Robert Martinez - STI Policy Comparison

8/3/2019 Robert Martinez - STI Policy Comparison

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Science, Technology and Innovation Policy: A

Cross-Country Comparison

Robert Martinez

April 2011


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Introduction

The attention of the comparative study will be focused on small countries at different stages ofeconomic development. These countries are: Botswana, Israel, Mauritius, Norway, New Zealand andSingapore. While many of the worlds most innovative countries have small populations, this is notthe primary reason for basing my analysis on them. The varianceof innovation performance in smallcountries is a more important reason for this selection, since it suggests that policy can have a strongimpact on country performance, for better or for worse. In addition, the factors affecting innovationand growth in small and large countries differ, to some extent. In large countries, industrialisation isoften the result of physical capital accumulation, expansive land use and the exploitation of scaleeconomiesso-called low-hanging fruit (Cowen, 2011), which are usually not available to smallcountries. By contrast, small countries must rely on human capital development, foreign directinvestment and technology transfer, among other things.

For each of the six countries observed, I outline the reasons for their inclusion in this study, byshowing their relevance to the Trinidad and Tobago context. Next, I conduct a brief review of the

countrys policies to support science, technology and innovation (STI)

1

. Finally, I offer some generalconclusions based on the review of these countries policies and, having reviewed draft STI policiesfor Trinidad and Tobago, I suggest some of the implications for Trinidad and Tobago as it develops apolicy framework for STI issues.

1 Wherever possible, I have attempted to use the latest version of each countrys STI policies.However, some countries policydocuments do not appear to be available online, and where this is the case, I have based my analysis on reliable secondary sources,

such as European Commission STI policy reviews.


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Botswana

Figure 1 - Time series comparison of GNI per capita at Purchasing Power Parity, between Botswana and Trinidad

and Tobago. Source: World Bank, World Development Indicators.

Figure 2 - Botswana's STI Strengths and Weaknesses, based on the 2009-10 Global Innovation Index. Source:

INSEAD, Global Innovation Index.

Rationale for InclusionBotswana is ostensibly poorer than Trinidad and Tobago (see Figure 1), but is usually classed in thesame middle-income bracket of nations. The two countries share some fundamental economiccharacteristics, such as a historical dependence on primary-product exports and government spendingas drivers of economic growth. For some time, both countries have been attempting to diversify their

economies by growing high value-added industries, thereby reducing vulnerability to commodityprice shocks. In addition, T&T and Botswana are, in many respects, at a similar stage of STIdevelopment, with relatively high rates of ICT take-up but low rates of innovation given eachcountrys middle-income status.

Policy ReviewSince independence (1966), governments have drafted sequential National Development Plans(NDPs), which chart, in great detail, the countrys short-to-medium-term policy course. Suchcontinuous policy planning is facilitated by uninterrupted power enjoyed by the ruling BotswanaDemocratic Party (BDP), which has won every general election since independence.

NDP 10 is the most current version of the development plan, and was last revised in January 2010. Its

macroeconomic focus is on lessening dependence on traditionally-dominant industries (diamonds,


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other minerals, beef, and tourism) and on government spending, as drivers of GDP growth. Thecountrys most recent S&T Policy was developed and approved in 1998, part of NDP 8.

Botswana is in the process of developing a governance structure to deal with science, technology andinnovation issues. The Ministry of Communication, Science and Technology (MCST) was establishedin 2002, and the Department of Research, Science and Technology was established under it in 2004.However, this Ministry was then subsumed under the Ministry of Infrastructure, Science andTechnology in 2009. A brief examination of the governance structure for Botswanas innovationsuggests that it is in a constant state of flux, though plans based on NDP 10 show that it hasrestructured in order to centralise responsibility in two main ministries: the Ministry of Infrastructure,Science and Technology and the Ministry of Transport and Communications, with each ministryhousing several departments related to the development of an STI framework and infrastructure tosupport it. It is unclear whether such organisational changes will bring more effective servicedelivery, since NDP 10 states no performance targets for this particular activity. 2007s National ICTPolicy (Maitlamo) includes initiatives on: ICT education for youth; e-Government; e-Health; andlegislation on electronic business.

Key features of Botswanas Science and Technology Policy (1998) include: A clear desire to see S&T touch upon all sectors of the economy and society. Expanding access to

and familiarity with technology and Sectoral focus on: Agriculture, Commerce and Industry,Education and HR Development, Energy, Environment, Meteorology, Mining, PopulationPlanning, Tourism, Transport, Water and Wildlife.

A very strong emphasis on providing opportunities for rural development, given the demographicand geographic characteristics of the country.

Sectoral analysiseach sector is given a short background, policy objectives and long lists ofgeneric strategies. However, there is little to no analysis of how the policy interventions arealigned with local capabilities.

Sector strategies which are very similar to those which are being pursued or have been suggestedfor T&T, including, inter alia: agricultural and pharmaceutical biotechnology, support for small

and medium-sized enteprises (SMEs); science, technology, engineering and mathematics (STEM)education; development of renewable, especially solar, energy; development of downstreamindustries from the traditional resource extraction (diamond-mining) sector.

Overall impressions of the 1998 STI policy are that it is quite generic, with strategies that are nottargeted to local conditions. Botswanas S&T policy also goes far beyond traditional ideas about thescope of a STI policy, including family planning. Because of the massive sectoral scope of thedocument, it seemed less like a focused STI Policy than a general policy framework for Botswana,and may be criticised for being over-ambitious in its aims. Looking at Figure 2, it appears that severalbasic aspects of technology diffusion, such as general Internet access, business use of the internet andtertiary education enrolment, are lacking in Botswana, which have hindered the countrysperformance in the 13 years since the original Policy was developed.

