Towards an Innovation-Driven Economy in Egypt Industry Policy Development Recommendations from

The Italian National Innovation Support System

Research Project Report

This document represents the individual research project report of the higher educational course on "Governance and Development of SMEs in Egypt “conducted in Italy from 10th of Sep. 2012 till 23rd of Dec. 2012.

Course of Higher Education in:

"Governance and Development of SMEs in Egypt"

Sunday, 16th

of Dec. 2012

Submitted by: Tarek Salah Kamel tsalah@itida.gov.eg Capability Development Unit Manager, Information Technology Industry Development Agency (ITIDA), Egypt.

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EXECUTIVE SUMMARY 3

I . RESEARCH METHODOLOGY 4 1.1 INTRODUCTION 4 1.2 RESEARCH FOCUS POIN T 4 1.3 RESEARCH APPROACH 4

I I . INTRODUCTION 6 2.1 SOCIETAL STEP MODEL OVERVIEW OF ITALY 7

2.1.1 ECONOMY BRIEF 7 2.1.2 SOCIAL BRIEF 9 2.1.3 POLITICAL BRIEF 10 2.1.4 TECHNOLOGICAL BRIEF 12

I I I . ITALIAN NATIONAL INNOVATION SYSTEM 13 3.1 INTRODUCTION 13 3.2 OUTLINE OF THE ITALI AN NATIONAL INNOVATION SUPPORT SYSTEM 14 3.3 NIS PERFORMANCE OVERVIEW 17 3.4 INTERVENTION PROGRAM S AND POLICIES FOR ECONOMIC DEVELOPMENT 23

3.4.1 OVERVIEW LIST OF NAT IONAL PROGRAMS AND P OLICIES 25 3.4.2 EU FUNDING PROGRAMS AND INSTRUMENTS FOR MEMBER STATES 27

IV. EGYPT AND THE EU 28 4.1 LONG HISTORY OF COOP ERATION 28 4.2 DEVELOPMENT COOPERATION INSTRUMENTS AVAILABLE FOR EGYPT 34

V. INDUSTRY POLICY DEVELOPMENT RECOMMENDATIONS 39 5.1 CONTEXT-AWARE VS. CONTEXT-NEUTRAL DEVELOPMENT CONCEPT 40 5.2 A FRAMEWORK FOR INDUSTRY POLICY DEVELOPMENT 41 5.3 INDUSTRY POLICY DEVELOPMENT RECOMMENDATIONS FOR EGYPT 45 5.4 CONCLUSION 49

VI. REFERENCES 50 EXHIBIT 1: Contents of the Higher Education Course on: "Governance and Development of SMEs in Egypt" 53 EXHIBIT 2: The European Union Structure and Main Institutions 54 EXHIBIT 3: Selected Key Organisations within the Italian National Innovation System 60 EXHIBIT 4: The Emilia-Romanga Region NIS Overview 62

Industrial Clusters of Emilia-Romagna and Main Competitive Sectors 63 Research and Innovation in Emilia-Romagna 78 The High Technology Network and Techno-poles 78 Some Best Practices Innovation Support Programs in Emilia-Romagna 81 Digital Infrastructure Overview 83 Incentives for Research and Innovation in Emilia-Romagna 84 Educational and Research Policy Brief of Emilia-Romagna 85

EXHIBIT 5: Overview of the ICT Sector in Italy 88

CONTENTS

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Executive Summary

The aim of this research work is to provide:

Industry policy development recommendations for decision policy makers in Egypt to transform its economy into an innovation-driven one, and

EU development cooperation instruments available for Egypt to be used for the value of Egyptian ICT SMEs either directly by them or through specific governmental SME support programs.

In this regard, this research provides an overview of the Italian National Innovation System (NIS) components, with specific detail to the Emilia-Romagna Region, as well as a performance review of that NIS global and European competitiveness through analysis of different global reports like the WEF, OECD, WB, EIS, IUC, PRO-INNO TrendChart, as well as other studies. This overview is preceded by an outline of a STEP model of the Italian economy aimed at understanding the context, in which, the Italian NIS operates. Combining knowledge gained from this research with the one gained from the “Higher Education Course on Governance and Development of SMEs in Egypt”, the research concludes with a central idea around which the two research targets are detailed in the last two sections. The central idea is about the necessity of adopting a specific form of context-aware strategic thinking in industrial policy development in contrast to context-neutral one. Context-aware in the sense that the properties of the industrial system cannot be explained by its components alone, rather they are explained through a holistic approach to industry policy development that’s able to comprehend the mechanics of its context to guarantee a level of coherence and compatibility with its socio-economic-and-political fabric yielding to its sustained development.

A proposed theoretical model for context-aware policy development is explained, as benefited from the Emilia-Romagna region successful innovation performance in Europe [1,2]. Also, implications for adoption of this model in Egypt are elaborated that would guarantee its effective application and usage for reaching a sustainable industry policy that extends its four pillars, namely: innovation, entitlements, provisions, and territorial dimension.

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1.1 INTRODUCTION

In the Innovation-based economy, the quest for sustained economic development and global competitiveness of a nation requires the existence of a reliable, efficient and competent National Innovation Support System (NIS) that ensures a sustainable national competency of innovating new technologies that could be realized by the industry sector, which are either commercialized from public research or realized through industry R&D and technology transfer.

Each Nation has its own National Innovation Support System (NIS), in what relates to policies, regulations, institutions, programs, and interconnections that eventually influence the level of economic development and the global competitiveness rank of the whole nation.

The course of higher education in “Governance and Development of SMEs in Egypt”, that was conducted in Italy from 9th of September till 21st of December 2012, presented a holistic approach to development of SMEs covering four main aspects affecting the National Innovation Support System within any country, which are: Law and Regulations, Political Economy and Finance, Public Administration and Regional Strategic Planning, as well as Business Organization [Exhibit 1]. It’s within the value of this holistic course and the specific study done on the Italian National Innovation Support system that this research is conducted.

1.2 RESEARCH FOCUS POINT

This research project aims to study the Italian National Innovation Support System in what relates to general components as well as performance and challenges. Most importantly is the study of the government intervention policies and regulations to ameliorate the competencies of the economic factors of production, and develop the ICT sector specifically towards a higher level of competitiveness. From this study, as well as from the higher education course, the aim is to extract for Egypt:

Industry policy development recommendations for decision policy makers in Egypt to transform its economy into an innovation-driven one, and

Development Cooperation Instruments Available for Egypt to be used for the value of Egyptian ICT SMEs either directly by them or through specific governmental SME support programs.

1.3 RESEARCH APPROACH

The research intends to answer the following questions:

What is the current performance of the Italian National Innovation Support System in terms of innovation capacity competence and global competitiveness?

I. RESEARCH METHODOLOGY

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What industry policy development recommendations can the Egyptian policy makers benefit from in improving the Egypt’s global competitiveness and innovation performance of our economy, with a special concern to the ICT industry?

What are the development cooperation instruments available for Egypt that could lead to possible collaboration opportunities between Egyptian ICT SMEs and the Italian counterparts?

To answer these questions, the following research process was followed:

1. Laying out a simple STEP model for the Italian Economy to understand the context, in which the Italian NIS operates.

2. Studying several global reports about the competiveness, innovation, and doing business rank of Italy. (WEF, OECD, IUC, EIS, WB .. etc)

3. Review on government intervention policies for industry development with specific regard to the ICT sector.

4. Extracting development cooperation instruments available for Egypt and industry policy development recommendations.

The outline of this process is described in Figure 1:

Figure 1: Research Approach

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Economic Development is at the heart of all national policies in all countries. However, in times of

crisis seeking an economic development policy becomes a very hard task. Egypt is still witnessing what

shall exceed two-year turmoil of events starting with the revolution in Jan. 2011. However, combined

with global crisis effects, weak political stability of the government, local deterioration of factors of

economic production, and increased level of political tension among the society, succeeding to even

lay down a clear economic development policy of the country seems even harder. This implies that

development of a certain sector cannot be attained alone, unless there is an adequate level of a

reliable and well-performing holistic model of the society.

However, in the quest for Development, it’s important to differentiate between development and

growth. Development is a long-term process of growth and improvement not only from an economic

point of view, but also from social and cultural points of view. As stressed by Sylos Labini (2006),

“Economic development is a means to reach the wider aims of cultural and social development”;

Dahrendorff (2008) also highlights that “Economic development cannot arise without civil

development” [1].

Bianchi and Labory have presented in [1] the results of a long-range research that suggests that the

current global crisis revealed a long-term structural changes in the economy, which all firms in all

sectors have to face and which require government intervention. The main problems revealed by the

crisis can summarized as:

1. Short-term views prevailed, highlighting short-term benefits of sustained consumption

and profits in the financial sector.

2. Partial views also prevailed in the sense of isolating economic phenomena from political

and social aspects

3. The crisis is also generated by a myopic and individualistic views whereby self-interest and

own profits and returns prevail, without regard to the community.

Further details are in [2], where they suggested a holistic approach to industry policy development,

revealing a basic and important idea that the properties of the industrial system cannot be explained

by its component parts alone. The whole industrial system has to be considered with underlying

society and policy, such that industry development is determined by – and in turn influences – the

characteristics and evolution of the society and its cultural development [1].

In this regard, and in order to understand the industrial development policy in Italy, the following

section of this study starts by presenting the context, in which the Italian National Innovation System

operates, which can be described by an overview STEP model of the Italian Economy.

II. INTRODUCTION

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2.1 SOCIETAL STEP MODEL OVERVIEW OF ITALY

2.1.1 ECONOMY Brief

Italy has a diversified industrial economy, which

is divided into a developed industrial north,

dominated by private small companies, and a

less-developed, welfare-dependent, agricultural

south, with high unemployment. The Italian

economy is driven in large part by the

manufacture of high-quality consumer goods

produced by SMEs, many of them are family

owned. Italy also has a sizable underground

economy, which by some estimates accounts for

as much as 17% of GDP [3].

Italy was one of the six member states that established the European Economic Community

(EEC), one of the predecessors of the EU. Italy was a founding member of the euro area and

was among the first group of countries to introduce the euro on January 1, 1999. Euro notes

and coins entered general use on January 1, 2002, replacing the Italian Lira [4] .

Figure 3: Some Economic Indicators of Italy. (Source: WEF Competitiveness Report 2012-2013)

After the 1950s, Italy transformed from a weak agriculture-based economy, severely affected

by the consequences of World War II, into one of the world’s most industrialized nations. It

has a highly developed infrastructure and was ranked number 10 in The Economist’s Quality

of Life 2010 Index [5].

While Italy has developed a reputation for producing high quality luxury goods, the small size

of Italian businesses prevented the country for benefiting from recent reforms. Italy has been

referred to as “the sick man of Europe” due to economic stagnation, political instability, and

challenges in pursuing reform programs. [4]

Figure 2: Societal STEP Model

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Italy is the third-largest economy in the euro-zone, but exceptionally high public debt burdens

and structural impediments to growth have rendered it vulnerable to scrutiny by financial

markets. Public debt has increased steadily since 2007, reaching 120% of GDP in 2011, and

borrowing costs on sovereign government debt have risen to record levels. During the second

half of 2011 the government passed a series of three austerity packages to balance its budget

by 2013 and decrease its public debt burden. These measures included a hike in the value-

added tax, pension reforms, and cuts to public administration. The government also faces

pressure from investors and European partners to address Italy's long-standing structural

impediments to growth, such as an inflexible labor market and widespread tax evasion. The

international financial crisis worsened conditions in Italy's labor market, with unemployment

rising from 6.2% in 2007 to 8.4% in 2011, but in the longer-term Italy's low fertility rate and

quota-driven immigration policies will increasingly strain its economy. The euro-zone crisis

along with Italian austerity measures have reduced exports and domestic demand, slowing

Italy’s recovery. Italy's GDP in 2011 is still 5% below its 2007 pre-crisis level [3].

Key Facts [4]:

The World Economic Forum (WEF) Global Competitiveness Report for 2011/2012

ranked Italy 42nd out of 139 countries in terms of competitiveness. The country’s

competitiveness is held back by structural weaknesses in the labor market (ranked

127th on labor market efficiency), weak public finances, and a poor institutional

environment.

Italy dropped four spots in the World Bank’s 2012 Doing Business Report to place

87th out of 183 countries. It fell ten places in the category of “starting a business”

(now 77th).

According to the European Commission’s September 2012 spring forecast, economic

growth is expected to be -1.4% in 2012 and a more welcomed +0.4 in 2013.

Plummeting global demand continue to seriously affect the country’s exports, while a

weak labor market and inflation pressures contribute to low consumer spending.

As is typical during recessions, the government has run a large deficit. In 2012, it is

projected to reach -2.4%. With the persistent government deficit the general

government debt is to reach 123.4% of GDP.

According to the European Commission, the characteristics of the Italian economy may be

summarized as follows [6]:

A predominance of SMEs, which affects the level of R&D expenditure, innovation

Enhancement and human capital improvement;

The perception of innovation carried out by SMEs as a modernization process rather

than as a strategic activity;

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An uneven distribution of economic activities and ICT infrastructure between north

and south;

Low levels of technical education;

A limited propensity to make patent applications; and

A shortage of finance and the need for a more dynamic venture-capital market.

