Building STI CapacityBuilding STI Capacityfor Competitivenessfor Competitiveness

Alfred WatkinsAlfred WatkinsWorld Bank World Bank

Science and Technology Science and Technology Program CoordinatorProgram Coordinator

Cairo, EgyptCairo, EgyptMarch 11, 2008March 11, 2008

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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

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There is No Choice:The World is Moving Fast…

With or Without You!

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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

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Why Worry About All This?

0

2

4

6

8

10

12

14

1960 1965 1970 1975 1980 1985 1990 1995 2000

Knowledge makes the Difference between Poverty and Wealth...

Rep. of Korea

Ghana

Thousands of constant 1995 US dollars

Difference attributed to knowledge

Difference due to physical and human capital

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Difference Attributable to Difference Attributable to KnowledgeKnowledge

• What kind of knowledge?

• Where do you get it?

• How do you find it?

• How do you learn to use it?

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Dimensions of STI Capacity

National (and local) government capacity to

formulate and implement coherent S&T programs

and policies

Enterprise capacity to utilize knowledge to

innovate and produce higher value added, globally competitive goods and services

Education, vocational training, and R&D

institutes

Technologically and scientifically skilled workforce trained to work with modern equipment and production processes

National (and local) government capacity to

formulate and implement coherent S&T programs

and policies

Enterprise capacity to utilize knowledge to

innovate and produce higher value added, globally competitive goods and services

Education, vocational training, and R&D

institutes

Technologically and scientifically skilled workforce trained to work with modern equipment and production processes

Import, adapt, and adopt knowledge produced

outside the country

Produce and use new knowledge via R&D

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Competitiveness and Sustainable Development are the Competitiveness and Sustainable Development are the Objectives;Objectives;

Education, Innovation, and PSD Education, Innovation, and PSD Are The Means to Achieve These ObjectivesAre The Means to Achieve These Objectives

Education

PrivateSector

DevelopmentInnovation

Competitiveness

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The Pieces Must Fit TogetherThe Pieces Must Fit Together

PSD

Innovation

Education

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Acquisition

Assimilation

Improvement

Creation

Where Do You Start?: East Asia Capacity Building Model

Developing

Country

Newly-Industrializing

Country

Advanced

Country

Imitation internalization generationSTI Capacity Focus

DevelopmentStages

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Korea R&D (% of GDP) 1963-2003

Source: Korea Science and Technology Policy Institute; WDI, 2007

0

0.5

1

1.5

2

2.5

3

1963 1970 1980 1990 2003

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Korea Patent Trends (1965-2006)

0

1000

2000

3000

4000

5000

6000

7000

1965

1967

1969

1971

1973

1975

1977

1979

1981

1983

1985

1987

1989

1991

1993

1995

1997

1999

2001

2003

2005

Source: United States Patent and Trademark Office (USPTO), 2007

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A Good Business Climate Is Necessary But Not Sufficient

Barriers to technology absorption and diffusion

Cap

acity

for

tec

hnol

ogy

abso

rptio

n an

d di

ffus

ion

High Barriers Low Capacity

High Barriers High Capacity

Low Barriers High Capacity

Low Barriers Low Capacity

Source: Adapted from RAND

Sub Saharan Africa

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High Tech Does Not Always Equal High Income

Philippines

India

Fiji Colombia

Chile

Argentina

Brazil

Indonesia

China

Pakistan

Malaysia

Thailand

Sri Lanka

Costa Rica

Vietnam

CambodiaB'desh

Mexico

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

0 10 20 30 40 50 60 70

Hi Tech (% of Manufacturing Exports)

GD

P P

er

Ca

pit

a (

Co

nta

nt

US

D)

Source: World Development Indicators, 2007

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It’s Not What You Produce But How You Produce It

That Determines Growth and Prosperity

Finland

Hi Tech22%

Medium Tech 30% Low Tech

10%

Resource Based 38%

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Manufacturing Value-Added Per Capita (Constant US Dollar)

Source: UNIDO, 2005

0 1,000 2,000 3,000 4,000 5,000 6,000 7,000 8,000 9,000

Bangaldesh

India

Pakistan

Sri Lanka

Philippines

Indonesia

Thailand

Malaysia

Korea

United States

Singapore

Finland

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Agriculture Value-Added Per Worker (Constant US Dollar)

0 5,000 10,000 15,000 20,000 25,000 30,000 35,000 40,000 45,000 50,000

Nepal

Timor-Leste

Vietnam

Cambodia

Bangladesh

India

Indonesia

Thailand

Pakistan

Sri Lanka

Mongolia

Philippines

Malaysia

Korea

Finland

United States

Singapore

Source: World Development Indicators, 2007

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Export Structure of Forest Cluster in Latvia and Finland, 2000

0

5

10

15

20

25Sa

w &

Othe

r Mills

,Pla

ning

Conta

iners

& Bo

xes

Furn

itures

& Fix

tures

Pulp

ofwo

od,

pape

r &pa

perb

oard

Me

tal &

Woo

dwo

rking

Mach

inery

Spec

ialIn

dustr

ialMa

chine

ry

Elec

trica

lIn

dustr

ialMa

chine

ry

Labor-intensive Technology-driven

Latvia

Finland

 

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How can we help countries build How can we help countries build the STI capacity they need to the STI capacity they need to

increase value added and generate increase value added and generate wealth?wealth?

Should countries focus on building Should countries focus on building capacity to create new knowledge capacity to create new knowledge

or utilize existing knowledge?or utilize existing knowledge?

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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

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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

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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

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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

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Moving from Ideas to Action:Need Assessment and Action Plan

Start with two or three sectorsEach 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

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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

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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

Visiting professors and researchers, including where appropriate, retired industrial experts to provide short-term, on-the-job training

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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.

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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

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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

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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)

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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

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THANK YOU

Alfred Watkins

Science and Technology Program Coordinator

Awatkins@worldbank.org

www.worldbank.org/sti