Building Science, Technology, Building Science, Technology, and Innovationand Innovation

Capacity for DevelopmentCapacity for Development

Alfred WatkinsAlfred Watkins

S&T Program CoordinatorS&T Program Coordinator

HDNEDHDNEDPresentation to STI Thematic GroupPresentation to STI Thematic Group

October 18, 2005October 18, 2005

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Plan of Presentation

• S&T Capacity Building: The International Agenda

• Why Is S&T Capacity Building Important?

• What Do We Mean by S&T Capacity?

• How Do Countries Build S&T Capacity? / What Has the Bank Done to Help?

• The Way Forward: Future Agenda

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S&T Capacity Building:S&T Capacity Building: The International Agenda The International Agenda

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Convergence of Views

• UN MDG Taskforce• Blair Commission• Inter-Academy Council• Many Government leaders (Mauritius, Rwanda,

Tanzania, Mozambique, Kazakhstan, Madagascar, Vietnam)

all agree that S&T capacity building is essential for growth and poverty reduction and that the World Bank must do more, and do it more effectively, to support indigenous S&T capacity building efforts

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Science and technology, including ICT, are vital for the achievement of the development goals …We therefore commit to:…Assist developing countries in their efforts to promote and develop national strategies for human resources and science and technology, which are primary drivers of national capacity building for development…

Draft Communique from UN Summit, September 14, 2005

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The World Bank has only had modest activities in promoting technological innovation in development. The first step would be for the World Bank to integrate technological considerations more fully into their operations.

Blair Commission Report

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World Bank Perspective

• S&T Vision Paper presented to Board

• Wolfensohn

• Wolfowitz

also agree with this assessment of the importance of S&T capacity building

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First of all, I think that sense of assuming responsibility [by developing country governments] is really critical. We often talk about building institutions or building capacity. And my feeling is that sort of suggests you can come in like an outside contractor and bring some bricks and mortar and you construct capacity. It doesn't work that way. You grow it. Its got to be indigenous. It's got to have indigenous roots. You can fertilize it. You can water it. You can rip the weeds out, which I think is part of fighting corruption. Or you can help people do it. But they need to do it themselves.

Paul Wolfowitz on capacity building at his first Town Hall Meeting

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Why Is S&T Capacity Building Why Is S&T Capacity Building Important?Important?

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S&T Seems to be the Answer,

But What are the Questions?• Why is S&T important, even for the poorest countries?• How can S&T help to achieve the MDGs?• How can S&T capacity help to increase wealth,

improve productivity and alleviate poverty?• What do we mean by S&T capacity building?• What is the role of the World Bank in supporting this

capacity building agenda?

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Why is S&T important, even (or especially) for poorest countries?

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6

8

10

12

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1960 1965 1970 1975 1980 1985 1990 1995 2000Thou

sand

s of

con

stan

t 199

5 US

doll

ars

S&T Capacity makes the Difference between Poverty and Wealth...

Rep. of Korea

Ghana

Difference attributed to knowledge

Difference due to physical and human capital

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Critical Lessons

• Investing in S&T capacity is not a luxury for the rich; it is an absolute necessity for poor countries that wish to become richer – there is no choice

• The time to start investing and building capacity is when you are poor

• Countries at different stages of development, and employing different learning strategies, need to invest in different aspects of S&T capacity – plugging in, catching up, innovating: different tasks and challenges for different stages of development

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• Increasing globalization: reduction of transportation & communication costs, increasing global information, increasingly mobile FDI.

• Rapid pace of technological change and innovation: Half life of technology is getting shorter. Keep up or fall behind – these are the only options

• Increasing competition: driven by trade liberalization and increasingly larger players (e.g., China, Korea, India) plus laggards that want to catch up – Vietnam, Mozambique, Rwanda

• Networking and disintegration of production

There is No Choice: “The world is moving fast…with or without you!”

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Typical Value Chain

R&D/Technology Manufacturing/Operations Sales & Marketing

Exp

erti

se

Significant ‘outsourcing’

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Differentiation

Profit Margin

Innovation Advantage Slope

Commodity

Global Brand

Differentiated

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Multi Nationals

First tier Second tier Third tier

Nature of relationship

Close family

Partner

Inter dependency

High trust

Relationship based

Nature of relationship

Cousin

Provider

Dependency

Medium trust

Specification based

Nature of relationship

No ties

Servant

dominated

No trust

Price based

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High Tech Is Not the Only (or Best) Route to Prosperity and

Competitiveness!!