2.1.2 SOCIAL Brief

Italy is the 23rd country of the world in terms of population at

61M citizens (July, 2012 est.). The Median age in Italy is 43.5

years and the proportion of the population that is older than

65 is 20.3%. On both these measures Italy is the second

“oldest” EU country (after Germany) [3].

Italy has a dearth of highly skilled human resources, and the

most highly qualified sometimes find better opportunities

abroad. During 2011/13 academics’ salaries and career

progression have been frozen in order to contain public

spending. A lack of opportunities and unattractive career

prospects and working conditions for talented individuals may further weaken the human

resource base. A recent parliamentary act aims to support the recruitment of early career

researchers. A new action plan for future youth employment (Italia 2020) aims to better align

curricula with the changing demand of industry [7].

As a result of the profound economic and social changes induced by postwar industrialization,

including low birth rates, an aging population and thus a shrinking workforce, during the

1980s Italy became to attract rising flows of foreign immigrants. The present-day figure of

about 4.6 million foreign residents, that make up some 8% of the total population, include

more than half a million children born in Italy to foreign nationals—second generation

immigrants, but exclude foreign nationals who have subsequently acquired Italian nationality

[8]. The level of immigration to Italy presents a social problem, as the level of unemployment

in Italy reached 11.1% in 2012, local authorities is striving to solve this problem and offer

better jobs to their own citizens.

According to [9], restrictive immigration policies that have been created over time are the

main reason for the continual illegal flows of immigrants. As a result, there is a certain sense

of widespread dissatisfaction with policies, which should not merely be based on countering

illegal flows, readmission agreements, temporary stay centers, or even the simple view of

immigration in terms of employment. Italians need, instead, to invest more in legal paths,

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which can be reached by creating an atmosphere of coexistence in which immigrants and

natives are asked to demonstrate reciprocal responsibility [9].

The most widespread religion in Italy is Roman Catholicism which is not, however, a State

religion. The Republican Constitution states that ''all citizens have equal dignity and are equal

before the law without distinction of sex, race, language and religion''. As far as the Catholic

Church is concerned, the Italian Constitution establishes that the State and the Holy Seat are

independent and sovereign and that relationships are ruled by the Lateran Treaty of 1929 and

subsequently amended in 1985 [10].

Italy is known to be suffering from network of organized crime organizations. Since their

appearance in the middle of the 19th century, Italian organized crime and criminal

organizations have infiltrated the social and economic life of many regions only in Southern

Italy, the most notorious of which being the Sicilian Mafia. There are six known mafia-like

organizations in Italy: Cosa Nostra of Sicily, ‘Ndrangheta of Calabria and Camorra of Naples,

are rather old. Recently, two new organizations, Stidda and Sacra Corona Unita of Puglia have

appeared [11].

Actually, the presence of criminal organizations represents one of the main obstacles to the

economic growth and development of several regions and countries around the world.

Besides the immediate costs imposed by violence and predatory activities, such organizations

may take advantage of their economic and military power to influence the political decision-

making process. It’s estimated in Italy that the expansion of organized crime lowered GDP per

capita by 16 percent over a 30-year period, relative to a control group of regions less affected

by mafia presence. The decrease was caused primarily by a contraction of private investment,

which was progressively replaced by (less productive) public capital [12].

2.1.3 POLITICAL Brief

Being part of the six EU states that started the process of the European

integration in 1952 and witnessed the evolution of the European

Union, it’s not accurate anymore to study the political status of an

European state without noting how the EU policies and regulations

affect such a state. Italy is a special case since the Treaty establishing

the European Community was signed in Rome in 1957. (Exhibit [2]

presents an the EU structure main institutions)

Currently governments of the European Union Member States are sharing competencies with

the EU itself, and their daily work is totally in compliance with the directives and regulations

set by the EU in its exclusive competency areas. The difference between exclusive

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competencies and shared competencies can be understood from the Figure 4 below according

to the Treaty on Functioning of the EU [13]:

Figure 4: Difference between Exclusive and Shared Competencies [13]

The EU policies in what relates to sustainable development, green economy, innovation, and

other areas are guiding lines for all EU Member States local policies, each in its own territory.

The Constitution establishes that the Italian

Republic is made up by State, Regions,

Provinces and Communes. These are all

autonomous bodies with powers and

functions limited by the Constitution [10].

Italy is a Parliamentary Republic. The

President of the Republic is the higher office

of the State. He is elected every seven years

by the Parliament in common session and by

representatives of the Regions. Italy is

subdivided into 20 Regions, five of which

enjoy a particularly high level of autonomy

according to special statutes adopted through constitutional law. The Regions are established

as autonomous bodies with their own statutes, their own powers and functions. The

Commune and the Province are administered respectively by the Commune and Provincial

Councils. These bodies have the power to deliberate, in the respect of the national and

regional laws, on all measures relating to the organization of the services specific to their

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jurisdiction. The Commune and Provincial Councils are made up of representatives elected by

residents by universal suffrage [10].

According to the global transparency report, there are a number of corruption challenges in

Italy [14]:

In the Government and Politics area:

Checks and balances in the Italian government are compromised. A

2012 study indicates that the legislative branch has little independence from the

executive. This creates a disparity in power and enables the executive to govern

without appropriate accountability.

Integrity mechanisms are also poor in the public sector. According to a 2011 report,

parliamentary and government codes of conduct are aspirational at best, and not

enforceable. Weak – and often non-existent – sanctions cannot effectively deter

corrupt acts. National corruption scandals also undermine public officials’ image.

The National Integrity Systems Assessment report says that: “Italy's National Integrity System

is far from robust, with an average NIS score of 55.04 per cent (scores range from 0 [lowest or

worst] to 100 [highest or best]). Corruption is able to flourish almost everywhere as state

institutions enjoy considerable autonomy, which does not correspond to standards of

accountability and integrity” [15].

In the Political Financing area [14]:

Corporate donations to political parties and candidates are unregulated. Although

there are constraints on election expenditure, there are no limits on donor

contributions to parties or candidates. Donor identities are only revealed for

contributions above €50,000 and even these loose regulations are not adequately

enforced.

Political party and campaign expenditure reporting are also unsatisfactory due to the

large gap between law and practice. The public is unable to access financial reports of

political parties and a number of corruption scandals have added to public distrust in

the party system. A 2010 report shows that Italians perceive political parties to be the

most corrupt institution in the country.

2.1.4 TECHNOLOGICAL Brief

The technological part of the STEP model will be elaborated in detail through the

study of the Italian National Innovation System in the Section 2 and in Exhibit 4 for

Emilia-Romagna region specifically.

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3.1 INTRODUCTION

Innovation is a priority of all Member States of the EU and of the European Commission. Throughout Europe, hundreds of policy measures and support schemes aimed at innovation have been implemented or are under preparation. The diversity of these measures and schemes reflects the diversity of the framework conditions, cultural preferences and political priorities in the Member States [16].

Over the last decade Italy’s economic growth has slowed and come to a halt, independently of the world economic cycle. It has been held back by the structural problems that reduce the ability of Italy’s productive system to take advantage of the opportunities inherent in the new patterns of world trade and of the innovative technologies that have spread throughout the world [16]. The financial crisis spreading at international level is affecting the Italian real economy in the same way that it is unfolding in other EU countries. The sharp reduction in revenue, the slowdown in lending and the deterioration in consumer and business confidence are holding back demand and output, creating economic contraction and significant job losses [17].

III. ITALIAN NATIONAL INNOVATION SYSTEM

THE INNO-POLICY TREND CHART

The ‘First Action Plan for Innovation in Europe’, launched by the European Commission in 1996, provided for the first time a common analytical and political framework for innovation policy in Europe. Building upon the Action Plan, the Trend Chart on Innovation in Europe is a practical tool for innovation organisation and scheme managers in Europe. Run by the Innovation Policy Directorate of DG Enterprise and Industry, it pursues the collection, regular updating and analysis of information on innovation policies at national and European level. The Trend Chart serves the “open policy co-ordination approach” laid down by the Lisbon Council in March 2000. It supports organization and scheme managers in Europe with summarized and concise information and statistics on innovation policies, performances and trends in the European Union (EU). It is also a European forum for benchmarking and the exchange of good practices in the area of innovation policy. The Trend Chart on Innovation has been running since January 2000. It now tracks innovation policy developments in all 25 EU Member States, plus Bulgaria, Iceland, Israel, Liechtenstein, Norway, Romania, Switzerland and Turkey. It also provides a policy monitoring service for three other non-European zones: NAFTA/Brazil, Asia and the MEDA countries. The Trend Chart website (www.cordis.lu/trendchart) provides access to the following services and publications, as they become available:

A database of innovation policy measures across 33 European countries; A news service and related innovation policy information database; A “who is who” of agencies and government departments involved in innovation; Annual policy monitoring reports for all countries and zones covered; Background material for four annual policy benchmarking workshops; The European Innovation Scoreboard and other statistical reports;

An annual synthesis report bringing together key of the Trend Chart [16].

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In 2008, Italy’s economy contracted by 1% following growth of 1.6% in 2007. Production fell by 3.1% and the trend continued in the first part of 2009. Most industrial sectors are in difficulty. Those which have suffered first from the contraction of the international demand have been the metal-mechanic and textile industries, which are the two pillars of the 'made-in-Italy' industries. Since September 2008 other sectors such as agro-food, construction, commerce and the chemical industry have also seen their investments and confidence in innovation reduced. The IFIIT index which measures the confidence for investments in technological innovation decreased from 78 to 65 points between June 2008 and March 2009. However, sectors such as energy, credit, insurance, telecommunications and luxury goods keep showing special attention towards innovation and new technologies, where investments are not expected to fall [17].

3.2 OUTLINE OF THE ITALIAN NATIONAL INNOVATION SUPPORT SYSTEM

The theoretical model proposed for the National Innovation System components is described in Figure 5 below. It outlines generally what components should be in place to realize an NIS [18-19].

Figure 5: A Proposed Model for the Components of the National Innovation Support System

As often happens when examining the “Italian system”, within its various subdivisions, even the “Italian National Innovation System (NIS) is characterized by a large number of entities and a high level of fragmentation” [15].

Based on the European Commission’s Annual Innovation Policy Trends and Appraisal Report for Italy, it is possible to group the different institutions and organizations determining and shaping the innovation system in Italy into six categories [15], which fit most of the proposed NIS model components outlined in Figure 5.

Those are:

1) Government and legislative bodies:

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1. Ministries of Education, Universities and Research (MIUR), Economic Development (MSE), Innovation and Technology, Economy and Finance, and, to a lesser extent, Ministries of Environment and Health; and

2. the Inter-ministerial Committee for Economic Planning (CIPE);

2) Universities and knowledge institutes:

1. 77 universities distributed across the country; 2. The Association of Italian University Rectors (CRUI); 3. Public Research Institutes, like the National Research Council (CNR), the National Agency

for New Technologies (ENEA), the Italian Space Agency (ASI), the Italian Aerospace Research Centre (CIRA), the National Institute for Nuclear Physics (INFN) and the Italian Institute of Technology (IIT) - the latter established in Genoa in 2004 by the Ministry of Education, Universities and Research and the Ministry of Economy and Finance, as a foundation with the aim of becoming an international centre of excellence for scientific research in advanced technology; and

4. Private research centers, mainly managed by the major industrial groups (Fiat, Pirelli, Telecom Italia, Finmeccanica, Enel etc.)

3) Public Innovation Agencies/Organizations:

1. The Italian Patent Office (which regulates industrial property issues); 2. The Institute for Industrial Promotion (IPI), a development agency controlled by the

Ministry for Economic Development, which is involved in industrial policies, incentive instruments and policies, technology transfer networks and multilateral and bilateral international cooperation efforts;

3. Sviluppo Italia, the national agency for enterprise and inward investment development, which controls “Innovazione Italia”, a dedicated agency that implements national innovation programs;

4. Agitec, the service agency designed to assist business in making investments in innovative technology;

5. At the regional level, relevant organizations are the Regional Innovation Agencies and the Regional Competence Centers (RCCs) - the latter have been established by the Department for Public Administration and the Department for Innovation and Technology to facilitate and accelerate the development of e-government and the information society at the regional level; and

6. The 2006 Budget Law created a National Agency for the Dissemination of Technologies for Innovation (Agenzia per la diffusione delle Tecnologie per l’Innovazione), monitored by the Italian Prime Minister’s Office and aimed at fostering the competitiveness of SMEs and of industrial districts by spreading new technologies and promoting integration between the research and industrial spheres;

4) Private sector organizations:

Main Italian industry associations such as Confindustria and Unioncamere;

5) Industrial Research Organizations and Centers:

1. The Italian Association for Industrial Research (AIRI), which promotes industrial research and cooperation between companies and public research institutions;

2. Industrial Experimental Stations: organizations supporting the competitiveness of enterprises in close collaboration with the relevant production sector;

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3. Industrial districts; 4. Technology districts: 24 technology districts have been promoted in key strategic areas; 5. Science and Technology Parks: the number in Italy is growing. The Association of Italian

Science and Technology Parks (APSTI), founded in 1989, now has 30 parks throughout the 6. country; and 7. Business Innovation Centers (BICs), Integrated Centers for Entrepreneurship

Development, Incubators and Innovation Relay Centers (7 in Italy), which support innovation and transnational technology transfer; and

6) Innovation Intermediaries and Financial Institutions.

