science and technology in the lac and the korean technology fund1... · science and technology in...

SCIENCE AND TECHNOLOGY IN THE LAC AND THE KOREAN TECHNOLOGY FUND

HYUNGHWAN JOOSenior Advisor for Technology and Innovation

Inter-American Development Bank

November 27-28 – Santiago, Chile

Hyunghwan Joo November 27-28, 2006 2

OUTLINE

● Main Trends in S&T in LAC

● Policy Challenges for LAC

● IDB’s Strategy for S&T

● Salient Features of the KTF� Eligibility

� Approval procedure

Hyunghwan Joo November 27-28, 2006 3

KOREAKOREAKOREAKOREA

● Area - 99,600 km²

● Population - 48 million

● GDP - US$ 788 bn(10th)

● Per capita income -$16,191(05)

● Trade vol. - $ 546bn(12th)

● Literacy – 98%

Hyunghwan Joo November 27-28, 2006 4

Transformation of the Korean EconomyTransformation of the Korean Economy

Per Capita GNI(US$)

16,191

Six “Five-Year Economic Development Plans”

200519801962 1970 1995

5,000

10,000

67 87

11,432

7,355

1953 19901945

100(1964)

1,000(1977)

1998

Big Take-offIndependence

(1945)Korean War(1950~53)

OECD(1996)

Fin. Crisis(1997)

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Developing countries will likely remain mired in poverty unless they can do what developed countries have done to achieve sustainable growth : incorporate science, technology and innovation into their economic strategies.

UN Millennium Project Taskforce on Science & Technology and Innovation, 2 005

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● Low investment in knowledge, particularly in R&D

� Countries in LAC spend 0.6% of GDP on R&D

Total R&D ($12 b.) < Korea ($16 b., 2.6%), US ($282 b., 2.7%)

� R&D intensity has either decreased or leveled off(except for Brazil (1.1%), T&T, Mexico)

● Predominance of public sector in R&D spending

� Public to Private ratio: 3 : 7 (OECD), 7 : 3 (LAC)

� The share of business R&D funding has declined

Main Trends (LAC)

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● Low linkage b/w university, PRIs and industry� The public research is biased toward basic research

Curiosity-driven rather than market-driven or problem-oriented

� Lack of “innovation culture” in firms & channel for demand articulation

● Shortage of researchers� Researchers per 1000 persons: 6~10 (OECD) vs. 0.7 (LAC)

● Low IT penetration rate� Low PC penetration, limited broadband connectivity, high access cost

⇒⇒⇒⇒ Low patentingGrowing technology gapLow competitiveness

Main Trends (LAC)

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TFP Has Not Been a Source of Growth for LAC Countries...

Annual TFP Growth

F : BID-RES. (*) et al World Bank, 2002-2

-1.5

-1

-0.5

0

0.5

1

1.5

OECD

1970-79

1980-89

1990-99LAC

Anual TFP growth

LAC

OECD East Asia

Main Trends (LAC)

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30 %60 ~ 75 %Private Sector in

R&D

15%50 ~ 70%Internet Users

0.7 (Argentina 1.6)

6 ~ 10Researchers

per 1000

0.6%(Brazil 1.0%)

2 ~ 3 %R&D as % of

GDP

LACOECD countries

Main Trends (LAC): Comparative Snapshot

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Policy Challenges (LAC)

● Mainstreaming innovation policy� Treat innovation as a strategic issue in development planning� Links to strategic economic and social directions

● Institutional development� Effective S&T policy framework (including reliable database) � Improve framework conditions

(Competition (service), FDI, Financing (SME, tech start-ups), IPRs)

Supply issues (funding/manpower) + Increasing demand for innovation by firms & ensuring closer PP linkag e

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● Public-Private linkage

� Stimulate R&D investment by industry� Policy mix (grants, loans, guarantees / tax incentives) � Strategic PP partnerships for research

� Greater stakeholder involvement in PRIs’ agenda setting

● Human resources development� Access & quality (secondary/tertiary + vocational training)

� Focus on 21 st century skills (IT, Science & Math, English)

� Enhance mobility b/w public and private institutions � Attract foreign talent and return migration of expatriates

● IT infrastructure

Policy Challenges (LAC)

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● There is no “one size fits all” model� Strategies depend on initial conditions & resources� Need to look beyond regional models : cross modelingIT development: Korean, Scandinavian, Irish, Indian , US models

