Global best practice in
productivity improvement –
lessons for Northern Ireland
May 2009
Contents
1 ▪ What we have done
2 ▪ Discussion of case studies
– Singapore (in depth)
–
–
–
–
–
–
Republic of Ireland
Costa Rica
Finland
Sweden
Portland, Oregon
Others
3 ▪ Implications for Northern Ireland
| 1
Contents
1 ▪ What we have done
2 ▪ Discussion of case studies
– Singapore
–
–
–
–
–
–
Republic of Ireland
Costa Rica
Finland
Sweden
Portland, Oregon
Others
3 ▪ Implications for Northern Ireland
| 2
To develop a long-list of examples to examine we used a simple ‘funnel’
NUTS 2 regions in Germany, France, Italy,
US, Korea and Canada
Countries of the world
Regions with GDP per capita <85% of
Northern Ireland
Germany: Sachsen
Germany: Sachsen-Anhalt
Germany: Thueringen
Germany: Brandenburg
Germany: M-burg-Vorp.
Italy: Molise
Italy: Basilicata
Italy: Puglia
Italy: Calabria
Italy: Sicilia
Italy: Capania
Korea: Gyeonbuk
Korea: Capital region
Korea: Jeolla
Korea: Gangwon
Korea: Jeju
Regions that have not recently achieved >2% CAGR
GDP per worker improvement in a 5 year period1
All French regions
All other German regions
Italy: Lombardia
Italy: Toscana
Italy: Abruzzo
Italy: Veneto
Italy: Emilia-Romagna
Italy: Sardegna
Italy: Valle D’Aosta
Italy: Marche
Italy: Lazio
Korea: Chungcheong
US: South Dakota
US: Oregon
US: Colorado
US: Arizona
US: Massachusetts
Countries with GDP per capita <85% of Northern
Ireland or total GDP greater than Spain
Relevance
Performance
Italy: Liguria
Italy: Piemonte
Italy: Friuli-Venezia G.
Italy: Umbria
Italy: PA di Trento
Italy: PA do B-Bozen
Korea: Gyeongnam
All other US states
All other Canadian
provinces
US: New York
US: California
US: District of Columbia
US: North Carolina
US: Vermont
US: Louisiana
US: Virginia
United States
China
India
Japan
Germany
UK
France
Russia
Poland
Barbados
Hungary
Russia
Croatia
Saudi Arabia
Bulgaria
Thailand
+67 others
Countries that have not recently achieved >2% CAGR
GDP per worker improvement in a 5 year period1
Kuwait
New Zealand
Norway
Argentina
Netherlands
Austria
Malta
Australia
US: New Hampshire
US: Washington
US: Idaho
Canada: Newfoundland
Canada: Alberta
Canada: Nova Scotia
Canada: Saskatchewan
Brazil
Italy
Indonesia
South Korea
Mexico
Canada
Venezuela
Malaysia
Iceland
Estonia
Slovenia
Latvia
Slovak Republic
Czech Republic
Belarus
Azerbaijan
Armenia
Lithuania
Kazakhstan
Hong Kong
Singapore
Ireland
Luxembourg
Denmark
Cyprus
Chile
Switzerland
Belgium
Portugal
Spain
Uruguay
Sweden
Finland
Taiwan
South Korea
Israel
Greece
United Arab Emirates
Qatar
1 Based on the area’s best results from either 2003-2008 or 1998-2003 for countries and either 1996-2001 or 2001-2006 for regions
SOURCE: ConferenceBoard, OECD, US Department of Commerce
| 3
These are the six cases that have been examined in detail
Singapore
Success founded in establishing pro-business environment and
aggressively pursuing FDI through a high performance agency
Republic of Ireland
Built on low tax rate with flexible approach to attract FDI, bring in
anchor investors and move up the value chain
Costa Rica*
Targeted approach to capturing FDI through independent marketing
agency
Finland
Built R&D capability around Nokia as an anchor and successfully
developed
Sweden
Deregulation and creation of pro-business environment to drive
competition and productivity
Oregon
Built on anchor firms and proximity to West Coast to create hot spot for
entrepreneurial spinoffs
* Originally filtered out on income
SOURCE: Literature review; press search; expert interviews
| 4
Disadvantage/
worst performer
Which have different sources of advantage and
disadvantage (1/2)
Corporation tax rate, %
Best in class/
Advantage
18
12.5
10-30
26
28
US: 35
28
Use of Zonal tax exemptions
YES
YES
YES
NO
NO
NO
NO
Ease of doing business rank
1
7
117
14
17
3
6
R&D expenditure, % GDP
2.3**
1.3**
<1.0**
3.5**
3.7**
2.6**
1.8**
Students graduating p.a., %*
N/A**
1.40**
N/A**
0.77**
0.67**
0.9**
1.06**
Engineers graduating p.a., %*
0.13**
0.17**
N/A**
0.16**
0.13**
0.06**
0.09**
Note: Data for Oregon (US) data is for United States as a whole. Oregon offers tax exemptions and other fiscal incentives lowering the effective tax rate
* % of total population
** 2006
SOURCE: WMM; IMF Global Insight; OECD; World Economic Outlook database
| 5
Which have different sources of advantage and
disadvantage (2/2)
Disadvantage/
worst performer
Best in class/
Advantage
Size of public sector (% GDP)
13.70
35.44
n/a
47.24
52.57
35.36**
43.13**
Average wage (manufacturing,
GBP per hour)
4.64**
14.07**
2.27**
16.21**
17.25**
12.93**
14.68**
Average wage (engineer, GBP annual)
36,447
62,308
25,000***
60,385
59,717
54,048
61,054
English-speaking (% population)
71*
98*
n/a
63*
89*
96*
98*
Electricity costs (GBP per KWH)
0.05
0.07
0.06
0.04
n/a
0.03
0.06
Broadband penetration, %
42**
19**
3**
31**
32**
26**
28**
* No consistent datasource for languages
** 2006
*** Annual Wage 2009 for Chief Computer Analyst
SOURCE: IMD; WDI, CINDE, Costarica.com, Language data: Eurobarometer 2005, US Census Data, EU Commission,
Singapore 2000 census data
| 6
For each example we have built a case study around four questions
1.
What was the context for this region’s productivity
improvement?
2.
What institutions, programmes and policies were used to
drive it?
3.
What were the key success factors for these institutions,
policies and programmes?
– Strategically?
– Organisationally?
– Operationally?
4.
What are the lessons for Northern Ireland from this
region?
