Programs’ focuses Line 2 - Cooperation between firms and scientific and technological institutions (STIs) Grants to STIs Coopera R&D projects and innovation acti vities PPI - APLs R&D projects focusing on technological assistance and services to firms RBT Suppliers and STIs (import substitution in selected productive sectors) Assistec PROGEX E PRUMO - Assistance and tech consultancy to MSMEs Line 3 - Scientifi c and technological institutions (STIs) Grants Proinfra Public scientific and technological institutions’ infrastructure modernization. Modernit Qualification and modernization of public technological institutes Promove Promotion and modernization of the Brazilian engineering Line 4 - Scientific and technological support to social development PROSAB FINEPs’ Programs – A wide range of mechanisms Grants Sanitation technology (low costs and easy applicability) HABITARE Housing technology (low costs and easy applicability) PRONINC Tech incubator s on popular cooperatives PROSOCIAL Development and diffusion of technologies with social contents and interests, low costs, easy applicability and social impact

46. 3 - Evaluating what? • The narrow and the broad vision of the NSI

47. Conceptual Framework Often policy makers and scholars have applied a narrow understanding of the concept (of Innovation System) and this has given rise to so-called ‘innovation paradoxes’ which leave significant elements of innovation-based economic performance unexplained. Such a bias is reflected in studies of innovation that focus on science-based innovation and on the formal technological infrastructure and in policies aiming almost exclusively at stimulating R&D efforts in high-technology sectors. Without a broad definition of the national innovation system encompassing individual, organizational and inter-organizational learning, it is impossible to establish the link from innovation to economic growth. (Lundvall, 2007, p. 1-2) In Lundvall, B.-Å. (ed.) (2007), National Innovation Systems: Towards a Theory of Innovation and Interactive Learning, London, Pinter Publishers (2nd edition of the 1992 book).

48. NIS: The Narrow Version Policy concentrates on R&D (in firms and U/I linkages) Narrow Very Narrow Firms Demand S&T infrastructure S&T&I Policy

49. NIS: the Broad Version Innovation is much more than R&D Geo-Political, Social, Political, Economic, Cultural & Local Context Wide Narrow Very Narrow Subsystem Production/Innovation Demand (segmented) Subsystem Capacity-Building, Research & Technology Services Subsystem Policy, Promotion, Representation & Financing

50. Fiscal Incentives to R&D: the Australian experience • R&D tax concession do not screen out R&D that would have happened anyway — the bulk of business R&D. This increases the costs to revenue from stimulating any additional R&D and reduces the magnitude of net benefits from the program. At present program settings, the net benefits of the program are not large and could be negative (p. XXVI) • … firms should be barely receptive to subsidies directed at R&D alone, any more than people buying cars would respond to a reasonable subsidy on the tyres ( p. 35). • The finding that other factors are also important for business innovation does not render R&D irrelevant. It simply means that innovation policy has to look at more than one explanatory factor and that these additional factors are of great importance. For example, governments have significant impact on the innovation system through policies relating to the creation of infrastructure and human capital (p. 36) The Productivity Commission (2007) Public Support to Science and Innovation, Melbourne Australia