69334 …‹‡�…‡ ‡…Š�‘Ž‘‰› ƒ�† ��‘˜ƒ–‹‘� BACKGROUND PAPER FOR THE WORKSHOP ON SCIENCE, TECHNOLOGY AND INNOVATION IN JORDAN, LEBANON AND SYRIA AMMAN JUNE 15-16, 2009 Page A. Introduction ........................................................................................................ 2 B. The Knowledge Economy .................................................................................. 3 C. Critical Characteristics of STI Projects .............................................................. 4 D. Policy Options for S&T...................................................................................... 6 E. Lessons from Promoting S&T ............................................................................ 9 F. Concluding Remarks......................................................................................... 10 Bibliography.......................................................................................................... 12 Annex I- Special World Bank S&T Initiatives .................................................... 14 Annex II – Case Studies ........................................................................................ 15 1 69334 …‹‡�…‡ ‡…Š�‘Ž‘‰› ƒ�† ��‘˜ƒ–‹‘� BACKGROUND PAPER FOR THE WORKSHOP ON SCIENCE, TECHNOLOGY AND INNOVATION IN JORDAN, LEBANON AND SYRIA AMMAN JUNE 15-16, 2009 A. INTRODUCTION In the last five decades, there has been a rapid growth in the effort to coordinate scientific research. Improvements and advances in science and technology are now considered a major force in accelerating growth and improving living standards. Though technological progress can arise from accidental discoveries, it is crucially dependent on intentional investments of resources (be they human/intellectual or financial) by governments, profit-seeking firms and individuals as well as various institutions (academic, research and so on). Research and technological advances can be driven by various motives (from military purposes to the pursue of fame), but the catalytic role of commercial returns and economic incentives to industrial innovation cannot be overrated. Approximately 80 per cent of all R&D is conducted in developed economies. In turn, some of the knowledge of these countries flows into and creates the stimulus for new ideas in less developed and less “R&D intensive� economies through technology transfers. The degree of R&D intensity in an economy is determined by a number of factors that range from macroeconomic stability and sound public policies, to the development of human capital and an “openness� to ideas. In a constantly changing international environment, countries need to find their own ways to innovative in order to remain competitive. Even resource abundant economies are now seeking to diversify economic resources, and an important aspect of this drive is building the capacity to tap into a continuously growing stock of global knowledge and, in doing do, tailoring it to meet local needs. 2 69334 …‹‡�…‡ ‡…Š�‘Ž‘‰› ƒ�† ��‘˜ƒ–‹‘� B. THE KNOWLEDGE ECONOMY The term “Knowledge Economy� is defined as “the new economic environment in which innovation and knowledge are replacing capital and labor as the primary wealth-creating assets.�1 The World Bank has developed a series of technology projects (see Annex II: Case Studies) in an attempt to facilitate the creation of an institutional environment that can link the productive sectors to the Science & Technology sectors. Since the 1980s the Bank additional emphasis has been placed on the private sector as a key stakeholder in technology development, in order to allow the process to be industry driven. In the areas of S&T and Innovation the World Bank has supported the upgrading of Intellectual Property Rights regimes, improved measurements, standards, testing, and quality systems, restructured R&D institutes, the setting up technoparks and venture capital funds, and assistance to enterprises to develop, adapt, use and commercialize new technologies.2 The success of such efforts depend on appropriate adjustments in policy frameworks, the introduction of economic incentives, a reasonably effective ICT backbone, and a reorientation of education and training toward industry needs. To this end, there are four distinct pillars that shape the formation of a “knowledge-based� economy. 1/ Policy & Institutional Framework: This requires the development and adoption of a coherent, multifaceted national strategy for building and sustaining a knowledge-based economy Key elements of the strategy encompass: free competition, ease of exit and entry of firms, developing a transparent financial sector, needed reforms of the enterprise sector, modernization of the tax system, promotion of FDI, rule of law, open trade, efficient labor markets and so forth. Additional requirements include the free flow of information across governments, businesses and citizens, the provision of incentives for full-fledged private sector participation, and the promotion of public private partnerships that serve economic needs. 2/ Innovation System: An effective national innovation system is characterized by: (a) functioning knowledge producing organizations in the education and training system (i.e. universities, research institutes and the like); (b) stable macroeconomic and regulatory framework, including a sensible trade regime; (c) communications infrastructure; and (d) access to the global knowledge base. Supportive to the development of a national innovation agenda are 1 Goel et. al., 2004, 9 2 Crawford et. al, 2006, 12 3 69334 …‹‡�…‡ ‡…Š�‘Ž‘‰› ƒ�† ��‘˜ƒ–‹‘� Intellectual Property Rights and Measurement, Testing, Standards and Quality that are in line with international and regional practices; R&D institutions (RDI’s) that have sufficient autonomy and incentives to conduct applied research in an environment conducive to contractual research and commercialization of R&D; Incentives for industry to adapt and commercialize technologies along with R&D tax incentives; and financing instruments for technology development that include an appropriate legal and regulatory framework for potential investors, as well as the creation of technology financing institutions and R&D financing instruments such as loans, equity, venture capital and start-up funds. 