● Develop indigenous absorptive capacity� Build with acquisition, adaptation, improvement, innovation� Distinguish among objectives at different stages – this is a multi-

generation process

● Create competitive advantage� Chile: salmon, Korea/Taiwan: electronics, Ireland/India: software

Policy Challenges (LAC): Paths to Innovation

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● Commitment of IDB leadership to strengthening Bank activities in the S&T and innovation area

● New Organizational Setup

� Establishment of the new Sub-Department in charge of S&T, ICT and education

� High level S&T advisory Group to the President● New Financing Tool : Korean Technology Fund

� Created by a contribution of US$ 50 million from Korea

� Increase the flow of technical assistance

IDB’s Strategy: New framework for S&T

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IDB’s Strategy: New Strategic Directions

● Mainstreaming S&TI into country dev’t strategies

� Through country dialogues & policy assessments, raise the awareness and identify policy priorities & funding requirements

� Employ convening power to stimulate dialogue among country policy makers and share best practices �Regional policy dialogue on S&T

● Institution Building� Institutional & governance reforms of the STI system

�Priority setting/Public funding/Autonomy & Accountability of PRIs

� Adapt regulatory conditions to innovation requirements� IPR, Competition, environmental and consumer regulations…

● Human resources development� Foster a skilled workforce at post secondary technical levels

� Engineering & technical training /curricula design & accreditation

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● Technological Infrastructure� ICT: e-applications, Public-private partnership facility in ICT � Establish and disseminate standards, metrology, IPR � Promote technology transfer and diffusion mechanisms

● Public-private linkage� Innovation cluster development, technology consortia, strategic

programs addressing social needs � Health, energy, housing, disaster prevention, digital divide …

● Promote innovation in the private sector � Notably in SMEs, and in the context of innovation cluster

� Support for the development of ICT-based portal for SMEs access to technology information

� Design / implement financing mechanism to support innovations� Assessment and improvement of incentive systems and support

instruments (tax/fiscal incentives, funds, guarantees….)

IDB’s Response: Strategic Directions

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IDB’s Strategy: New strategic Directions

<Approach: Systematic/Evolutionary approach > ● Differentiated approach

� Based on needs of a particular country, considering diversity in terms of economic and institutional development

� Strengthening NIS in more developed countries vs. technological infrastructure (metrology, standard, IPRs…) and capacity building in less developed ones

● Regional approach� Pool knowledge and S&TI capacity for large scale projects

�Regional large scale technological projects, training programs � Develop common best practices

�Harmonization and training of IPR regime

� Development of a regional information system to monitor STI for performance

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● Korea’s contribution of $ 200 million in 2005

● IDB : $ 50 million KTF (two-tranches: $25 mil. in ‘05 + $ 25 mil. in ‘08)

$ 50 million Poverty Reduction Fund

● IIC : $ 40 million SME Development Fund

● MIF: $ 60 million replenishment

KTF : Background

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● Supports technical cooperation projects� Small-scale e-application projects

● Non-reimbursable

● 100% untied

● No project ceilings

● Proposals of $100,000 or more : donor approval

KTF : Salient Features

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● To support activities that promote S&T and innovation capacity of the countries in the region

● To enhance the Bank ’s competence in the S&TI area

Develop the portfolio of the Bank’s ST&I loan & TC

Enhance the countries’ capacity to generateS&T and technological innovation policies and projects

KTF : Purpose

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● All borrowing member countries� Public institutions (federal / state/local governments)

� Private organizations that are eligible to receive TC fund(e.g., private firms, industry organizations, educational institutions, NGOs)

● Regional + Sub-regional organizations composed of borrowing member countries

● All Bank Units● Supports demand driven activities + Bank-sponsored

activities� Finances collaborative proposals b/w Bank Units + b/w the Bank &

other organizations Promotes intra- / inter-institutional collaborations

KTF : Eligibility - Grant Recipients -

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● Activities that strengthen S&T and related innovation capacity building

� e.g.) (pre) feasibility studies, policy assessments, sector analysis, institution building and strengthening, strategy and policy making, regulatory frameworks and human resources development

� In case of economic and sector work, more specific/action oriented assessments or analyses are preferred

● Activities that promote IT infrastructure and related e-applications� e.g.) e-government, e-health, e-education, e-business…

KTF: Eligibility – Eligible Activities -

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● Activities that identify and disseminate best practices for S&T and innovation capacity

� e.g.) workshops, conferences, seminars, publication of papers, development of a regional S&T data (statistical) base