Botswanas 10th National Development Plan (NDP 10) includes a section on the Knowledge

Society, which states the following STI Policy initiatives:

Botswana Innovation Hub (BIH)A feasibility study on the BIH project was done during NDP 9,with the project aimed at fostering university-industry linkages, similar to science and tech parkinitiatives in T&T and in other countries around the world. The Hub has an ambitious goal,namely to promote innovation by establishing an incubator for start-up companies, facilitatenetworking between universities and businesses located at the Hub and between the businessesthemselves, with partners both locally and internationally. Considerably less is said on theincentives universities and businesses have for networking with each other, and how the

businesses will attract partners. Government is the leading investor in the Hub, and according to


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the plan, firms in several sectors (biotech, minerals and energy) are interested in establishingoperations at the BIH when the project is completed.

Full liberalisation of the telecommunications sector during NDP 10. There is a high rate of take-up in mobile telephony, with three national mobile carriers. However, expanding access to theInternet remains a challenge, and has created problems for developing e-government readiness. Inaddition, an ICT Development Programme aims to develop the countrys ICT infrastructure,which is a very important initiative, as the government aims to diffuse general-purposetechnologies such as the Internet, across Botswana.

R&D PolicyIn 2005, the MCST developed a National Science and Technology Plan, whichidentified five priority areas for research funding: ecosystems; manufacturing, engineering andinfrastructure; processing and mining; geomatics; and biosciences. It is important to note that thepriorities in this plan were far narrowerthan that pursued in the original 1998 S&T Policy,indicating that the earlierplan was too broad, and would have spread the countrys researchresources too thin. The 2005 Plan was substantially more focused on making use of the countrysnatural resources in a more innovative way, with proposed research ideas on catchment areamanagement, cosmetics based on local products (e.g. aloes), improvements in mining efficiency,among others. However, it should also be acknowledged that plans for bioscience research still

seem quite vague and untargeted. Neither the S&T Policy nor NDP 10 make mention of venture capital (VC). While this may be

considered unambitious, in the context of a developing country at an early stage of STIdevelopment, it may be wiser to prioritise more fundamental issues such as access to technologyand STEM education. It is true that the rise of clusters in Silicon Valley and Tel Aviv have beenaided by VCs, in both cases, the ICT industries came first, and the VCs followed when they werealerted to potential high returns. When countries attempt to establish VC funds in the absence ofhigh-growth industries and energetic start-up companies, failure inevitably results.


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Israel

Figure 3 - Time series comparison of GNI per capita at Purchasing Power Parity, between Israel and Trinidad and

Tobago. Source: World Bank, World Development Indicators

Figure 4 - Time series comparison of high-tech exports (as a percentage of total manufactured exports) at Purchasing

Power Parity, between Israel and Trinidad and Tobago. Source: World Bank, World Development Indicators

Rationale for Inclusion

Israel has a slightly higher per capita GNI than Trinidad and Tobago (US $27,110 to US $24,960 in2009), so the two countries can be considered at a similar stage of economic development, in thebroadest possible terms. However, while T&T derives much of its wealth from natural resourceextraction, Israel has few such resources to exploit. As a result, much of its economic output must bedriven by knowledge-based industries; the success of the modern Israeli economy is partially due tothe success of its governments innovation policies. In addition, while its well-developed venturecapital market suffered in Q1 and Q2 of 2009 (with a 50% fall from its 2008 peak), the overall Israelieconomy emerged relatively unscathed from the financial and economic crises of 2007-09 (seeFigure 3). This suggests that its policies, along with a fairly conservative banking sector, have createda stable environment for innovation, and largely protected the economy from the speculative financial


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bubbles, which caused havoc in many developed economies. These factors, coupled with its thrivingstart-up sector and its high-tech export industry (see Figure 4), mean that Israel may be an example ofbest practice for innovation policy, though many of its policy interventions may not be reproduciblein the T&T context.

Policy ReviewIsrael is a country without a formal innovation policy methodology, (European Commission, 2009a:8) i.e. its innovation policy is not embedded in one unified policy document. Therefore, I will refer tosecondary sources that address the main aspects of Israeli policies, such as venture capital and fundingfor education and research, which support STI.

Israel has seen some large pharmaceutical and biotech firms develop internally, with TevaPharmaceuticals among the top 20 pharmaceutical firms worldwide. While many countries that haveshown an interest in developing biotechnology industries without demonstrating any source ofcomparative advantage in the area, some potential success factors exist in Israel: Israel is firstworldwide in medical device patents per capita, fourth worldwide in biopharma patents per capita,seventh in the absolute number of medical device patents, and first worldwide in the share of life

science patents in total patents. (European Commission, 2009a: 15). The problem facing most Israelibiotech companies at the moment is finance, as both private-equity and public (stock market)investors find the very long product development pipeline too much of a risk, especially when newcompanies would be competing primarily against giant American-based firms. Therefore, thegovernment decided that the mid-2000s was an appropriate point at which it could intervene tokickstart the Israeli biotech sector. As a result, the main recent development in Israeli innovationpolicy has been the development of a dedicated venture capital fund for biosciences. It is interestingto note the rationale for this changeThis government decision to enter the private equity market,results from a clear and evident market failure of innovative firms in these industries. (EuropeanCommission, 2009a: ii) Only after the private sector was seen to have failed in funding and managingbiotech start-ups was the government compelled to offer assistance. This strategy contrasts with onein which government commits investment funding before technical and commercial capabilities are

established in the private sector. Such a strategy is exemplified by the following statement: The shareof private sector investment in innovation in Israel is very high, some 80%, and the government hasfor a long time now tended to rely on the private sector to provide the finance for promotinginnovation. One example of this is the growth period of 2004-2007: during these years, businesssector financing of civilian R&D jumped by a very significant 44.8%, while the government increasedits financing by only 17.9%. (European Commission, 2009a: 4)

