9/7/2015 Background  Research Development and Innovation (RDI) is an investment in a company’s future  Highest productivity improvements and hence GDP growth always came from innovation and this since the invention of the wheel  Adapting to fast growing technological innovation is crucial. In open markets, obsoleteness is a wide spread disease  Globalization, open information, and increasing linkages between Universities and Industries facilitate innovation and may one day turn it into a commodity

Remember !  For Industry, the principal purpose of business RDI is to develop differentiated products and services to meet the market needs COMPETITEVENESS: competitiveness is the set of institutions, policies, and factors that determine the level of productivity of a country

9/7/20154

5 The Global Competitiveness Index Ranking for ESCWA Member Countries covered by the report CountryRank (139 countries) Qatar17 Saudi Arabia21 UAE25 Oman34 Kuwait35 Bahrain37 Jordan65 Egypt81 Lebanon 92 Syria97 Lebanon Scores VERY BAD in Competitiveness Index

Basic Requirement Macroeconomic Environment  Lebanon has successfully maintained a healthy economy despite the worldwide economic and financial crisis. (8.7% GDP growth in 2009 vs. world average of 1%) HOW CAN WE SUSTAIN IT !?

Basic Requirement Health and Primary Education  Good health services exist in Lebanon  Basic Education is of good quality and available to all. Literacy rates are improving  Healthy educated population yields competitive workforce  Resource allocation should remain strong for both sectors in order to sustain competitiveness

Efficiency Enhancers Higher Education and Training  The relatively acceptable higher education system of Lebanon should be built on (we score 4.6/7 – still significant room for improvement)  “There is no science w/o scientists, there is no scientists w/o research!”  Efforts should be made on enforcing linkages with industry hence economy (jobs, R&D, etc)

Efficiency Enhancers Goods Market Efficiency  The country produces a good mix of goods and services  A wide variety of goods are traded on the market competitively

Efficiency Enhancers Financial Markets Development  Banking sector is strong, stable, and well developed.  Stock market is limited and inefficient  Access of funds and capital is low (besides bank loans)  IPOs, private equity and M&As are very low  Investment banking is very weak

Efficiency Enhancers Technological Readiness  The technological readiness of Lebanon’s developed industries is average given their partial ability to use the available technologies to improve productivity and efficiency  The country’s labor force is quite qualified and needs to be continuously up-to-date; they have the ability to adopt the available technologies  Are we going to produce technology or remain users?

Efficiency Enhancers Market Size  Lebanon’s market size is not limited to its boundaries  The market spans to the Arab and European countries and beyond  Exports have been growing and are crucial

Innovation and Sophistication Factors Business Sophistication  Many sectors have high sophistication (mature, efficient, profitable, up-to-date)  Sophistication results also from strong: oLinkages and openness to the world oAmount of expats that are still in close contact with the country oOut-sourcing, sub-contracting, joint ventures, etc

Innovation and Sophistication Factors Research Development and Innovation  Four of Lebanon’s top exporter industrial sectors namely: oElectromechanical (about 22% of exports) oAgri-food (about 10% of exports) oChemical (about 8.5% of exports) oTransportation (about 7% of exports) …are by nature conducive to innovation

What Research?  Product and Material Research  Manufacturing and Operations Research  Market Research

Product and Material Research  Find new product ideas to meet customers’ needs  Research new Materials to develop new products and processes  Improve Material performance  Find new and different products and new uses of existing products or by-products

Manufacturing and Operations Research  Development of tools and equipment  Manufacturing methods aimed at improving productivity and reducing costs  Application of information technology for informed decision-making  Study of optimal resource allocation  Predict system behavior

Market Research  Collection and analysis of market data oTarget market oCompetition oEnvironment  Crucial for understanding new trends  Very important to analyze competitiveness

Development  The most economically feasible method for applying the facts or principles identified  Carried out typically after applied research

Innovation  It is the final stage of a development process, representing the final result achieved and implemented successfully  Innovative activities may relate to new products, new services, new methods of production, opening new markets, new sources of supply, and new ways of organizing  Innovation is directly correlated with the performance of firms  Around the world innovation is now recognized as a prime source of national competitive advantage

MASTER PLAN for RDI Industrial Innovation  A large improvement can be made on one of the main pillars of competitiveness  Industrial Innovation  We recommend a Master Plan involving 4 major players: oPublic Sector oUniversities oIndustrialists oBanks and Financial Institutions

RDI Master Plan: Public Sector  National RDI policy with stakeholders led by CNRS with RDI observatory to measure i/o, impact, foresight, studies  Tax incentives for RDI in private sector (industry, universities, centers)  IRI facilitation and coordinating industrial research and innovation  ALI matchmaker between industry, CNRS, IRI and universities

RDI Master Plan: Universities  Participate in national RDI observatory activities  Graduate and post-graduate relevant and connected research  Develop tracks of research priorities needed in country (industry, energy, environment, water, etc)  Establish graduate schools to offer multi- disciplinary programs and activities  Crediting professional activities by faculty members towards promotion (consulting, development, applied research, innovation)

RDI Master Plan: Industrialists  Include in their business plans an RDI chapter  Strategy on % of RDI spending per year  Conduct state-of-the-art-product research to confirm need for development  Conduct extensive market research to identify consumer needs  Seek local RDI capacity to solve efficiency and development problems, build local expertise over time, hence, multiplier effect  Ask for help from ALI, CNRS, IRI, and Universities

RDI Master Plan: Banks and Financial Institutions  Create Innovation funds (Equity and Loans) to be invested in spin-offs which resulted from innovation  Find strategic partnerships and alliances

Productive or Waste: Importance of Cycles!  RDI can result from two cycles:  Market Driven  Research Driven  Any flaw from within one cycle makes the difference between a productive and wasted RDI

Practical Recommendations  We should extend the current law of tax incentives on “Tawzifat Zatiyyeh” related to CAPEX, to include RDI expenses.  Industrialists should be ready to have a high failure rate in RDI projects; however, one success out of ten failures will largely compensate all the losses.