The need for additional Financing Resources & Mechanisms for R&D (S&T) in the Arab Region Adnan Shihab-Eldin On the Issues and Problems of Scientific Research in the Arab World 14-15 November, 2006 Alexandria - Egypt Adnan Shihab-Eldin

Status of RD and Financing in the Arab Region Outline Background Status of RD and Financing in the Arab Region Role of State and private Sector Additional novel mechanisms National vs. Regional/International : Is there a need for a pan-Arab Financing of RD? For What and How Adnan Shihab-Eldin

R&D and Innovation within modern Knowledge Economy Background Financing is Necessary but not Sufficient for success of Knowledge-Based Economy R&D and Innovation within modern Knowledge Economy What we learn from recent experiences:  The case of Finland  Implications for Developed, Developing (including Arab) Countries and Region Adnan Shihab-Eldin

Knowledge Based Economy The knowledge economy is based on: the generation and adoption of new knowledge created by scientific research and technological advances; investments in education and research; adoption of best practices; and openness to social, economic, and cultural innovations. For advanced industrialized countries with high labor and infrastructure costs, the knowledge economy offers competitive advantages in high-technology product manufacture and efficient service sectors. For natural-resource-based economies it offers improved technologies and higher-value added products with closer customer linkages, as well as a path for sustainable develop. For developing countries, knowledge offers possibilities to short cut development phases, leapfrog technologies, and more quickly integrate into the global economy by becoming more attractive to international investors. Adnan Shihab-Eldin

Fundamental changes taking place Globalization Transportation and communications costs down Global information and media Regional integration (NAFTA, EU, ASEAN+3) Trade liberalization and increased competition Exports and imports increased from 38% to 52% 1990-2002 Value added by MNCs is 27% of global GDP in 2002 Digital revolution Knowledge-based economies World Bank Studies, Korea, China, Japan, India, Finland Adnan Shihab-Eldin

The Four Pillars of the Knowledge Economy Economic and Institutional Regime Education Interconnected Interdependent EIR that provides incentives for the efficient use of existing and new knowledge and the flourishing of entrepreneurship Information Infrastructure R&D, Innovation Adnan Shihab-Eldin

The Experience of Finland Adnan Shihab-Eldin

The share of high tech exports in some OECD countries 1988-2001 Exports of Finnish high tech products totalled 9.9 billion euros in 2001, i.e. 21 % of total exports of goods. USA Japan United Kingdom Netherlands FINLAND Switzerland France Sweden Germany Denmark % of total exports of goods EU Norway Source: Statistics Finland, according to the OECD product catalogue defined in 1995 Adnan Shihab-Eldin

Competitiveness scoreboard Total ranking IMD Total competitiveness WEF Total growth competitiveness WEF Current competitiveness 2002 2001 2000 1999 2001 2000 1999 2001 2000 1999* USA FINLAND Luxembourg Netherlands Singapore Denmark Switzerland Canada Hong Kong Ireland Sweden Iceland Germany France Japan 1 2 3 4 5 6 7 8 9 10 11 12 15 22 30 1 3 4 5 2 15 10 9 6 7 8 13 12 25 26 1 4 6 3 2 13 7 8 12 5 14 9 11 22 24 1 5 3 4 2 9 7 10 6 8 14 13 12 23 24 1 6 3 4 2 14 10 7 8 5 13 24 15 22 21 .. 11 9 16 17 20 19 18 25 23 2 1 .. 4 9 6 5 11 16 22 7 17 3 15 14 10 8 18 12 21 * Based on earlier competitiveness index of micro economy Sources: The World Competitiveness Yearbook (IMD) and The Global Competitiveness Report (WEF) Adnan Shihab-Eldin Docs 36107 04-2002

Development of Knowledge Economy: Lessons From Finland The Finnish approach to the broad innovation system, including the creation of new knowledge and the commercialization of that knowledge, is very relevant for the larger and more technologically advanced countries with a critical mass of scientists and engineers, as well as a critical mass of R&D expenditures, It is also relevant for middle-income countries, as the ever-increasing globalization (in particular the increasing importance of technology and information) means developing effective strategies of tapping into the rapidly growing stock of global knowledge, ( Finland still doing); However, for the majority of developing the focus needs to be somewhat different (modified) than Finland’s. Adnan Shihab-Eldin