SOURCE: Literature review; press search; expert interviews
| 7
To address these questions we carried out primary and secondary
research
Over 30 interviews conducted
Country experts
Agency
employees
Functional
experts
Investor
perspective
Northern Ireland
▪
▪
Conducted 8 interviews with
experts for Singapore, Finland,
Sweden, Ireland, US, Israel
Country specific
information
2 Offshoring specialists
3 Productivity experts
Industrial policy expert
▪
6 Investor perspectives on
Ireland, Singapore, Eastern
Europe and Northern Ireland
▪
Economic
strategy
literature
MGI
Conducted interviews with Invest
NI, Bombardier, Citigroup, Almac,
All State
SOURCE: Literature review; press search; expert interviews
▪
▪
▪
7 interviews with current or former
employees of government
agencies (FDI/Export promotion)
in Costa Rica, Singapore, Finland,
Ireland
▪
▪
▪
▪
Literature and Research reviews
Government and agency reports for 6
case study countries from 20002009)
National press searches
Business school case studies on
country competitiveness (Ireland,
Costa Rica, Estonia)
Academic literature
▪
OECD, World Bank, IMF reports and
academic research on
– FDI policies
– Country competitiveness
– R&D and Cluster strategy
– Industrial policy
– Government efficiency
▪
McKinsey Global Institute knowledge
incl. 15 country productivity reviews
| 8
Contents
1 ▪ What we have done
2 ▪ Discussion of case studies
– Singapore
–
–
–
–
–
–
Republic of Ireland
Costa Rica
Finland
Sweden
Portland, Oregon
Others
3 ▪ Implications for Northern Ireland
| 9
Introduction to Singapore
Background
Key achievements
▪
▪
▪
▪
▪
▪
▪
▪
▪
▪
Small city-state situated on 63 islands and
connected to the Malaysian peninsula
Population 4.8m (~70% of Chinese origin)
Land area 710.2 km2 (~5% of NI)
Official languages: English, Malay, Mandarin,
Tamil
5th wealthiest country in the world in terms of
purchasing power adjusted GDP per capita
Self-governed since 1959, independent from
Malaysia since 1965
Parliamentary Republic
Single Party (People’s Action Party PAP)
dominates political process
Limited natural resources (no freshwater)
SOURCE: Literature review; press search; expert interviews
▪
▪
▪
▪
Real GDP growth has averaged 8.1 percent
since independence in 1965
Productivity grew by a 4.0% between 1980
and 2008, over three times faster than the
OECD
Attracted major > 7,000 international investors
from broad range of industries, including for
example Infineon, Exxon, GSK, Merck
Succeeded in building sectors “from scratch”
such as Health Care
Rated #1 in Ease of Doing Business by World
Bank in 2008
| 10
Why are we interested in Singapore?
Relevance
Small island economy
▪ 2007 GDP 250% of NI
Applicability

Openness to investment and trade
▪ 2007 Exports 246% of GDP

Developed
▪ 2007 GDP per capita 90% of
NI
Successful
▪ Achieved 3.0% productivity
growth from 1995-2008
compared to UK average of
1.7%


Aspects NI could learn from
▪ Integrated economic strategy of Singapore where
“packages” to attract FDI aims at creating lasting
benefits
▪ Customer-focus of the EDB through tailoring to
individual investor needs and efficient end-to end
process
▪ Focus of government agencies in serving all customer
needs conveniently (online) and through “one-stopshops”
Aspects NI is unlikely to learn from
▪ Semi-authoritarian government in Singapore facilitated
alignment and “top down” implementation
▪ Creation of state-owned enterprises
▪ Strong use of trade policy and financial incentives
– Early import substitution phase to industrialise
– Customised financial incentive package to attract
FDI
SOURCE: Economist Intelligence Unit; UNESCO Statistics; World Bank “Ease of doing business” reports; IMF International financial
statistics; WMM/Global Insight; World Economic Outlook database; IMD World Competitiveness online
| 11
Singapore developed through ambitious planning and outwardorientation
1959 - Self-government of
Singapore, led by the People’s
Action Party (PAP) Became
independent from Malaysia is in
1965. Lee Kuan Yew is first
Prime Minister. Government
declares itself “pragmatic”
(~capitalist and semiauthoritarian)
1960s
1970s
1961 - Creation of the
Economic
Development Board
(EDB). Created the
Jurong Industrial
Estate, Singapore’s
first industrial estate.
EDB open offices in
NY and Hong Kong.
Attract Shell, National
Iron and Steel Mills
1980s - Singapore’s
high-wage policy to
force move to
knowledge economy
fails in context of world
economic crisis.
Economic review by
MTI recommends PCs
and disk drives as
“sunrise sectors”
1980s
1970s - Start of the
electronics industry
in Singapore –
Texas Instruments
investment of 6m
USD is secured
within 6 months and
operations start 90
days after
investment decision
SOURCE: Literature review; press search; expert interviews
1997 - Asian Crisis
hits Singapore, but
country recovers
already starting in
1999. Re-orientation
of economic policy
with more focus on
knowledge economy
1990s
1983 - Creation
of the Trade
Development
Board (TDB)
to promote
Singapore’s
exports.
Rebranded IE
Singapore in
the early new
millennium
1991 - Creation of
EDBI - the
independent equity
investment arms of
the EDB which
invests in
companies in new
strategic industries
Has invested in
240 companies
since its creation
2000s Continuing emphasis
R&D and knowledge
economy. Focus on
attraction of foreign talent to
Singapore and positioning
of Singapore as destination
for R&D research facilities
and regional headquarters
of multinationals
2000
2009
2001- Creation of
A*STAR- The agency of
Science Technology and
Research focusing on
Biomedical Sciences
and
Engineering/Science,
promoting research and
public-private
collaboration
| 12
Singapore’s productivity growth was associated with FDI, export
and R&D growth
FDI
Exports
Total stock inward FDI, % GDP
% GDP, excluding tariffs
200
250
Singapore
150
150
100
100
UK
50
0
1980
Singapore
200
1985
1990
1995
2000
2005
2010
50
0
1980
UK
1985
1990
1995
2000
R&D
Productivity growth
% GDP, all R&D
Change in real GDP per employed worker, % p.a.*
2.5
Singapore
2.0
UK
1.5
1.0
0.5
0
1980
1985
1990
1995
2000
2005
2010
2005
6
5
4
3
2
1
0
1980
2010
Singapore
UK
1985
1990
1995
2000
2005
2010
* 10-year rolling average
SOURCE: WMM / Global Insight (GDP, exports, productivity); OECD (R&D expenditure); IMF
| 13
Singapore’s success is built on strategic planning and the creation
of a business-friendly environment that enabled FDI-driven growth
▪
Rigorous policy
planning
▪
▪
▪
Prioritisation of FDI
▪
▪
Creation of a
business-friendly
environment inc.
