Juan Carlos Navarro, Principal Technical Leader
Competitiveness and Innovation Division, IDB
Paramaribo, February, 2013
CONTENTS
• Quick overview: Competitive position of Suriname
• The notion of a knowledge-driven economy
• Salient issues: Some details and a framework
– Innovation, technology ICTs
– Skilled labor force
– Business climate
• What the IDB does and how it can help
Suriname’s Competitive Outlook, WEF 2012
Barbados
Trinidad and Tobago
Jamaica
Dominican
Republic
Guyana
Suriname
Haiti
Infrastructure
44
24
22
84
91
55
97
87
85
105
126
105
109
100
109
114
93
79
142
143
144
Macroeconomic Stability
134
19
141
105
109
96
86
Health and Primary Education
16
55
104
106
99
82
134
Higher Education and Training
19
71
75
97
87
102
144
Good Market Efficiency
64
106
80
101
84
128
142
Labour Market Efficiency
29
110
77
107
85
96
83
Financial Market Sophistication
33
60
55
96
86
107
141
Technological Readiness
30
60
73
78
94
105
138
Market Size
134
107
100
65
132
139
127
Business Sophistication
36
84
79
80
64
112
142
Innovation
40
104
86
118
76
124
143
Indicator
Overall Rank
Institutions
An intermediate stage of development
Defining the knowledge economy
• The adaptation, creation, transmission and productive application of
knowledge becomes a major driver of the economy.
• The most dynamic economic sectors at the global stage are those that
can clearly be defined as knowledge intensive.
• Knowledge embedded in human capital (skills) or intangibles
(intellectual property) grows consistently in importance.
• The knowledge content of products grows continuosly.
• Skilled work becomes ever more valuable. Highly skilled even more
valuable.
• Innovation becomes key for business productivity and profitability
across the board, including traditionally low tech sectors.
• Innovation is increasingly driven not only by technology, and certainly
no mainly by advanced research, but by intangibles such as design,
marketing and communications.
• Technology has, however, lowered the cost of innovation worldwide to
unprecedented levels.
Visualizing the knowlege economy
iPad’s value chain
There is a worldwide race aimed
at turning national economies
into knowledge economies
The reason: a knowledge-driven economy is the
closest thing there is to an economy with an
ability to withstand adverse external shocks over
long periods of time. It is arguably the best
source of a sustained competitive advantage.
Suriname’s WEF 12th Pillar: Innovation
2012-2013
Rank Value
12th pillar: Innovation, 1-7 (best)
124 2.617
12.01 Capacity for innovation, 1-7 (best)
106 2.707
12.02 Quality of scientific research institutions, 1-7 (best)
128 2.524
12.03 Company spending on R&D, 1-7 (best)
115 2.638
12.04 University-industry collaboration in R&D, 1-7 (best)
106 3.162
12.05 Gov’t procurement of advanced tech products, 1-7 (best) 126 2.837
12.06 Availability of scientists and engineers, 1-7 (best)
111 3.486
12.07 PCT patents, applications/million pop.
92 0.192
Source: GCR 2012/2013
2011-2012
Rank Value
121 2.59
100 2.639
120 2.686
116 2.587
117 2.954
120 2.938
103 3.504
WEF 9th Pillar: Technological readiness
9th pillar: Technological readiness, 1-7 (best)
9.A Technological adoption, 1-7 (best)
9.01 Availability of latest technologies, 1-7 (best)
9.02 Firm-level technology absorption, 1-7 (best)
9.03 FDI and technology transfer, 1-7 (best)
9.B ICT use, 1-7 (best)
9.04 Individuals using Internet, %
9.05 Broadband Internet subscriptions/100 pop.
9.06 Int’l Internet bandwidth, kb/s per user
9.07 Mobile broadband subscriptions/100 pop.
Source: GCR 2012/2013
2012-2013 2011-2012
Rank Value Rank Value
105 3.19
96 3.29
122 4.01 123 3.99
110 4.273 101 4.45
121 4.071 124 3.918
130 3.675 131 3.612
85 2.37
70 2.58
83
32
78 31.59
76 4.533
83 2.987
109 4.722
94 2.426
128
0
Benchmarking ICTs in LAC
Global IT Report 2012
There is a lack of
information and indicators
to measure the use of ICTs
at the firm level in all the
LAC region, including
Suriname.