Lessons Learned Because DC are still very far from technological frontier, still need to put priority on developing effective means of tapping preexisting and rapidly growing stock of global knowledge. DC should conceive of innovation system broadly & include all of the relevant actors. However, DC need to put more weight than they do now on understanding, acquiring, adapting, diffusing, and using existing knowledge, including indigenous knowledge. This priority includes putting in place basic technological infrastructure such as norms and standards, metrology, testing, and quality control, as well as strong dissemination mechanisms and institutions such as technical information centers, productivity organizations, and agricultural and industrial extension agencies. DC also need to set up/develop public research institutes that can help them access what global technologies may be relevant and help them adapt these technologies to their circumstances. Adnan Shihab-Eldin

Implications I Importantly, utilizing their existing knowledge involves creating technological capability in their productive firms and in getting them to invest in improving and eventually creating their own technologies in their most advanced sectors. DC will have to pay more attention to all levels of education. DC will have to pay more attention to strengthening universal basic and secondary education as well as higher and secondary education for their citizens to become effective users of technology, & to keep up with and make effective use of the rapidly expanding technological frontier. Developing an effective innovation system also involves attracting FDI that can bring in relevant new technology to advance local economies. Attracting FDI can be an important tool if properly utilized! It includes getting into global value chains controlled by multinational companies and trying to move up those value chains. It also includes developing linkages & networks between domestic public & private research institutes and universities & foreign ones, and among all of these domestic institutions. Adnan Shihab-Eldin

Implications II A final implication for all countries is the importance of focusing not only on what can be learned from the past but on anticipating and preparing for the future. ; This Finnish example explains why Finland not only was able to make such a dramatic transformation to a knowledge-based economy but also why it has been able to remain competitive; as a result of the rapid advances in knowledge & continuous challenge of globalization, the world is not standing still; What worked in the past may not work in future prerequisites for being successful seem to be rising ever higher &demanding  importance of looking forward to see how to be better prepared for future challenges & opportunities. Arab countries in particular need to monitor this aspect closely because there may be important new areas that can be exploited;  One must be ready to take advantage of them. Adnan Shihab-Eldin

What Institutional Changes are Needed for Improved Innovation System? For Each Country: Study Knowledge Economy Index and Its Components at www.worldbank.org/kam What Institutional Changes are Needed for Improved Innovation System? What Model Would Best Advance Economic Development?  Then decide on additional resources needed for key targeted interventions, sources & mechanisms; Adnan Shihab-Eldin

Sources, Targets & Mechanisms for Financing RD/ST in Arab region State of Arab RD/ST, State Financing vs. Private Financing in the Arab Region: Additional financing by Arab States : Must establish strategic goals of additional financing (intervention) in priority areas Targets & Sources for additional intervention  (priority areas for Knowledge economy) Sources for Additional Financing by Private Sector Additional Financing by Regional and International sources Adnan Shihab-Eldin

Features of RD in Arab Region : Then and Now Common: quantitative growth in numbers in most Arab Countries, institutional, manpower and coverage; However Evolving quality paths and expenditure differ dramatically: Retreated in some, Advanced rapidly and then stagnated/retreated, etc.. Continued advance (slow and fast) (Ups and downs) Overall capacity converged with small average growth positive but behind OECD and emerging developing countries; Need for strong intervention to produce results; Some additional financing is needed: Targets for and Sources of additional financing: national, regional, international Adnan Shihab-Eldin

Additional Sources and Mechanisms for Financing RD/ST National Level: National Sect oral Funds  Redirect “Corporate Tax” for direct support of RD/ST/TD Brazil Pakistan Telecommunication (1% of gross income for national ST) National Budgets must be increases for targeted interventions Education Innovation/knowledge-based economy KFAS NOC Direct small part of Oil revenues to support both energy and other targeted research; Direct IOC to allocate part of revenue to support targeted research (KISR) Encourage Private Sector funding of innovations to increase profit (TDI UK Scoreboard 2006) Role of VC Funds (national, regional & international) Adnan Shihab-Eldin

Additional Sources and Mechanisms for Financing RD/ST II Regional Level: ( An AFSTD again?) Centers of excellence Support programs in priority areas of regional dimension International Level Global Institutional and Program Funds (p 42) Maintain open RD/ST system in DC Debt Swap FDI (Partnerships) Support capacity building Adnan Shihab-Eldin

The case for an Arab Fund for RD/ST 1976 CASTARAB Decision to Establish an Arab Fund: Objective Capital Mission Goals reason for failure Have conditions changed? Is there a need now? The case for reviving the AFSTD Adnan Shihab-Eldin