low taxation
Government
agencies as
efficient one stop
shops
Culture of
excellence
Long-term analysis and planning for direction of economic policy carried out by MTI, economic
reviews led to re-orientation (e.g. focus on PC and disk drives in 80s post oil crisis)
Dedicated planning unit in the EDB with ~10 employees in Strategic Planning and Knowledge and
60 in Planning and Policies
EDB Annual reviews help to bring together market intelligence and trends, identify focus sectors
and areas and re-allocate resources accordingly
Strategic clarity that FDI matters for growth as Singapore’s lack of natural resources and small
insular position constrained endogenous wealth creation
EDB “makes things happen” to attract FDI, e.g. set-up of university courses, infrastructure
investment
Strong support by leadership to attract investors - Lee Kuan Yew used to gather CEOs of potential
investors to reassure about doubts and assert commitment
▪ Singapore comes top in the World Bank’s Ease of doing business rankings 2007 and 2008
▪ Eliminating unnecessary red tape is constant government concern. For example, businesses can
▪
▪
▪
▪
▪
▪
▪
submit suggestions online to Pro Enterprise Panel to cut red tape (e.g. outdated regulations)
Effort to create a pro-businesses environment: EnterpriseOne Portal which centralises all relevant
information, e-services, walk-in centers of government agencies
Public services mainly provided through government agencies (e.g. EDB ~500 employees, IE
~370 employees vs. 200 employees in the MTI) which are operated similarly to private entities
Government agencies (EDB, Spring, IE) set up as “one-stop-shops” where all customer needs can
be addressed (capital, capability-building, advisory services, market intelligence)
Customer services centre for initial point of contact
Talent recruitment – high performing students and graduated are attracted to public sector
Talent retention – incentives through performance-based pay (15-50% performance-dependent
bonus) and fast promotions
Talent development – emphasis on functional and managerial training. Early on-job responsibilities
including client relationships
SOURCE: Literature review; press search; expert interviews
| 14
Four major agencies drive Singapore’s development, lead roles are
taken by the EDB and IE Singapore
ROLE
STATUS
FUNDING
▪
Key government agency in
charge of attracting FDI and
creation of favourable
business environment
EDBI is Investment arm
investing in new industries
▪
▪
Government agency
One-stop-shop for foreign
investors
500 employees of which ~ 100
in one of 19 international
offices
▪
▪
Government
2008 Expenditure: USD 400m
Promotion of exports of
Singapore-based enterprises
Financing options and
capability building focus (skillbuilding)
▪
▪
Government agency
One-stop-shop for firms
seeking to export
~500 employees of which ~50
in 30 offices abroad
▪
▪
▪
Government
2008 Expenditure: USD 117m
Payment by companies for
selected customised services
Agency supporting SMEs and
start-ups with overall mission
to “Enable Enterprises” and
create a competitive SME
sector through financing
Skill building
▪
▪
Government agency
~370 employees
▪
▪
▪
Government
2008 Expenditure: USD 96m
Payment by companies for
selected customised services
Agency for Science,
Technology and Research in
charge of promotion of
research and innovation
Focus on life science and
engineering/IT
▪
▪
Government agency
~ 150 employees
▪
▪
▪
Government
2008 Expenditure: USD 710m
Payment by companies for
selected customised services
Online information portal
serving the business
community by centralising all
relevant information to start,
sustain and grow a business
▪
SPRING (Government agency)
in collaboration with 44 partner
agencies involved in the
Enterprise One project
▪
Government
▪
▪
▪
▪
▪
▪
▪
▪
SOURCE: EDB, MTI, Spring, A*Star
▪
▪
| 15
The EDB is a high-performing, customer-focussed government
agency delivering significant benefits to Singapore’s economy
SCOPE AND
APPROACH
▪
▪
▪
▪
▪
PROGRAMMES
AND POLICIES
ORGANISATION
AND CULTURE
500 employees, budget of 410m USD (0.3% of GDP) of which $330m is spent on grants
Provides input to other government agencies on how to make Singapore an attractive business location has led Singapore’s to be first in ease of doing business worldwide (World Bank)
~15% of staff located in 19 international offices which develop mainly contacts with new potential
investors
Headquarter staff manages relationships with foreign and domestic companies within a “cluster”
Annual strategic reviews of targeted sectors and companies serve to re-focus efforts and identify
opportunities based on existing strengths.
▪
Customised assistance and incentives schemes are provided throughout the investment process
– Working in Singapore and registering business: easy access to visas, step-by-step guides
– Business location: List of science parks provided, EDB staff will look for suitable land
– Setting up the business - Financial incentives and assistance schemes* range from assistance in
manpower development, technological/equipment upgrading, to R&D, intellectual property and industry
development.
– Recruitment and Staff – EDB funds on the job training and overseas training of Singaporeans in MNCs
– Attractive taxation policy: 17% corporate income tax, capital gains not taxed, GST 7%
– Conditional grants: payments against milestones, if conditions not met re-negotiation or claw-back
▪
EDB recruitment targeted at high potentials – scholarships are offered to high performing high school
students to study abroad and then return to work for the EDB
Incentives for EDB employees are significant: financial incentives (15-50% of salary) and fast promotions
The organisation is focused around seven vales: Care, Integrity, Team, Imagination, Courage, Excellence
and Nation - losing a deal to another country is seen as shameful
Junior staff get responsibilities for managing day-to-day client relationships early on and account directors
own client relationships and are empowered to create flexible deals to meet investor needs and to start
deals moving while formal processes and approvals get completed
Focus on training programmes. EDB employees learn financial and other functional skills as well as
managerial skills in workshops on creativity, teamwork and risk-taking
▪
▪
▪
▪
* Detail on different schemes available in Back-Up
SOURCE: EDB, expert interviews
| 16
The organisation of the Economic Development Board is aligned
with its key tasks and emphasizes importance of planning
EDBI
International
Advisory Council
▪
▪
EDB Board
Senior executives
from MNCs advising
EDB (e.g. COO of
P&G, CEO of 3M)
International
Operations
▪
▪
4 Executive Directors
lead division with
area responsibility
19 international
offices with ~ 100
EDB employees
Development of
sector clusters of
local firms and
foreign investors in
Singapore
Clear dedicated support functions
(Admin, HR, CIO) account for ~40
employees but additional support staff
is probably within divisions
SOURCE: EDB, expert interviews
Enterprise Ecosystem and
Planning
Cluster
Development
▪
▪
Independent investment
arm created in 1991
Invests in companies in
new strategic industries
(over 250 to date)
▪
▪
▪
▪
▪
▪
Enterprise
Ecosystem
Incubation Unit
Intellectual Property
International Policies
Planning
Resource
Development
Corporate
Services
▪
▪
▪
▪
▪
▪
▪
▪
Business Knowledge
Group
Client Services
Finance &
Administration
Human Resources
Information Systems
Legal
Marketing
Communications
Organisation Excellence
| 17
Members
Chairmen
Structure of the EDB Board brings together international
private sector expertise and public sector leadership
Name
Job/Background
Lim Siong Guan
EDB Chairman (full time), former Permanent
Secretary to the Primer Minister
Leo Yip Seng Cheong
EDB Deputy Chair (full time)
Ashwin Muthiah
Beh Swan Gin
Chairman Proteus Petrochemicals Pte Ltd.
Managing Director, EDB
Deborah Henretta
Group President Asia, Procter&Gamble
Erik Peyrer
VP, Business Development APME
Francois Guibert
Corporate CP, CEO Asia/Pac ST Microelectronics
Gautam Banerjee
Exec. Chairman, PWC
George Goh
Executive Chairman, MeibanGroup
Goh Chye Boon
Deputy Secretary Ministry of Trade
Iain John Lo
VP New BD Ventures, Shell
Jonathan Asherson
Regional Director SE Asia, Rolls Royce
Jon Niermann
President Asia, Electronic Arts
Lui Pao Chuen
Advisor National Research Foundation
Shunsuke Ohtsu
Chief Executive Asia and Chair, Hitachi Asia
SOURCE: EDB, Expert interviews
Board members
and roles
▪ Mixed group
▪
▪
▪
of private and
public sector
professionals
Executives
from foreign
companies
Singaporians
and nonSingaporians
Role is to give
strategic
guidance,
external
perspective,
industry
expertise
| 18
Singapore’s financial assistance and other incentive schemes
Equipment and
Technology
Business
Development
Innovation, R&D
and Intellectual
Property
Examples
Purpose of the schemes
Benefits
▪
▪
Approved Foreign Loan Incentive (AFL)
Investment Allowance (IA)
▪
AFL provides full/partial exemption on