In addition, Israeli policy is focused mainly on industrial innovation and much less on basic researchin universities. Despite this, Israel maintains a world-class university system, which, given thecountrys tiny population, generates a disproportionate amount of cutting-edge, Nobel Prize-winningresearch2. The Office of the Chief Scientist (OCS) allocates public funding for industrial R&D withinfirms, and is part of the Ministry of Industry, Trade and Labour (MITL). Since the global recession

began, more OCS funding has been directed towards small firms, with the goals of helping smallR&D-intensive firms survive and keeping R&D projects afloat.

It is important to note that the Israeli venture capital industry took off nearly 30 years after the Israelihigh-tech industry began in the 1960s. The Israeli VC program, Yozma, which began in 1991, offeredlarge tax incentives to foreign venture capital investors in Israel, with a government promise to doublethe private equity investments of the VCs, based on a matching fund of USD $100m by thegovernment. Once Yozma had attained a sufficient rate of take-up in Israel, it established 10 separate

2Tel Aviv University has been ranked number 11 worldwide in citations per faculty in 2010 a truly staggering resultIt is, in factabsolutely amazing that the research at Tel Aviv University is so highly ranked. The total annual budget of Tel Aviv University is less

than Harvard raises just from its alumni year after year. Carlo Strenger, Haaretz, 18th March, 2011.


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VC funds by 1996, with USD $20m of capital each. It was successfully privatised in 1998, and nowmanages two funds with capital of USD $170m. More than 800 companies have been funded by VCcapital in Israel, and nearly all of its VC activity comes from the private sector. In 2009, biosciencesreceived the largest share of VC funds (24%), followed by software (23%), and communications(20%), from a total of USD$1.12b.

One of the Israeli governments main goals is to encourage more organic growth of its successfulstart-up companies, since there is a tendency of entrepreneurs and venture capitalists to sell theirR&D-intensive companies to multinational corporations at a relatively early stage. (EuropeanCommission, 2009a: ii) This is an enviable problem for a countrys national innovation system tohave. While there were large declines in VC investment in 2009, due to the global financial crisis,there was no significant change in its composition, with foreign VC investment comprising upwardsof 60% of the total, and local VCs contributing the rest.

Israels national innovation system is at a stage where new policy problems have emerged from theundoubted successes of previous policies:

The success of the venture capital industry, which began in 1993, have led to an over-dependence of some sectors on VC funding, which is highly volatile and very short-term inoutlook.

The rapid growth of the ICT sector in Israel has led to other sectors of the economy losingcompetitiveness, with the result that government is attempting to boost new industries, suchas biotechnology - supported by the50m fund, which was approved in late 2009.

The success of encouraging private investment in industrial R&D has created the long-termproblem that Israel is losing its competitive edge in terms of public and university research.

With respect to many of the initiatives that T&T is interested in pursuing ICT sector development,venture capital, and private investment in innovationIsrael is far ahead of us. However, ashighlighted in a 2007 presentation by Manuel Trajtenberg (of the Israeli Office of the Prime Minister

and the Tel Aviv University Department of Economics), there is a bandwagon effect in this area, asmany developing countries try to replicate the policy successes of nations that have vastly differentcharacteristics from themselves. Predictably, these examples of policy transfer often meet withdisastrous effects.

One major differencebetween Israels approach to STI policy and that of the other countries beingstudied is that its government takes aproblem-orientedapproach to innovation policy (Brunner,1991). This means that policy interventions are based mainly on current emergent problems, with lessemphasis on overarching goals and grand strategies, which often become obsolete by the time policydocuments are approved. For example, the development of a Venture Capital fund should be aspecific response to a specific problem, namely that there are several competing start-up companieswhich lack access to capital.

In addition, there is a clear idea of which organization (OCS) is responsible for innovation policy inIsrael. It is known for its quick, efficient delivery and rigorous pre-funding evaluation for researchprojects. A similarly streamlined approach in T&Ts STI policy could be beneficial, thoughpotentially difficult to arrange.

To some extent, Israels technological leadership stems from military spillovers, not only ofphysical capital but also of human capital. Because of Israels unique geopolitical situation, it hasinvested heavily in high-tech military hardware, and has therefore developed one of the mosttechnologically sophisticated armies in the world. However, while some technological breakthroughsmay have crossed over from military to civilian use, such as digital encryption, the human and social

capital aspects of recruitment and conscription in the Israeli Defence Forces seem to have made alarger contribution to entrepreneurship in the country. As Senor and Singer (2009) have showed,


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several of the most successful technological entrepreneurs in Israel acquired the skills necessary forcivilian business leadership while serving in elite regiments of the IDF. Obviously, this is not apolicy initiative, nor is it something that can be copied by Trinidad and Tobago. However, it hasbeen included here to illustrate the ways in which the social and economic institutions of a countrycan condition its innovation performance in unexpected ways.