� 2007 workshops: Financing technological innovations, Strengthening S&T policy framework, Promoting university-industry partnership, Sustaining rural connectivity…

KTF : Eligibility – Eligible Activities -

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● Particular emphasis will be given to :<country>

� Lower income countries + Countries with a weaker S&T capacity

<sector> � e-applications

� Industrial development with strong technology and innovation components

� through adoption & diffusion of new technology such as IT, BT…

� Promotion of technological innovations in SMEs

� S&TI Institution building & strengthening

� Training (in the areas of science, engineering, IT and for SMEs)

KTF : Eligibility – Emphasis for Funding -

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● Impact on S&TI capacity and performance● Sustainability● Additionality in terms of financing and approach● Consistency with the Bank’s strategy and priorities

� in the country / on S&TI

● Contribution to Bank effectiveness� enhanced lending, quality technical support, and potential to

replication

● Others:� Legal/technical competence of the requesting organization� Plans to monitor & evaluate projects (indicators and outcomes)

KTF : Proposal Characteristics (quality)

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● The approval process follows the Bank TC guidelines with the following exceptions:

● Proposal may be submitted at any time of the year

● In-country organizations must provide a non-objection letter from their respective governments �submit proposals through local Bank offices

● The Manager of the proposing Dep. will submit the proposal to the KTF manager (SDS/EST)

KTF : Approval Procedure

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● The KTF manager will screen the proposal for its compliance with eligibility criteria

● Proposals of $100,000 or more are forwarded to the Donor for approval

● The CRG will review the Plan of Operation for approval

● A completion report should be prepared within six months from the project completion date

KTF : Approval Procedure

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Preparation

of Proposal

Preparation

of Proposal

Eligibility Screening(all projects)

Eligibility Screening(all projects)

Review & Approval(donor, CRG)(> $100K)

Review & Approval(donor, CRG)(> $100K)

ImplementationImplementationMonitoringMonitoringCompletion(Report)

Completion(Report)

< Overview of Approval Procedure >

Hyunghwan Joo November 27-28, 2006 28

Thank youHyunghwan JOO

Senior Advisor for Technology and Innovation &Korean Technology Fund Program Coordinator

Inter-American Development Bank

hjoo@iadb.org

Hyunghwan Joo November 27-28, 2006 29

Appendix: IT industrial Development (Korea)

● At the initial stage, the government played a leading role as an enabler or a facilitator

● Put in place an effective policy framework� Laws & Master Plan: Informatization Promotion Act(‘95), Cyber

Korea 21(‘99)� Funding mechanism: Informatization Promotion Fund � Propelling Institutions: MIC and NCA

● <Supply push>� Expand telephone & broadband network� Invest in human resources & critical technology (such as TDX,

CDMA through PPP)

� Promote IT Venture

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● <Demand pull>� Liberalization and competition in telecom/broadband market encourage

telecoms to main low tariffs via a reduction in cost

� Provide low cost PC, free broadband access to all primary & secondary schools, internet training for 10 mil. people for 3 yrs

� e-government projects

● Slogan to spread an IT culture: Media Campaign “Although our industrialization lagged, our digitalization will not”

● Approach: Strategic & focused

� Which area to target: HW or SW� If SW, which niche market to target: business applications/solutions, on-line

game, e-gov’t, computer animation…� Business model: Global penetration, outsourcing(India), near sourcing(Mexico)

� Roadmap with a proper sequencing and pacing of core measures is key

Appendix: IT industrial Development (Korea)

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● Salient features :� Project ceiling: US$ 500,000� non-reimbursable� 100% untied� All proposals exceeding US $100,000 should obtain an

approval from the donor

IIC SME TF: Salient Features

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● Purpose :� To promote private SME development through an IIC mission

support

● Project eligibility :� Accounting, legal and environmental consulting services for

SMEs� Feasibility study and project identification � New financing mechanism development� Best practice and training activities � SME capacity building and business environment enhancing

activities (e.g., through IT)

IIC SME TF: Purpose & Eligibility

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● Qualitative criteria� In line with an IIC’s business plan � In support of a new business initiative � Enhance synergies with the IDB and the MIF

● On-going and future projects� FINPYME (SME diagnosis program)� Family corporate governance training � Local currency bond issuing project � SME consulting project (accounting improvement & legal advice

for small loan, renewable energy project)

IIC SME TF: Criteria & On-going Projects