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Patrick CunninghamChief Scientific Adviser to the Government

Engineers Ireland – Cork, Nov 8, 2010

Building the Knowledge Economy

“to become the most competitive anddynamic knowledge-based economy in theworld, capable of sustainable economicgrowth with more and better jobs andgreater social cohesion.”

�3% of GDP on R&D�1/3 public; 2/3 business

Lisbon Agenda (2000)

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3

“Ireland by 2013 will be internationallyrenowned for the excellence of itsresearch, and will be to the forefront ingenerating and using new knowledge foreconomic and social progress, within aninnovation driven culture.”

SSTI vision (2006)

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17762007

2006

4

Rich: $439k

The Wealth of Nations:capital per person

Poor: $7k

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Source: Where is the Wealth of Nations?World Bank , 2006.

Ireland’s Wealth

Source: Where is the Wealth of Nations? World Bank , 2006.6

0

5

10

15

20

25

30

35

40

45

55-64 45-54 35-44 25-34

Age Group

%

0

5

10

15

20

25

30

35

40

45

55-64 45-54 35-44 25-34

Age Group

%

OECD

Ireland

% of 25-34 Age Group with Tertiary Education

Source: Education at a Glance, OECD, 2008.

1976 1986 1996 2006

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The Tiger Years

1990 1995 2000 2007

€60Bn

€40Bn

€20BnTraditional

Manufacturing

Internationally-tradedServices

ModernManufacturing

Source: Forfás, 2008

Sale

s

Roots:

�EU / Euro�Tax�Education

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-12%

-10%

-8%

-6%

-4%

-2%

0%

2%

GlobalEconomy

US EU Ireland

Sources: International Monetary Fund;Central Bank of Ireland

Depth of Global Recession

Decline inGDP(GNP)

for 2009

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Benefits to Society: Employment, Health, Quality of Life

Business

Research

Publications,Citations

Patents

Capital Investment,Start-ups

Money IdeasPeople

Public

Research &Development

Patents

Money IdeasPeople

New/ImprovedProcesses,

Products, Services.New/Improved Processes, Products, Services.

MoneyPeople

Collaboration

10

GDP per capita

Source: International Monetary Fund, 2009

GDP per capita and Human Development Index

Sources: International Monetary Fund, 2009,Human Development Report, UN Development Programme

Correlation = 0.90

GDP per capita and Satisfaction with Life Index

Sources: International Monetary Fund, 2009; White, A. (2007). A Global Projection ofSubjective Well-being: A Challenge To Positive Psychology? Psychtalk 56, 17-20

Correlation = 0.85

GDP per capita and Happy Planet Index

Sources: International Monetary Fund, 2009,Happy Planet Index 2.0 from the New Economic Foundation (nef)

Correlation = 0.35

GDP per capita and GINI Coefficient

Sources: International Monetary Fund, 2009,Human Development Report, UN Development Programme

Correlation = 0.22

0

500

1,000

1,500

2,000

2,500

3,000

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

current €m

Investment in R&D (GERD)1.66% GNP

Private

1.41% GNP

Source: derived from Forfás data

Public

16

200

400

600

800

1,000

1,200

1,400

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

€m constantprices (2007)

Public Investment in R&D*

-15%**

* GBAORD - Government budget appropriations or outlays on R&D.** Indicative only: SSTI relative to 2008, 2009 (nominal), respectively. Source: Forfás, DETE, 2009

NDP 2000-2006Total = €4B

NDP 2007-2013Total = €8.2B

-4%**

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?

Capital 12%

Education13%

SSTI 1%

SocialWelfare 33%

Health 24%

Justice 4%

Agriculture2%

Enterprise2%

Other 9%

Sources: Revised Estimates for Public Services, DF, April 2009; SSTI Finances, DETE, May 2009

Exchequer Expenditure 2009 (~€60 bn)

Investmentfor the future

Spendingfor today

Seedcorn

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Gross Domestic Expenditure on R&D as % GDP

Source: Annual Competitiveness Report Vol. 1, NCC, August 2009

Ireland ranks 18th

out of OECD 28

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European Innovation Scoreboard - Inputs

Human Resources� S&E, SSH Primary Graduates� S&E, SSH PhD Graduates� Pop. with Tertiary Education� Life-long Learning� Youth Education Attainment

Finance & Support� Public R&D Expenditure� Venture Capital� Private Credit� Firms with Broadband

Linkages & Entrepreneurship� SMEs Innovating In-house� Innovative SMEs Collaborating� Firm Renewal� Public-Private Co-publications

Throughputs� EPO Patents� Community Trademarks� Community Designs� Technology Balance of Payments

Firm Investments� Business R&D Expenditure� IT Expenditure� Non-R&D Innovation Expenditure

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European Innovation Scoreboard - Outputs

Innovators� SME Product / Process Innovation� SME Marketing / Organ. Innovation� Resource Efficiency Innovators

Economic Effects� High-tech Manuf. Employment� Knowledge-Intensive Serv. Employment� High-tech Manuf. Exports� Knowledge-Intensive Serv. Exports� New-to-market Sales� New-to-firm Sales

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Summary Innovation Index 2008(29 Indicators)

Source: European Innovation Scoreboard 2008, UNU-MERIT,Maastricht , Jan 2009

Followers Leaders

EU-15

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0.4

0.45

0.5

0.55

0.6

0.65

0.7

2004 2005 2006 2007 20080.4

0.45

0.5

0.55

0.6

0.65

0.7

2004 2005 2006 2007 2008

EIS (“2008 methodology”) Time Series

EU-27

Ireland

Denmark

Finland

Switzerland

Sweden

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Source: European Innovation Scoreboard 2008, UNU-MERIT,Maastricht , Jan 2009

Summary

�Metrics now show Ireland close to EU-15average

i.e. among the “followers”.

�Target peer group includes FI, SE, DK, CH & AT.

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Challenges

�Monitoring Delivery against Correct Indicators

�Effective Linkages to Dual Business Sectors� Close attention to needs of foreign-owned firms� Special efforts to lift indigenous firms

�Keeping on Track to Target� To match leading countries� Achievable in ~10 years

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Dublin: European City of Science 2012