3/ Education & Training: The essential development of an education/training system that is capable of equipping job-seekers and workers with skills that match the demands of the labor market. To this end, areas of focus include the modernization of the curricula, investments in science and technology projects that upgrade science, engineering and technical skills, adequate testing/examination processes, quality assurance systems, accreditation of firms and institutions involved in workforce development, and an orientation towards the training needs of industry. 4/ Infrastructure & ICT: An effective communications infrastructure is central to the knowledge-based economy. Specifically: (a) universal and equal access to telecommunications services; (b) affordable internet services; (c) improved access to telecommunications in rural areas; and (d) promotion of various means of communication, including wireless services. This can further enhance the process of information-sharing and increase information-flows to more peripheral locations. C. CRITICAL CHARACTERISTICS OF STI PROJECTS Project Scope/Complexity: The type and nature of each project should be appropriate to the country context. From the supply side, project-based reforms should include: restructuring of R&D institutions to match them to industry demand; building functional measurements, standards, testing, and quality systems to enhance competitiveness of domestic product, internationally; and assisting the industry to develop an effective Intellectual Property Rights regime. From the demand side, reforms can support the utilization and application of innovations developed by the research sector. Furthermore, the technology sector may require financing support such as venture capital, and start-up funds. Given the difficult nature of initial reforms 4 69334 …‹‡�…‡ ‡…Š�‘Ž‘‰› ƒ�† ��‘˜ƒ–‹‘� and restructuring, and the resistance that may be met by governments struggling with fiscal or macro instability, a local champion can ensure the integrity of the project. Flexibility in Project Design: There should be a certain element of flexibility in project design and implementation, which can in turn permit the project to evolve and adapt to changes in institutional environments. A segment of unallocated funds be set aside to allow additional financing to priority areas, or those areas that demonstrate particular success as the project evolves. Intensive monitoring and evaluation are important for determining if a project can continue as is, or if it should be modified or even terminated Public-good Nature and Externalities: The role of the public-sector is central to the success of innovation projects. While the private sector will be the primary investor in these activities; it will only do so under the expectation of profits. Therefore, the government can provide targeted support for technology services and simultaneously build an appropriate institutional framework with regulations conducive for technology development. Private Sector Participation: Private sector participation is important to a sector’s ability to inject “process efficiency, management capability, good governance, and cost-effective design and delivery�.3 Strong support and co-financing from the private sector are important in order to proceed with science and technology initiatives that include venture capital funds and technoparks. Government support may be useful for providing initial seed funding. Technology Financing Agencies: In some cases, funding can be targeted to autonomous specialized technology financing agencies that can facilitate the achievement of project goals and objectives. Institutional Reforms: Public institutions dealing with R&D and STI may need to be restructured to meet industry demands. Therefore, at financial, institutional, and individual levels, public institutions should strive to be accountable for their performance in order to obtain the rewards associated with successfully conducting applied industry-driven research. Management Intensity: Due to the rigorous nature of technology sector restructuring, high-level management and coordination are essential. This necessitates solid commitment by governments 3 Crawford et. al, 2006, 35 5 69334 …‹‡�…‡ ‡…Š�‘Ž‘‰› ƒ�† ��‘˜ƒ–‹‘� to dedicate a sufficient amount of resources to these initiatives. In this regard, as already mentioned, a local champion is fundamental to the success of these projects. Time Factor: The project should be allowed a sufficient timeline to begin and conclude activities (usually 4-5 year time horizons have been effective for successful implementation). Impediments to Avoid (From the World Bank standpoint): 1. Highly complex project design 2. Rigidity 3. Insufficient resources 4. Poor preparation and supervision 5. Poor Monitoring & Evaluation (M&E) 6. Project not customized to country context or local capacity 7. Insufficient follow-up on institutional and policy issues. Impediments to Avoid (From the Client standpoint): 1. Ineffective leadership 2. Weak institutional capacity 3. Resistance to change 4. Inappropriate policy framework 5. Lack of continuity in institutions and project management teams 6. No monitoring and evaluation (M&E) 7. Insufficient focus on project impact4. D. POLICY OPTIONS FOR S&T The development of S&T depends on a number of policies and practices that encourage the development and longer term growth of the sector. Different countries face different challenges in varying degrees, but there are generally four policy options to those seeking to enhance S&T and its role within the economy. 