AFSTD Detailed Feasibility Study carried out by AFSED, KF and KISR 1976-1978 proposed the establishment of a regional body to assist Arab countries in their efforts to overcome ST ”backwardation” and dedicate ST efforts to Development; Among key objectives for the fund were the following: Using available capacities effectively; Developing ST capacities; Assist in formulating appropriate policy of ST development; Support initiatives of Arab Cooperation  Scope was found too broad and Role fo AFSTD was seen as partial: supplementary, promoting and catalysts through: Grants, Technical Assistance, loans, etc…through support for specific objectives avoiding provisions for general support; To be capitalized at 150 m KD (500 $ m KD) Reason for not failures: Mainly political disagreements among key Governments on HQ location and Governance structure Adnan Shihab-Eldin

AFSTD II? Reasons for Failure of prior effort: Conditions changed? Yes and no! Reasons for renewed effort: Capacity Building at regional level Centers of excellence Common Regional Priorities that may be best addressed through regionally/sub-regional coordinated efforts Call for AFSED to take a lead and call for, initially, creating a 10-y regional funding program that could be a nucleus for such a FUND open for participation by other concerned national/international funds (OFID,IDB, etc.. Adnan Shihab-Eldin

GERD 1999 2000 Arab Asia 1.9 $ bn Arab Africa 0.4 $ bn Total ~ 0.5% Source: UIS Bulletin, 2004 Adnan Shihab-Eldin

R&D Exp. (GERD) in $bn (PPP) & R&D Intensity (GERD/GDP) in % 1990 GERD/GDP 2000 World 410 1.8% 755 1.7% Developed 367.9 2.35 596.7 2.3% Developing 42 0.7% 158 0.9% India 2.5` 0.8% 20 China 12.4 50.3 1% NIC Asia 8.2 1.6% 48.2 1.9% Arab Africa 0.4 0.3% 1.1 0.2% Arab Asia 1.9 0.4% 0.6 0.1% Israel 1.8 2.5% 6 4.7% Latin America 11.3 0.5% 21.3 0.6% Source: UIS Bulletin, 2004 Adnan Shihab-Eldin

R&D expenditures by source of funds Business enterprises: R&D financing in 1999 R&D expenditures by source of funds Japan Korea Ireland Sweden Switzerland United States Belgium FINLAND OECD Germany Czech Rep. EU Denmark UK Norway Austria Canada Netherlands France Australia Spain Italy Iceland Turkey Hungary Poland N. Zealand Portugal Greece Mexico Business enterprises Public sector Other national resources Abroad No breakdown Arab Countries Business enterprises: < 10 % (range 0 -15%) 20 40 60 80 100 % Source: OECD, MSTI database, April 1999 Adnan Shihab-Eldin J07/ 00-06

Company Profitability vs. Investment in R&D Source: UK TDI R&D Scorecard 2006 Adnan Shihab-Eldin

Different priorities and specializations of Industry RD Adnan Shihab-Eldin Source: UK TDI R&D Scorecard 2006

Different priorities and specializations of Industry RD Adnan Shihab-Eldin Source: UK TDI R&D Scorecard 2006

Source: UK TDI R&D Scorecard 2006 RD and Sales Growth Adnan Shihab-Eldin Source: UK TDI R&D Scorecard 2006

Adnan Shihab-Eldin

Innovation environment in Arab Countries Resources and funding (qualitative/Relative) Total < 2 $ bn < 10% Private Private The figures represent the total extent of each organisation in million euros in 2002, the figure for business angels is from year 2001. In parenthesis the share that is funded from the State budget. The funds of Tekes, the Academy of Finland and Innofin are funded entirely from the State budget. Public Public Business development Marketing Internationalisation Business development Marketing Internationalisation Basic research Applied research Business R&D Basic research Applied research Business R&D Adnan Shihab-Eldin

Features of RD in Arab Region : Then and Now Common: quantitative growth in numbers in most Arab Countries, institutional, manpower and coverage; However Evolving quality paths and expenditure differ dramatically: Retreated in some, Advanced rapidly and then stagnated/retreated, etc.. Continued advance (slow and fast) (Ups and downs) Overall capacity converged with small average growth positive but behind OECD and emerging developing countries; Need for strong intervention to produce results; Some additional financing is needed: Targets for and Sources of additional financing: national, regional, international Adnan Shihab-Eldin