interest payments to non-residents
IA provides capital allowance for new
equipment on the condition that it introduces
new technology or contributes to industry
efficiency
▪
Investors pay lower taxes in Singapore;
reduces tax liability
▪
▪
Development Expansion Incentive (DEI)
Script to Screen (S2S)
▪
▪
DEI provides preferential corporate tax rates
S2S provides grants to support the
development of creative and technical
talents in content production
▪
Reduces tax liability/Assist companies to
move towards higher value-added business
activities
▪
▪
Approved Royalties Incentive
Further Deduction for R&D Expenses
(S14E)
Innovation Development Scheme
Research Incentive Scheme for Companies
Technology for Enterprise Capability
Upgrading
Writing Down Allowance for Cost Sharing
Agreement
▪
Tax incentives and grants are given to
promote R&D capability (technical +
manpower)
Technology transfer must take place
R&D should be conducted in Singapore
(S14E)
In many cases, schemes are open to
companies with at least 30% local equity or
ones registered in Singapore
▪
Non-resident recipients of payments pay
lower taxes
Meets the cost of R&D; assists companies
in technology and knowhow transfers
Helps local enterprises build in-house R&D
capabilities
Regional/International Headquarters Award
(RHQ/IHQ)
▪
Encourage companies to use Singapore as
a base
Customised package of tax incentives or
grants are provided
▪
Customised support for qualifying projects
Development Expansion Incentive
Initiatives in New Technology
Local Industry Upgrading Programme
Locally-based Enterprise Advancement
Programme
Pioneer Incentive
Venture Capital Fund Incentive
▪
Activities must lead to the development or
introduction of new capabilities for
companies or industry
Projects must generate significant economic
benefits for Singapore
▪
▪
Reduces tax liability
Helps meet costs of technology transfer,
introduction of new capabilities, manpower
and operating costs etc
Foster closer ties with industry contacts
Programmes cater to the needs of startup,
local enterprises, global companies with
large-scale needs such as the set up of
regional headquarters in Singapore
▪
Help businesses improve efficiency,
strengthen capabilities and explore new
opportunities in their business
▪
▪
▪
▪
▪
▪
Headquarters
Management
Industry
Development
▪
▪
▪
▪
▪
▪
▪
Local Government Incentives
SOURCE: EDB Website
▪
▪
▪
▪
▪
▪
▪
▪
▪
Loans, grants, tax incentives, equity
financing and non-financial assistance etc
| 19
International Enterprise offers a one-stop-shop service
to promote exports
SCOPE AND
APPROACH
▪
▪
▪
▪
▪
▪
PROGRAMMES
AND POLICIES
▪
▪
▪
▪
▪
ORGANISATION
AND CULTURE
SOURCE: IE Singapore
▪
▪
▪
▪
~ 370 employees of which ~50 in the 30 offices worldwide (IE employee sometimes in embassy)
Objective to provide a “one-stop-shop” services to all Singapore-based companies seeking to export
IE Advisory Centre as a point of contact for businesses serves and as shop where firms get generic
information (general enquiries, access to databases) and customised services
Important information and range of services can be accessed online via Enterprise One Portal
Customised services are available to all companies (no minimum size or export potential)
35,000 companies benefited from IE Singapore services in 2007 across all activities (+60% vs. the previous
year)
Activities of IE are within three areas: CONNECTIONS, CAPABILITIES and CAPITAL
CONNECTIONS:
– Organisation of Singapore’s participation in major trade fairs in key sectors including 50-70% subsidy to
Trade Associations’ costs (all companies eligible, subject to approval by involved trade association)
– Facilitation of search for export partners base through online platform BuySingapore which
automatically matches exporters and buyers across over 100,000 business members, basic
membership is free but enhanced membership has annual subscription fee (250 SD)
COMPETENCY:
– Development of managerial capabilities of business to operate abroad (e.g. Scholarships for
international management courses abroad for Singaporean executives)
– Identification of selected areas where companies need help (Manpower, appropriate branding and
design for international expansion, intellectual property)
CAPITAL:
– Provides top up trade insurance and subsidies for firms purchasing commercial trade insurancee
– Subsidised credit for purchases of overseas facilities
– Subsidised loan insurance
Most services are provided for free to companies (IE Concierge service, use of databases and portals
(BuySingapore), seminars but payment for customised services
Competitive pay levels for employees
5-year career plan and attractive incentive schemes
Design of training roadmaps
Participation in Singapore-wide competitions for service-level quality of agencies/public institutions
| 20
Enterprise One is the online portal for Singapore’s
business community
CONCEPT
CONTENT
▪
▪
▪
▪
Key features of the online portal
▪ Industry Guides: Topics are grouped by industries and organised in sections so that information relevant
to business sector is easy to find.
▪ Quick Find (Online Interactive Tools) for
– Funding options customised for one’s business
– Government assistance based on needs
– Market statistics released by Government agencies
– Business-related Government e-Services
– Licences and permits based on relevant business needs
▪ Frequently Asked Questions (FAQs)
▪ How-To Guides: More than 150 How-To Guides, Checklists and Flowcharts to make it easier to apply for
government assistance schemes, licences, permits, approvals and other registrations.
▪ Case Stories
▪ RSS Feed
▪
OPERATION AND
MANAGEMENT
Online-Portal launched in 2006 which centralises information required by businesses
Aims to help local enterprises find the answers they need to start, sustain and grow their businesses
Points towards available e-services and relevant government agencies
44 participating partners (government agencies and Ministries)
▪
▪
▪
Managed by the government agency SPRING in close conjunction with 44 partners (including EDB,
A*STAR, SPRING, MTI)
Available 24/7
Phone hotline offers additional support
Constantly updated FAQ database
SOURCE: SPRING SINGAPORE, Enterprise One Portal
| 21
Enterprise One is the online portal for Singapore’s
business community
SOURCE: Enterprise One
Single web
presence
across all
agencies and
government
departments
Sophisticated
online help
system and
single helpdesk
contact point
Complete
listing of
policies and
incentives (over
70 schemes)
Questionnaire
to identify
government
schemes
applicable to
your business
| 22
Potential lessons from Singapore for Northern Ireland
▪
Foresight in economic policy making and long term approach of EDB in
measuring FDI benefits
▪
Relentless focus on creation of a business-friendly environment through “Onestop-shop” government agencies (EDB, International Enterprise, Spring), eservices and online portal for businesses
▪
Performance-oriented agency attracting FDI with incentive schemes for talent
recruitment, development and retention based on financial and non-financial
incentives
SOURCE: Literature review; press search; expert interviews
| 23
These are the six cases that have been examined in detail
Singapore
Success founded in establishing pro-business environment and
aggressively pursuing FDI through a high performance agency
Republic of Ireland
Built on low tax rate with flexible approach to attract FDI, bring in
anchor investors and move up the value chain
Costa Rica*
Targeted approach to capturing FDI through independent marketing
agency
Finland
Built R&D capability around Nokia as an anchor and successfully
developed
Sweden
Deregulation and creation of pro-business environment to drive
competition and productivity
Oregon
Built on anchor firms and proximity to West Coast to create hot spot for
entrepreneurial spinoffs
* Originally filtered out on income
SOURCE: Literature review; press search; expert interviews
| 24
Contents
1 ▪ What we have done
2 ▪ Discussion of case studies
– Singapore
–
–
–
–
–
–
Republic of Ireland
Costa Rica
Finland
Sweden
Portland, Oregon
Others
3 ▪ Implications for Northern Ireland
| 25
Introduction to the Republic of Ireland
Background
Key achievements
▪
▪
▪
▪
▪
▪ GDP per capita trebled between 1985 and
▪
Small country on edge of Europe
Population 4 million
Total land area 82,000km2
Member of the EEC/EU since 1973
Member of single currency zone (using the
Euro) since 1999
Youngest population in Europe
▪
▪
▪
SOURCE: Literature review; press search; expert interviews
2008
Strong productivity growth of 3.2%
between 1990 and 2007, as opposed to
1.3% in OECD
Rapid FDI growth, of 10x EU 15 average,
resulting in 4x UK FDI level as % of GDP
by 2003
Attracted major global multi-nationals in
pharmaceuticals and IT, including Intel,
Microsoft, Google, Pfizer and Wyeth
| 26
Why are we interested in Ireland?
Relevance?
Applicability?
Small?
▪ 2007 GDP 380% of NI

Open?
▪ 2007 Exports 80% of GDP

Developed?
▪ 2007 GDP per capita
140% of NI
Successful?