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Mauritius

Figure 5 - Time series comparison of GNI per capita at Purchasing Power Parity, between Mauritius and Trinidad

and Tobago. Source: World Bank, World Development Indicators

Figure 6 - Time series comparison of high-tech exports (as a percentage of total manufactured exports) at Purchasing

Power Parity, between Mauritius and Trinidad and Tobago. Source: World Bank, World Development Indicators

Rationale for InclusionAn island with a diverse population, Mauritius is another of Africas under-reported success stories.Currently, its major industries include textile manufacturing and sugar. The Government of Mauritiusis looking to diversify the countrys export base, into higher value-added industries. It is at a similarstage of STI development as Trinidad and Tobago, with relatively high levels of ICT take-up, an

extremely conducive business climate and strong creative industries, but very low levels of scientificpublication and patenting activity, and a lack of trained scientists and engineers. In order to kick-startits innovation system, its Ministry for Industry, Science and Research (MISR) published a Science,Technology and Innovation Policy in 2010.

Policy ReviewMauritius is currently establishing institutions and coordinating mechanisms to develop its NationalInnovation System. Its two main policy measures in this regard are the establishment of a NationalAdvisory Commission for Science & Research (NACSR), which will coordinate and develop STIpolicy frameworks, and a National Research Infrastructure and Equipment Policy Committee(NRIEPC), which will advise the government on funding of research infrastructure, with a view tooptimal use. These new institutions will support the existing Mauritius Research Council, which

currently allocates public research funding.


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Like many other countries, Mauritius aims to increase its investment in R&D to a substantial extent,with a target of 1% of GDP spent on R&D by 2015. To this end, it aims to establish a NationalInnovation Fund, which will support STI projects and policy assessments, and a Venture Capital fund,aimed at investing in R&D-intensive start-up companies. It also aims to direct resources from itsCorporate Social Responsibility Fund towards R&D. An extremely ambitious Small Business Grantsprogram is also mentioned, which will target small high-tech firms: Grants will be provided toqualified companies in a phased manner, to first carry out basic research in high-priority areas, andsubsequently to transfer the technology developed into commercial products and services. (MISR,2010: vii)

Other initiatives include: changes to secondary educationmaking one science subject compulsoryup to Form 5 level; strengthening tertiary research institutions; and a Mauritian STI Diasporaprogram, which aims to involve Mauritian STI experts working abroad to collaborate with localinstitutions. The ambitious Diaspora program includes initiatives like creating a database ofMauritian experts working abroad, facilitating workshops and seminars by Mauritian experts, creatingincentives for the Mauritian diaspora to collaborate with Mauritian institutions. Since the braindrain is an issue with which T&T also contends, it could be highly beneficial to track the progress of

the STI Diaspora Program.

The MISR has also targeted STI sectors for attention, though specific sector initiatives were notidentified in the Innovation Policy. These sectors include, inter alia: Energy, ICT, Sugar, Textiles,Agriculture, Marine and Coastal Resources, and Biotechnology. Its marine resources seem especiallypromising, with a current of very cold water (50 to 60C) of high purity at a depth of more than1000m past the coasts of Mauritius, with potential applications in cooling, sea salt production,cosmetics and health products. (MISR, 2010: 41-42)

Though investment thus far has been low, R&D in the sugar industry has shown promise, and it hasbeen proposed that research should go into sugar as a renewable energy source. Interestingly, R&D inMauritius thus far has been concentrated on agriculture, with fisheries, oceanography and sugar each

having dedicated research institutes. While the choice of targeted industries seems well-justified, alack of identified support measures for these sectors means it is difficult to assess the impact of policyon their future performance.


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New Zealand

Figure 7 -Time series comparison of GNI per capita at Purchasing Power Parity, between New Zealand andTrinidad and Tobago. Source: World Bank, World Development Indicators

Figure 8New Zealands STI Strengths and Weaknesses, based on the 2009-10 Global Innovation Index. Source:



New Zealands innovation performance relative to its fellow OECD members has been slipping forsome time, despite its highly successful education system and strong research base. A 2007 OECDreview of innovation policy suggested that its difficulties lie in the commercialisation of research, anarea often neglected by policy experts who subscribe to a linear model of innovation, where basicresearch funding is assumed to flow smoothly through science, technological development andeventually innovation. It may be useful to observe New Zealands performance to illustrate thatincreasing public R&D spending may not be enough to ensure sustained improvements in innovativeoutput.

Policy Review

STI Policy in New Zealand is largely under the purview of the new Ministry of Science andInnovation (MSI), which brought together the Foundation for Research, Science and Technology andthe Ministry of Research, Science and Technology (MoRST) in February 2011. It appears that thegovernment is attempting to streamline the governance of its STI policies. Despite this, the countrysMinistry of Economic Development (MED) is also a key player, and developed a Growth and

Innovation Framework in 2002, which was reviewed in 2005 and updated with an Innovation Systemframework in 2006. MoRST released an STI strategy document in 2010, entitledIgniting Potential.


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Access to information and communication technologies is widespread in New Zealand, and its world-class education system exposes students to science and technology issues at an early age. Therefore,its key STI policy challenge is to transform the economy into one that takes advantage of its well-developed base of human capital. The OECD Review of New Zealands innovation policy noted that,despite a high degree of publication and patenting activity per capita, there is a low level ofcommercialisation of research, resulting from small scale and a relative lack of managerial andmarketing skills in most firms. In addition, while there is a strong base of researchers in New Zealand,both public and private investment in R&D have been historically low, and a 2010 survey of scientistsand technologists indicated that excessive bureaucracy and interruptions in research funding were thechief barriers to their research. The streamlining of the governments STI governance structure is adirect response to this issue, as outlined inIgniting Potential (MoRST, 2010). The underperformanceof its Crown Research Institutes (CRIs), which are publicly funded but commercially-oriented, wasalso identified.