Vietnam

Thailand

Sri Lanka

Philippines

Pakistan

Mexico

Malaysia

Indonesia

IndiaColombia

China

Chile

Brazil

Bangladesh

Argentina

0

15

30

45

60

75

0.00 20.00 40.00 60.00 80.00 100.00

Manufactures exports (% of merchandise exports)

Hig

h-t

echn

olog

y ex

port

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of

man

ufac

ture

d ex

port

s)

What Do We Mean by S&T What Do We Mean by S&T Capacity?Capacity?

Parable of the blind men and the elephant. Parable of the blind men and the elephant. Every perspective is correct,Every perspective is correct,

but each provides only a partial view of realitybut each provides only a partial view of reality

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Five Dimensions of S&T Capacity•National (and local)

government capacity to formulate and

implement coherent S&T programs and

policiesEnterprise capacity to

utilize modern equipment to produce higher value added, globally competitive goods and services

Technologically and scientifically skilled workforce trained to work with modern

equipment and production processes

Import, adapt, and adopt knowledge

produced outside the country – “act locally,

think globally”

Produce new knowledge in

universities and research institutes via

R&D

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Capacity Building Occurs at Different Levels of the Economy

• National policy institutions

• S&T organizations -- -- universities, public and private R&D institutes/technology diffusion institutions

• Enterprises – both users of knowledge and creators of new knowledge

• Labor Force

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S&T Capacity Building: Strategic Policy Options

• Creation of new knowledge vs. import adaptation, diffusion, and adoption of knowledge created elsewhere

• Enhance supply of knowledge vs. stimulate demand for knowledge

• Hardware vs. software

• Horizontal policies vs. vertical policies

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S&T Capacity BuildingNational Policy Making • Fundacion Chile, MOST,

• Technology diffusion institutions

• Technology Foresight

S&T Capacities in Universities and R&D Institutes

• R&D vs. ERC

• Centers of Excellence

Enterprises • In-house research

• Supplier development

• Innovation capacity improvement

Labor Force • Vocational training, secondary ed.

• Skills Development Centers

• Life-long learning

Education Sector • Primary education

• Secondary education

• Higher education

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S&T Capacity Building

Scientific research Technology adoption, adaptation, and diffusion

Supply• MSI Centers of Excellence

• Instrumentation Centers

• Higher Education projects/ESW

• Engineering Research Centers

• Technology Transfer and Diffusion Institutes

Demand

• Tax incentives for in-house research

• Industrial labs

• Grant programs for industrial research

• Modernization of industrial firms

• Agriculture technology projects

• Industrial credit lines

Linkages• Technology consortia

• Mobility schemes• Matching grants

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How Do Countries Build S&T How Do Countries Build S&T Capacity? / What Has the Bank Capacity? / What Has the Bank

Done to Help?Done to Help?

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Linear S&T Capacity Building Model

BasicScience

Applied Research

Marketing ProductionDevelopment

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Acquisition

Assimilation

Improvement

Creation

East Asia Capacity Building Model: A Different Approach

Developing

Country

Newly-Industrializing

Country

Advanced

Country

Imitation internalization generatingS&T & R&D Stages

DevelopmentStages

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Growth of Science and Technology Community in Korea

GERD (US$, Million)GERD (US$, Million)

Gov’t vs. PrivateGov’t vs. Private

R&D / GDPR&D / GDP

Researcher (Persons)Researcher (Persons)

Source: Ministry of Science and Technology* R&D / GNP

4

97 : 3

0.25*

33

71 : 29

0.38*

5,628

428

64 : 36

0.77*

18,434

4,676

19 : 81

1.87

70,503

14,433

26 : 74

2.53

189,888(FTE: 141, 917)

1963196319631963 1970197019701970 1980198019801980 1990199019901990 2002200220022002

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Overseas Patents of KoreaOverseas Patents of Korea

U.S.A. Patent Registration: No Growth in Applications until the Late Development Stage

RankRank 17 11 8 6

1990199019901990 1993199319931993 1995199519951995 1998199819981998

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1999199919991999

NumberNumber 224 765 1,166 3,267 3,568

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2000200020002000

8

2001200120012001

3,331 3,546

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Levels of Innovation

Frontier Innovation

Technology Improvement and Monitoring

Significant Adaptation

Basic Production – use technology

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R&D

Design &Engineering

Technician & CraftSkills & Capabilities

Basic OperatorsSkills and Capabilities

ScienceDevelopmentand Creation

ScienceUse, Operation

and Maintenance

(These all need human capacity.)