▪ Achieved 3.2% productivity
growth from 1990-2007
compared to UK average
of 2.0%

Aspects NI could learn from
▪ Long term focus on targeting anchor investors
▪ FDI-driven growth performance
▪ Entrepreneurial as opposed to compliance oriented
agency
Aspects NI is unlikely to learn from
▪ Ability to use corporate tax rate to encourage
inward investment and establishment of profit
centres

SOURCE: Economist Intelligence Unit; UNESCO Statistics; World Bank “Ease of doing business” reports; IMF International financial
statistics; WMM/Global Insight; World Economic Outlook database; IMD World Competitiveness online
| 27
Early on, the Republic of Ireland succeeded in attracting anchor
companies
1970:
Pfizer sets up
its first
manufacturing
plant in Cork
harbour
1970
1973: Ireland
joings the
European
Economic
Community
1985: Microsoft founds
first European base in
Ireland 1989: Intel
establishes first
operations in Ireland –
both after many years’
cultivation as IDA’s
policies became more
focussed on key targets
1992: Culliton report
1999: Euro
published encouraging
established
increased focus on areas including RoI
increasing productivity,
reduced reliance on
grants and a bringing
together of multiple
factors/institutions across
the economy (e.g. role of
education, infrastructure)
1985
1987:
Ratification
of the Single
European
Act to join
the Single
Market
1995
1994: Enterprise
Ireland spun off
from IDA to increase
focus on developing
indigenous firms
SOURCE: Literature review; press search; expert interviews
2003: 12.5%
corporate
tax rate
established
on universal
basis
2000
1998-1991
Creation of
“Programmes for
Advanced Technology”
to support key areas of
R&D through partnership
between government,
business and universities
2003:
Google
invest in
RoI
2005
2000: Technology
Foresight fund and
Science Foundation
Ireland created
giving €646m over
five years to R&D
| 28
The Republic of Ireland’s productivity growth has been driven
by FDI
FDI
Exports
Total stock inward FDI, % GDP
% GDP, excluding tariffs
150
100
RoI
UK
50
0
1980
1985
1990
1995
2000
2005
2010
R&D
120
Productivity
100
80
RoI
60
40
20
0
1980
UK
1985
1990
1995
2000
2005
2010
Productivity growth
% GDP, all R&D
Change in real GDP per employed worker, % p.a.*
2.5
5
2.0
4
UK
1.5
3
RoI
1.0
2
UK
0.5
1
0
1980
RoI
1985
1990
1995
2000
2005
2010
0
1980
1985
1990
1995
2000
2005
2010
* 10-year rolling average
SOURCE: WMM / Global Insight (GDP, exports, productivity); OECD (R&D expenditure); IMF
| 29
The Republic of Ireland was successful in attracting FDI combining a
customer-oriented agency with attractive financial incentives
Moved early on FDI
and focussed on
attracting key
anchors
Overall economic
system aligned to
attract the right
investment
▪ Ireland focussed early on FDI and maintained this focus despite growing calls to provide
▪
▪
▪
more support to indigenous firms, which meant it was able to attract key anchor investors
early on (Intel, Microsoft) and establish itself in the FDI market
Key anchor investors were pursued over very long periods (10 years plus) and the IDA
dedicated high levels of resource to attracting them (e.g. interviewing 300 Irish
semiconductor engineers working abroad within 5 weeks for Intel)
Long term success of the Republic as a destination for FDI has required an increasing
focus on R&D support and building collaborative research projects (for example with
government support of up to 80% for R&D expenditure carried out in partnership)
Skills have also been aligned to investor needs, with colleges creating new courses
specifically to meet local investors’ skills gaps
▪ The Republic of Ireland was able to build on its strength as an EU member with low
corporation tax rate to encourage MNCs to establish their European base in the Republic
and to book profits there
Low corporation tax
combined with EU
membership
▪
Dedicated, dynamic
investment agency
▪
▪
▪
The IDA, despite being a government agency, has developed its own, customer-focussed
culture based on pride in attracting companies to Ireland and respect from across the
political system
Culture is focussed on “seizing opportunities” and “creating jobs” which has helped gain
political alignment
The IDA’s customer-focussed culture and risk-taking of employees has been enforced by
staff being measured based on outcomes of work rather than targets
Technologists have been recruited to enhance capability to attract R&D intensive firms
SOURCE: Literature review; press search; expert interviews
| 30
Institutions in the Republic of Ireland
GOAL
STATUS
FUNDING
▪
▪
Government agency with
considerable autonomy
16 international offices situated
across 4 continents
10 offices across the Republic
▪
▪
2007 turnover of €180m,
Of this, €80m was given to
firms in grant funding
Policy advisory body in the
Department of Enterprise,
Trade and Employment
Sits at heart of national-level
planning of enterprise and
science strategy
▪
-
Attracting and embedding FDI
in the Republic of Ireland
▪
▪
▪
National advisory body for
Enterprise and Science
▪
▪
▪
Promoting the indigenous
business sector, with a
particular focus on exporting
firms
▪
▪
Government agency with
31 international offices in 24
countries, with support
services provided in another
39 countries
▪
2007 turnover of around
€270m, of which €150m was
spent on financial support to
industry
▪
Attracting and supporting world
class scientific researchers in
the Republic of Ireland
▪
Public organisation
responsible for distributing
research grants to recruit and
retain research groups
▪
Awarded €157m in grants in
2007
SOURCE: Literature review; press search; expert interviews
| 31
The IDA helps attract investors to the Republic of Ireland
▪
SCOPE AND
APPROACH
▪
▪
▪
▪
▪
▪
PROGRAMMES
AND POLICIES
▪
▪
▪
▪
▪
▪
ORGANISATION
AND CULTURE
▪
▪
Created in 1949, state-sponsored agency that is funded through a government grant under the National
Development Plan
Focused entirely on attracting and embedding FDI to the Republic of Ireland (incl. marketing the Shannon Free Zone
abroad)
2007 turnover of €180m, of which around €80m was given to firms in grant funding
16 international offices situated across the US, Europe, Asia and Australia, 10 offices across the Republic – 48% of
projects in 2007 came from US companies
Initially the IDA initially was responsible for both the attraction of foreign inward investment and the development of
indigenous firms; the spin-off of Enterprise Ireland from the IDA in 1994 was aimed at separating the development of
indigenous firms (through Enterprise Ireland) from FDI activities. The separation was driven by a need for greater
transparency of the different performance of the two sides and a perceived need for greater focus on indigenous
firms
In 2007 26% of projects were with new clients
Identifies and builds long-term relationships with firms it wishes to attract to the Republic, and maintains an ongoing
dialogue with companies. Opportunity-driven in its targeting
Builds on incentives including:
– 12.5% corporation tax rate
– 25% R&D tax credit applicable to R&D and buildings where at least 35% of activity is R&D
– Grants to R&D (52%), capital (15%), employment (28%) and training (1%) that are capped overall on an
amount per job and amount per unit capital basis
Is responsive to the needs of target firms. To “seal the deal” with Intel for example, the IDA interviewed 300 Irish
engineers within 5 weeks who were living abroad and presented Intel a list of 85 qualified candidates
Follows a rigorous evaluation process for investment, taking into account cash flows to the state as well as broader
economic benefits of the project. Algorithm updated constantly (e.g. in times of full employment, job creation of
project is less important).