The financial system supporting R & D in Italy is made up of:

1. The Italian Business Angels Network (IBAN); 2. The Italian Venture Capital and Private Equity Association (AIFI); and 3. A series of private banks and financial intermediaries that offer funding to finance

R&D and innovative projects. (Rinnova, and others)

These 6 main categories are illustrated in Figure 6 below [15]: (Refer to Exhibit [3] for more details).

Figure 6: Outline of the Italian Innovation System Major Organizations

3.3 NIS PERFORMANCE REVIEW

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In terms of innovation performance, Italy is below the EU average and its relative position has not significantly improved over the years 2004-2008 (SII was 0.314 in 2004 and is 0.354 in 2008). According to the European Innovation Scoreboard (EIS), Italy positions itself in the group of 'moderate innovators', showing slow progress and registering a below-average annual growth rate (1.8 in 2008 versus 2.3 EU average) [20].

Figure 7: Summary of Innovation Performance of the EU Member States [20]

The moderate innovators could be compared to countries performance of the other categories in related innovation dimensions as in Figure 8.

Figure 8: Country Groups: Innovation Performance per Dimension [20]

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Table 1: Sample Country Groups per Innovation Category [20]

According to the EIS, Italy performs well (slightly above or around the EU average) in the following indicators:

1. R&D activities and employment in medium-high, high technology and knowledge-intensive services sectors. Such performance is mainly attributed to the importance of the Italian medium-technology industrial base (especially industrial areas of mechanics).

2. Community trademarks and design, a sign of the traditional country leadership at international level in sectors marked by the 'made-in-Italy' production, design creativity and invention, which have contributed and can further boost the consolidation of the Italian products in several key markets, and

3. Non R&D innovation expenditure.

On the contrary, low performance is registered for indicators such as Human resources, Finance and Support, and Linkages & entrepreneurship. The EIS indicators reflect the main traditional weaknesses of the country, namely:

1. Insufficient supply of knowledge base for high-technology solutions and dissemination of new technologies (still low number of university educated people, inadequate average level of skills and know-how among the adult and young population, low number of researchers employed),

2. Shortage of finance both from public and private sources and inefficient capital market (inadequate development of the domestic capital market, poorly performing financial sector and slow growth of companies through third-party capital, credit market still managed according to rigid and traditional criteria),

3. Low level of inter-firm collaboration and still weak system of consolidated public-private partnerships. These factors strongly affect the Italian innovation system and the ability of the country to gain on other EU countries in terms of innovation and competitiveness.

Based on the analysis of indicators from several sources such as the EIS, Organization for Economic Cooperation and Development (OECD) and International Institute for Management Development (IMD), as well as on national policy debates, publications, and on the analysis of the press, three main challenges can be identified in the Italian innovation system:

(1) Innovation financing (especially venture capital), (2) Mobility of talents (especially brain drain), and (3) Improvement of technology transfer mechanisms [6].

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Figure 9: Italy European Innovation Scoreboard Country Profile [20]

However, it’s to be noted that according to the WEF Global Competitiveness Index Report 2012-2013, Italy is ranked as an innovation-driven economy category of countries [21]. So linking the two reports gives an indication that Italy is positioned close to the tail of the list of innovation driven economies as clear from Figure 10; the diamond graph shows how Italy is behind in most of the indicators of the innovation-driven economies.

According to the WEF GCI report 2011-2012, Italy succeeded to move up by one place to reach the 42nd position this year. The country continues to do well in some of the more complex areas measured by the GCI, particularly the sophistication of its businesses, where it is ranked 28th, producing goods high on the value chain with one of the world’s best business clusters (2nd). Italy also benefits from its large market size – the 10th largest in the world – which allows for significant economies of scale. However, Italy’s overall competitiveness performance continues to be hampered by some critical structural weaknesses in its economy. Its labor market remains extremely rigid – it is ranked 127th for its labor market efficiency, hindering employment creation. Italy’s financial markets are not sufficiently developed to provide needed finance for business development (111th). Other institutional weaknesses include high levels of corruption and organized crime and a perceived lack of independence within the judicial system, which increase business costs and undermine investor confidence – Italy is ranked 97th overall for its institutional environment. The efforts being undertaken by the present government to address such concerns, if successful, will be an important boost to the country’s competitiveness [21].

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Figure 10: GCI General and Innovation Performance Rankings. [21]

Other reports, such as the Innovation Union Competitiveness (IUC) Report 2011, also reported comparative details of the performance of the Italian innovation system performance. According to the Innovation Union Competitiveness report 2011, The Italian R&D and innovation system shows positive and negative aspects. In innovation, Italy ranks below the EU average as a moderate innovator. Policy intervention has opened many possibilities which have not been completely exploited due to two types of structural weaknesses [22]:

Inertia regarding modernization within the public research system and

The difficulty to realize growth and innovation within the industrial system, particularly with regard to the most high-tech sectors.

The levels of population with tertiary education (11.6 %) and participation in life-long learning (6.8 %) are below the EU averages of 22.8 % and 9.8 % respectively. The total number of researchers (FTE) had an annual average growth rate of almost 4 % between 2000 and 2009, but is still well below the EU average. The business sector in Italy is characterized by a large number of small and medium-sized firms, specialized in products that require high-quality design and engineering, whose average size is significantly smaller than the EU average [22]. There is a predominance of SMEs (98% have less than 20 employees) specializing in low and medium technology sectors [21].

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Figure 11 shows the R&D profile of Italy as compared to the EU and US.

Figure 11: Italy R&D Profile Relative to EU and US. [22]

It’s noted that Italy is well integrated in the European research and innovation system. Together with Germany, France and the United Kingdom, Italy is among the highest producers of overall publications and of cross-border co-publications. The preferred partners for scientific collaboration with Italy are among these three countries plus Spain and Switzerland [21].

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Also, according to the OECD Science, Technology and Industry Outlook 2012 [7], Italy’s share in world trade has declined and low productivity growth has led to a widening gap in GDP per capita with the best OECD performers. The weak investment in R&D may reflect the specialization of firms in traditional sectors and the prevalence of small family businesses. However, strict regulations also reduce incentives for firms to operate efficiently, invest in innovative technologies and undertake organizational change. In recognition of this, the government has begun to liberalize certain sectors by lowering entry barriers and removing price and quantity restrictions. Figure 12 shows a Comparative Performance Data of National Science and Innovation Systems [7].

Figure 12: Comparative Performance of National Science and Innovation Systems (Italy and EU).

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In the National Strategic Reference Framework (NSRF) 2007-2013, related to the Cohesion policy, the poor innovation capacity of the private and public sectors is identified as the principal source of competitive lag in the country [15].

The systemic weakness of Italy is linked to:

The modest amount of private research conducted even in very large firms,

The insufficient capacity to institute relationship mechanisms between the latter and SMEs,

The limited aptitude of SMEs to dialogue with the research supply system,

The inadequate level of training of entrepreneurs and The poor involvement of workers in the innovation process both in businesses and in the

public administration. More generally, the weaknesses are traced back to:

o An inadequate climate of competitiveness and to the existence of highly-protected positions in the market, in businesses and in public institutions, as well as

o To lower skill levels than in other industrial countries and o To poor dialogue between businesses and the research sphere.

Also insufficient is the ability to produce and attract skilled human capital, while at the same time the national economy has difficulty in absorbing human resources that have successfully completed higher education.

The research supply system is described as being “patchy”, that is, as having areas of excellence which are not however supported by an adequate system of rules. This in turn leads to the perpetuation of situations of unaccountability fuelled by the absence of merit-based recruitment mechanisms [17].

However, despite the overall Italian relative lower performance in innovation as compared to the leader-innovation players, some regions like Emilia-Romagna are considered as model of innovation in Europe [2]. Regions of Italy have their own regional development policies that could fill gaps and account for shortages in the national ones, as and explained in the next section.

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3.4 INTERVENTION PROGRAMS AND POLICIES FOR ECONOMIC DEVELOPMENT

To put the economy on a sustainable growth path based on sound macroeconomic fundamentals, the Italian government has embarked since 2011 on a substantial process of fiscal consolidation and structural reform [7]. Italy aims to improve productivity, competitiveness and innovation throughout the country via a sustainable development framework. The main focus will therefore be on promoting skills and providing public services to people and investors. These national objectives are to be achieved through four macro-objectives [24]:

Developing knowledge circuits; Improving living standards, security and social inclusion; Fostering clusters, services and competition; and Internationalizing and modernizing the economy.

However, for Italy with 20 regions, each region put also its own development policies that sometimes fill some gaps in the national policy or simply account for its failure. That’s why regions have a considerable level of inequalities according to the competency of the responsibles within this region for policy development and availability of resources and how they are put into the economic cycle of development. This is realized in the north and south disparity problem in Italy for example with much R&D and innovation capacity concentrated in northern and central regions of the country. Also across all Europe, led to the adoption of the Cohesion policy aiming to improve the economic conditions of specific regions within the EU suffering from such disparity.

So the result is that, for a specific region, we have 3 sets of policies and programs targeting different economic development dimensions or even the same dimension together but through different means and mechanism.

Figure 13: National, Regional, and EU Policies and Programs Integrating Together.

In the following section, a list of national intervention programs and agreed policies across Italy is outlined, and then followed by a summary of major EU funding programs. Of course, details of the 20 regional policies and programs in Italy are beyond the scope of this research. Nevertheless the Emilia-Romagna region specifically is overviewed in more detail in Exhibit [4].

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3.4.1 OVERVIEW LIST OF NATIONAL PROGRAMS AND POLICIES The Fund for the Promotion of Research (FAR)

o With a budget of USD 2.5 billion (2010-11), it’s contributed significantly to increasing public funding for business firms, universities and Public Research Institutes (PRIs)

The National Research Plan (2011-13) o Aims to promote research by strengthening business sector co-operation with the

public sector and supporting the internationalization of research. Industry 2015 (2006-15)

o The program establishes strategic guidelines to ensure development and competitiveness of the country’s economic system and defines new tools aimed at encouraging investment. Sets out to support business networks and industrial innovation projects and includes a fund for enterprise finance [17].

Industrial Innovation Projects

Such support measures are aimed at promoting investment in high-innovation programs within strategic sectors for Italy’s development.

Enterprise Networks

An enterprise network is a form of contractually-based coordination among enterprises. It’s specifically designed for SMEs seeking to achieve critical mass and greater market power.

Fund for Corporate Finance

Intended to make it easier for SMEs to obtain credit and risk capital. National Reform Program 2011-12

o Requires general policies to have a small impact on the national budget. The National Strategic Framework 2007-13

o Includes the National Operational Program (PON) Research and Competitiveness 2007-13, funded by the European Regional Development Fund (ERDF) and by the National Revolving Fund (Fondo di Rotazione), which is of high importance for regional cohesion and competitiveness

Territorial Research and Development Initiatives o The aim is to enhance competitiveness of high-export product areas through R&D. To

such end, the Italian Government has developed a policy focused on the formation of Technology Districts (TDs). Currently, there are 29 formally approved TDs throughout the country specializing in different areas (e.g. nanotechnologies, wireless technologies, biotechnologies, logistics, cultural heritage, mechatronics, .. etc) [25].

Science, Technology , and Innovation (STI) Policy Governance Improvement o The Ministry for Economic Development (MISE) is in charge of industrial innovation,

and the Ministry for Education, University and Research (MIUR) is responsible for the national education system, including higher education, but also for promoting research at national and international level. The National Agency for the Evaluation of Universities and Research Institutes (ANVUR) has operated under MIUR since 2010.

o In order to improve public research performance, a reform of funding mechanisms for and management of universities were approved in 2010 by Parliament and is being implemented [7].

o As stated in the National Reform Program 2011, for 2011/12, tax incentives have been strengthened for research commissioned by firms to universities and PRIs as well as for research developed in collaboration with them.

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o A Fund for Competitiveness and Development was created to support industrial innovation projects in such areas as energy efficiency, new technologies for “Made in Italy” products, new technologies for life, and innovative technologies for cultural heritage. An independent agency is being set up to evaluate universities and research in order to improve the governance of the research and innovation system. Italy also obtains EU Structural Funds, which help to finance regional projects.

Public Sector Innovation o The e-Government Plan 2012 of the Department for Public Administration defines a

set of digital innovation projects to modernize the public administration, to make it more efficient and transparent, and to improve the quality of services and reduce costs. The plan sets out some 80 projects and 27 targets to be achieved by 2013.

Knowledge Flows and Commercialization o Various initiatives aim at bridging the gap between academia and industry.

Technological districts and high technology poles as well as public-private laboratories are established in different parts of the country.

The National Innovation Fund (FNI)

Was created in 2012 by MiSE to facilitate the financing of innovative projects based on the exploitation of industrial designs and patterns. In addition, the Innovation Package introduced in 2011 supports the patenting activity of SMEs.

The National Technology Platforms and Industrial Innovation Network (RIDITT)

Were set up in 2010 to ensure dissemination of innovation and technology between research system and enterprises.