Igniting Potential has acknowledged that New Zealand cannot afford to spread its STI resourcesacross a wide range of areas, since it does not have the scale of resources available to the US, China

or even the larger R&D intensive firms. As a result, its strategy is based upon identifying nicheopportunities for research, so that priority will be given to investment where New Zealand hascompetitive advantage. (MoRST, 2010: 10) The government identified areas such as agri-technology, ICT, sustainable energy, healthcare and hazard infrastructure for further investment,while promising more general support for talent development, international partnerships and nationalresearch facilities.

In order to raise the levels of business R&D activity, the New Zealand government has committed$250m of public funding over a 4-year period. In order to simplify the funding process, it willestablish a one-stop shop for firms seeking funding support. It has also planned to allocate the newfunds through a Technology Development Grant, which reimburses 20% of a business R&Dactivities for up to 3 years; and a Technology Transfer Voucher scheme, which supports linkages

between firms and research organisations. TechNZ, the business investment arm of the MSI,coordinates these two programmes. There is also an initiative to develop a food industry developmentnetwork, called Food Innovation Network New Zealand (FINNZ), with an allocation of NZ$21m(US$16.5m).

One of the key aspects of New Zealands STI policy is that it also focuses on human capital andinfrastructure. Sections are devoted to science in schools, science prizes, and importantly, careerpathways for scientists and researchers. The latter area is a major issue for many countries, asgraduates must have the incentive to pursue careers in research or entrepreneurial science, so that theirskills are fully utilised. TechNZ piloted a Postgraduate Internship Programme, which gives graduatesplacements within relevant companies. With respect to infrastructure, a computational network hasbeen proposed to link research organisations, universities, and government together.


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Norway

Figure 9 - Time series comparison of GNI per capita at Purchasing Power Parity, between New Zealand and

Trinidad and Tobago. Source: World Bank, World Development Indicators

Figure 10Norways STI Strengths and Weaknesses, based on the 2009-10 Global Innovation Index. Source:


Rationale for InclusionWhile Norway is one of the richest countries in the world on a per capita basis, there are severalsurprising commonalities between its economy and that of Trinidad and Tobago. First, there is a verylarge state presence in the economy, with 30% of its employment coming from the public sector. In

addition, it is a significant oil and natural gas exporter, and like T&T, it battles with issues stemmingfrom its dependence on its offshore economy - its fishing and shipbuilding industries are also strong -and the relative lack of dynamism of its mainland sectors, with few globally-known companies. Inaddition, its surplus petro-dollars go into a sovereign wealth fund the Government Pension FundGlobal (GPFG)which, like T&Ts Heritage and Stabilisation Fund, is invested for future rainyday scenarios.

Policy ReviewThe Norwegian Ministry of Trade and Industry developed its first STI policy white paper, AnInnovative and Sustainable Norway, in 2008. In this paper, it took a very different approach frommost other countries innovation policies, by explicitly downplaying the role of high-tech industries ininnovation, while making the case for employee-driven innovation: innovation does not merely

encompass research, high-technology and products. The government believes that it also concerns


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issues such as employees trust and participation, as well as low wage dispersion. Strong welfareschemes have crucial importance in our ability to adapt and innovate. (NMTI, 2008: 9)

Strategy councils have been appointed for the tourism and maritime industries, with other industrycouncils to follow. No single ministry is responsible for STI policy in Norway, but the key agenciesare the Ministry of Trade and Industry and the Ministry of Education and Research. While Norway isknown as a highly developed economy, it has only just begun developing its STI policy framework, inresponse to its poor innovation performance relative to its fellow European countries. A 2009 reviewof Norways innovation policy performance summarises it thus:

In strong contrast to the excellent macroeconomic performance of the Norwegian economy, it has a low performance incomparison on a large number of standard R&D and innovation indicators. During the last five years, Norway has beenpart of the EIS grouping 'Moderate innovators' with innovation performance and average annual growth in innovationbelow the EU-27 average. In the European Innovation Survey (EIS 2008), Norway ranks 18th out of the 32 countriescovered. While Norway remains in the 'Moderate innovators' category, it is among the poorer performers in thisgrouping, and now counted among the 'Slow growers' in the grouping. ( European Commission, 2009b: i)

With the depletion of oil and natural gas being accelerated by rapidly rising demand from China and

India, Norway is beginning to create an institutional framework to support its mainland economy.Another issue facing Norway is that it has a shortage of science and engineering graduates, whichillustrates that this is a not only a problem that developing countries face. Without the availability oflabour with the necessary skill sets, no firm, local or foreign, will invest in innovation-intensiveindustries.

Of the countries studied so far, Norways innovation policy is the one that is most unconventional with less focus on R&D-intensive industries, and much greater focus on human capital developmentand comparative advantage. Norways approach to innovation policy differs from some of the othercountries under observation, in that it explicitly acknowledges the role of low-tech industries as asource of innovation. Many countries, especially developing countries, conceive of innovation toonarrowly, assuming that it takes place primarily in cutting-edge high-tech sectors, and therefore miss

out on opportunities in less fashionable sectors. The Scandinavian countries are good examples oflow-tech innovative success. Norway is known as a world-beater in shipbuilding, fishing and resourceextraction, Denmarks most innovative industries are in bacon and cheese production, and Swedensmost famous company, IKEA, is known for its highly innovative approach to retail. While theseinnovative sectors all vary in kind, one thing they all have in common is very low R&D intensity.Therefore, the performance of these countries national innovation systems may be underestimated bydifferent performance indices, which place heavy weight on R&D spending.