Purchases and develops Business & Technology Parks with (e.g.) broadband telecommunications network, on site
childcare facility, new office & production buildings
Lobbies other government organisations on policies to support its mission, such as the maintenance of a low rate of
corporation tax
Highly entrepreneurial culture, with a pragmatic focus on “getting things done” within the overall grants cap rather
than adhering to strict processes and rule
Staff are incentivised through strong mission and sense of purpose and through recognition of past success of IDA
Staff performance is measured on results rather than fix targets giving them more autonomy (no bonuses paid,
public sector pay)
SOURCE: Literature review; press search; expert interviews
| 32
Structure of the IDA
CEO
▪
Total ~300 staff
Business
Development
▪
▪
▪
Structured by
division, “hub of
operations”,
responsible for
new and existing
investors
Each division also
paired with a
region to ensure
close connection
Staff lead
identification of
priority
sectors/firms,
negotiations with
investors
As of 2006
SOURCE: IDA
Marketing
~50 heads
▪
▪
Structured by
region of the
world
Staff make
presentations,
attend
conferences,
liaise with other
Irish agencies
overseas, monitor
competitors
Marketing,
Personnel and
Org Dev
▪
Works in
partnership with
skills
development and
R&D
organisations to
meet investor
needs
Influencing
agenda, planning
and regions
~90 heads
▪
▪
▪
▪
Structured by
region of Ireland
Staff refine
regional
messages, work
with infrastructure
providers,
represent IDA on
regional bodies
Includes property
department that
buys and sells
property
Also contains
Planning &
Ecosystem
division that
develops IDA
strategy
Corp Services
▪
Handles
communications,
legal, IT, accounts
etc
| 33
Enterprise Ireland is responsible for supporting
indigenous firms
▪
SCOPE AND
APPROACH
▪
▪
▪
▪
PROGRAMMES
AND POLICIES
▪
▪
▪
Enterprise Ireland is the government agency responsible for the development and promotion of the indigenous
business sector
31 international offices in 24 countries, with support services provided in a further 39 countries
10 offices across Ireland
2007 turnover of around €270m, of which €150m was spent on financial support to industry
Increasing sales from exports (key priority)
– Provides firms with customised support,
▫ Helping new exporters validate market opportunities and secure first sale reference customers (EI initiated
7,724 client-buyer meetings in 2007, 405 large sales contracts signed with EI support)
▫ Supporting clients in establishing an in-market presence and providing advice on acquisition and partnering
strategies (83 international mentors appointed to provide expertise and advice to clients)
– Support is primarily practical (export credit guarantees are provided privately by Irish Exporters Association)
with the exception of the Going Global Fund launched in 2008– grants up to €50,000 to fund 50% of expansion
costs given out competitively
Investing in research and innovation through multiple grants programmes including:
– R&D fund supplies grants of up to €450,000 to fund up to 45% (depending on firm size) of R&D expenditure,
with an additional 5% funding available for collaborative projects
– Innovation Partnership initiative, funding 80% of costs for collaborative research projects led by HE institutions
– Pilot funding for small R&D projects from firms who have not previously undertaken R&D
Competing through productivity
– Training grants to support (e.g.) supply chain management training
Encouraging foreign firms to use indigenous firms as suppliers (use of local suppliers is never condition for FDI
investment deals, e.g. through grant conditionalities)
SOURCE: Literature review; press search; expert interviews
| 34
Potential implications for Northern Ireland
▪
Illustrates the potential benefits of a long term focus on FDI and
attracting major anchor investors
▪
Provides a possible institutional model in the IDA – closely linked to
central government but with a sales-oriented culture and flexible mindset
▪
Demonstrates some success in government R&D expenditure driving
R&D excellence in the economy
SOURCE: Literature review; press search; expert interviews
| 35
Contents
1 ▪ What we have done
2 ▪ Discussion of case studies
– Singapore
–
–
–
–
–
–
Republic of Ireland
Costa Rica
Finland
Sweden
Portland, Oregon
Others
3 ▪ Implications for Northern Ireland
| 36
Introduction to Costa Rica
Background
Key achievements
▪
▪
Productivity grew by 2.5% between 1990 and
2000, as opposed to 1.8% OECD average
▪
Growing higher value-add sector (high-tech,
electronics) through attraction of FDI. 51 foreign
companies operate in electronics sector in 2006
▪
Increasing enrolment of students in engineering
and science degrees
▪
Attracted major investors including Intel,
GlaxoSmithKline, Procter & Gamble and Amazon
to Costa Rica
▪
Development of local supplier base and clusters
around foreign companies through government
programs
▪
▪
▪
▪
▪
▪
▪
▪
▪
Central American country with borders to
Panama and Nicaragua, coastlines with Pacific
and Carribean sea
Capital: San Jose
Population 4.1m
Land area 51,100 km2
Official language: Spanish
Constitutional democracy since 1953
4th country in Latin America based on the Human
Development Index but 16% of population living
below poverty line
Natural resources: coffee, bananas and other
tropical plants
First country in the world to abolish its army
President: Oscar Arias 1986-1990 and 2006present (Nobel Peace Prize winner)
SOURCE: Literature review; press search; expert interviews
| 37
Why are we interested in Costa Rica?
Relevance?
Applicability?
Small?
▪ 2007 GDP 110% of NI

Open?
▪ 2007 Exports 48% of GDP

Developed?
▪ 2007 GDP per capita 46%
of NI
Successful?
▪ Achieved 2.0% productivity
growth from 2000-2008
compared to UK average
of 1.7%
~

Aspects NI could learn from
▪ Focus of a small agency on selected sectors and
priority companies where Costa Rica is competitive
to attract FDI
▪ Positive externalities on domestic economy by
limited number of FDI investments
Aspects NI is unlikely to learn from
▪ Use of special export processing zones as financial
incentives to attract FDI
▪ Workforce at very low cost
▪ Relatively unproductive labour force in sectors with
no/low FDI
SOURCE: Economist Intelligence Unit; UNESCO Statistics; World Bank “Ease of doing business” reports; IMF International financial
statistics; WMM/Global Insight; World Economic Outlook database; IMD World Competitiveness online
| 38
Costa Rica’s strategy to attract higher value FDI was supported by
strong leadership
Early 1980s – Costa
Rica creates several
Export Processing
Zones (Zonas Francas)
where importers can
import inputs free of
duties and are
exempted of tax for 812 years
1980s
1994 – Election of
President Figueres gives
new momentum to Costa
Rica’s economic policy.
Priority is shifted towards
higher value add economic
sector while deprioritising
investments seeking lowcost manufacturing.
1996 – FIAS report on
competitiveness of Costa Rican
electronics sector recommends
pursuing FDI in sub-sectors requiring
relatively high inputs of skilled labour:
power technologies, PC cards and
surface mount technologies, system
integration technologies and call
centres (to the electronics industry).
1990s
1982 – Creation of CINDE as
a non-profit, nongovernmental agency by
businessmen in collaboration
with US-Aid to attract foreign
investment to Costa Rica.
1984 – government
acknowledges CINDE to be of
public interest. Initial focus on
a broad range of sectors
Early 1990s – CINDE
loses part of US-Aid
funding and has to
focus efforts (higher
value add)
1995 – Active pursuit of
Intel investment and
involvement or
President. Creation of
“Intel task force”.
SOURCE: Literature review; press search; expert interviews
Today
- Assessment of
.
HC capabilities and
existing private and
public research in Costa
Rica on which R&D
intensive FDI can be
built. Led by CINDE with
other institutions.
2000s
1997 – 300m Intel
Investment is
secured
1996 – Creation of
Procomer as
government agency
aimed at
promoting exports
2000 Creation of PROVEE
program aimed at
developing local supplier
base for foreign companies
and creating linkages in the
economy.