Innovation environment in Finland Resources and funding R&D at companies 3,375 Business Angels 387 Private From abroad 152 Venture capitalists: Private 349 Industry Investment Ltd 63 (42, additional state investment) Sitra 48 VTT 219 (68) Finnvera 352 (34) Universities 926 (402) Tekes 386 Finpro 35 (20) Academy of Finland 177 The figures represent the total extent of each organisation in million euros in 2002, the figure for business angels is from year 2001. In parenthesis the share that is funded from the State budget. The funds of Tekes, the Academy of Finland and Innofin are funded entirely from the State budget. Ministries, TE-Centres, sectorial research 311 (227) Innofin 5 (4) Source: Jorma Routti Knowledge Economy Public Business development Marketing Internationalisation Basic research Applied research Business R&D The figures represent the total extent of each organisation in million euros in 2002. In parenthesis the share that is funded from the State budget. The funds of Tekes, the Academy of Finland and Innofin are funded entirely from the State budget. Adnan Shihab-Eldin

Evaluations of the Finnish Science, Technology and Innovation Environment Since 2000, the European Commission has published the European Innovation Scoreboard (EIS). On the base of EIS, the leading innovative countries in the EU are Finland, Sweden, Denmark and the Netherlands. Indicators published in The Key Figures 2002 also confirm that the Nordic countries Finland, Sweden, and Denmark are best prepared and are rapidly turning their economies into knowledge-based economies. In a comparison made by the University of United Nations Finland is ranked 2nd in overall ranking. Finland is also ranked 2nd in Education, Technology and Information Indices. According to a United Nations Development Programme (UNDP) report released in 2001,  Finland is the most advanced country in creating and using technology. Adnan Shihab-Eldin

The End Thank You Adnan Shihab-Eldin

GDP and Average Growth (WB WDR 2006) DGP Avg. growth, $ million2004 % (2000-2004) World 40,887,837 t 2.5 % Low income 1,253,353 5.4% Middle income 6,930,704 4.4 % Upper middle income 2,988,438 2.7% Lower middle income 3,941,575 5.7% Low & middle income 8,183,030 4.6% East Asia & Pacific 2,367,508 7.5% Europe & Central Asia 1,768,088 5.0 % Latin America & Carib. 2,018,715 1.5 % Middle East & N. Africa 600,256 4.5 % South Asia 878,785 5.8 % Sub-Saharan Africa 543,990 3.9% High income 32,715,777 2.0% Adnan Shihab-Eldin

Sharing Knowledge between Companies and Universities Recruitment Education and training R&D Cooperation Cooperation benefits both parties, but independent basic and applied research in unversities is equally important Adnan Shihab-Eldin

Cooperation between companies Share of cooperating companies of all innovating companies Tiedot perustuvat EU:n innovaatiotutkimukseen, joka kattaa tiedot yhteistyöstä vuosilta 1994-1996. Suomi on EU-vertailussa johtava innovaatioyhteistyötä tekevä maa. Monissa maissa tutkimusyhteistyötä on vasta nyt ryhdytty edistämään, kun taas Suomessa yhteistyö on ollut tutkimusrahoituksen periaatteissa keskeistä jo 1980-luvulla. % Source: Towards a European Research Area - Key Figures, Special Edition. EU 2001 Adnan Shihab-Eldin Docs 36110 04-2002

R&D expenditures by source of funds R&D financing in 1999 R&D expenditures by source of funds Japan Korea Ireland Sweden Switzerland United States Belgium FINLAND OECD Germany Czech Rep. EU Denmark UK Norway Austria Canada Netherlands France Australia Spain Italy Iceland Turkey Hungary Poland N. Zealand Portugal Greece Mexico Business enterprises Public sector Other national resources Abroad No breakdown 20 40 60 80 100 % Source: OECD, MSTI database, April 1999 Adnan Shihab-Eldin J07/ 00-06

Services in the Mobile Information Society Entertainment Corporate access and e-mail Voice e-education Video e-shopping and banking Adnan Shihab-Eldin

CREATIVITY, INNOVATION AND ROLE OF Second ECA Education Conference Tertiary Education: Quality, Financing and Linkages with Innovation and Productivity Dubrovnik, Croatia, October 2-4, 2005 CREATIVITY, INNOVATION AND ROLE OF HIGHER EDUCATION IN ECONOMIC DEVELOPMENT Professor Jorma Routti CIM Creative Industries Management & Helsinki University of Technology jorma.routti@cimfunds.com jorma.routti@hut.fi Former President of Sitra & Director General of Research DG of European Commision Adnan Shihab-Eldin