4 Crawford et. al, 2006, 30-36 6 69334 …‹‡�…‡ ‡…Š�‘Ž‘‰› ƒ�† ��‘˜ƒ–‹‘� 1. Policies for Human Resource Development A. Provide basic science education at the primary and secondary levels that create scientific literacy across the total population; B. Encourage careers in science and technology and provide lifelong learning and skills upgrading; C. Encourage the conduct of research and advanced training and enhance the linkages between the private sector and academic research. 2. Policies for Stimulating Demand for Knowledge in the Private Sector Countries that have successfully transformed their economies and improved technological performance have generally combined investment policies and polices for encouraging entrepreneurship, with policies that facilitate the free flow of commercially-relevant information.5 There are a number of factors that have been identified as the drivers of private sector investment in R&D, including the following: A. Laws and regulations that foster competition and healthy business (e.g. laws on foreign direct investment); B. Stable macroeconomic factors such as low interest rates, limited currency fluctuations, and low inflation; C. Low cost of capital and financial development; D. Available internal and external sources of finance; E. Support and expansion of public research that can support and create a synergy with business and sector related research; and F. Fiscal incentives for R&D and tax breaks for firms that conduct extensive R&D.6 At the level of the firm, some promising policy areas include: A. Strong university/industry and labor market linkages; B. Tax or other incentives for cooperative research; C. Commercialization of publicly funded research; D. Sponsorship of “scientist-in-industry� programs; 5 Watson et. al. 2002, 14 6 OECD, 2007, 9 7 69334 …‹‡�…‡ ‡…Š�‘Ž‘‰› ƒ�† ��‘˜ƒ–‹‘� E. Provision of advanced training; F. Sharing of basic research results; and G. Rigorous research evaluation. 3. Policies for Public Sector Support of S&T: Effective S&T systems emerge when governments are constantly engaged in the cycle of priority setting, policy formulation and implementation, execution, use, monitoring and evaluation.�7 The role of the public sector can therefore be broken down into distinct functions such as determining priority areas for public sector financing; governing, regulating, and sometimes managing the system; incorporating research results into public policy decisions; and monitoring and evaluating the system. Overall, the lessons from the experience with public support of S&T can be summarized as follows: i. Create transparent governance and peer review systems that are at the heart of the S&T system and avoid emphasizing physical inputs at the expense of policy inputs. While infrastructure is important, the policies underpinning it will determine the effectiveness and usefulness of S&T ii. Maintain sustained engagement and long term commitment and continuously strive to improve quality. iii. Increase scientific rigor of S&T funding and merit through competitive funds, reviews, and institutional linkages; iv. Create sustainable funding through a diverse array of mechanisms; v. Conduct human resource training. 4. Policies to Promote Adequate ICT Infrastructure: ICT infrastructure is central to the knowledge economy and to innovation systems generally as it facilitates the free flow of information, enhances communication, and reduces transaction costs. Policies that encourage connectivity are an important ingredient to bridging the gap and creating communities of knowledge between the private and public sectors, education systems and research institutes. 7 Watson et. al, 2002, 16 8 69334 …‹‡�…‡ ‡…Š�‘Ž‘‰› ƒ�† ��‘˜ƒ–‹‘� E. LESSONS FROM PROMOTING S&T To date, the World Bank has supported S&T initiatives in education, industrial and private sector technology development, agriculture, and ICT. Many activities have evolved around agriculture and related initiatives as well as S&T in Middle Income Countries (MIC’s). A number of non- lending operations have been supported by grants from the Development Grant Facility (DGF)8. World Bank S&T projects seek to “build capacity to produce, select, adapt, diffuse and/or use S&T knowledge�. In reviewing Bank lending to S&T over the period 1980-2004, Crawford et. al. draw a distinction between agricultural lending and non-agricultural lending. The purpose of such a distinction is that S&T lending for agriculture-related research has unique characteristics such as type of crop and the nature of a particular agro-ecological area. Most agricultural S&T projects involved crop-related research, and some were focused on fisheries, livestock, and forests. Agricultural: These S&T projects supported increased competitiveness and productivity of the agriculture sector through: i. Investing in adaptive and applied research; ii. Strengthening of existing National Agricultural Research Systems (NARS); iii. Formation of human capital.9 Non-Agricultural: Activities in this area include: 1. Comprehensive S&T Development Projects that link supply and demand for S&T services, supporting activities such as matching grants for Small and Medium Enterprises (SME), fostering university and industry cooperation, and promoting intellectual property rights. 