While other countries STI policies are mainly devoted to fostering research and innovation in firmsand universities, Norways policy also places strong emphasis on improving public sector servicesthrough innovation, with clearly defined role for the government: the public sector is facing majorchallenges, which cannot be solved merely by increasing resources and personnel. It is also necessary

to innovate new solutions and to organise work in a smarter way. This applies not least to thehealthcare sector. (NMTI, 2008: 9) There are also plans for a product design-driven innovationprogramme, and, like Singapore, the Norwegian government plans to use the harmonious relationshipbetween firms and labour to promote staff-driven innovation in collaboration with the NorwegianConfederation of Trade Unions and the Confederation of Norwegian Business and Industry. (NMTI,2008: 13)

Thus far, its tax support scheme for industrial R&D, the Skattefunn, has done little to raise the level ofoverall private R&D spending in the country. However, when it was evaluated in 2007, it seemed tohave other beneficial effects, which have improved technology transfer and broadened STI access inNorway. It was said to be:

[S]trongest in small firms, firms in non-central areas, firms in which the employees have a relatively low level ofeducation and firms in industries that are traditionally not research intensivehas not contributed much to raising the


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level of privately funded R&D in Norway. The evaluation provides evidence that the Skattefunn scheme enhancesthe learning capacity and R&D orientation of firms with limited previous R&D experience. The scheme is perceivedas user-friendly and is well known among eligible firms. (European Commission, 2009b: 27)

The White Paper identified the following as areas of competitive advantage for Norway: marine andmaritime, tourism, services and environmental technologies. While the range of sectors identified was

sufficiently narrow to allow for targeted investment, the policy was criticized as vague and overlydescriptive, and lacking in specific measures to support or enhance the industries. (EuropeanCommission, 2009b: ii) STI policy cuts across several policy areas, including health, education andtrade. However, the paper does not say whether future initiatives will be horizontally coordinated, orwhether there will be a separate innovation policy for each policy area. Norways White Paper on STIpolicy should be considered a blueprint for further policy developments, which should includedetailed plans on investment in its targeted sectors.


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Singapore

Figure 11 - Time series comparison of GNI per capita at Purchasing Power Parity, between Israel and Trinidad and

Tobago. Source: World Bank, World Development Indicators

Figure 12 - Time series comparison of high-tech exports (as a percentage of total manufactured exports) at

Purchasing Power Parity, between Singapore and Trinidad and Tobago. Source: World Bank, World Development

Indicators

Figure 13Singapores STI Strengths and Weaknesses, based on the 2009-10 Global Innovation Index. Source:



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Singapore is globally acclaimed as a high-tech success story, with one of the fastest economic growthrates in the world over the past 50 years. Like T&T, it is a highly diverse and multi-ethnic society.Because of its lack of natural resources, its economy has had to depend on high levels of ForeignDirect Investment (FDI) as a source of physical capital, while the government has spent heavily ondeveloping technologically capable human capital through its education system.

Policy ReviewLike Israel, Singapore appears not to have a single, unified STI policy. Instead, its government hasbeen committed to pursuing innovation and economic growth as core objectives since the countrysindependence from Britain and separation from Malaysia in 1965 (Lee, 2000). As is the case inBotswana, policy continuity has been enabled by uninterrupted post-independence power for theruling Peoples Action Party (PAP). Innovation policy has been spread across a number of stateagencies, including: the Economic Development Board (EDB), the Agency for Science, Technologyand Research (A*STAR), and the Ministry of Education (MOE). New Zealands Ministry ofEconomic Development commissioned a comprehensive overview of Singapores policies in support

of innovation and growth, and an analysis of which policies would be applicable to the New Zealandcontext (MED, 2003). This document will be used to give an idea of Singapores education,investment and trade policies for innovation.

Education in Singapore is widely acclaimed as world-class, and indeed it prepares students forparticipation in the local labour market, as evidenced by the countrys consistently low unemploymentrate. While the MOE subsidises primary and secondary education to ensure access for all students, itis meritocracy, not egalitarianism, which characterizes the Singaporean system. Students areaggressively streamed by academic ability once they leave primary school. Top-performing studentsare intensively groomed for leadership positions from a young age, while less academically-inclinedstudents are streamed into technical and vocational programmes. While clearly an effective system,two of its key weaknesses have been identified. At the top end, a focus on purely academic

achievement has led to a relatively low level of entrepreneurship among Singaporeans, with mostlarge companies in the country being foreign-based multinationals (Tan and Gopinathan, 2000). Atthe same time, there is a shortage of technical and vocational skills in Singapore, which is partly filledby a large number of foreign-born workers. This suggests a lack of effectiveness in the lower tier ofSingapores education system.

Singapore is known for having extremely business-friendly tax policy, which has encouraged inwardinvestment by multinational firms throughout the countrys history. Firms that provide substantialtechnological upgrades to an industry can be granted Pioneer Status, which exempts them for up to10 years from the (22%) corporate income tax.

The Local Industry Updating Programme (LIUP) is another method used by Singapores EDB to

accelerate the process of technology transfer, and to ensure that the benefits of foreign investment areshared in the local economy.New Zealands Ministry for Economic Development (2003) describedthe Programme in three stages:

The first phase is improvement of overall operational efficiency such as production planning and inventorycontrol, plant layout, financial and management control techniques. The second phase introduces and transfersnew products or processes. Finally, local enterprises progress to joint product and process R&D with MNCpartners. (MED, 2003: 35)

Wong (1999) argues that the LIUP, among other government initiatives, helped to ensure the dramaticshift of hard-disk-drive manufacturing from the US to Asia between the 1980s and 1990s. As Seagateand other large US companies relocated production to Singapore, co-investment under the LIUP

introduced technologies such as CAD/CAM and supply chain management to their local Singaporeansuppliers, thereby helping many of them, such as MMI Holdings, to develop rapidly into globalcompanies (MED, 2003).