The Strategy for the Internationalization of Italian Research (SIRIT 2010-15) o Integrates the national research priorities in international strategies and priorities,

notably the EU’s 2020 Strategy. Italy actively participates in EU R&D programs, the European Strategy Forum on Research Infrastructures (ESFRI) and other European initiatives such as EUREKA (for international S&T cooperation) and Erasmus (for mobility of students and researchers).

Green Innovation o Italy has improved its RTA in environment-related technologies over the past decade

and will soon develop a specialization if this trend continues. The government provides a number of incentives for renewable energy production. The Energy Account (Conto Energia) initiative promotes solar photovoltaic, and a Kyoto Fund was set up to finance measures to reduce greenhouse gas emissions. Green Certificates (CV) promote electrical energy produced from renewable sources and White Certificates – energy efficiency labels (TEE) – encourage energy-saving measures. A package of fiscal incentives for energy efficiency interventions in existing and new buildings was approved by Parliament in 2011 [7].

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3.4.2 EU FUNDING PROGRAMS AND INSTRUMENTS FOR MEMBER STATES

Supporting all EU Member States (MSs) are a specific set of EU Funding programs, which have a big role in funding many programs aimed at financing different dimensions of economic, social, and technological development in all MSs, including Italy as well. These funding programs actually are emerged from another set of EU Policies and Treaties that were developed over time, are being continuously enhanced, and elaborated more since the start of the buildup of the European Union. From the European Economic Union Treaty in 1957 till the Lisbon Treaty in 2007, that targets to achieve a globally technologically competitive EU economy, such treaties and policies aims to achieve more general targets encompassing economic, social, and political competitiveness of the EU. Guided by the desire to achieve peace and prosperity after the WW2, the customs union was created, then the European Union, then the Monetary Union, with some recent challenges to the Euro that may result in speeding up discussions towards a political union. However, for the scope of this research only the list of Funding programs shall be outlined, not the evolution of such treaties [24-27].

Figure 14: Most Important EU Funding Programs for Member States.

Such Funding Programs are very valuable in extending the resources of each Member State up to the value of greater access to much more resources, which is one of the important values gained through the EU. Realized in the union is that the sum of the group is greater than the sum of its parts, which shall be referred to in a later section about lessons learned in the political dimension with very profound possible impacts on the economic development of Egypt.

Further more details about EU policies, programs and priorities covering all areas from agriculture to transport can be found in http://ec.europa.eu/policies/index_en.htm.

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4.1 LONG HISTORY OF COOPERATION

The Euro-Mediterranean Co-operation was launched at the 1995 Barcelona Conference between the European Union and its originally 12 Mediterranean Partners: Morocco, Algeria, Tunisia, Egypt, Jordan, the Palestinian Authority, Lebanon, Syria, Turkey, Cyprus, Malta, and Israel. The main objectives of the Barcelona Declaration were [29]:

1. Establish a common Euro-Mediterranean area of peace and stability based on fundamental principles including respect for human rights and democracy (Political and Security Partnership).

2. Create an area of shared prosperity through the progressive establishment of a free-trade area between the EU and its Partners and among the Mediterranean Partners themselves (Economic and Financial Partnership).

3. Develop human resources; promote understanding between cultures and rapprochement of the peoples in the Euro-Mediterranean region as well as to develop free and flourishing civil societies (Social, Cultural and Human Partnership).

Under this framework, Association Agreements have been adopted between the EU, the Member States and the Mediterranean country partners. And In general, it provides a gradual establishment of a Mediterranean free trade area in accordance with the rules of the World Trade Organization (WTO).

IV. EGYPT AND THE EU

EGYPT EU RELATIONS

The EU and Egypt began diplomatic relations in 1966. The EU seeks to develop a particular close

relationship to Egypt, its geographical neighbor, and to support Egypt’s domestic and political

reforms. The relationship emphasizes close cooperation on democratic reform, economic

modernization, social reform, and migration issues. The current agenda of EU-Egypt relations is

spelled out in an Action Plan under the European Neighborhood Policy. Egypt and the EU are

bound by the legally binding treaty in the form of the Association Agreement which came into

force in 2004. Trade remains another important subject of relations, as well as financial co-

operation, details which can be found in the Country Strategy Paper [28].

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Under the general Development and Cooperation Europeaid, the EU-Egypt Association Agreement forms the legal basis governing relations between Egypt and the EU, modeled on the network of Euro-Mediterranean Partnership Agreements between the Union and its partners in the southern flank of the Mediterranean Sea. The Association Agreement was signed in Luxembourg on 25 June 2001 and entered into force on 1 June 2004, following ratification by the Member States and by Egypt. It replaces the earlier Co-operation Agreement of 1977. Figure 15 shows the scope of the agreement.

Figure 15: Scope of the EU-Egypt Association Agreement [30].

The Association agreement establishes an FTA between the two partners with the elimination of tariffs on industrial products and significant concessions on agricultural products, which means lower tariff rates and increased quotas for certain products. Amended with an agreement on agricultural, processed agricultural and fisheries products (in force since 1 June 2010), Figure 16 shows the value gained for both industrial and agriculture products.

Figure 16: Association Agreement FTA Impact on Trade between Egypt an EU [30].

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Currently there is an online export helpdesk tool that allows exporters to the EU to extract information about customs tariffs, imports procedures and preferential arrangements applicable to their products, as well as to have access to trade statistics and useful links. It has an Arabic version and Egypt recorded more than 75% of the website hits [31].

Figure 17: Online Export Helpdesk Tool [31].

In 2008 the Barcelona Process, under the Euro-Mediterranean Partnership (EUROMED), has been re-launched through the establishment of the Union for Mediterranean (UFM), which should promote economic integration and democratic reform across 16 neighbors to the EU’s south in North Africa and the Middle East.

Figure 18: UFM Key Initiatives [32].

The Euro-Mediterranean Co-operation is further supported by the European Neighborhood Policy. With its European Neighborhood Policy (ENP), the EU is seeking to reinforce relations with

neighboring countries to the east and south in order to promote prosperity, stability and security at its

borders. The ENP was launched in 2004. At present, 16 partners are addressed by the ENP: Egypt,

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Algeria, Armenia, Azerbaijan, Belarus, Georgia, Israel, Jordan, Lebanon, Libya, the Republic of

Moldova, Morocco, the occupied Palestinian territory, Syria, Tunisia and Ukraine. The ENP provides

the EU with the means to deepen bilateral relations with these countries. The policy is based upon a

mutual commitment to common values: democracy and human rights, rule of law, good governance,

market economy principles and sustainable development. The ENP actually takes relations beyond

standard cooperation or trade agreements to offer political association and deeper economic

integration, increased mobility and increased people-to-people contacts [29, 33].

Countries wishing to deepen their relationship with the EU agree joint bilateral action plans to this

effect. And the EU-Egypt Action Plan has been adopted in 2007. Figure 19 shows the extent of this

action plan priority areas [34].

The European Neighborhood and Partnership Instrument (ENPI) is the financial instrument for the

ENP. It is addressed to ENP partner countries and offers co-funding for promoting good governance

and equitable social and economic development process. It has been operational since 1 January

2007. The ENPI is the main source of funding for the 17 partner countries, with overall allocation for

the ENPI instrument amounts to almost €12 billion for the seven-year period 2007-2013 [35].

The ENPI supports the following in particular:

Political reform (good governance, rule of law, respect of human rights);

Economic reform (economic development, market economy, convergence with the EU internal

market);

Social reform (integration, employment, non-discrimination);

Sectoral co-operation (environment, energy, health…)

Regional and local development;

Participation in EU programs and agencies.

EU-EGYPT ACTION PLAN 2007-2013

“This Action Plan is a first step in a process covering a timeframe of three to five years. Its

implementation will help fulfil the provisions and aims of the Association Agreement (AA)

and will encourage and support Egypt’s national development, modernization and reform

objectives. It will furthermore help to devise and implement policies and measures to

promote economic growth, employment and social cohesion, to reduce poverty and protect

the environment, thereby contributing to the long term objective of sustainable development.

Implementation of the Action Plan will also help, where appropriate, further integration into

European Union economic, social and technological structures and significantly increase the

possibility to advance the approximation of Egyptian legislation, norms and standards to

those of the European Union in appropriate areas, thereby enhancing prospects for trade,

investment and growth.” [34]

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Figure 19: EU-Egypt Action Plan Priority Areas [34]

Since 2007, the Commission's priorities in terms of financial cooperation with Egypt have fallen under

the strategic framework for EU co-operation with Egypt is established in the Country Strategy Paper,

which currently covers the period 2007-2013.

Figure 20: ENPI Egypt Strategy Paper Funds per Priority Area [35].

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Egypt signed Memorandum of Understanding with the EU on Strategic Partnership on Energy in 2009.

It targets from 2009-2015 to give priority to [36]:

Development of a comprehensive Egyptian energy strategy,

Development of a wide-ranging policy and projects in the field of energy demand

management, energy efficiency and renewable energy sources;

Enhancement of technological, scientific and industrial cooperation.

Development of energy networks and energy security

Establishment of a work program for the gradual convergence of Egypt’s energy market

regulations with those of the EU

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4.2 DEVELOPMENT COOPERATION INSTRUMENTS AVAILABLE FOR EGYPT

Considering this long history of relations between Egypt and the EU, currently Egypt has considerable

access to many development cooperation instruments that can be used to support its economic

development efforts, including the development of its SMEs in all fields as well as in ICT. Figure 21

gives a general overview of these instruments that are available for Egypt [25-27].

Figure 21: Development Cooperation Instruments Available for Egypt.

Overview summary of most of these programs are provided in the figures below:

Figure 22: Partnership for democracy and shared prosperity with the Southern Mediterranean [37].

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Figure 23: The SPRING Program [29, 38]

Figure 24: The Development Cooperation Instrument (DCI) [29, 39]

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Figure 25: The European Instrument for Democracy & Human Rights (EIDHR) [40]

Figure 26: Framework Protocol 7 for Research and Technology Development [41]

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Egypt is eligible for co-operation activities financed under the ENPI multi-country and regional

programs and the ENPI Cross Border co-operation component. Egypt also benefits from the

new Erasmus Mundus program, enhancing mobility and co-operation with EU in the field of higher

education [42].

Beyond the bilateral geographic instrument (ENPI), Egypt is also eligible for additional funds under

the European Instrument for Democracy and Human Rights (EIDHR) and thematic programs

established under the Development Co-operation Instrument (DCI), which covers among others

the Non-State Actors and Local Authorities in Development (NSA & LA), Investing in

People and Migration. In 2010, a budget of €1.9 million was made available to civil society

organizations (€0.9 million under EIDHR; €1 million under NSA & LA). In 2011 Egypt benefitted from

EIDHR (€2.0 million), NSA & LA (€1.0 million) and from global calls under the DCI thematic programs

[42].

Full details about the international financial institutions can be found in [26] including history of

previous engagements with Egypt in different sectors, however SIMEST as a specific Italian institution

playing an important role in developing Italian companies locally and in international markets needs to

be elaborated here.

Established in 1990, SIMEST is an Italian state – owned agency specialized

in facilitating the processes of internationalization of Italian enterprises

and companies all over the world. Based in Rome, it operates by providing

financial support, technical assistance and professional consultancy during

the entire process of internationalization of the company.

BOOSTING CO-OPERATION THROUGH TWINNING

Twinning is a European Commission initiative that was originally designed to help candidate

countries acquire the necessary skills and experience to adopt, implement and enforce EU

legislation. Since 2003, twinning has been available to some of the Newly Independent States of

Eastern Europe and to countries of the Mediterranean region.

Twinning projects bring together public sector expertise from EU Member States and beneficiary

countries with the aim of enhancing co-operative activities. They must yield concrete operational

results for the beneficiary country under the terms of the Association Agreement between that

country and the EU [43].

A budget of €62 million is available for Egypt under the Twinning instrument which promotes

institution and capacity building through support provided by experts from Member States' to

partner country Ministries. Areas covered by the Twinning Instrument include Tourism, Maritime

Safety, Postal Services, Investments and Free zones and Railways safety. Future projects will cover

other areas of the Association Agreement and the EU-Egypt Action Plan such as: Statistics,

Occupational Health, Water Quality, Waste Management, Telecommunications, Animal Disease,

Norms and Standards and Road Safety [42].

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The Italian Government holds a 74% stake in SIMEST, while minor shareholders are banks and

business associations. Today, the agency operates in every country in the world, outside the European

Union, including Egypt.

Figure 27: SIMEST Profile [44, 45]

Table 2: SIMEST Services in All Phases of Development [44]

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Egypt is still in a transition stage from a Factor-Driven economy to an Efficient-Driven one and still far

from being in the Innovation-Driven category like Italy for example according to the latest Global

Competitiveness Index report 2012-2013. Its

global competiveness rank suffered a

significant decrease in this latest report, as

clearly affected by the recent turmoil after

the revolution in Jan-2011, the observed

level of inefficiencies in the total factors of

economic production, and the increased

government and political instability [21].

