Way Forward: Unleashing Productive Innovation in Kazakhstan Yevgeny Kuznetsov World Bank Astana Economic Forum Astana, Kazakhstan May 22, 2015

Table of Content 1.Setting the stage: why innovation? 2.Models of innovation-based growth 3.Adapting and adopting global experiences to Kazakhstan 2

Innovation as the means for rapid growth Central Lesson of the Growth Report: “They fully exploited the world economy and its knowledge” Commission on Growth and Development. The Growth Report: Strategies for Sustained Growth and Inclusive Development. Washington DC: World Bank, 2008, p.22. 3

Diverging Growth Trajectories: Knowledge Makes a Difference GDP per capita (current US$)

Innovation as Change Technology: How we currently do things, including management Innovation: Changes to how we do things (it is not about high-tech) Knowledge: What we already know Research: How we find new knowledge Development: The steps to apply knowledge Entrepreneurship: A way of thinking and doing 5

Diversity of innovation-based models Super-star model – R&D and technology commercialization Israel (highest share of R&D per capita in the world), South Korea, Finland, Taiwan Resource-based innovation High income ‘developing economies’: Norway (oil), Australia (mining), New Zealand (agriculture), Canada (the renewables: agriculture and forestry) Mixed model: USA (think about ‘fracking’ in shale oil and gas, in addition to Silicon Valley) There is no single road to innovation-based prosperity 6

Innovation in Mining and Resource Exploration –Australia: knowledge cluster export know- how- mine closing technologies, environmental technologies. –Norway: StatOil (State company – the global innovation leader; Norwegian school of petroleum extraction) –Chile: innovation in renewables (salmon farming, wine cluster; fruits value chain) –Argentina: global leader in no-till agriculture; wine clusters; biotech for agriculture 7

Kazakhstan’s Innovation System: Internal Diversity Macroeconomic indicators do not reveal what is emerging: new successes and role models. Two developments in Kazakhstan are crucial: Diversity of entry points for innovation based- growth About 20 modern laboratory facilities Significant number of research teams of junior and senior scientists) A government program to develop talent for innovation by funding young people to receive Master and PhD degrees in leading Western universities (the Bolashak program ) New promising public support programs TCP and other MOES initiatives Pilot initiatives of NATR (grant programs for techno-entrepreneurship, technology platforms program) Key issue for the medium-term: from the diversity of these entry points to a ‘critical mass’ 8

Kazakhstan: Adapting the Two Models of Innovation Diversity of entry points as the foundation The medium-term challenge: How to achieve ‘critical mass” Two main directions: -- Energy and mineral resource innovation: the consortia approach -- Adopt and adapt the super-star model: consolidate the incubation/ commercialization cycle 9

First direction: Consortia Approach Consortium – long-term private-public technology project Three objectives To expose domestic organizations to global performance standards and practices: participation of international partners is mandatory. To have long-term multi-year strategic nature To introduce demand orientation: the consortia are user driven Best junior and senior scientists research teams of the TCP are mini-consortia: Open to global practices: a magnet for Bolashak graduates Multi-year duration of the grant is its main attraction The best teams seek and work with clients from day 1 10

Growth and Competitiveness Example: StatOil, the Norwegian State and Consortia Intensive technological learning Just one generation ago StatOil has no innovation capabilities. How did it learn? A requirement in the end of the 70’s that at least 50% of R&D necessary to develop a field had to take place in Norwegian institutions (later replaced by “goodwill agreements’’). By itself, StatOil is not a leading R&D and technology company. Technology capabilities are created within networks it builds with universities, other R&D organizations and suppliers. StatOil as a mentor and investor for technology-intensive start- ups. For instance, “Statoil Technology Invest” program took equity stakes in 20 oil and gas technology or renewable companies. LOOP program gives funding, project support, and pilot testing to suppliers for specific technology concepts. About 300 projects have been funded since An example of technology company which has been developed is Seadrill (www. Seadill.com) whose main customer now is Brazilian Petrobras. It has about 7,300 employees, representing some 75 nationalities, operating in 15 countries on five continents 11

Second direction: From Incubators to the Incubation Cycle The Incubation Cycle 12

Creating the Incubation Cycle: Results of World Bank’s TCP The Technology Commercialization Project (TCP) is a 75-million-dollar joint project of the World Bank and Ministry of Education and Science of Kazakhstan aimed to enhance knowledge base and link science to market in Kazakhstan. Many scientists around the world do not know how to commercialize their inventions nor do they have the connections to markets and investors that would be needed to mount a successful commercialization effort. And Kazakhstan is no exception to this. TCP has been designed to break the existing commercial vacuum in which Kazakh R&D community operated. After 6 years to its launch, the TCP has demonstrated incredible success: 33 R&D projects commercialized 55 international peer-reviewed publications 17 patent applications registered 460 scientists and entrepreneurs trained at TCP Technology Commercialization Office 15 laws, rules and regulations amended 70 partnerships between scientific groups, research institutes and the private sector An International Materials Science Center established 25 partnerships established between researchers and academia 13

THANK YOU Yevgeny Kuznetsov 14