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Because of Singapores tiny size and dense population, the only way that industries could developsuccessfully was through cluster development. Most recently, the government has turned its attentionto developing a strong biotechnology cluster. Through its first two National Technology Plans, for1991-1995 and 1996-2000, developed by A*STAR3, Singapore has managed to produce manyresearchers who are employable biotech industries, and the government has spent heavily indeveloping favourable infrastructure and attracting foreign investment into its science parks. Its twomain biotech parks are Biopolis and the Tuas Biomedical Park (TBP). Biopolis opened in 2006, andimmediately attracted investment from U.S. firms and researchers who were attracted by a favourabletax climate and liberal regulatory environment regarding stem cell research. A favourable businessenvironment has also contributed to the success of TBP, which currently houses divisions of majorpharmaceutical and biotech firms such as Merck, GlaxoSmithKline, Pfizer, Genentech and Novartis.In 2010, Singapores biomedical production finally took off, with year-on-year growth of 163% fromNovember 2009 to November 2010. As a result of this growth, pharmaceuticals now account foralmost 20% of Singapores manufacturing output.

While several of Singapores innovation policies have had great success, there have been some

substantial failures including: the Innovation Development Scheme, which attempted to get firms toconduct patentable innovation activities in Singapore, and the E21 initiative (formerly known asTechnopreneurship 21), which attempted to situate Singapore as a hub for venture capital activity.

In addition, there are other important aspects of Singapores institutional structure which maycontribute to its excellent innovation and growth performance, but which nonetheless cannot becopied in a democratic polity such as Trinidad and Tobago. First, Singapores government quickly co-opted national trade unions to create a non-confrontational relationship between labour and the state,while at the same time restricting the power of unions to strike. In addition, Singapores high savingsrate, which allowed large investments in education and infrastructure, was forced by mandatorycitizen contributions to the Central Provident Fund. While favourable industrial relations and highsavings rates would be beneficial to Trinidad and Tobagos STI aims, it would be unreasonable to

expect a government to achieve those objectives through similar means.

3 Formerly the National Science and Technology Board.


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Conclusions and Implications for STI Policy Development

The countries being studied here vary in several ways, are all at different stages of STI development,and therefore would appear to have different needs with respect to STI policy. However, it issurprising to note that their STI policies and priorities show such a striking degree of similarity. Everycountry in this brief study has shown an inclination to develop a biotechnology industry or cluster,though only Israel and Singapore thus far have demonstrated physical capital, human capital orregulatory advantages in this area. While it is still possible for the other small countries to developniche biotech clusters, currently their STI policies seem unclear as to how they will attract investmentand talent into their fledgling industries. In addition,

While research and development (R&D) are taken together as a whole in most countries nationalstatistics, a distinction should be made between private and public R&D. Basic research is the primaryoutput of public R&D, while technological development by firms is the primary output of privateR&D. Basic research usually takes place in academic settings, and is published in scientific journals,divorced from market conditions, whereas technological and product development are done in firms,subject to success or (more often) failure in a market setting, and the results are almost always

protected via intellectual property rights. This has important implications for innovation policy,especially as developed countries have a far higher share of R&D spending done by private firms thando developing countries (see Figure14 below).

Figure 14 - Comparison of the distribution of R&D Spending in Developing and Developed Countries. Source:

Government of Mauritius, Science, Technology and Innovation Policy, 2010.

While this analysis has used Global Innovation Index rankings to glean strengths and weaknesses ofcountries innovation systems, Trinidad and Tobagos STI policies should not be too concerned with

the countrys overall ranking on this particular index, or on the World Economic Forums GlobalCompetitiveness Index (GCI). The reason for this is that a majority of the performance ratings thatcomprise these indices are based on unreliable, subjective survey data, based on interviews with

business executives in each country. Instead,

There is no single best practice regarding the governance of STI policy. No institutional structurefor the governance of innovation policy. In Israel, STI policy is based largely around R&D funding tosolve problems arising from market failuresas a result, there is a simple and clearly definedgovernance structure involving the Office of the Chief Scientist. However, in Singapore, STI issuesare dealt with in a much broader fashion, involving education, cluster development, R&D incentivesand industrial investment, and are spread over the relevant government departments. Other countries,such as Botswana, New Zealand and Mauritius, which are at less-advanced stages of STIdevelopment, are still building institutional structures that are appropriate to their contexts. However,based on this study, it appears that most countries are moving towards more streamlined, centralisedgovernance systems, so as to reduce the amount of complexity and bureaucracy involved in accessing

research funding.


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Fiscal incentives, such as R&D tax concessions or R&D subsidies, are only effective in spurringindustrial research activity once R&D-intensive industries have a significant presence in the country.It would be unreasonable to expect R&D incentives alone to kick-start an industry, or a cluster ofindustries. If a country wishes to develop a foothold in sectors such as ICT, biotechnology andsemiconductors, it would be better off investing in fundamental issues: human capital, through aneffective education policy; access to technology, through government diffusion and Foreign DirectInvestment; and an accessible, effective governance structure for innovation policy.