15 Largest Economies: GDP 2002 (Trillions of international $) Ave RGDP per capita growth 1990-2002 (%) 9 China $5.73t 7 South Korea France 5 $0.78t India $2.69t $1.55t Canada United Kingdom $0.90t $1.51t 3 Spain $0.85t Mexico $0.88t United States Indonesia Italy $1.48t $10.14t $0.66t 1 Brazil $1.31t Germany $2.17t Japan 3.26 5,000 10,000 15,000 20,000 25,000 30,000 35,000 -1 Russia $1.41t -3 GDP per capita (international $) 2002 ©Knowledge for Development, WBI Adnan Shihab-Eldin

China United States India France Russian Federation United Italy Real GDP (PPP): Projections 2004-2015 (Using 1991-2003 Average Growth Rates) 2 4 6 8 10 12 14 16 2003 2005 2007 2009 2011 2013 2015 Trillions of 1995 international $ India China Brazil Canada France Germany China Italy Japan Mexico Russian Federation United Kingdom United States United States India France Russian Federation United Italy Brazil Kingdom Mexico Germany Japan Canada Adnan Shihab-Eldin

Telecommunications and Nokia's Change Net sales USD 19.9 billion 1999 Market capitalization USD 236.5 billion, as of February 28th 2000 Net sales USD 5.2 billion 1988 Market capitalization USD 1.4 billion at year end 1988 1988 1998 Mobile Phones 60% Infrastructure 33% Other 7% Floorings 1% Chemicals 2% Machinery 4% Electrical Wholesale 4% Rubber 6% Information Systems 23% Cables 9% Paper 10% Consumer Electronics 31% Mobile Telephones 5% Telecommunications 5% 2000 Four weeks ago, we released our end-of-year figures for 1999 and I was delighted to announced a third consecutive record year – the strongest annual operating results in our history - with net sales of close on 20 billion USD. We now employ over 55,000 people and have increased our global presence in mobile phone terminals to over 130 countries and are supplying infrastructure to well over 150 network operators on all continents. Adnan Shihab-Eldin

Services in the Mobile Information Society Entertainment Corporate access and e-mail Voice e-education Video e-shopping and banking Adnan Shihab-Eldin

FOCUS IN THE VALUE CHAIN CONSUMER CONTENT CREATORS PRODUCERS DISTRIBUTORS CREATES IDEA HOLDS IPRs TECHNOLOGY DRIVEN IDEAS DEVELOPS COPYRIGHTS PACKAGES IPRs PROGRAMMING DISTRIBUTES MARKETS / BRANDS IPRs DISTRIBUTION PLATFORMS TICKETS MAGAZINES BOOKS, CD, VIDEO, DVD, RADIO, TV NET, WAP/3G Adnan Shihab-Eldin

Innovation – Weighted by Population Adnan Shihab-Eldin

Education and Innovation Keys to Competitiveness Education is the fundamental enabler of the knowledge economy and a key to competitiveness and growth Critical; no longer basic or even secondary but higher education and the constant upgrading of skills Increasing competition for people with high level skills Education couples with research and innovation Adnan Shihab-Eldin

R&D input in some OECD countries Percentage of GDP 4.5 Israel Sweden 4.0 FINLAND Japan 3.5 Iceland USA 3.0 South Korea Germany 2.5 OECD total France Singapore 2.0 Suomi on OECD:n vertailuissa tutkimuksen huippumaita. Suomen tutkimus- ja kehityspanostuksen osuus bruttokansantuotteesta on kasvanut jatkuvasti, jopa 1990-luvun alun lamavuosina. Tällä on vauhditettu elinkeinoelämän rakennemuutosta kasvualojen suuntaan. Päävastuun tutkimus- ja kehityspanosten kasvusta ovat kantaneet yritykset, paljolti julkisen rahoituksen kannusteidenkin vaikutuksesta. Kolmen viime vuoden aikana kasvuvastuu on ollut lähes pelkästään yrityksillä. Julkisen rahoituksen osuus kaikista tutkimuspanostuksista Suomessa on laskenut jo alle 30 prosentin. Tämä on johtanut tutkimus- ja kehitystyön luonteen muuttumiseen lyhytjänteisemmäksi. Maiden erilaiset elinkeinorakenteet vaikuttavat kansantalouden tutkimusintensiivisyyteen. Nykyisen elinkeinorakenteemme takia panostusten pitääkin olla muita maita korkeampi Suomessa. Denmark 1.5 Canada Great Britain Austria 1.0 Norway 0.5 China est. Sources: OECD, Main Science and Technology Indicators database, Statistics Finland (Finland 2002) and Statistiska centralbyrån (Sweden 2001, estimate). Adnan Shihab-Eldin Docs 36109 02-2003