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Enterprise Demand for Technology

• Category 1: Demand for existing specifications, equipment, and know-how – new machines

• Category 2: Demand for new designs and systems, generated by engineering and other services, but based on existing technology – new processes

• Category 3: R&D to create new technology – new inventions

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Nine dimensions of Firm Technological Capability

0123

4Awareness

Search

Core competence

Strategy

Assess/selectAcquire

Implement

Learn

Linkages

Best practice model Company x profile

Source: Korea: How Firms Use Knowledge, Part A – Firm Level Innovation in the Korean Economy, World Bank processed, 2002

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Groups of Firms According to Technological Capability

High

Low

Awareness of the need to change Low High

Type 1 Firms ‘ Don ’ t know that they don ’ t know ’

Type 2 Firms ‘ Know they don ’ t know,

but don ’ t know what ’

Type 3 Firms ‘ Know what, but not

always where and how ’

Type 4 Firms High capability and absorptive capacity

Awareness of What and How to Change

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• “Everyone can get the same technology. But that doesn’t mean they can make an advanced product”

“Samsung’s Perspective,” Business Week, June 16, 2003

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Emerging Issue

Need to take an inventory of skill requirements, technology demand, and enterprise capacity and improve all dimensions.

Bank needs to take the lead – encourage countries to think systematically about these issues

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Lessons Learned From World Bank Operations (1)

• Sustained long-term engagement is required to build both S&T capacity and industrial development capability

• Specific investment loans rather than budget support -- hands-on rather than arm’s-length

• Focused (vertical) interventions in specific sectors to help local firms build capacity to absorb and adapt existing technology

• Many projects (e.g. Korean Institute of Electronics Technology) supported institution-building and strengthened institutes that transferred existing knowledge into local economy.

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Lessons Learned From World Bank Operations (2)

• Comparative advantage is created not given -- e.g., salmon in Chile, electronics in Korea and Taiwan.

• World Bank projects and interventions were grounded in each country's own S&T and industrial strategy. PW on capacity building

• Explicit learning strategies (learning-by-doing, learning-by-interacting) in targeted areas are as important as general regulatory framework

• Developing human capital is an essential pre-requisite for S&T capacity building. Nothing else is possible without human capital

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Conclusions and Challenges (1)• Ability to produce new knowledge (R&D) is important, but

ability to absorb and utilize existing knowledge may be even more important at early stages of development – National Systems of Economic Learning and Technology Diffusion. This aspect of capacity building needs to move higher onto the World Bank and international development agenda

• Absorptive capacity of enterprises and labor force must be developed – spillovers (from FDI) aren’t automatic --e.g., enclaves

• S&T capacity building policies should be devised within the context of an overall industrial development strategy – not separately

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Conclusions and Challenges (2)

• Policy options shouldn’t be limited by today’s relative factor prices. Singapore 1965 vs. Singapore today.

• Getting basics right – rule of law, business climate, etc. -- is absolutely necessary but not sufficient

• Goal of universal primary education should be complemented by expanded access to vocational, secondary and tertiary education

• Building one excellent institution vs. competition among existing institutions

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Conclusions and Challenges (3)• A critical challenge is increasing the effective demand for

R&D by developing enterprise capacity to innovate and utilize knowledge

• Tension between expanding the supply of skilled workers and the private sector’s demand for skilled workers – chicken and egg / brain drain vs. skill shortage, Vietnam (supply with limited demand) vs. Thailand or Malaysia (demand with limited supply)

• How firms learn and from whom is a key issue -- also how they innovate. Put this in a slide. competitors, suppliers, PRIs, universities, etc.