This situation briefs the current final

deteriorating state of Egypt’s global

competitiveness despite a lot of

development policies, strategies and

programs deployed over the last decade using national and international resources. Sustainable

development is not yet attained. More precisely, this highlights the fact that development only occurs

within a supportive context. Socio-economic and socio-political parameters of a society actually can

enable or mute any development policy. Laying down an elaborate strategy and policy for

development with miscellaneous high-value programs for the society and industry is not the final

answer or the magic key to wealth and prosperity. Despite the intellectual difficulty to actually settle

on the detailed content of such strategies and policies that should be of a correct and true relevance

to increasing the global competitiveness of a nation, there exists the socio-economic/political context

in which this strategy and policy operates that actually determines factors of implementality and

feasibility of meeting the minimum success measures foreseen in development programs. Like most of

entrepreneurship trials; many actually fail to sustain, whatever an elaborate business plan was

previously written, for the same reasons.

Considering this clear fact the industry development recommendations are needed to be holistic ones

that aim to find gaps to fill in Egypt in the socio-economic/political fabric of the society, which are

critically needed to really assure the correct channeling of policy documents to the real world.

V. INDUSTRY POLICY DEVELOPMENT RECOMMENDATIONS

Figure 28: Egypt GCI Profile

Table 3: Past 5 years of Egypt GCI Rank

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5.1 CONTEXT-AWARE VS. CONTEXT-NEUTRAL DEVELOPMENT CONCEPT

This research was not intended to just copy existing efficient systems from Italy to Egypt, whatever

differences or similarities that exist between the two countries on many aspects, however it aimed

rather to try to understand the economic efficiency of Italy and how some development initiatives

were much tuned with the socio-economic/political fabric of the society that made them successful in

some economic sectors and yielded them less or not successful in some others.

In general, universal concepts and generic methodology practices could be transferred from a certain

context to another, however may be yielding into completely different practices on ground in that

other context. As what has been recorded to be successfully efficient and of high productivity in a

certain context doesn’t necessarily prove the same in another context.

It’s worth noting that there is a generic trap in copying systems from one context to another in the

macro scale of strategy and policy development. Apart from differences in contexts mentioned before;

to even start by selecting a certain successfully-implemented governmental macro-scale program to

copy, it’s really very difficult to report that this program did pass its true KPIs set before launching it,

or even report the exact enhancements and value improvements it brought to the socio-economic

fabric of the society. The exact causality to an even existing improvement is generally uncertain,

whether it’s due to availability and efficient use of resources, competency and talented skill set of the

human-factor of implementation, efficient organizational structure and procedures of control and

communication, having an elaborately defined project with complete risk mitigation strategies and

tactics that are well-defined and exactly followed, or any other parameter affecting project success in

general. Majority of governmental programs do not report their exact added-value to their

beneficiaries and hence the society after implementation. Reporting numbers of beneficiaries and

amounts of invested resources doesn’t necessarily mean that the value-added really exists or matches

such invested resources that if could have been invested in another program might have achieved

greater success on ground.

The political context plays a major role in how development programs are presented and reported,

and it’s often that program managers care about reporting their personal success in managing the

program and meeting its delivery requirements within its time frame and assigned budget rather than

the exact amount of added value of such deliverables to the program beneficiaries, that is really

practically difficult to measure in most cases. Also the human factor is a major contributor to the

success or failure rate of any real program implementation on the individual competency and skill set

level as well as on the teamwork level.

This shows the importance and necessity of following a context-aware way of strategic planning and

thinking when it comes to the formulation of an industry development policy. On the contrary

applying context-neutral development programs may fail to effectively enhance the total factors of

economic production specific to a certain context if not carefully tuned to it.

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5.2 A FRAMEWORK FOR INDUSTRY POLICY DEVELOPMENT

The framework proposed in [1 & 2] is a model of context-aware strategic thinking model for industry

policy development. The authors in [2] have analyzed the industrial policy of Emilia-Romagna region in

Italy, which is considered a model of diffused industrialization and flexible specialization, and where

industrial development is intimately linked to the civil society and social norms and values. They

showed that the relatively good performance of the Emilia-Romagna region in terms of economic and

social development can be attributed to a large extent to the industrial policies that have been

implemented since the 1980s, which represent a model for their proposed framework that’s much

more needed after the recent crisis. These policies were proactive, in that they have tried to

anticipate change in industry and favor industrial structure

adaptation to provide the appropriate gears towards

sustainable development paths. And also they were

participative, in that the policy was defined and

implemented through discussion and consensus with all

relevant stakeholders, primarily firms, but also with other

regional public entities such as towns and provinces. This

model of stakeholder engagement is also characterized in

the literature also as a quadruple helix model, as an

evolution from the triple-helix one, that capitalized only

on public-private-university relations without the civil

society engagement.

Following is a description of this framework, as successfully applied by Emilia-Romagna Region [2].

The Sundial Model

Figure 29: The Sundial Model of Industrial Policy Development (Showing the Four Levers of Industrial Development)

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The authors in [1&2] state that both provisions and entitlements are determinants of development.

They determine the available resources and the capabilities of individuals to use these resources in

order to create value. Countries have different trajectories of industrial development according to

their set of provisions and entitlements. Historically this has been explained through classical theories

like the Ricardian model through comparative advantage of nations due to differences in labor

productivity, then adapted by Heckscher-Ohlin model through differences in the total factors of

production (labor, labor skills, physical capital and land), and finally elaborated in more detail by Paul

Krugman new firm-based theory highlighting increased return to scale, consumer appreciation of

diversity, and thus explaining intra-industry trade [46].

A territory social structure, economic organization and institutional governance determine the

development of certain competencies at regional level that lead to specific task specialization. This

task specialization primarily arises territorially or regionally because it is the level at which certain

types of knowledge relations arise more easily and densely, and some resources are deeply rooted. An

important consideration regarding task specialization is locating precisely within a territory where the

competence is embedded.

A territory may specialize in specific tasks because the competencies underlying these tasks are held

and controlled by regional firms. These firms in this case determine the specialization of the territory.

Hence the development of this territory must then consider this local specialization competency and

could depend on the firm strategic decisions.

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In this context, territories should not be considered as simple administrative units but as places

where values and distinctive competencies and skills can be intensified, due to being territorially

defined through social aggregations with economic and political structures. The regional

administrative level is more appropriate to identify possible synergies and possible competencies to

develop locally, because of its better knowledge of both local actors and local knowledge. So this

implies that regional development policies must exist to complement and synergize with national

development ones, that should still provide resources, promote task specialization at the regional

level, and favor interregional exchanges and synergies when different regions are specializing in

complementary competencies. Coordination between regional and national development policies is

critical to success.

Therefore, it is increasingly important for regions to be able to favor synergies at local level so that

task specialization can occur – usually through the support of buildup of industrial clusters – and be

able to adapt to changing circumstances, however at the same time to develop their capacity to create

relations elsewhere in the world, so that the local industry can become part of the global value chains.

The Industrial policy in this model highlights that policies require adequate politics and coherent

policies. The design of an industrial policy requires identification of industries’ current and future

trends, and foresight of emerging technologies with their possible disruptive or advantageous

applications to existing industries generating possible scenarios, which policy-makers have to choose

from. The question for policy is to identify a possible development path on the basis of the current

situation of the regional system and its historical evolution, which identifies its distinctive

competencies, the current resources and entitlements and the desirable new developments. “The

past sets the possibilities, while the present controls what possibility is to be explored”.

Since the industrial policy choice is very political, it’s necessary that all stakeholders are involved in

order to share and gain access to critical knowledge as well as achieve consensus that indicates that

implementation will be more precisely followed.

The economic system is complex, thus industrial development is determined by complex

interdependencies and processes, which imply the abandonment of methodological individualism in

not considering the overall system of which industrial development is a part.

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HOW THE SUNDIAL MODEL OPERATES

The overall area defined by the four elements in Figure 29 can be divided into four quadrants

showing different focuses of policies as the sundial arm representing the policy focus, which

is graphed as an axis in the 3rd

dimension.

The IOP Area: (Innovation-Provisions)

This is the area of traditional

Industrial/Innovation Policies, consisting

in measure to develop resources such as

infrastructure, financing for firms,…etc,

and measure to promote innovation.

The IOE Area: (Innovation- Entitlements)

Entitlements are a key element of not

only social policies, but also Human

Capital Policies in the sense of training

and education. Providing the population

with the relevant skill development is

essential to industrial and economic

development.

The TOE Area: (Territory- Entitlements)

Is the area of Social Policies since people

are primarily part of territorial

communities and their social well-being

is intimately linked to it..

The TOP Area: (Territory- Provisions)

This is the area of Territorial

/Environmental Policies as it links the

territorial dimension with resources

necessary to perform economic activities.

For sustainable development this has to

consider the environment perspective.

If the axis leans towards the provision pole, away from entitlements, the risk is to reach what

can be called a “Chinese Syndrome”, which is growth of provisions without entitlements,

hence growth that is unsustainable from a social point of view because economic growth is

not supported by redistributive and participative justice. In contrast, if the axis is shifted

towards entitlements, without simultaneously developing provisions, we have a high social

demand that cannot be easily fulfilled given the lack of resources. If the axis is pushed greatly

towards innovation, the risk is that of a non-embedded change, while pushing excessively

towards the territory risks leading to conservation without the ability to manage change.

The sundial therefore expresses the necessity of coherence between the different levers. It’s

not necessary for all countries to be perfectly in equilibrium, but if the axis leans towards one

pole or another it can indicate necessary policy adjustments and possible actions for policy

makers so that long-term vision and , consequently, implemented instruments become more

coherent and effective.

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In summary:

Development depends on both the extension of the four pillar elements (Innovation,

Entitlements, Provisions, and Territory), and on the coherence between instruments that the

state, at different levels (Regional, National and super-national – when applicable),

implements to develop and coordinate the four key elements. The sundial therefore

represents a holistic approach to industrial policy, trying to understand the mechanics of the

whole in which industry is a component part in order to favor sustainable development, that

is, Industrial development that is compatible with social development and equity as well as

environmental preservation for future generations.

5.3 INDUSTRY POLICY DEVELOPMENT RECOMMENDATIONS FOR EGYPT

This holistic model for industrial development implies generic recommendations for Egypt should this

model be adopted and applied by decision policy makers. Following are some basic recommendations

then specific ones to the innovation dimension are detailed:

Synergy of Regional and National Policy Development:

o It’s critical for achieving sustainable development that a mix of influential, resourceful,

and competent development policies are carried out on both the national and

regional levels. National central orientation in policy development cannot tune itself

to the unique territorial knowledge of the existing local condition of the four pillars of

development and what is the best policy to deploy based on this on-ground

knowledge.

o Egypt needs to empower regional administrative levels, which by nature are more

appropriate to identify possible synergies and possible competencies to develop

locally. The policies they develop at their regional levels should complement and

synergize with the national ones.

o The national development policies should still provide resources, promote task

specialization at the regional level, and favor interregional exchanges and synergies

when different regions are specializing in complementary competencies.

o Coordination between regional and national development policies is critical to

success. Such coordination between different regional complementary competencies

is missing in the latest ICT strategy of Egypt 2012-2017 [47], which is a very elaborate

industry development strategy document, however it’s still considered as a national

one, with no coordination with regional competencies and developmental needs.

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Strategic Development Plans for Cities

o The Egyptian law identifies five types of local administrative levels in the Egyptian

government: Governorates, Cities, Markaz “kisms”, Hai, and Villages “Shieakhah”;

each one of which has its own legal personality [48]. Egypt is missing strategic

planning efforts done at each of these levels by their corresponding administrative

officials. As governorates represent the regional dimension for Egypt as discussed

before, cities must have strategic plans as well that highlight local challenges and

competencies, focus areas, development strategies, visions, and procedures for

implementation and performance evaluation. These local strategic development plans

complement with both national and regional ones. Some great examples are shown in

[49, 50, 51] for strategic plan for Barcelona, Manchester, and Stockholm cities.

o In [52, 53] the process for public administration strategic planning is fully detailed,

incorporating full external and internal analysis, SWOT analysis, and stakeholder

analysis, defining strategic issues in a participative model to reach the general

development plan. [54] Represents a sample application of this strategic planning

process – as orchestrated by the author in a group exercise – for a sample city model.

The Super-National Development Policy Dimension

o So far only national and regional policy development and resources dimensions were

discussed. The super-national dimension is clear in the case of Italy as coming from

the numerous values of the EU integration process with access to a variety of

development funding initiatives and policy regulations as in Figure 14. However, for

Egypt, the various existing economic treaties and political bodies between Egypt and

the Arab nations in North Africa or in Asia are ineffective to really influence local

development activities in a relative comparison to the EU ones.

o Facing globalization, economies of scale, and competition from emerging economies

like the BRICs, the model of economic integration followed by the EU seems a survival

option to be followed by the Arab Nations that are still mostly characterized by infant

industries, and market inefficiencies.

o This is a political effort that Egypt is entitled to lead for a true establishment of a free

trade area and a customs union, where free movement of goods, services is

guaranteed as well as of productive factors (people, and capital).

o The extent of resources, knowledge, and market expansion is very critical to gain

global competiveness to this region. And according to [56], the region is compatible

with the optimal currency theory, which entitles it to establish a common monetary

union and be ready for a political one.

The following part details further policy development recommendations that are related to the

dimension of the innovation/industrial policy.