Conceptual framework: ICT, competiveness and
productivity
• A whole series of studies point clearly to a strong positive impact between
firm’s adoption and use of ICT and productivity.
• ICT penetration in firms has grown steadily over the past 10 years, reaching
a majority of SMEs, but penetration in other emerging economies has been
faster and deeper, maximizing the economic impact.
• In LAC, ICT adoption and use has advanced mostly in administrative
functions, with very little inroads into advanced uses (marketing, value chain
optimization, business analytics…).
• Adoption has taken place in a highly unequal manner, differentiating regions,
urban and rural areas, economic sectors…
• SME’s capacities to manage ICT well tend to be very low, given:
• Insufficient investment in broadband infrastructure.
• Shortage of skilled human capital specialized in ICT.
• Low overall ICT readiness in the population and the labor force.
• Firms do not have information about potential applications that could enhane their
productivity.
4
Constraints to private sector development
1.
Inadequately
Educated
Workforce
2. Customs
and Trade
Regulations
4.
Corruption
7. Licenses
and Permits
5. Courts
8. Tax Rates
World Bank Enterprise Survey 2010
3. Access to
Finance
6. Practices
of the
Informal
Sector
9. Access to
Land
10. Crime,
Theft
Inadequately trained workforce+ elevated rates
of skilled outmigration
• Approximately 65% of
the firms interviewed
in the Enterprise
Survey round stated
that an inadequately
trained workforce was
a major constraint. Of
those, 30% identified
this skills gaps as the
greatest constraint to
their growth.
• Over 40 percent of the
labor force with higher
education emigrates
World Bank Enterprise Survey 2010
Suriname: Education’s positive impact on
employment and earnings
I.
Determinants of the likelihood of employment
Education
(in relation to
no education)
Primary: +13%
Junior Secondary: +21%
Senior Secondary: +62%
Tertiary: +86%
II. Determinants of monthly earnings
IDB, Gardiner and Spampini, 2009
Junior Secondary: +11%
Senior Secondary: +43%
Tertiary: +86%
The Disconnect
• Over 40 percent of employers say that a skills shortage is a leading
reason for entry-level vacancies.
• Only 43 percent of employers agreed that they could find enough
skilled entry level workers.
• Only half of youth believe that their post-secondary studies improved
their employment opportunities.
• 1/8 of 15 to 24 year-olds are NEET (not in employment, education or
training).
• Over 70 percent of training and post-secondary institutions declare
that they are providing the right skills to their students.
McKinsey: Education to Employment: Designing a system that Works. 2012.
The basics: Simplify choices for families and
students
The basics: gather and disseminate
information on jobs, demands for skills, career
paths of graduates…
IDB, Bassi, Busso, Urzua, Vargas, 2012
Conceptual Framework: TFP, Competitiveness and
Human Capital
• Focus on an economy’s distance to the technological
frontier in order to decide what kind of innovative activity is
the priority and what types and levels of skills are a better fit
to it.
• A more educated labor force adopts existing technology
faster.
• If most businesses operate far from the technological
frontier, a premium has to be put in intermediate levels of
skills –vocational and technical post-secondary, engineering
degrees- rather than in highly advanced diplomas.
When strategizing to acquire talent, remember
• “NO MATTER WHO YOU ARE,
MOST OF THE SMARTEST PEOPLE
WORK FOR SOMEONE ELSE”
Bill Joy, co-founder of Sun Microsystem
Constraints to private sector development
1.
Inadequately
Educated
Workforce
2. Customs
and Trade
Regulations
4.
Corruption
7. Licenses
and Permits
5. Courts
8. Tax Rates
World Bank Enterprise Survey 2010
3. Access to
Finance
6. Practices
of the
Informal
Sector
9. Access to
Land
10. Crime,
Theft
Creation of new businesses
In 2011, Suriname held one of
the lowest business entry
density rates in the LAC region
however the number of newly
registered firms has been
increasing since 2009.