2000 - Creation of R&D
matching grants system
Fondo de Recursos
Concursables to develop
Costa Rica’s focus on
knowledge economy
| 39
Costa Rica’s performance was driven by rapid growth in FDI and
exports
FDI
Exports
Total stock inward FDI, % GDP
% GDP, excluding tariffs
60
50
UK
40
Costa Rica
60
50
30
30
20
20
10
10
0
1980
1985
1990
1995
2000
2005
2010
R&D***
0
1980
UK
1985
1990
1995
2000
2005
2010
Productivity growth
% GDP, all R&D
Change in real GDP per employed worker, % p.a.*
3.0
2.0
UK
1.5
1.0
0.5
0
1996
Costa Rica
40
Costa Rica
2.5
2.0
Costa Rica
1.5
UK
1.0
0.5
1998
2000
2002
2004
2006
0
-0.51980
1985
1990
1995
2000
2005
2010
* 10-year rolling average
** Recent fall in productivity may be due to falling agricultural productivity and dependence on performance of US economy
*** Gaps in Costa Rican R&D Data sourced from WDI
SOURCE: WMM / Global Insight (GDP, exports, productivity); OECD (R&D expenditure); IMF, WDI
| 40
What were the key success factors for Costa Rica?
▪
Identifying
opportunities based
on existing strengths
▪
▪
▪
Agency focus on a
small set of sectors
▪
▪
▪
Strong leadership
▪
When losing competitiveness as a low cost manufacturer in the early 1990s Costa Rica made
the conscious effort to understand its existing strengths and identify development opportunities
The FIAS study was commissioned to assess competitiveness and opportunities in the
electronics sector, CINDE carried out significant market intelligence and identified market
trends
Focus on building on existing strengths
– Anchor companies: Use of Motorola, Intel for high tech sector, Baxter for medical devices
for “reference selling”: CINDE refers to large companies on its website and provides details
on “investment story”, gives possibility to talk to large investors in country
– Existing human capital: Use of relatively skilled labour to build electronics/high tech sector;
CINDE assesses available current and future capital and skill levels
– Leverage quality of life: Marketing of political stability, democracy quality of life and
proximity to the US
CINDE adapted its 1997 strategy on recommendations of the FIAS study and its internal
market intelligence and focussed on selected sub-sectors
– Services (Shared services, Advertising & Marketing, Software, Design)
– Advanced Manufacturing (Telecommunications, Electric Assemblies, Electronic
Components, Semiconductors, Engineering and Software, Consumer Electronics,
Engineering and PCB Repair)
– Medical devices
Strong focus: 29 out of 30 companies that invested in Costa Rica with CINDE support
were in these sectors, 99% of employment created with CINDE in these sectors
President Figueres shifts focus to higher value add sector priority of economic policy
Intel investment: When CINDE’s focus allows Costa Rica to be on Intel’s long list, attracting
Intel to Costa Rica becomes a government priority
– Creation of an Intel task force includes Minister of Foreign Trade
– President meets Intel team in person for 3 hours to discuss the project
Today: CINDE has Minister of Trade or President attend important meetings 3-5 times per
year. Requests for “VIP” are informal and Minister and President are highly responsive
SOURCE: Literature review; press search; expert interviews
| 41
Costa Rica has a set of institutions to support development
ROLE
STATUS
FUNDING
▪
Attracting investment to Costa
Rica
Policy advocacy to create a
business friendly environment
for investors
▪
Independent non profit, nongovernment agency
30 employees, one
international office in New York
▪
▪
▪
Private. Originally from USAID,
now partly from CRUSA
foundation
Budget 2.2m USD
Services provided for free
Trade promotion and
supporting exporting firms
▪
Non governmental public
agency, linked to the Foreign
Trade Ministry (COMEX)
5 offices in regions, 5 offices at
major customs posts, 8 offices
abroad
▪
Government
▪
▪
▪
▪
▪
Supporting SMEs and
encouraging entrepreneurship
▪
Part of Ministry of Economy,
Industry and Trade
▪
Government
▪
Supporting technology startups and firms with high
innovative content
▪
? Part of Ministry of Economy,
Industry and Trade
▪
Government
▪
Financing R&D
▪
Part of Ministry of Science and
Technology
▪
Government
CONCIT
SOURCE: CINDE, Procomer, Literature review
| 42
CINDE is an independent, non-profit organisation
SCOPE AND
APPROACH
▪
▪
▪
▪
▪
▪
▪
▪
▪
▪
PROGRAMMES
AND POLICIES
▪
▪
ORGANISATION
AND CULTURE
Independent non profit, non-government agency 30 employees International office in New York
Budget: 2.2m USD
Focus on promotion of sub-sectors where strong growth is expected: advanced manufacturing, medical devices,
services
Constantly develops and refines sector focus. In 2008 orthopaedics and cardiology added as sub-sectors in medical
devices. Aim to reach a mix of stable and volatile industries to improve stability of investments
Focus: Targeting of companies based on a list of potential investors (metrics are used to prioritise, based on match with
strategy and investment potential). 50% of presentations are result of cold calls. In 2008 29 out of 30 new investments
that had CINDE support and 99% of employment created through these investments were within target sectors.
Trade fairs and investor targeting is limited to identified subsectors
Policy advocacy work in collaboration with Presidency to create favourable domestic environment to retain FDI.
After-care: Assistance in establishment process and “after-care” to boos re-investment that is higher up in value chain.
Relationship are cultivated “forever” with potential investors
Two key service areas for potential investors
– Information on Costa Rica (free of charge and highly customised)
– Preparation of detailed and customised investment agendas
▫ Meetings with service providers, Government organisations, universities, real estate brokers, attorneys,
accountants, industrial parks, and office parks. For large companies President of Minister of trade attend
whenever possible
Support to foreign companies post-establishment in the country
– Policy Advocacy to improve business climate in Costa Rica (CINDE-supported initiatives are training programs for
bilingual workforce, technical training, ease of doing business: improvement in administrative processes)
– After-care for businesses: help through establishment process, connect with institutions (universities to secure
human capital in the long run), encourage re-investment (e.g. Procter&Gamble upgraded from a shared service
centre to its Business Transformation Centre)
Performance culture created through incentives. Financial incentive package (private sector pay levels) for
employees depends on:
–
–
Internal evaluation: performance against agreed annual targets
External evaluation: performance assessment by companies served in investment process (detailed survey)
▪
Credibility of institution: Independence, stability and success in attracting FDI isolates CINDE from political
pressures but creates strong links to Presidency and Ministry of Trade
▪
Ability to gain leadership support: Minister of Trade and President highly responsive to CINDE’s request to attend
investor meetings “We ask them and they come unless they have a major crisis to solve.”
SOURCE: CINDE, Expert Interviews
| 43
CINDE – Organisation
Status : Private. Independent,
recognised of public interest to Costa
Rica. Funded by endowment fund.
Head of CINDE is
former Minister of
Trade
CINDE Board
Investment
promotion
department
▪
▪
Investment promotion
activities (targeting,
presenting)
Identification of new
sectors and niche
markets
“After-Care”
department
Investment
Intelligence
▪
▪
Analytics and
statistics
Response to
customised request
for potential investors
▪
▪
▪
▪
SOURCE: CINDE, Expert interview
Policy Advocacy –
cooperation with
Presidency to improve
business climate
Establishment process
Inter-institutional
coordination
After-care process to
promote re-investment
International
relations
▪
▪
▪
▪
Contacts with potential
investors abroad
Media relations
Public relations to
public and private
sector (e.g.
consultants, research
institutes)
Identification of
conferences CINDE
should attend
| 44
PROCOMER provides practical support to exporters
SCOPE AND
APPROACH
PROGRAMMES
AND POLICIES
▪
▪
▪
Run as non-governmental public agency linked to the Foreign Trade Ministry COMEX
International offices in New York, Miami, Houston, Los Angeles, Mexico, Guatemala, Panama, Puerto
Rico, Dominican Republic, China, Germany, Chile
Operates the Free Trade Zones (zones of temporary tax exemption for large investments by exporting
companies requiring $150m in fixed asset investment if physically inside the zone or $2m if physically
outside the zone)
▪ Training support to exporting firms
– Runs programmes on trade logistics and to improve trade capacity
– Set-up of meetings with potential importers (e.g. provides addresses, phone numbers, schedules
▪
▪
▪
▪
▪
meetings) in market of interest
Trade promotion for Costa Rica
– Organises participation in trade fairs etc; combining this with training and support for firms, e.g.
exporters are offered lectures and fora on specific topics (negotiation, getting to know the market,
access standards) one week prior to an event where they will be meeting a group of buyers
– Organises market visits for groups of exporters, with market studies are offered to provide participants
with data about the region they will visit in order to plan their negotiation strategies prior to travelling
and their subsequent sales follow-up.