2. Human Resource Development Projects that include university-based research and education, polytechnic (tertiary) education, and secondary science education. 3. Technology Development Projects involving the restructuring public Research and Development (R&D) institutes to make them more responsive to industry needs, to enhance technology development in industry, and to support projects in the areas of Metrology, Standards, Testing, and Quality (MSTQ) systems. 4. Health Projects that support for infrastructure capacity building, operational research, disease surveillance, and R&D activities. 8 Watson et. al, 2002, 19 9 //, 17 9 69334 …‹‡�…‡ ‡…Š�‘Ž‘‰› ƒ�† ��‘˜ƒ–‹‘� 5. Environmental Projects in the areas of quality control in laboratories and capacity building at environmental protection agencies. World Bank and S&T funding • Over the past 25 years 119 of the World Bank’s projects were dedicated solely to S&T. • However, S&T activities have been included in 647 projects.attracting $8.6 billion10 • Most support for S&T projects stemmed from the Agriculture and Rural Development sector. The agriculture sector accounts for nearly 42% of S&T lending, followed by education and industry. • From 1980-2004, East Asia received about 40% of all major S&T loans, followed by Latin America, which took out approximately 20%. • Smaller countries have been found to request assistance primarily in tertiary technical studies and technical standards related to trade liberalization. • The DGF provides close to $100 million annually for programs that are S&T oriented. Lessons from experience in ICT i. Investments in ICT should be matched with equal amounts of investment in human capital and skills development. ii. IT activities should be more closely integrated with research programs and private sector development initiatives. iii. OED recommends arriving at a basis for more demand driven information and IT infrastructure that can also incorporate the expertise of the InfoDev11 initiative.12 F. CONCLUDING REMARKS The degree of R&D and STI intensity in an economy is determined by a number of factors that range from macroeconomic stability and sound public policies, to developed human capital and openness to ideas and information flows: an economy that restricts the movement of goods, individuals, and ideas will create disincentives for investment in research and innovation. 10 Crawford et. al. 2006, 10. 11 InfoDev is a global development financing program among international development agencies, coordinated and served by an expert Secretariat housed in the Global ICT Department (GICT) of the World Bank, one of its key donors and founders. The InfoDev mandate is to help maximize the impact of ICTs in global efforts to achieve the internationally-supported Millennium Development Goals. 12 Crawford et. al. 2006, 24 10 69334 …‹‡�…‡ ‡…Š�‘Ž‘‰› ƒ�† ��‘˜ƒ–‹‘� According to the Knowledge Economy Index, the correlation between accumulation of knowledge and levels of economic development is approximately 87 per cent. There are demonstrated ways in which STI can enhance growth and development in an economy, but there are a number of crucial factors that facilitate the consolidation of a R&D intensive economy; human capital accumulation, science and technology, global trade, and macroeconomic stability are the underpinnings of robust R&D systems that simultaneously translate into thriving knowledge-based economies that can inform and encourage development and growth. It is important that countries (and the Bank) incorporate into their strategies measures to increase the awareness of the role of S&T in development, integrate S&T activities into sector and national approaches, and prioritize S&T within the development agenda. In a nutshell, four critical recommendations include the following. First, education should be given active attention and support at all levels. Second, the private sector should be given a central role in demanding certain technologies and innovations and to this end, should seek to link with academic and research institutions in order to create a synergy that facilitates the creation and adoption of applicable and timely innovations, technologies, and information. Third, the Government should set priorities and evaluate and monitor S&T strategies and programs, as well as ensure that the necessary elements, regulations, and frameworks are in place to create an environment conducive to investment and innovation. Finally, ICT networks should improve and thus establish universal access to telecommunications and internet, so that information can flow more freely and further stimulate knowledge as a public good. 11 …‹‡�…‡ ‡…Š�‘Ž‘‰› ƒ�† ��‘˜ƒ–‹‘� BIBLIOGRAPHY Crawford, Michael; Yammal, C. Cesar; Yang, Hongyu; and Brezenoff, Rebecca L. “Review of World Bank Lending for Science and Technology, 1980-2004�, 2006. Number 1: Science, Technology, and Innovation Discussion Paper Series. Education Department, Human Development Network, The World Bank. Gill, Indermit. Kharas, Homi. An East Asian Renaissance: Ideas for Economic Growth. International Bank for Reconstruction and Development/ The World Bank. WBI Development Studies, 2007. Goel, Vinod K.; Koryukin, Ekaterina; Bhatia, Mohini; and Agarwal, Priyanka. “Innovation Systems: World Bank Support of Science and Technology Development�, 2004. The World Bank. Rodriguez, Alberto. Dahlman, Carl. Salmi, Jamil. Knowledge & Innovation for Competitiveness in Brazil. International Bank for Reconstruction and Development/ The World Bank. WBI Development Studies, 2008. Watkins, Alfred. Ehst, Michael. Science, Technology, and Innovation: Capacity Building for Sustainable Growth and Poverty Reduction. International Bank for Reconstruction and Development/ The World Bank. WBI Development Studies, 2008. Watson, Robert; Crawford, Michael; and Farley, Sara. “Strategic Approaches to Science and Technology in Development�, 2006. The World Bank. FURTHER READING Blackburn, Keith. Hung, Victor T. Y. Pozzolo, Alberto F. “Research, Development and Human Capital Accumulation�. Journal of Macroeconomics. Vol. 22, No. 2. Spring 2000, 189-206. Cameron, Gavin. “Innovation and Growth: a survey of the empirical evidence� Nuffield College, Oxford, July 1998. Coe, David T. Helpman, Elhanan. “International R&D Spillovers�. European Economic Review. Vol. 39, 1995, 859-887. Feller, Irwin. “Universities as Engines of R&D Based Economic Growth�, Research Policy 19, 1990, 335-348. Grossman, Gene. Helpman, Elhanan. Innovation & Growth in the Global Economy. MIT Press, Cambridge, Massachussetts. 1991. Grossman, Gene. Helpman, Elhanan. “Endogenous Innovation in the Theory of Growth�. National Bureau of Economic Research. NBER Working Paper No. 4527. November 1993. Jones, Charles I. “R&D Based Models of Economic Growth�, Journal of Political Economy, Volume 103, Issue 4, August 1995, 759-784. 12 …‹‡�…‡ ‡…Š�‘Ž‘‰› ƒ�† ��‘˜ƒ–‹‘� Kim, Linsu. Nelson, Richard R. Technology, Learning, and Innovation: Experiences of Newly Industrializing Economies. Cambridge University Press. Cambridge, United Kingdom. 2000. Kuemmerle, Walter. “The Drivers of Foreign Direct Investment into Research and Development: An Empirical Investigation�. Journal of International Business Studies. Vol. 30, No. 1. 1st Qtr 1999, 1-24. Lederman, Daniel. Maloney, William F. “R&D and Development�. Policy Research Working Paper 3024. The World Bank: Latin America and the Caribbean Region. Office of the Chief Economist: Regional Studies, April 2003. Nelson, Richard R. Pack, Howard. “The Asian Miracle and Modern Growth Theory�. The Economic Journal. Vol. 109, July 1999, 416-436. 13 …‹‡�…‡ ‡…Š�‘Ž‘‰› ƒ�† ��‘˜ƒ–‹‘� ANNEX I. SPECIAL WORLD BANK S&T INITIATIVES: Millennium Science Initiative: The MSI was established in 1998 and is comprised of a group of projects that are partially funded by World Bank loans and which support high level S&T research. It involves the creation of competitive funding mechanisms that provide grant support to individuals that are conducting high-level research that are of high relevance to their particular context. It also has a training component for aspiring young scientists and researchers. In this respect, the MSI aims to contribute to the long term development and growth of S&T systems. The country criteria sought by MSI are as follows: (1) Subsidiary in government vision and policies; (2) Congruence in government priorities and sector practices; (3) Ownership of the program by the main government stakeholders and beneficiaries; (4) Resistance to the risk of neglecting basic science and social sciences; and (5) Existence of emerging, cohesive, and committed research teams of critical size.13 Non-lending Special initiatives include: Special Program for African Agricultural Research (SPAAR) Established in 1985 by a group of donors under World Bank leadership to further the contribution of agricultural research to food security, environmental sustainability and economic development in Africa. Consultative Group on International Agricultural Research (CGIAR) The Bank cosponsors and hosts the secretariat of the CGIAR which aims to increase productivity, protected the environment, save biodiversity, improve policies and strengthen national research. Knowledge for Development (K4D) The Knowledge for Development Program builds the capacity of countries to access and utilize knowledge in order to increase competitiveness and enhance economic and social growth. The Program works with clients to design knowledge strategies and assess how they compare with others in the global knowledge economy. It also assists clients in adopting suitable policies for their needs. The 4 main products lines offered by the K4D Program are as follows: (1) Policy Services (2) Knowledge Economy (KE studies) (3) Learning Events (4) The Knowledge Assessment Methodology (KAM). 13 Crawford et. al. 2006, 26 14 …‹‡�…‡ ‡…Š�‘Ž‘‰› ƒ�† ��‘˜ƒ–‹‘� ANNEX II. CASE STUDIES INDIA Republic of Korea Electronics Technology Project Project approved: 1979. Project completed: 1986. Total amount: $29 million The project supported setting up and development of Korean Institute of Electronics Technology (KIET). The project was to support KIET as a central facility in semiconductor industry, including exploring and developing export opportunities for the Korean electronics sector overseas. The project played a catalytic role in building the electronics sector in Korea. However, the project did not meet some of its objectives, including profitability targets and industry-related research and development (R&D) programs because of the situation in the country when the industry started to invest heavily into semiconductors research, leaving less room for KIET, and other economic and business conditions in Korea. Technology Development Projects (First, Second, and Third) Projects approved: 1982, 1984, 1988. Projects completed: 1986, 1989, 1992. Total loan amount: $129 million The Technology Development Projects were a series of projects designed to foster the technological development of industry in the Republic of Korea through the financing of the Korea Technology Development Corporation (KTDC) and the strengthening of three key institutions: KIST, one of Korea’s leading multidisciplinary research institutes; KSBC, the Korea Basic Science Center; and