World Bank Doing Business Report
The challenge of enhancing productivity
Business climate in Suriname
World Bank Doing Business Report
Beyond business climate, an innovation
climate
• An innovation climate (a business climate that favors
knowledge-driven economic activities), includes mostly:
–
–
–
–
–
–
–
–
–
An entrepreneurial culture
High awareness and skill in managing intellectual property rights.
Well developed university-industry linkages
Public programs focused on encouraging the private sector to
innovate (correcting widespread market failures)
Public policies that take facilitate technology diffusion and adoption
Technological services (metrology, quality certification, standards
and laboratories) are available.
Smart capital
Good deal flow
Good pipes for that flow (trust among key actors and excellent
broadband connectivity).
PRODUCTIVITY THRIVES WHEN:
THE WHOLE INNOVATION SYSTEM WORKS
Long-term Innovation Investment
Openness to Investments and
International Commerce
Skilled Labor Force
National Development Strategies
Firm Innovation
ICT Infrastructure
Networks and
Legal & Institutional
Framework
Venture Capital
Business
Development
Technological & Institutional Services
IDB’s Competitiviness and Innovation
Division
MANDATE
Enhance business productivity and competitiveness in the
Latin America and Caribbean region by facilitating the
creation and growth of dynamic firms with the capacities
and tools to innovate and compete in international
markets.
CTI’s STRATEGIC OBJECTIVES
Improving the policy and regulatory framework so that it is conducive to
innovation and entrepreneurship, and to the creation and growth of
competitive firms
Designing, implementing and evaluating productive (business)
development and innovation policies that:
•Increase private sector investment in innovation and technological
development
• Boost the productivity of firms and their capabilities to network
and compete in international markets.
Strengthening the capacity of institutions to design and implement
innovation and productive development policies (governance models,
policy coordination, management and evaluation capacities).
CTI’s AREAS OF WORK
ENTREPRENEURSHIP
INNOVATION AND TECHNOLOGY
Economic growth depends on private sector
investment in innovation and new technologies.
The ability of a country to adapt and take advantage
of technological changes depends upon its
entrepreneurs.
BUSINESS DEVELOPMENT
Business and knowledge networks, value chains,
International standardization, quality certification
INSTITUTIONS AND ENVIRONMENT
Institutions and enabling environments are crucial for promoting competitiveness and innovation in firms.
INNOVATION AND TECHNOLOGY
 Support for firms to increase their investment in innovation and
technological development, based both on R&D and new business
models.
 Programs for technology diffusion, transfer and adoption in firms
such as ICTs and green & clean technologies.
 Developing increased firm capabilities in design, quality
management and intellectual property.
 Strengthening human capital for innovation
and technology absorption.
©
BUSINESS DEVELOPMENT
 Support for productive development policies and programs to
strengthen firm linkages, upgrade productive capabilities and foster firm
competitiveness (clusters, value chains, and innovation systems).
 Programs to strengthen provision of business development and access to market
services (export promotion, internationalization, ICT programs).
 Support
for improved access to information for the design, monitoring and
evaluation of Productive Development Policies & SME policies.
INSTITUTIONS AND ENVIRONMENT
 Programs to improve business climate and environment for innovation
and competitiveness (i.e., reduce costs of doing business, facilitate business
registration).
 Improved regulatory frameworks to facilitate the creation
and development of innovative companies (i.e., strengthen
intellectual property rights framework).
Support the strengthening of institutions to coordinate productive
development and innovation policies.
 Support for mechanisms for public-private sector dialogue.
ENTREPRENEURSHIP
 Programs to develop and strengthen sources of entrepreneurial
finance (seed and angel financing).
 Promote and develop a climate of entrepreneurship.
 Support networks, incubators and programs to unleash entrepreneurial talent.
 Incentives to support entrepreneurs and entrepreneurship
in sectors such as ICT and other knowledge intensive industries.
MAJOR IDB/IFD/CTI PRIORITY
ACCELERATE BROADBAND DEVELOPMENT IN LAC
 Forthcoming publications, TCs and ESWs under preparation.
 In Brazil UNASUR announced that the 12 Southern Cone countries
agreed upon a set of mandates that they will pursue to address the
region’s gap in Broadband penetration.