• Freer trade and attracting FDI is necessary but not sufficient – spillovers won’t occur without accompanying capacity building efforts

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Conclusions and Challenges (4)• Increased spending on education and/or R&D will not

improve economic performance if there are poor linkages between research institutes and education sector on the one hand and enterprise sector on the other – Russia, Latvia, Vietnam, Bangladesh, etc. Linkages, quality and relevance are critical

• Need for focus and realism – don’t spread resources too thin; develop a few niche areas; today’s comparative advantage vs. tomorrow’s needs; existing strengths vs. new competencies – comparative advantage must be created

• Long term vs. short term – need for political commitment since it takes time (> ten years) for capacity building to affect economic development and poverty

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The Way Forward: Future The Way Forward: Future AgendaAgenda

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Trends in World Bank Lending for S&T Capacity Building

• Between 1980 and 2004, $8.6 billion to S&T activities; $343 million average annual lending for S&T

• 9% of projects over the past 25 years provided some support for S&T– But only 2% of projects principally supported S&T– Annual average = 26 S&T projects:

5 major, 21 minor

• The Agriculture-Rural Development Sector provided more support for S&T than all other sectors combined

• 42 of 75 major non-ag S&T loans went to 7 countries (Korea, China, Brazil, India, Indonesia, Chile, Mexico)

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Capacity building is important and the Capacity building is important and the Bank is being asked to do more, but Bank is being asked to do more, but

the Bank has recently been doing lessthe Bank has recently been doing less

0

200

400

600

800

1000

1200

1400

1600

1800

FY80 82 84 86 88 90 92 94 96 98 00 02 04

Projects Providing Major Support for S&T, FY80-04

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Capacity building is important and the Bank Capacity building is important and the Bank is being asked to do more, but the Bank has is being asked to do more, but the Bank has

recently been doing less (2)recently been doing less (2)

-

1,000

2,000

3,000

4,000

5,000

6,000

7,000$ million

FY80 83 86 89 92 95 98 01 04

Figure 4: Projects Providing Minor Support for S&T, FY80-04

Minor S&T costs Non-S&T costs

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Issues for the World Bank• No operational home for STI.• Sectoral silos, e.g., Kazakhstan, Bangladesh, Vietnam• No unified framework to incorporate S&T into operations in all sectors• Most PRSPs and CASs don’t mention S&T; those that do give it

cursory attention; Bank-IMF instructions for PRSPs do not refer to S&T

• Many Country Directors and country economists are unsure how to respond to requests for assistance – Is it in the CAS; is it a priority? Is it relevant? Does it divert resources from poverty reduction?

• Limited country budgets – especially in smaller countries. Leads to large omnibus projects, especially for budget support, while experience shows the need for a larger number of smaller projects.

• Critical mass in individual countries vs. regional projects – e.g., AIST• Staff are unfamiliar with S&T issues; limited delivery capacity

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Next Steps for World BankWorld Bank leadership in global S&T

capacity buildingWork cross-sectorally Incorporate S&T into CSPs, PRSPs, and

CEM’s – e.g., Mozambique, Vietnam (CG)

Integrate S&T capacity building into high priority sectors, such as health, agriculture, water, PSD, tertiary education

Work at the (international) regional levelForge strong strategic alliances with

external partners

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Initial Work Program

• Organizational

• Operational

• Analytical

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Organizational• S&T Program Coordinator position established• Internal Advisory Group • Inter-sectoral thematic group

– BBLs: AIST, Capacity Building, Learning Strategies, IK, Reverse Pharmacology, pro-poor innovations

• Web site – an open source learning tool• Establish closer working relationships with sectoral anchor

units and regions where existing relationships are still personal and ad hoc

• Forge closer alliances with external partners• Cross support to help TTLs integrate S&T into CASs,

PRSPs, environment and health projects, PSD projects, etc.

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Operational Support

• Operational (projects, ESW, TA) activities in Kazakhstan, Latvia, Viet Nam, Mauritius, Bangladesh, Malaysia, Mozambique, Rwanda

• Capacity building workshops for TTLs/managers and government officials?

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Analytical• Typology of countries: (i) based on learning strategies, (ii) template

for assessing S&T capacity and (iii) menu of options suitable for each group – available for informal internal discussion with thematic group

• Review of recent trends in World Bank lending for S&T -- completed• Review of World Bank lending for S&T capacity building in China,

India, Korea, Mexico and Brazil – ongoing• Global Forum on S&T Capacity Building – organized around Spring

meetings? – Audience – donors, NGOs, government officials, Bank

• Regional (or sectoral) S&T seminars?• Review of DFID S&T strategy• Report on pro-poor S&T initiatives?• Higher Education/S&T/ICT strategy for Africa ?

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Parable of the Lion and the Zebra

• Lion only has to run faster than the slowest zebra to survive and prosper

• Zebra has to run faster than the fastest lion!!

To accelerate growth, achieve the MDGs, and reduce poverty, our clients have to build their capacity to run much faster.

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