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Empowering the VC industry

o Armour and Douglas present in [56], an interesting question related to our context-

aware development central idea. The questions is: “Must policymakers seeking to

replicate the success of Silicon Valley’s venture capital market first copy other US

institutions, such as deep and liquid stock markets? Or can legislative reforms alone

make a significant difference?” The results of their extensive research to answer this

question showed that:

Liberal bankruptcy laws stimulate entrepreneurial demand for venture capital;

Government VC programs more often hinder than help the development of

private equity industry, and crowd out private investments in VC,

The legal environment matters as much as the strength of stock markets.

o The empirical results show that economic factors are important determinants of

venture capital investment, and not only the existence of deep and liquid stock

markets.

o If such economic factors still need time to be fixed and adjusted, the public authorities

and policy makers are required to quickly intervene to pave the legal environment

that would effectively stimulate supply and demand sides of VC, which are;

Demand-Side of VC

- Easing legal restrictions on foreign investments

- Freedom of private economic initiative

- Dismantling of legal monopolies

- Protection against unfair competition and natural monopolies

Supply-Side of VC

- A liberal personal bankruptcy law that should make it easier for

entrepreneurs to emerge from bankruptcy proceedings and start new

businesses.

- Availability of a limited liability company within the domestic

corporate law

- legal measures that are conducive to the development of liquid stock

markets, such as disclosure laws, minority shareholder protection,

and anti-director rights.

o The Government should not directly invest in entrepreneurial firms but rather provide

capital to privately-owned VC funds so that only the latter would invest in portfolio

companies. Analysis of this point is provided in [57]

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Demand-Side Innovation Policy (Empowering the use of ICT Technology as an

Assistive Technology)

o There are two views of ICT technology development; either focusing on acquiring

specific competencies to develop the ICT technology itself in different areas like: cloud

computing, telecommunication systems, pervasive systems, ..etc, or to use existing

ICT technologies to offer innovative solutions for other economic and social sectors

like: ICT for health, ICT for agriculture, ICT for public administration, ..etc. The first

approach may take time to produce real globally competitive innovations and requires

a lot of investments, while the latter one brings immediate business opportunities and

extended market relations to existing firms and helps generate new ones and requires

a lot of coordination.

o Both views are important, however it’s recommended for Egypt to give more focus

and attention to the latter one.

o Lepida (www.lepida.it) experience in Emilia-Romagna has been very successful to gear

the local developmental needs and challenges to be empowered by local innovative

ICT solutions, creating for themselves best practices for innovative ICT solutions for

public administration, for example, that they are now consulting other countries on

how to do the same for themselves.

o So basically, the government, given the huge Egyptian market, should help local ICT

firms to provide innovative solutions to many developmental challenges faced by

various economic sectors next to public administration. ICT export policy focus should

come after in priority.

o The concern of this point is that it’s not always a question of how to develop the ICT

sector from a supply-side perspective only, but rather of how to coordinate between

various economic developments sectors such that the ICT sector can flourish, which is

basically a local demand-side development for ICT.

o This recommendation is much backed up by the OECD report on demand-side

innovation policies 2011 [58], that stated that; “The Demand-side innovation policies

have been receiving increasing interest from a number of OECD countries in recent

years in the context of slow growth and lagging productivity performance. Pressures

on fiscal budgets in the aftermath of the financial crisis have also motivated

governments to seek ways to boost innovation without necessarily engaging in new

program spending, primarily to meet social demands in areas such as health, energy

or the environment”. Both the OECD report as well as the PRO-INNO Europe

Trendchart report on demand-side innovation policies listed many such policies in

different EU Member States [59]

Egypt Cohesion policy

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o Much like the EU Cohesion policy Egypt needs to deploy a local one to focus solely on

solving problems of considerable territorial disparities and inequalities. The policy

should be geared towards providing resources and incentives to help regions, of lower

developed state, be more competitive, fostering economic growth and creating new

jobs, by unlocking the innovation potential of Egyptians outside the current few big

cities and lower the disparity and inequality among governorates.

o The PPP model of engagement and coordination between public and private actors

could be very useful to optimize resource utilization and capitalize on local economic

capacities, while at the same time make use of the various EU development

cooperation instruments available to Egypt outlined in this research.

5.4 CONCLUSION The Sundial Model of Industrial Policy Development represents a form of a context-aware

strategic thinking methodology that is derived from the successful top innovation

performance of Emilia Romagna region in Italy across all Europe. Although the global

competiveness of Italy in ICT is not high, yet the industrial as well as the government public

administration sectors have benefited much from the ICT technology as a support technology

offering innovative solutions that answer critical local challenges faced by these sectors,

yielding a mature globally competitive industrials sectors that are best tuned to the region

local talents, supporting clusters and culture.

The economic system is complex, thus industrial development is determined by complex

interdependencies and processes, which imply the abandonment of methodological

individualism in not considering the overall system of which industrial development is a part.

In this regard, Industrial development should be compatible with social development and

equity as well as environmental preservation for future generations.

The outlined industry development recommendations for Egypt are based on application of

this model, and should be grouped with the set of development cooperation instruments

available for Egypt, which are detailed in this research, that could be of a significant support to

Egypt’s development initiatives across all sectors.

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1. Philip Cooke, Mario Davide Parrilli, and Jose Luis Curbelo, “Innovation, Global Change and Territorial

Resilience”, Chapter 13 on: “Conceptualizations, relationships and trends between innovation,

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Elgar Publishing Limited , 2012.

2. Bianchi P., Labory S, “Industrial Policy after the Crisis: the Case of the Emilia-Romagna”, Faculty of

Economics University of Ferrara, Italy.

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content/uploads/2012/11/Italy.pdf

4. CIA fact book, Italy. https://www.cia.gov/library/publications/the-world-factbook/geos/it.html

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16. “Annual Innovation Policy Trends and Appraisal Report - Italy”, European Trend Chart on Innovation, 2006.

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18. Tarek Salah, “Business Incubation”, MSc. Project Report, Nile University, 2009.

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and Innovation.

23. “National Strategic Reference Framework 2007-2013 Italy”.

24. “Cohesion Policy 2007-2013”, National Strategic Reference Framework.

25. Sergio Conti, “EU Policies and Project Fundraising”, Higher Education Course on Governance and

Development of SME in Egypt. Bertinoro, 28th August, 2012.

26. Giovanni Roncucci, “Fund Raising Tools and Credit Access Systems”, Higher Education Course on Governance

and Development of SME in Egypt. Bertinoro, 5th Oct. 2012,

VI. REFERENCES

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27. INVITALIA, Incentive Programmes. Agenzia Nationale per l’attrazione. Degli investimenti e lo sviluppo

d’impresa SpA.

28. EU External Action Website. http://www.eeas.europa.eu/egypt/index_en.htm

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European Neighbourhood Policy”, Bertinoro, 17-18 September 2012.

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31. Online Export Helpdesk Tool. http://exporthelp.europa.eu

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33. European Neighborhood Policy. http://ec.europa.eu/world/enp/index_en.htm

34. EU-Egypt Action Plan. http://trade.ec.europa.eu/doclib/docs/2010/april/tradoc_146097.pdf

35. ENPI Country Strategy Paper for Egypt (2007-2013).

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36. Memorandum of Understanding with the EU on Strategic Partnership on Energy between the European

Union and the Arab Republic of Egypt http://eeas.europa.eu/egypt/docs/mou_energy_eu-egypt_en.pdf

37. Partnership for Democracy and Shared Prosperity with the Southern Mediterranean.

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en.pdf

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release_MEMO-11-636_en.htm?locale=en

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40. The European Instrument for Democracy & Human Rights (EIDHR).

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41. CORDIS: Framework Protocol 7. http://cordis.europa.eu/fp7/home_en.html

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cooperation/egypt/egypt_en.htm

43. Twinning under Europeaid.

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44. SIMEST Brochure. http://www.simest.it/content/pdf/brochures/brochure_inglese_all.pdf

45. “SIMEST Welcomes the Egyptian Delegation", 31st Oct. 2012, Rome.

46. A. Mantovani, “International Trade”, Higher Education Course on Governance and Development of SME in

Egypt. Bertinoro, October, 2012.

47. ICT Strategy Egypt 2012-2017.

http://www.mcit.gov.eg/Publication/Publication_Summary/660/ICT_Strategy_2012-2017

48. “ARAB REPUBLIC OF EGYPT Public Administration Country Profile”, DESA, UN, 2004.

49. “Barcelona Vision 2020 – A Strategic Proposal”, Barcelona, 2 Nov. 2010

50. “A strategic plan for Manchester city centre 2009-2012”, Manchester City Council

51. “THE WALKABLE CITY - Stockholm City Plan”, adopted by Stockholm City Council on 15 March 2010.

52. Luca Mazzara, “From Strategic Planning to the Social Reporting in the municipalities: A way to drive the

economic and social development”, Higher Education Course on Governance and Development of SME in

Egypt. Bertinoro, Sep-Nov, 2012.

53. Luca Mazzara, Ursula Guidi, “Strategic Planning Working Sheets”, Higher Education Course on Governance

and Development of SME in Egypt. Bertinoro, Sep-Nov, 2012.

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54. Tarek Salah, et al. “GARDINEA-The Hub City Group Report”, Group project report to the Public

Administration track of the Higher Education Course on Governance and Development of SME in Egypt.

Bertinoro, Nov. 2012.

55. Luigi Marattin, “International Economics – The European Integration Process”, Nov 3rd

2012. Higher

Education Course on Governance and Development of SME in Egypt. Bertinoro, Nov. 2012.

56. J. Armour and D. Cumming, “The legislative road to Silicon Valley”, Oxford University Press, 2006

57. Alessandro Pomelli, “Equity Financing for SMEs: Engineering a Venture Capital Market in Egypt”, Higher

Education Course on Governance and Development of SME in Egypt. Bertinoro, 25th

Sep. 2012..

58. “OECD report on Demand-Side Innovation Policies – Highlights”, 2011

59. Paul Cunningham, “Demand-Side Innovation Policies”, Manchester Institute of Innovation Research,

University of Manchester, 2009.

60. Klaus-Dieter Borchardt , “The ABC of European Union law”, Publications Office of the European Union 2010.

61. Invest in Emilia-Romagna Portal. http://www.investinemiliaromagna.it

62. Emilia-Romagna Wikipedia http://en.wikipedia.org/wiki/Emilia-Romagna

63. Invest in Automotive in Emilia-Romagna.

http://www.investinemiliaromagna.it/wcm/investiner_en/pagine/production_chain_sheets/Invest_in_automotive.pdf

64. Invest in Mechanics in Emilia-Romagna.

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65. Invest in Agro-Food in Emilia-Romagna.

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pdf

66. Invest in Fashion in Emilia-Romagna.

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f

67. Invest in Housing in Emilia-Romagna.

http://www.investinemiliaromagna.it/wcm/investiner_en/pagine/production_chain_sheets/Invest_in_housing.pdf

68. Invest in Health-Care in Emilia-Romagna.

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69. Invest in Boating in Emilia-Romagna.

http://www.investinemiliaromagna.it/wcm/investiner_en/pagine/production_chain_sheets/Invest_in_boating_in_Emili

a_Romagna.pdf

70. Emilia-Romagna High Technology Network

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71. Technopoles in Brussels. http://fesr.regione.emilia-romagna.it/news-archivio/towards-europe-2020-emilia-romagna-

technopoles-on-display-in-brussels

72. “The role of networks in Knowledge transfer from public research organisations”, Proton Europe 9° Annual

Conference, September 28-30, 2011 Rome.

73. “Good Practices Emilia-Romanga”, Med-Ked, program

74. Lepida: http://www.lepida.it/la-societa

75. “Educational Research Emilia-Romagna”,

76. “Invitalia –I nvestment opportunities in ICT”, Invitalia.

77. “ICT Trends in Italy”, http://www.globaltrade.net/f/market-research/text/Italy/Computers-

Telecommunications-Internet-ICT-trends-in-Italy.html

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EXHIBIT 1: Contents of the Higher Education Course on: "Governance and Development of SMEs in Egypt"

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EXHIBIT 2: The European Union Structure and Main Institutions

Source: “The ABC of European Union law”, by Klaus-Dieter Borchardt, Publications Office of the European Union 2010 [60]

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EXHIBIT 3: Selected Key Organisations within the Italian National Innovation System

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EXHIBIT 4: The Emilia-Romanga Region NIS Overview

Emilia Romagna (ER) is an administrative Region of Northern Italy, comprising the former regions

of Emilia and Romagna. Emilia-Romagna is one of the richest, most developed regions in Europe, and

it has the third highest GDP per capita in Italy. Bologna, its capital, has one of Italy's highest quality of

life indices and advanced social services. Emilia-Romagna is also a cultural and tourist center, being

the home of Bologna University, one of the first universities in the world. According to Eurostat data,

Emilia-Romagna is among the most prosperous regions in Europe. In 2007 Istat calculated the regional

GNP at around 135 billion euro, approximately 9% of the national total. To ensure regional prosperity,

there is a productive fabric with over 400 thousand businesses, mostly small to medium size.