Every country observed in this analysis, as well as Trinidad and Tobago, has indicated a desire todevelop its own biotechnology industry. This is despite the fact that more than 20 years of massivebiotech investment have failed to yield a profitable stream of new products. The US devotes nearlyhalf of its research budget to biosciences, yet less than 10% of biotech firms were profitable in 2005(DePalma, 2005). However, some countries biotechnology strategies seem to be based on genericideas about the development of the industry, and fanciful notions of attracting large pharmaceuticalinvestments. This was unfortunately the case in Botswanas 1998 STI Policy, and such thinking hascontinued through to the latest NDP for Botswana in 2010. However, as a 2009 report on the countrystated, Botswana does not yet have a pharmaceutical manufacturing industry and thus, all drugs are

imported. A more productive strategy would be to attract investment in niche biotech markets, basedon the countrys comparative advantage, either in human capital, natural resources, or regulatoryadvantages.

One observation of note is that the most successful, innovative countries in this study (Singapore andIsrael) targeted far fewer industrial sectors for development than have the less successful countries,such as Botswana. While it may be too much to infer from such a small sample, it seems reasonable tosuggest that a developing country cannot spread its investment resources too thin in assisting R&D orstart-up industrial activity. There are enough difficulties in managing incentives and developing onenew industry that it is unfeasible to approach sector support in a more widespread way, as Botswanaattempted to do in 1998.

For small, open economies such as those studied in this analysis, the pursuit of an innovation-basedstrategy can bring benefits, but can also be extremely risky, since exposure to global competition canbe damaging if the country does not possess a clear competitive edge in the industries within which itsfirms compete. In this regard, developing economies should not ignore their local markets, since theexistence of specific local conditions means opportunities for product differentiation, innovation, andtherefore profit. At the same time, there are difficulties in creating new local markets with fewbuyersand entering global markets, with many competitors. In addition, many of the benefits ofsmall-economy innovation can accrue to the large foreign firms that must necessarily be a part of theirnational innovation systems. A solution to this problem is for small countries to develop absorptivecapacity (Cohen and Levinthal, 1990) so that the small country can appropriate the benefits ofknowledge exchange. One example of this would be to encourage multinational companies to provideextensive technical training for employees, in exchange for tax concessions, sacrificing short-run

revenue for long-run productive potential. Of the countries studied here, Singapore has been the mostsuccessful in developing such absorptive capacity, through technology transfer schemes such as theLocal Industry Updating Programme.


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Policy Comparison Matrix

Botswana Mauritius Norway New Zealand Israel Singapore

Governance

Structure

Diffuse (1998)

Increasinglycentralized(2010)

Simple, underdevelopment

Diffuse, underdevelopment

Previouslydiffuse,

complex, beingsimplified

Simple,narrowly

focused

Private sectordominant inventure capital

Diffuse, well-established

Policy

Approach

Very broad(1998),(2010),Inward-looking

Narrow,developmental

Broad,developmental,integrative(Government,business,labour)

Narrow,problem-oriented

Problem-oriented,targeted

Intervention asresponse tomarket failure

Technology-focused,Outward-looking

Key Policy

Initiatives

InnovationHub

Newgovernance

system,support forbasic research,expansion ofinternet access

Support forcreative

industries,Public sectorinnovation,esp. inhealthcare

Expansion ofR&D funding,

Streamlinedsupportmechanisms,Incentives forscience andengineeringgraduates

Support forIndustrial R&D

inbiotechnology

Clustering,technology

transfer,economicopenness,STEMeducation

Primary

Investment

Source

State State State State, PrivateSector

Private sector,FDI

State, FDI

Widespread

Access to

ICT?

Partial Partial Yes Yes Yes Yes

Comparative

Advantage

Not identified Sugar,

Textiles,MarineResources

Government,

Maritime,Fishing

Food

processing,Tourism

ICT, Software

Medicalbiotechnology

Electronics,

finance,Pharmaceuticals


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Bibliography

Botswana Technology Centre. 1998. Science and Technology Policy for Botswana.

Brunner, Ronald. 1991. The Policy Movement as a Policy Problem.Policy Sciences 24: 65-98.

Tan, J., & Gopinathan, S. 2005. Education reform in Singapore: Towards Greater Creativityand Innovation. InInternational Forum on Vietnam Education. pp. 271- 287.

Cowen, Tyler. 2011. The Great Stagnation: How America Ate All The Low-Hanging Fruit ofModern History,Got Sick, and Will (Eventually) Feel Better. New York: Penguin Books.

DePalma, Angelo. 2005. "Twenty-Five Years of Biotech Trends." Genetic EngineeringNews 25 (14): 1, 1423.

Ministry of Industry, Science and Research (Mauritius). 2010. Science, Technology and

Innovation Policy.

Ministry of Research, Science and Technology (New Zealand). 2010.Igniting Potential.

Ministry of Trade and Industry (Norway). 2008.An Innovative and Sustainable Norway.

European Commission. 2009a. Inno-Policy TrendChart: Innovation Policy Progress Reportfor Israel (2009).

European Commission. 2009b.Inno-Policy TrendChart: Innovation Policy Progress Reportfor Norway (2009).

Lee, Kuan Yew. 2000. From Third World to First: The Singapore Story 1965-2000. NewYork, NY. HarperCollins.

Senor Dan, and Saul Singer. 2009. Start-up Nation. New York: Twelve Books.

Ministry of Economic Development, New Zealand. 2003.Innovation Policy in Singapore andApplicability to New Zealand.

Wong, Poh-Kam. 1999. The Dynamics of HDD Industry Development In Singapore.Information Storage Industry Center, Graduate School of International Relations and PacificStudies, University of California, San Diego.

Robert Martinez - STI Policy Comparison

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