The share of high tech exports in some OECD countries 1988-2001 Exports of Finnish high tech products totalled 9.9 billion euros in 2001, i.e. 21 % of total exports of goods. USA Japan United Kingdom Netherlands FINLAND Switzerland France Sweden Germany Denmark % of total exports of goods EU Norway Source: Statistics Finland, according to the OECD product catalogue defined in 1995 Adnan Shihab-Eldin Docs 32187 B 03 /02-03

Securing competitiveness in the Forest Industry INFORMATION TECHNOLOGY sensors, mea suring and control computational intelligence, simulation and machine vision multimedia and telecommunication tomography MANUFACTURING TECHNOLOGY forestry machines process and production machinery material technology F O R E S T I N D U S T R Y Pulp and paper technology Machines, machinery and processes Wood products industry CONSTRUCTION AND WOOD TECHNOLOGY modification of wood construction technology and architecture logistics, assembly FORESTRY ENERGY AND ENVIRON- MENTAL TECHNOLOGY biofuels, combustion technology ecobalances closed cycles energy-saving and emissions MARKETS quality competitiveness price competitiveness environmental expertise BIOTECHNOLOGY enzymes rot prevention gene technology CHEMICAL TECHNOLOGY paper and bleaching chemicals surface treatment substances pigments, adhesives Adnan Shihab-Eldin A11/ 99-08

Co-operation between companies and universities and research institutes Share of innovative companies having co-operation agreements with universities (1994-1996) Share of innovative companies having co-operation agreements with public research institutes (1994-1996) Norway UK Sweden FINLAND Portugal Austria Netherlands Ireland Italy France Denmark Germany Belgium EU Norway UK Sweden FINLAND Portugal Austria Netherlands Ireland Italy France Denmark Germany Belgium EU 20 40 60 % 20 40 60 % Source: Eurostat, Enterprise DG, 2nd Community Innovation Survey Adnan Shihab-Eldin J05/ 00-06

Forest Industry Cluster Poyry Design and Consulting Pulp Mills Sunds Design, manufacting and maintenance Valmet Paper Machines Design, manufacturing and remote operations Timberjack Forest Harvestors World wide marketing Paper, cardboard, packaging material Production Focus on specific market segments and products Brasil, South Africa, China, Indonesia Manufacturing and Operations Adnan Shihab-Eldin

Composition of Regional Economies United States, 2001 Traded Clusters Local Clusters Natural Resource-Driven Industries 31.6% 1.7% $44,956 133.8 4.5% 144.1 21.7 590 67.6% 2.8% $28,288 84.2 3.7% 79.3 1.3 241 0.8% -1.0% $33,245 99.0 2.0% 140.1 7.2 48 Share of Employment Employment Growth, 1990 to 2001 Average Wage Relative Wage Wage Growth Relative Productivity Patents per 10,000 Employees Number of SIC Industries Note: 2001 data, except relative productivity which is 1997 data. Source: Cluster Mapping Project, Institute for Strategy and Competitiveness, Harvard Business School Adnan Shihab-Eldin

Share of Traded Employment in Strong Clusters (LQ > .8), 2001 Determinants of Regional Prosperity Cluster Strength and Wage Levels Average Regional Wage, 2001 Bay Area, CA New York, NY Boston, MA y = 96.736x + 16218 R2 = 0.377 Share of Traded Employment in Strong Clusters (LQ > .8), 2001 Source: County Business Patterns; Michael E. Porter, The Economic Performance of Regions”, Regional Studies, Vol. 37, 2003 Adnan Shihab-Eldin

TECHNOLOGY & INNOVATION SOCIAL & HUMAN CAPITAL RESEARCH CAPACI TY s SUPPLY USERS ABSORTION CAPACITY DEMAND CREATORS TECHNOLOGY & INNOVATION Adnan Shihab-Eldin

TECHNOLOGY & INNOVATION SOCIAL & HUMAN CAPITAL s SUPPLY USERS RESEARCH CAPACI TY UK USA IRL FIN ITA ABSORTION CAPACITY SWE FR DE JAPAN CREATORS DEMAND TECHNOLOGY & INNOVATION Adnan Shihab-Eldin