Competition levels of the network of micro-businesses, often located in industrial districts, crucial to

the entire system, remain excellent with respect to the rest of Italy [61, 62]

Source [61]

Emilia-Romagna is a region where enterprise culture is at home. So much so that every day new

businesses join the ranks of the existing 400,000+ companies in the region. They are attracted by a

mixture of factors which make this region unique: the services, the entrepreneurs, quality of life, in

terms of which Emilia-Romagna is one of the top places in the world thanks to a far-reaching welfare

system and a uniquely Italian art of living, and an entrepreneurial tradition which has combined

experience in traditional industries with the judicious use of new technologies and the creation of

specialized research and technological transfer centers located throughout the territory [61].

http://www.regione.emilia-romagna.it/

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Industrial Clusters of Emilia-Romagna and Main Competitive Sectors

The productive economic system of Emilia-Romagna features activities in numerous industrial

districts. Their businesses have contributed to the socio-economic development of the region in terms

of widespread wealth and employment and the ability to compete on an international level,

generating a considerable opening on an international scale. Emilia-Romagna now boasts strong

industrial specialization throughout the production chain, in many cases located in specific areas

also overlapping between one province and another. Some of these companies are now present

across the entire region, with activities decentralized also on a national and international level, but

which still keep their centre of gravity in the areas of high concentration of Emilia-Romagna which

found their excellence on a system of knowledge based on local expertise [61].

The region is still a model today of diffused industrialization and flexible specialization, and discussed

in the literature on regional innovation and regional development, as a knowledge-based society and

economy [2].

Territorial Specializations by manufacturing industry sector in Emilia-Romagna [61]

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leading Sectors with international competence in ER [61]

The Automotive Cluster has made Emilia-Romagna world

famous and also known as the “Motor Valley”. Alongside the

renowned brands from the region which have achieved the highest accolades internationally on a

sporting level, the highest levels when it comes to quality and luxury, there is also a widespread

system of suppliers who are capable of creating great synergies and collaboration amongst

themselves. Starting with a strong cultural tradition and investment in innovation, the region has

developed an outstanding, highly productive and profitable cluster which stems from the even more

widely diffused mechanical cluster in our region [63].

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The Automotive Cluster has 7,350

local units with 85,315 employees and

had a level of 15.6 billion Euros of

exports in 2008.

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The Mechanical Cluster in Emilia-Romagna is known not

only as a leader on an international level, but also presents a

cluster which is highly competitive and subdivided into a number of sectors and sub-sectors, noted for

their globally important “prototypes” and for their numerous small and medium-sized enterprises all

highly specialized and leaders in their respective niches. The most important sectors are: mechanics

and industrial equipment, motor industry, agricultural machinery, hydraulics and precision machining.

A collection of highly specialized technical skills that together make up and attract a great deal of

interest to our region [64].

The Mechanics Cluster has 330,678 local units with 60,901 employees and had a level of 27.4

billion Euros of exports in 2008.

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The Agro-Food Cluster in Emilia-Romagna is known as a

leader on an international level not only for combining

tradition and innovation but also for achieving high standards of food quality and safety. Companies in

our region are competitive both in vegetable and animal production. They are skilled and efficient at

processing and preserving these products; as well as in cross sectors such as agricultural mechanics

and food packaging.

The Agro-Food Cluster has 28,219 local units with 180,522 employees and had a level of 4.8

billion Euros of exports in 2010.

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The Fashion Cluster in Emilia-Romagna has a significant

presence in the regional economy. Its real

competitiveness is based on quality and design, local specialization, big brands and the ability

of its products to have an impact on an international level.

Investors in the fashion industry in Emilia-Romagn count on the support and availability of

specialized human resources, innovation centres and local suppliers of services and products

which are all part of the system [66].

The Fashion Cluster has 26,602 local units with 93,796 employees and had a level of 4.36

billion Euros of exports in 2010.

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The Housing Cluster has a significant presence in the

regional economy and includes the productive sectors,

which carry out the designing, construction and furnishing of building, and also includes the

production of highly technological machinery necessary for such business activities and

related services. Investors in housing count on a network of suppliers of quality products and

services, which are used to being part of a network of centers working specifically on

innovation and internationally known trade fairs and specialized human resources.

The regional ceramic sector is considered a leader not only on a national level but

internationally too [67].

The Housing Cluster has 92,159 local units with 294,561 employees and had a level of 4.6

billion Euros of exports in 2006.

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The Health-Care Cluster is made of specialized

sectors and its real competitiveness is based on

high quality products and services. Better still given that the number of people employed in

this cluster in lower than the other productive clusters. Research also has a highly strategic

and important value, especially in the life science sectors, and the network that connects

companies, laboratories, universities and public services contribute towards creating an

excellent base for investment.

Health also reflects quality of life; hospitals and clinics in this region are leaders in their fields

and renowned for their high quality of service [68].

The Health-Care Cluster has 4,001 local units with 21,427 employees and had a level of 1.5

billion Euros of exports in 2008.

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The Boating Cluster in Emilia-Romagna originates in the late

1950s, which led to the production of sporting boats in addition

to the already established tradition for fishing boats. The cluster, which focuses on innovation

and design has grown notably and specializes in particular on leisure boats. A highly

competitive supply system for related components and services has sprung around the boat

and shupyards in the region. Actually, the Italian pleasure boat industry is the largest in the

EU and the second largest worldwide after the United States. In 2007, boat production saw an

11.4% increase, with estimated sales of $4.5 billion [69].

The Boating Cluster has 230 local units with 2,574 employees and had a level of 386 Million

Euros of exports in 2008.

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Research and Innovation in Emilia-Romagna

The Region’s level of innovation ranks among the highest in Italy and Europe. With its universities and

research centers, Emilia-Romagna generates almost 17% of Italian invention patents, the second

highest datum at national level. Regional incentives and transfer centers ensure a healthy transfer of

innovations and technology from the world of research to the world of business. Innovation

permeates sectors at the heart of Emilia-Romagna’s industrial activity, such as mechanical

engineering, and the world of research, which is investing in areas affecting the quality of future life,

such as health and the environment [61].

Emilia-Romagna is one of Europe’s top regions for research. The public sector alone employs 8,000

researchers, which represents 8.1% of the national total. The National Research Centre (CNR) has a

large number of branches in the region: no less than 13 institutes. The national agency for energy and

the environment (ENEA) also has a significant presence in the region, with the highest concentration

of research laboratories together with Lazio. Universities also make a major contribution to the

research system: almost 6,400 university lecturers and researchers works in a technical/scientific

field. There is also a network of centers focusing on specific sectors, usually connected with the

region’s most established industries, such as agro-food, mechanical engineering, textiles and ceramics.

The High Technology Network and Techno-poles

The Emilia-Romagna Regional Government, in recent years, has developed a strategy for the

improvement and promotion of innovation in local productive system, through the Regional Program

for Industrial Research, Innovation and Technology Transfer (PRRIITT). In this context it was created

the High Technology Network of Emilia-Romagna [70].

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Source [71]

The Network joints together and coordinates activities of industrial research carried out by a set of

"organizations", mostly public: industrial research Laboratories and Innovation Centers. This set of

structures is organized into thematic platforms, designed to [71]:

To meet the demand for business research in strategic areas.

To identify technological scenarios and requirements not yet noticed by enterprises.

To encourage enterprises towards the transition from incremental research to innovation.

To compete at international level and to become a benchmark for industrial research.

The Techno-poles are characterized by an integrated and coordinated offer of innovation services for

enterprises, research structures or centers and companies of the Emilia-Romagna region. The overall

objective is to reduce the gap between demand and supply of research, simplifying connections and

relationships and supporting collaborations. In general working autonomously on:

Industrial research and technological development Technology transfer Business Creation Communication and Promotion

There are 22 structures equipped for research, innovation and technological transfer: 14 laboratories

and 8 innovation centers, the fruit of a recent merger of numerous previously existing entities that

aim for greater functionality and efficiency [61].

Their work focuses chiefly on Emilia-Romagna’s traditional sectors, such as high-technology

mechanical engineering, agribusiness and construction, but also on fields that have emerged in recent

years and are now increasingly important, such as environment, life sciences and information

technology. The thematic platforms are shown below as well as their techno-pole association.

Source [72]

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Thematic Platforms of the Techno-Poles

Thematic Platforms Association to Techno-Poles

Technological transfer in Emilia-Romagna is also supported by Aster, www.aster.it a consortium

comprising the Regional Administration, the universities, the research centers (ENEA and CNR),

Unioncamere and the main business associations: it acts as an agency for technological transfer, with

the task of bringing the various parties involved in the system of innovation into contact with each

other, with particular reference to research centers on the one hand, and businesses (especially small

and medium enterprises) on the other.

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Some Best Practices Innovation Support Programs in Emilia-Romagna [73]

WE TECH OFF www.wetechoff.eu

WE TECH OFF is an incubation program co‐funded by the Italian Ministry of Economic

Development and managed by Aster, the consortium ‐ set up by Emilia Romagna region, the

regional Chambers of Commerce, Universities and research centers operating in Emilia

Romagna ‐ which promotes industrial research and technology transfer for regional

development. WE TECH OFF is directed to all sectors which use innovative technology. It

provides single persons or stock companies located in Emilia Romagna with support

services, covering the pre‐incubation, incubation and post-incubation phases. Aiming at the

creation of a “virtuous spiral” between research and business. The project involves public institutions, research

centers, entrepreneurs and support service providers, in order to support beneficiaries in exploiting research

results and acquiring useful competences to establish new businesses. Since September 2008, the program

launched 4 calls to access pre‐incubation and incubation services, receiving about 180 proposals, 90 of which have

been selected. WE TECH OFF has been already selected as best practice in several EU projects (as ENTREDI,

cofounded by the Interreg IV C program) and in 2011 was awarded as best Italian initiative to compete for the

European Enterprise Award 2011.

INNOVAMI www.innovami.it

INNOVAMI is an incubation project for research based start‐ups developing new

technologies or knowledge intensive services. It is managed by Con.Ami, a

consortium made up of 23 municipalities of Emilia‐Romagna to run/handle local

development. It operates mainly in Imola and surrounding areas, but aims at

sustaining the establishment of knowledge based businesses in the whole region. In

fact, the incubator cooperates with other initiatives aiming at strengthening the entrepreneurial idea ‐ such as

Spinner and WE TECH OFF ‐ and capitalizes on the results of previous business plan competitions such as Start

Cup‐Imola, which are suitable tools for marketing the business idea and attract investors. The main objective of

Innovami consists in sustaining smooth and fast innovation processes. It tries to tackle the lack of suitable services

to put research results into practise, so it covers not only the incubation path, but also prototyping and testing

phases, in order to mitigate low‐risk propension. The incubator supplies specialized services in a flexible way, also

through the reduction of real costs, and promotes relations for the development of products/services and access to

the market. Innovami pays particular attention to IPR protection, one of the main tools for developing economic

and entrepreneurial tissues, organizing workshops and providing monitoring services to complete the rendering of

services supplied.

INNOVADAY www.innovaday.it

In previous years, the project, run by DemocenterSipe and the

Center for Technology Transfer of the Modena Province, was

configured/conceived as a single event, but it has evolved into a

complete start‐up program: in 2011 it is at its third edition. INNOVADAY aims at meeting the specific needs of

high‐tech start‐ups, providing high profile consulting and organizing thematic workshops as well as business

meetings. It acts as a process composed by various phases: training, business acceleration actions and business

matching events are core activities. The training courses provide competences for business plan improvement, IPR

protection and public presentation techniques, which are basic skills to acquire for potential entrepreneurs,

especially those who have scientific competencies. The business matching events organized are also particularly

relevant for innovative spin‐off and start‐ups, because entrepreneurs can establish relations with financial backers

and increase their knowledge about easy loans and other financial instruments. In short, the project contributes to

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establish the knowledge based economy, supporting the creation of a network among the business world,

service providers and the research world, especially in the high‐tech sector, which results in many benefits for the

regional development in terms of conversion of knowledge in resources.

SPINNER 2013 www.spinner.it

SPINNER 2013 Global Grant is the consortium/program devoted to create a

knowledge community in Emilia Romagna. SPINNER is an innovative tool for

managing the fulfillment of European Social Fund Regional Operational Programs.

In 2000, the regional public authorities set up a consortium which is responsible for

promoting specific intervention policies and acts as an intermediate body. In order to contribute to the regional

development, Spinner aims at human capital qualification and promotion of industrial research projects, provides

researchers and graduates with funding opportunities, supports the definition of business ideas and research

projects, offers specialized consulting and organizes conferences and seminars. The program operates within the

framework of regional competitiveness and employment objectives ‐ sustaining in particular persons unemployed ‐

and pays attention to women involvement in the research world, thus complying with the equality of opportunity

principle. Companies, Universities and research centers are involved in the project, with the final objective of

creating a community acting as a meeting point for people, enterprises and institutions interested in innovation

and industrial research topics, as well as persuaded of human capital importance for the regional development.

CREATER www.creativegrowth.eu

CREATER is a pilot action which arises from “Creative Growth” project, cofounded by the

Interreg IV C program and run by Aster and Spanish, Scottish and Scandinavian partners.

The initiative is devoted to the rendering of specific support services for creative

industry, starting from the experience acquired with the We Tech Off incubation

program, fitting Europe 2020 strategy and promoting the establishment of knowledge

based entrepreneurship as well as people‐driven innovation. Creative people need to

acquire entrepreneurial skills, to attract investment to develop ideas and bring them to the market. Moreover,

creative entrepreneurs often find it hard to gain financial backing because investors are often reluctant to get

involved in such high‐risk sectors, where business potentials are difficult to evaluate. The project faces these

challenges, involving different European partners specialized in supporting creative enterprises, in order to

establish a long‐term “creative network”.