NITI. Support for KIST was intended to cover a broad spectrum of applied research activities and to recruit high-quality researchers; KBSC was established to provide more opportunities for joint basic science research, the foundation of technological innovation; and the role of NITI was to support small and medium enterprises (SMEs) by raising product quality. KTDC helped create links between the R&D institutes and industry, supported SMEs through the financing of technology start-ups and technological support, and formulated technology policy and appraised national joint R&D projects between SMEs and industry. Technology Advancement Projects (First, Second, and Third) Projects approved: 1989, 1990, 1991. Projects completed: 1993, 1994, 1994. Total loan amount: $108 million The Technology Advancement projects were a series of projects aimed at providing funds for the purchase of modern equipment for the five main national Research and Development Institutions (RDIs). The broad objective of this initiative was to strengthen industrial R&D and basic research capacity and to increase the use of industrial standards to raise product quality. These objectives were in conformity with government policy, which sought to expand and strengthen vocational, technical, and tertiary education in science and engineering and to support public and private R&D activities as Korea sought to join the ranks of the industrial countries. The availability of the new equipment and facilities made it possible for the RDIs to increase their R&D activities and joint projects, expand their testing for quality improvements, and increase their output of technical and scientific publications. Program for Science and Technical Education Project, Universities Science and Technology Research Project, Science Education and Libraries Computerization Project Projects approved: 1984, 1990, 1992. Projects completed: 1989, 1995, 1997. Total loan amount: $195 million. The Program for Science and Technical Education aimed to raise the quality of S&T education to the level required by an industrial system that sought to be more skill- and knowledge-intensive 15 …‹‡�…‡ ‡…Š�‘Ž‘‰› ƒ�† ��‘˜ƒ–‹‘� and that was moving toward the use of more advanced technologies. The Universities Science and Technology Research Project aimed to help selected universities strengthen their ability to undertake research in science and technology and strengthen their science teacher education, with the goal of raising the quality of science education in secondary schools. The Science Education and Libraries Computerization Project aimed to help improve the quality of basic science education and to provide a more effective flow of information among those university libraries that service teaching and research. China Rural Industrial Technology (Spark) Project Project completed: December 1997. Loan amount: $114 million The Ministry of Science and Technology’s pilot Spark program became nationwide in 1986. The overall objective of the program was to help transfer technological and managerial knowledge from the more advanced sectors of the economy to rural enterprises to support growth and development in the nonstate rural enterprise sector, mostly town and village enterprises, and to help increase output and employment. This project was the first Bank Group–supported operation in China specifically oriented to the rural nonstate industry. The term “Spark� referenced the phrase “one small spark can start a prairie fire,� reflecting the anticipated catalytic effect of the program on rural enterprise development. Technology Development Project Project approved: 1995. Loan amount: $200 million The objective of this project is to support government reforms in technology policy and institutions, with the aim of promoting the development of clean, productivity-enhancing technologies in China’s industries. The project is designed to accelerate the diffusion and adaptation of technologies in China and abroad through the deepening of technology markets and through institutional initiatives. The project consists of two components. The first component is designed to assist in transforming part of them R&D establishment into market-responsive technology development corporations. This component will hive off the most dynamic technology development and service-oriented elements of existing research institutions to create, through a competitive selection process, market-oriented Engineering Research Centers. The second component includes complementary investments aimed at improving public technology services, including the modernization of the National Institute of Metrology and a technical assistance program for a productivity center. “China and the Knowledge Economy� Report—year 2000 At the request of the Chinese Government, the World Bank Institute conducted a Knowledge Economy Assessment in China in 2000 and published “China’s Development Strategy: the Knowledge and Innovation Perspective, the World Bank, Washington D.C., 2000. (This report was used by the government as an input into the development of China’s 10th Five-Year Plan.) This assessment concluded that China’s strategy should be to build a foundation for a knowledge- based economy by (1) updating the economic and institutional regime; (2) upgrading education and learning; (3) building the information infrastructure and raising the technological level of the economy through the active diffusion of new technologies; (4) improving the R&D system; and (5) exploiting global knowledge. Mexico Industrial Technology Development Project Project approved: July 1986. Project completed: June 1993. Loan amount: $48 million 16 …‹‡�…‡ ‡…Š�‘Ž‘‰› ƒ�† ��‘˜ƒ–‹‘� The