ECONOMIC POLICY MANAGEMENT PROGRAMS SINCE 1977 Participants: Members of Parliament, Media Leaders, Civil Servants Labour Movement, Industry Organizations, Academia Objectives: Growth, Employment, Balance, Low Inflation Instruments: Fiscal Policy, Taxation, Incentives, Echange Rates, Interest Rates Topics: Globalization, Integration, Trade, Social Policy, Regional Policy, Education, Research, Industry, Agriculture, Banking, Environment, etc. Government: Consencus Building, Trade-offs Simulation Models, Economic Advisors Adoption: Baltic Countries, New EU Members, Latin America, WB Adnan Shihab-Eldin

TIME – ENERGY - INFORMATION T = max I = max I = 0 T = 0 E = max  Jorma.Routti@cimfunds.com Adnan Shihab-Eldin

Summary of Finland KE experience Adnan Shihab-Eldin

Sharing Knowledge between Companies and Universities Recruitment Education and training R&D Cooperation Cooperation benefits both parties, but independent basic and applied research in unversities is equally important Adnan Shihab-Eldin

Evaluations of the Finnish Science, Technology & Innovation Environment According to WEF Finland is ranked 2nd both in growth competitiveness and microeconomic competitiveness. In technology Finland is ranked 3rd. WEF also ranks Finland first in the Networked Readiness Index (NRI), boosted by the best performance in terms of technology usage by its citizens, businesses and the government. IMD ranks Finland 2nd in overall competitiveness in 2002. In technological infrastructure Finland ranks 2nd and scientific infrastructure 6th. The Lisbon Review measures and ranks annually the performance of the European Union in achieving the goals laid out in the EU's Lisbon Strategy. Based on the Lisbon Review Finland is the only consistently leading country in the EU. The dimensions of the Lisbon diamond are information society, innovation and R&D, liberalization, network industries, financial services, enterprise environment, social inclusion and sustainable development. Adnan Shihab-Eldin Docs 20377

R&D input in some OECD countries Percentage of GDP 4.5 Israel Sweden 4.0 FINLAND Japan 3.5 Iceland USA 3.0 South Korea Germany 2.5 OECD total France Singapore 2.0 Suomi on OECD:n vertailuissa tutkimuksen huippumaita. Suomen tutkimus- ja kehityspanostuksen osuus bruttokansantuotteesta on kasvanut jatkuvasti, jopa 1990-luvun alun lamavuosina. Tällä on vauhditettu elinkeinoelämän rakennemuutosta kasvualojen suuntaan. Päävastuun tutkimus- ja kehityspanosten kasvusta ovat kantaneet yritykset, paljolti julkisen rahoituksen kannusteidenkin vaikutuksesta. Kolmen viime vuoden aikana kasvuvastuu on ollut lähes pelkästään yrityksillä. Julkisen rahoituksen osuus kaikista tutkimuspanostuksista Suomessa on laskenut jo alle 30 prosentin. Tämä on johtanut tutkimus- ja kehitystyön luonteen muuttumiseen lyhytjänteisemmäksi. Maiden erilaiset elinkeinorakenteet vaikuttavat kansantalouden tutkimusintensiivisyyteen. Nykyisen elinkeinorakenteemme takia panostusten pitääkin olla muita maita korkeampi Suomessa. Denmark 1.5 Canada Great Britain Austria 1.0 Norway 0.5 China est. Sources: OECD, Main Science and Technology Indicators database, Statistics Finland (Finland 2002) and Statistiska centralbyrån (Sweden 2001, estimate). Adnan Shihab-Eldin Docs 36109 02-2003