EMILIAROMAGNA STARTUP www.emiliaromagnastartup.it

Since 2000, the Emilia‐Romagna Region developed

several tools and initiatives supporting the creation of

technological and/or innovative enterprises. The process

of development of these tools has been a “spontaneous”

phenomenon: regional operators, even though

intervening on different targets, cooperated informally ‐ thus offering high level, but not‐integrated services. The

EmiliaRomagna Start Up initiative aims at meeting this lack, offering an integrated system of actors providing high

quality, targeted and effective services to people who wish to start or improve an innovative business. The project

arose from an activity realized within the ENTREDI project (project cofounded by the Interreg IVC Program)

targeted at identifying all regional actors supporting entrepreneurship in its various features, following an holistic

approach to boost entrepreneurship. Starting from that mapping exercise, ASTER submitted to the Emilia‐Romagna

regional authority a project proposal focused only on new innovative entrepreneurship support, aimed at gathering

all actors active in the region, creating synergies and boosting visibility of the regional start‐up community.

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Digital Infrastructure Overview

ADSL for the Entire Region

Following the Regional ICT Plan, Emilia-Romagna is state-of-the-art with respect to other Italian and European regions for broadband services. Lepida, the digital telematic network, ensures the availability of broad-band for the entire region, from the Adriatic to the Apennines. This will put a definitive end to the digital divide, which is already below the European average. This is borne out by recent start-ups of dynamic young businesses, which are bringing people back to mountainous areas, from which only a few years ago there was an outflow of people in search of work [61, 73].

Public Administration and Online Services

The presence of digital infrastructures in the region guarantees citizens and businesses with increasing efficiency of Public Administration, which already exploits the benefits of the Internet to the full: the public institutions of Emilia-Romagna have a rate of presence online far higher than the Italian average and are at the leading edge in Europe for the supply of interactive services. High speed web is a facility in most municipalities of Emilia-Romagna (87.7%), which make use of a wide ranged of evolved tools for document management and digital signatures.

Connectivity of Businesses

From a point of view of businesses and private subjects, nearly 80% is reached by an xDSL service, an achievement that places the region among the top in Europe. Services such as tax payments or business registrations are now possible online for the Emilia-Romagna companies. Many also provide their clients with a purchasing service on the Internet: 66% of businesses have their own web site (source: Istat 2007).

LEPIDA

Lepida SpA is the culmination of a process that began in early 2000, with the design and construction of a

broadband network (the network Lepida), homogeneous and efficient, able to connect fiber optic locations of Public

administration in the region. The aim was to achieve the availability of an efficient network, modern, quality and

reliability, available at reasonable prices and managed in a unified manner. For the same reason he joined the

project as a whole also Mobile Radio Network Regional multi-service (Erretre). The presence of Lepida SpA, with its

integrated approach to infrastructure development helps in reducing the so-called Digital Divide affects not only

the government, but also citizens and businesses. Lepida focuses on [x15]:

Networks

o The Network Lepida is the network of public administrations established by the Emilia-

Romagna Regional Law n. 11/2004 consists primarily of fiber optic connections and extended

the territory through the Apennine backbone technology radio Hyper-LAN

Services

o Development of innovative services and its integration into the network Lepida.

R&D

o The Research & Development Lepida SpA mainly concern:

Design of new services

Evultion technology support

Education technology specialist

ICT workshops for public administrtaion

Clubs of stakeholdes

Technology scouting

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Lepida, the Broadband Network for Emilia-Romagna’s Public Administrations [61].

Incentives for Research and Innovation in Emilia-Romagna

One of the main objectives of the system of incentives is to support research and innovation activities of the businesses. The regional programs aim to stimulate investment in R&D, promote new high-tech entrepreneurial activities, support the network of industrial research laboratories and stimulate joint programs between research entities and companies.

Investments in Emilia-Romagna receive incentives for [61]: o Finance for R&D projects in companies o Collaborative research amongst SMEs, companies and the research network o Support for spin-offs and start ups of innovative companies o The use of IT in SMEs o Innovative tools for financial management o Favorable credit terms for companies that invest in R&D o Support for training in the innovation field o Support for investment in energy and environmental technology

Funding derives primarily from the European Regional Development Fund’s Regional Operational Program (with 270m euro dedicated to industrial research and technological transfer for the period of 2007 to 2013) and the Regional Program for Industrial Research, Innovation and Technology Transfer (PRRIITT).

The funds allocated so far for investments in research and innovation amount to 244 M Euro with the regional contribution set at 96m euro. Regional legislation has financed the establishment of 529 company research projects, the creation of 26 high-tech companies, the hiring of 930 new researchers for companies, 750 work contracts between businesses, universities and research bodies and 300 new patents.

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The protagonists of the regional program are small and medium enterprises. The sectors that undertake the most research are specialized mechanical engineering (precision engineering, mechatronics, automotive), followed by agribusiness, ceramics, ICT and energy/environment.

The European Social Fund also plays an important role in training-related issues and the Regional Plan for Telematics to support infrastructures and telematics services for business R&D and organizational innovation. Various venture capital funds specializing in innovation such as the Ingenium Fund are also active in the area. The main national incentives include the deduction from tax of private investment in R&D (a 40% allowance for contracts with universities and research centers, 10% for the other investments in R&D) and the Industria 2015 support program.

Educational and Research Policy Brief of Emilia-Romagna

Over the past few years a special attention

has been paid to education economics, i.e.

studies on the impact that investment in

human capital and educational facilities has

on the economic and social system and on

the development of a given country or

context. Knowledge is defined by Nobel

laureate in economics Elinor Ostrom as a key

asset of the community, and today it is

considered to be a strategic element for

individuals and for the community. To

profitably invest in knowledge, supporting

growth processes based on participation

rights, it is necessary to identify the skills that

will be needed in the years to come.

Starting from this awareness and from an idea of

knowledge as “common good”, the Emilia-Romagna

Region has outlined a strategy for action aimed at

generating conditions in furtherance of a closer

relationship between provision of training and

human capital qualification requirements. The policy

that has been implemented since 2010 covered the

whole area of education and research, from the first

segment under the regional responsibility, aimed at

the acquisition of a vocational qualification, up to

PhD courses [75].

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The result is a new educational infrastructure, established in liaison with social partners, based on

inter-institutional cooperation and integration between training providers and enterprises, subdivided

into four branches:

Education and Vocational Training (EaVT) System,

o Vocational Qualifications

o Vocational Training Providers

o Vocational Schools

Polytechnic Network,

o Higher Technical Institutes

Higher Education, Research and International Mobility (Knowledge Networks),

o Training Vouchers for Higher Education

o Funding Scholarships for PhD on strategic issues

o Research Grants, financial incentives and training support services (Spinner 2013)

Employment and skills (offers opportunities targeting the hiring and retention of qualified

people in the labor market)

o Apprenticeships

o Traineeships

o Continuous Education and Lifelong Learning

The full map of the policy can be found in the graph below with details in [75]

Special Plan for Youth Employment, Continuity of Employment, Promotion of Entrepreneurship

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In 2012, the Emilia-Romagna Region approved a special plan for the access of

young people to the labor market, continuity of employment, support and

promotion of entrepreneurship, in liaison with the whole ER and, in particular,

with the fourth segment on Employment and skills. The idea behind this action,

funded by European, national and regional resources, amounting to € 46

million, is to enhance youth skills to combat unemployment and precarious

work, to support the creation of new businesses, rewarding enterprises

investing in young people and their education [75].

The plan envisages four lines of actions:

Recruitment and retention incentives (20 Million Euro)

Apprenticeship training actions (20 Million Euro)

Pre-integration training actions (3 Million Euro)

Actions in support of entrepreneurship (3 Million Euro)

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EXHIBIT 5: Overview of the ICT Sector in Italy

The ICT sector in Italy is still considered as an emerging economic sector with lower international

competitiveness compared to other competitive economic sectors outlined before. Italy has

capitalized on ICT technology a lot as a support technology to existing internationally competitive

economic sectors. Several innovations in ICT deployment as an assistive technology outperform

innovations in the ICT technology itself as compared with top performers. However, several factors as

outlined below show that the ICT sector is expected to grow more in competitiveness.

Market

Italy is Europe’s fourth largest ICT market, with market value exceeding € 60 billion in 2010.

Telecommunications (TLC) market share is worth € 41.8 billion and the Information Technology (IT)

one is equal to € 18.4 billion [76].

With reference to the Telecommunications sector, Italy is one of the most advanced mobile

communications market in the world. As for the Mobile Phone Penetration, Italy is among the highest

in the world, ranking second in Europe after Germany for overall number of users with over 90 million

active SIM Cards. Clients served number more than 46 million, about three quarters of the total

population.

With a number of 29.2 million Internet users registered in 2009 Italy ranks 3rd in Europe and 13th in

the world.

Broadband access is developing steadily, at a rate of 6,9% in the last year: with 13, 3 million users at

the end of 2010 Italy ranks 4th in Europe. Moreover, in 2010 49% of households are broadband

connected (39% in 2009). xDSL dominates the market and is used in over 97% of cases, while fiber

optics represents only 3% [76].

Italy is the world's sixth largest industrialized economy and the Italian ICT market represents

approximately 9% share of the total European market. The size and importance of the Italian economy

are often not fully appreciated by ICT exporters. The market is far from being mature in many

segments, and the potential for ICT exports to Italy is still significant [77].

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Italy is also Europe’s third largest market for the communications equipment and services industry, as

well as the second largest and most advanced mobile communications market in Western Europe.

Despite its magnitude, the Italian ICT market does still suffer from long-existing structural problems

and is undersized and lags behind in comparison with the other major European countries. The

technology gap is still significant, although ICT penetration is improving.

Broadband access is developing steadily; however, Italy is in urgent need of an ultra high-speed Next

Generation Network (NGN). While the Italian government has committed to NGN investments of $1

billion in the next three years, incumbent operator Telecom Italia SpA, which owns the existing fixed-

line network, is not willing to share control of its key copper and broadband infrastructure with other

operators. The company has announced its own investments for $9.7 billion for network infrastructure

and information technology, plus an additional $8.3 billion by 2016, with the aim of offering ultra

broadband services to 50% of the Italian population by 2018 through a 1OO megabit fiber optic

infrastructure.

On the other hand, Italy's main alternative telecom operators (Fastweb, Wind and the local subsidiary

of Vodafone) have recently presented to the European Union a joint Fiber-to-the-Home (FTTH) project

aimed at boosting the country's broadband infrastructure by replacing the traditional copper network

with a broadband fiber network. The project will involve a total investment of about $3.5 billion

during the first five years and should provide high-speed services to 15 major Italian cities and 10

million people. A second phase calls for an investment of $11.8 billion, which should provide services

to cities with more than 20,000 inhabitants, thus reaching 50% of the Italian population. The project

will also be open to other telecom operators and the three providers have asked the Italian

Government to trigger the process for the creation of a “fiber company.”

With regard to ICT market results, while some signs of recovery have manifested themselves towards

the end of the year and in the first quarter of 2010, trade figures indicate that, overall, 2009 was the

worst year since 1991 for the Italian ICT market. According to ASSINFORM, the major Italian

Association of Information and Communications Technology companies, in 2009 the Italian ICT market

was worth $86 billion, an aggregate decrease of 4.2% in Euro currency over the previous year, with IT

registering an 8.1% decrease, and the telecommunications market a 2.3% decrease.

The Italian Government is committed to modernizing the country through the development of

policies which will accelerate widespread acceptance and use of new information and communication

technologies, both in the public and private sectors. It is also fostering a “new ICT economy” business

culture by offering grants to small and medium size enterprises. Among the most recent programs is

the “Industry 2015” innovation program for the adoption of advanced IT solutions in “Made in Italy”

sectors, which provides grants of $280 million to companies and research centers [77]

Industry

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With reference to the IT industry, Italy ranks 2nd for number of companies after the UK, and ahead of

France and Germany with 97,000 active companies and 390,000 employees.

The major ICT Clusters in Italy are locted in Peimonte, lombardy, and Lazio regions.

Following are some graphs about Italian ICT sector performance from the OECD Information Technology

Outlook report 2010 that give a clearer picture of it.

THE INFORMATION SOCIETY IN THE EU – DIGITAL AGENDA FOR EUROPE

One of the seven flagship initiatives of the Europe 2020 Strategy adopted by the European Commission is the

Digital Agenda for Europe (DAE). Issued in May 2010, it is set out to define the key enabling role that the use of ICT

will have to play if Europe wants to succeed in its ambitions for 2020. The objective of this agenda is to chart a

course to maximize the social and economic potential of ICT and, most particularly, of the Internet, which over two

decades has become a vital medium of economic and societal activity for doing business, working, playing,

communicating and expressing ourselves freely.

The Europe 2020 Strategy underlines the importance of broadband deployment to promote social inclusion and

competitiveness in the EU. [Riela-Telecom_Course]

The DAE sets ambitious broadband targets:

Basic broadband for all by 2013: basic broadband coverage for 100% of EU citizens;

Fast broadband by 2020: broadband coverage at 30 Mbps or more for 100% of EU citizens;

Ultra-fast broadband by 2020: 50% of European households should have subscriptions above 100 Mbps.

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