project was designed to improve the capability of industry (especially private firms) to undertake the technological innovation needed to contend with the increasing competition that was expected because of the government’s economic liberalization program. This project may have been premature, coming as it did in the early stages of what has been a profound transformation of Mexico’s economy: conditions were not yet suited for private sector R&D and Mexico was going through one of its worst economic crises. The project nonetheless can be credited for having been a catalyst in the policy dialogue on science and technology and a factor in the ensuing changes in institutions and operational environment that are now providing a much more fertile ground for technological innovation. Studies financed under the project enabled the government to improve its project policy and infrastructure; the metrology studies additionally produced a number of significant findings on which the follow-up project was able to build. Science and Technology Infrastructure Project Project approved: May 1992. Project completed: June 1998. Loan amount: $189 million The main objectives of this project were to rationalize public sector funding for science and technology and to develop technology institutions by supporting the restructuring of a science research program and improving the efficiency of public support. The project was successful in increasing the number of Mexican scientific research publications and their impact, significantly increasing the production of research-trained personnel, renewing the Mexican research instrumentation infrastructure, institutionalizing a merit-based peer review, and improving the efficiency of the National Science and Technology Council. The project supported the creation of the Mexican National Center for Metrology (CENAM), which now has 104 laboratories operational and which has helped to attract foreign investment and promote competitiveness in Mexican industry, and supported the creation of the Mexican Institute of Industrial Property, significantly reducing delays in the award of patents, increasing enforcement activities, and increasing inspections relating to Intellectual Property Rights (IPR) violations. The project was also successful in creating a supply of basic S&T infrastructure and in helping to sustain development of an R&D capacity. Knowledge Innovation Project Project approved: June 1998. Planned completion: June 2003. Loan amount: $300 million The Knowledge and Innovation Project, approved in 1998 to support a third generation of reforms and to address some of the gaps remaining on completion of the S&T Infrastructure Project. Specifically, it was designed to enhance the effectiveness of research support programs while increasing links to user groups in society and industry. The project’s development objectives were (1) to support S&T research by stimulating work in new and lagging fields, specifically by promoting quality in research, by consolidating and improving peer review, and by prioritizing the integration of young researchers into the system; and by overseeing the institutional strengthening of the scientific management research conducted by National Council of Science and Technology (CONACYT); (2) to support joint action between universities/public research institutes and the private sector, by restructuring public S&T institutes to increase cost recovery and reorientation to industry and by matching grants for joint industry-academia projects; and (3) to support the productivity and competitiveness of firms, particularly SMEs, through a technology modernization program to support upgrading with matching grants and through the development of private regional and sectoral institutional technology support centers. India Industrial Technology Development Project Project approved: December 1989. Project completed: June 1998. Loan: $200 million 17 …‹‡�…‡ ‡…Š�‘Ž‘‰› ƒ�† ��‘˜ƒ–‹‘� The objective of this project was to facilitate the acquisition and development of technology by industrial firms in India. It aimed to balance existing domestic technological capability with the import of foreign technology and to reduce the financial constraints on new technology ventures and the foreign exchange constraint on technology imports. The project helped small, innovative firms obtain financing by supporting the development of venture capital (VC) in India, in the form of six VC companies managing nine VC funds. These VC companies invested in more than 300 firms, producing returns that have averaged 18–20 percent. The project, in essence, launched the VC industry in India, but its indirect contribution—introducing a culture of risk finance and thus attracting foreign venture capitalists to India—may have been equally important. The project additionally supported the upgrading of RDIs, providing technology services to industry and promoting collaboration between industry and research institutions. The project provided loans rather than grants, forcing the borrower institutions to focus on their financial management and rates of return. A number of research institutes were able to modernize and upgrade their physical facilities, enabling them to enter new areas of research and to reorient themselves to serve industry. Finally, the project also financed the importation of technology and technical know-how by supporting the fast-track Technology Development Fund, which put forward $100 million to benefit between 600 and 800 firms. Technical Education Engineering Quality Improvement Project Project approved: 2003. Loan: $250 million This project aims to improve the quality of engineering institutions throughout