R&D input in some OECD countries Percentage of GDP 4.5 Israel Sweden 4.0 FINLAND Japan 3.5 Iceland USA 3.0 South Korea Germany 2.5 OECD total France Singapore 2.0 Suomi on OECD:n vertailuissa tutkimuksen huippumaita. Suomen tutkimus- ja kehityspanostuksen osuus bruttokansantuotteesta on kasvanut jatkuvasti, jopa 1990-luvun alun lamavuosina. Tällä on vauhditettu elinkeinoelämän rakennemuutosta kasvualojen suuntaan. Päävastuun tutkimus- ja kehityspanosten kasvusta ovat kantaneet yritykset, paljolti julkisen rahoituksen kannusteidenkin vaikutuksesta. Kolmen viime vuoden aikana kasvuvastuu on ollut lähes pelkästään yrityksillä. Julkisen rahoituksen osuus kaikista tutkimuspanostuksista Suomessa on laskenut jo alle 30 prosentin. Tämä on johtanut tutkimus- ja kehitystyön luonteen muuttumiseen lyhytjänteisemmäksi. Maiden erilaiset elinkeinorakenteet vaikuttavat kansantalouden tutkimusintensiivisyyteen. Nykyisen elinkeinorakenteemme takia panostusten pitääkin olla muita maita korkeampi Suomessa. Denmark 1.5 Canada Great Britain Austria 1.0 Norway 0.5 China est. Sources: OECD, Main Science and Technology Indicators database, Statistics Finland (Finland 2002) and Statistiska centralbyrån (Sweden 2001, estimate). Adnan Shihab-Eldin Docs 36109 02-2003

Securing competitiveness in the Forest Industry INFORMATION TECHNOLOGY sensors, mea suring and control computational intelligence, simulation and machine vision multimedia and telecommunication tomography MANUFACTURING TECHNOLOGY forestry machines process and production machinery material technology F O R E S T I N D U S T R Y Pulp and paper technology Machines, machinery and processes Wood products industry CONSTRUCTION AND WOOD TECHNOLOGY modification of wood construction technology and architecture logistics, assembly FORESTRY ENERGY AND ENVIRON- MENTAL TECHNOLOGY biofuels, combustion technology ecobalances closed cycles energy-saving and emissions MARKETS quality competitiveness price competitiveness environmental expertise BIOTECHNOLOGY enzymes rot prevention gene technology CHEMICAL TECHNOLOGY paper and bleaching chemicals surface treatment substances pigments, adhesives Adnan Shihab-Eldin A11/ 99-08

FOCUS IN THE VALUE CHAIN CONSUMER CONTENT CREATORS PRODUCERS DISTRIBUTORS CREATES IDEA HOLDS IPRs TECHNOLOGY DRIVEN IDEAS DEVELOPS COPYRIGHTS PACKAGES IPRs PROGRAMMING DISTRIBUTES MARKETS / BRANDS IPRs DISTRIBUTION PLATFORMS TICKETS MAGAZINES BOOKS, CD, VIDEO, DVD, RADIO, TV NET, WAP/3G Adnan Shihab-Eldin

Adnan Shihab-Eldin

R&D intensity and GDP growth in some countries 4.0 3.0 2.0 1.0 0.0 0.0 1.0 2.0 3.0 4.0 5.0 6.0 7.0 8.0 9.0 Real growth in GDP 95-99, % Source: Statistics Finland Adnan Shihab-Eldin A 07B/ 01-06

INNOVATION SYSTEM Economic and absorptive social needs capacity users interaction - knowledge transfer - user needs Knowledge base knowledge producers - quality - relevance Adnan Shihab-Eldin 190199/EO/mwe

Cooperation between companies Share of cooperating companies of all innovating companies Tiedot perustuvat EU:n innovaatiotutkimukseen, joka kattaa tiedot yhteistyöstä vuosilta 1994-1996. Suomi on EU-vertailussa johtava innovaatioyhteistyötä tekevä maa. Monissa maissa tutkimusyhteistyötä on vasta nyt ryhdytty edistämään, kun taas Suomessa yhteistyö on ollut tutkimusrahoituksen periaatteissa keskeistä jo 1980-luvulla. % Source: Towards a European Research Area - Key Figures, Special Edition. EU 2001 Adnan Shihab-Eldin Docs 36110 04-2002

Council of State Science and Technology Policy Council Ministry of Education Ministry of Trade and Industry Other Ministries Academy of Finland Technology Development Centre SITRA Fund Universities and government research institutes Enterprises, private research institutes, funds and foundations, learned societies Adnan Shihab-Eldin 070598/EO/mwe

Fundamental changes taking place Globalization Knowledge-based economies Digital revolution Adnan Shihab-Eldin

Features of RD in Arab Region : Then and Now Common: quantitative growth in numbers in most Arab Countries, institutional, manpower and coverage; However Evolving quality paths and expenditure differ dramatically: Retreated in some, Advanced rapidly and then stagnated/retreated, etc.. Continued advance (slow and fast) (Ups and downs) Overall capacity converged with small average growth positive but behind OECD and emerging developing countries; Need for strong intervention to produce results; Some additional financing is needed: Targets for and Sources of additional financing: national, regional, international Adnan Shihab-Eldin