 At a broadband forum co-organized by the IDB in November 2011 -
Caribbean
Ministers mandated an audit of the broadband infrastructure and regulatory
frameworks
Infrastructure,
Services
and
Applications
Capacity
Building
Public
Policy
Strategic
Regulation
IN THE PRODUCTION FRONTIER…
If anything LAC suffers from a deficit of
average players; firms with medium
productivity levels. (DIA, IDB 2010)
Super Star Firms
Medium Productivity
Firms
Most policy
interventions in LAC
are needed among
these firms and here is
where CTI concentrates
its work.
Low Productivity Firms
The productivity of the firms in Latin America varies across a very wide spectrum. CTI supports
increasing incremental innovation capabilities - meeting LAC firms along a spectrum of existing
capacities - to move low productivity firms closer to the technological frontier.
IN THE PRODUCTION FRONTIER…
This process enhances competitiveness.
Super Star Firms
(2) Supporting
entrepreneurship
increases the number of
firms in the market.
(3) The market selects the
most viable firms and
remove the obsolete ones.
Medium Productivity
Firms
Low Productivity Firms
(1) Policy Push is intended to level the Playing Field
In the end, you have to
write your own book
John Kao
Surinam’s firms
Only 14.6% of firms in Suriname export
compared to 18.4% in the average LAC
country
94% of the firms surveyed were Micro, Small
and Medium Sized (<99 employees)
enterprises.
The firms were evenly split over the services
and manufacturing sectors.
World Bank Enterprise Survey 2010
IN ADDITION: LOW LEVELS OF INSTITUTIONAL READINESS
UNDERMINE LAC’S ABILITY TO COMPETE GLOBALLY
High-Technology (ISO) Technical Committee (TC) Members: Low-Technology (ISO) Technical Committee (TC) Members:
100
100
80
80
60
Percent
Percent
Proportion of LAC and OECD Countries that are ISO TC members
50
40
60
50
40
20
20
0
0
LAC
OECD
Information
technology
LAC
OECD
Information and
documentation
LAC
OECD
LAC
OECD
Financial services Nanotechnologies
LAC
OECD
Food products
LAC
OECD
Tourism and
related services
Both in High-tech and in Low-tech
Source: ISO. 20010
LAC
OECD
Textiles
LAC
OECD
Rubber and rubber
products
CERTAIN MARKET AND GOVERNMENT FAILURES ARE
ESPECIALLY PREVALENT IN LAC
•
Market failure is more prevalent in less developed countries, and the non-market
institutions that try to intervene may be less successful in doing so (Hausmann et al.
2008; Stiglitz, 1989).
•
Government failures rather than market failures often [i.e., in Costa Rica] represent
the main justification for productive development policies (IDB, 2010).
Government (Public Sector) Failures:
Institutions and the
Environment
•
The regulatory system is biased against failure (stiff penalties for bankruptcy,
burdensome transaction costs for starting and closing a business, etc.) & cultural
contempt for failure, create inefficiencies and reduce healthy economic risk taking
behavior.
•
Deficient technological business services (i.e., metrology, quality certification services
and institutions).
•
There are low levels of institutional capacity for public policy coordination and minimal
support (financing and otherwise) for long term investments in innovation activities.
•
The education system has not produced an adequate supply of skilled workers or
entrepreneurs.
CERTAIN PRIVATE SECTOR CHARACTERISTICS EXACERBATE
MARKET FAILURES IN LAC
PRIVATE SECTOR CHARACTERISTICS:
•
Firms, Entrepreneurs
and their Networks
The Productivity Trap in LAC
– Firms in less developed countries may face greater uncertainties about their
ability to produce and market new goods; lack of complementary products in
product markets can be an additional hurdle (Stiglitz 1989).
– In some countries in LAC - markets and firms are smaller than they optimally
should be; therefore they can not make optimal use of economies of scale. If
external economies of scale are intra-national, larger markets have a positive
effect on productivities (Exteco).
•
Weak linkages between firms or poor performing intermediary companies
create huge information gaps and compromise the quality of the entire value
chain.
•
Knowledge gaps regarding specific market distortions (public and private)
creates the need for an “identification” policy process (Hausmann et al,
2008).