India. The country has six Indian Institutes of Technology (IITs) that every year send a large percent of their graduates to work for foreign multinationals, both in India or abroad. Initially the project proposed increasing the number of IITs in India, but based on a Mashelkar Committee report, it was determined that upgrading existing regional engineering and technical institutions would be more resource-efficient and would produce a wider supply of qualified specialists to better meet the needs of industry. The institutions are being selected based on their willingness to accept academic, financial, managerial, and administrative autonomy, increase cost-recovery ratios, and so on. The number of institutions to be selected is expected to be between 20 and 25. Turkey Technology Development Project Project approved: May 1992. Project completed: June 1998. Loan amount: $100 million This project had three broad objectives: (1) to develop the Metrology, Standards, Testing, and Quality (MSTQ) system; (2) to encourage market-oriented R&D in the private sector; and (3) to foster the growth of a VC industry. The project supported the establishment of an independent National Metrology Institute (UME), separating it from the Marmara Research Center. By the end of the project, UME was able to meet 30–40 percent of the needs of Turkish industry. The project supported modernization of the Turkish Standards Institute and improvement of the standardization processes; it also initiated an R&D financing culture in Turkey by setting up the Technology Development Foundation of Turkey (TTGV) a private sector-managed nongovernmental organization (NGO), and by funding the country’s first technology financing program (103 R&D projects financed). However, a VC industry did not materialize because of a range of reasons, including the absence of necessary incentives for the private sector and a lack of support from the International Finance Corporation (IFC), which initially had been nominated as the main catalyst for this effort. The VC component was picked up by the follow-up project. Industrial Technology Project Project approved: June 1999. Planned completion: December 2004. Loan amount: $155 million 18 …‹‡�…‡ ‡…Š�‘Ž‘‰› ƒ�† ��‘˜ƒ–‹‘� The main project objectives are to (1) assist in the harmonization of Turkish technology infrastructure with ECU standards, and (2) assist firms in upgrading their technological capabilities to improve the competitiveness of Turkish industry. To achieve these objectives, the project concentrated on four main areas: (1) strengthening of IPR services; (2) strengthening of metrology services to serve a larger section of Turkish industry; (3) restructuring of RDIs to make them more industry-oriented; and (4) supporting technology upgrades by firms (including the formation of a VC industry and the establishment of technology). The project follows up on the First Technology Development Project by continuing support to (1) UME, which is developing into a world-class metrology institution capable of meeting 95 percent of Turkish industry’s metrology needs, and (2) the Technology Development Foundation of Turkey that is developing into a diverse technology financing institution that has changed the entire technology financing culture in Turkey. In addition, the Project supports (1) restructuring the public R&D system in Turkey through reconfiguration of Marmara Research Center (MAM, a group of eight leading RDIs), and (2) upgrading the Turkish IPR regime by strengthening Turkish Patent Institute (TPE). As a result of the project investments, by end-2003 (1) UME is capable of meeting 80 percent of the industry’s metrology needs and provides about 500 services to the industry; (2) TTGV, in addition to its original technology financing mandate (it has financed some 200 projects to date), has become a catalyst in supporting VC funds (two VCCs were set up with TTGV’s equity participation) and also supports two techno parks––in addition, its competitive Technology Support Services (TSS) grant scheme for advisory services has benefited about 600 SMEs; most of TTGV’s projects have resulted in the commercialization of R&D outputs; (3) MAM has increased its contractual research base and industry outreach, and was about 49 percent self-sufficient in 2003, targeting 65–70 percent self-sufficiency by 2006; and (4) the IPR regime is improving its alignment with ECU and World Trade Organization requirements, and TPE is developing into an international-level institution. Chile Millennium Science Initiative Project dates: 1999–2002. Loan amount: $5 million This project consisted of three components and aimed at creating (1) a management structure for the Millennium Science Initiative; (2) a competitive fund for scientific excellence; and (3) a network for the promotion of scientific excellence. Science for the Knowledge Economy (Phase I) Project planned: 2003–2007. Loan amount: $25 million Given the long-term commitment that is necessary to consolidate institutional and behavioral changes in the S&T sector, a program approach is proposed for Chile that would use the Adaptable Program Lending (APL) instrument. The program comprises two phases. The first phase, Science for the Knowledge Economy, extends until 2007 and supports the establishment of a strong policy framework. It also will provide for the continuation of the Millennium Science Initiative and a further strengthening of the science base. The second phase (2007–10) will continue the activities to strengthen Chile’s science base, with a view particularly to enhancing private sector R&D. A further phase aimed at improving the innovation system is planned for fiscal 2006. 19