Market and trade research
– Market research on sectors and products in specific markets (accessible online) for exporters
Logistical support with exporting and investment
– An online-portal (SIVUCE) for exporters to provide a “one-stop shop” for export administration and
documentation
Manages the 12 Free Trade Zones in Costa Rica in collaboration with COMEX
Close collaboration with CINDE on FDI investments in Free Trade Zones
SOURCE: PROCOMER, expert interview
| 45
PROCOMER has recently expanded to include support
to suppliers of MNCs through PROVEE
SCOPE AND
APPROACH
▪ PROVEE (Supplier Development Project for High-Technology Multinational Companies)
▪ Mission is to facilitate business deals between export companies and those with export potential and
▪
▪
▪
PROGRAMMES
AND POLICIES
Business-making
– Potential suppliers can register online
– PROCOMER checks suitability and quality of suppliers and connects them with MNCs
–
▪
▪
▪
SOURCE: Procomer
domestic suppliers, thus contributing to enhance value added from Costa Rican industries, as well as the
country's global competitiveness.
186 MNCs and >250 suppliers work through PROVEE
Focuses on three sectors:
– Communications & Information Technology / Electrical - Electronics / Metal Mechanics Sector
– Medical / Chemical / Pharmaceutical Sector
– Agribusiness / Textiles / Other Sector
Introduction of suppliers identified and analysed by Costa Rica Provee. TNCs are given the suppliers' diagnoses
carried out by the Management Office.
After-care
– Issue resolution
Training
– Manufacturing and supply chain training for suppliers
Close collaboration with government institutions and CINDE in the PROVEE program, e.g. CINDE
provides a potential investor with a list of qualified local suppliers
| 46
Multiple organisations work to support R&D and enterprise
▪
▪
▪
CIE-TEC Enterprise Incubator of the Technology Institute of Costa Rica (in collaboration with the Ministry of
Science and Technology). Focus on technology start-ups and firms with high innovative content
– Provides management, communication and other training
– Access to financing from international sources and national projects (World Bank, Proyecto Mermas,
connected ministries)
▪
PROPYME (administered by CONICIT)
– Financing of research to develop new products, technology, processes and patents
– 80% of R&D costs covered, non reimbursable
– Financing from government budget on demand
FORINVES (funded and administered by CONICIT
– Venture fund, non-profit for investment in research and innovation.
– Clear eligibility criteria for grants (academic qualification, past achievements, project, link to research
institutions)
CONICIT
▪
SOURCE: Government websites
DIGEPYME Costa Rica (Support to SMEs) is an entity of the Ministry offering different types of support
programs to SMEs, in cooperation with other ministries and with national banks
– BN PYMEX program to for exporting SMEs (in cooperation with national development bank). 140
offices in Costa Rica as “one stop shops”
▫ Technical assistance and market research, Logistical support, International payment support,
International finance, Loans
DIGEPYME Costa Rica (Support to SMEs) (cont.)
– CAAP-IMPROSA in cooperation with Banco Improsa offers financial services to SMEs. Legal,
accounting, tax services, help with financial transaction, HR and financial advisory services.
– FODEMIPYME Development fund for SMEs
▫ Provides guarantees for SMEs who seek loans
▫ Provides credit to SMEs who want to invest in R&D, technical development, research and training
| 47
What were the key success factors for Costa Rica that Northern
Ireland could learn from?
▪
Success of small agency with limited resources in attracting FDI
through clear focus and support from senior leadership
▪
Beneficial use of small number of foreign investors (Motorola, Intel) to
create benefits in the economy and use of “reference-selling” to attract
further investments
▪
Policy focus on embedding FDI through close collaboration of
institutions and agencies in creation of a local supplier networks
SOURCE: Literature review; press search; expert interviews
| 48
Contents
1 ▪ What we have done
2 ▪ Discussion of case studies
– Singapore
–
–
–
–
–
–
Republic of Ireland
Costa Rica
Finland
Sweden
Portland, Oregon
Others
3 ▪ Implications for Northern Ireland
| 49
Introduction to Finland
Background
Key achievements
▪ Small country bordering Russia, Norway
▪ Productivity grew by 2.8% between 1985
▪
▪
and Sweden
Population 5.25m, land area 338,000 km2
Languages: Finnish, Swedish, English
▪ Limited natural resources (forests)
▪ Member of the EU since 1995
▪ Elected president and independent
▪
▪
and 1995 – more than twice the OECD
average
▪ R&D more than trebled in 25 years from
1981 to 2006
▪ Exports doubled from 1991 to 2008
assembly with legislative powers
History of excellence in education and
training
GDP/capita of
$36,000 – 20th highest
in the world
* On nominal basis
SOURCE: Literature review; press search; expert interviews
| 50
Why are we interested in Finland?
Relevance?
Applicability?
Small?
▪ 2007 GDP 380% of NI

Open?
▪ 2007 Exports 46% of GDP

Developed?
▪ 2007 GDP per capita
125% of NI
Successful?
▪ Achieved 2.8% productivity
growth from 1995-2005
compared to UK average
of 1.9%


Aspects NI could learn from
▪ Close collaboration between companies,
governments, and universities in all public efforts to
promote growth
▪ Government was very responsive to local company
needs and looked for targeted support
opportunities to embed and retail companies in
local economy
▪ Creation of successful clusters through the use of
formal mechanisms to encourage co-operation
between sectors
Aspects NI is unlikely to learn from
▪ Choice of sector and subsequent policies driven
very strongly by presence of Nokia
▪ Finnish high-tech growth supported by skilled labour
available from world’s best education system
SOURCE: Economist Intelligence Unit; UNESCO Statistics; World Bank “Ease of doing business” reports; IMF International financial
statistics; WMM/Global Insight; World Economic Outlook database; IMD World Competitiveness online
| 51
Finland used R&D agencies to build a successful cluster around
Nokia
Oulu development began in
1972 when Nokia was
offered a government
radio-technology contract
on the condition it located in
a “peripheral” area of Finland
– a key factor in winning the
contract was the promise to
work alongside the University
of Oulu in solving the
technical issues
In 1983, Government R&D
subsidies were reorganised from the
“politically” controlled Ministry of
Industry, favouring heavy industry,
into a separate agency, TEKES, that
allocated subsidies based on the
anticipated innovation and growth
benefits, and tended to favour hightech firms. Early on, almost 30% of
TEKES’ funding went to Nokia
alone
1970
1980
In 1974, Government-owned
Research Institute VTT opened a
Laboratory of Electronics in
Oulu. This was to become a centre
for innovation over the next 3
decades, with significant cooperation between Oulu University,
Nokia and other firms, and VTT. A
number of key figures in the
development of the ICT industry in
Finland moved between these three
organisations
SOURCE: Literature review; press search; expert interviews
High tech employment in the
municipality of Oulu,
Northern Finland reaches
18,000 jobs (nearly 10% of the
population), an increase from
<1,000 high-tech jobs in 1975,
making Oulu the fastest
growing region in Finland. Oulu
voted the “Best place to live in
Finland” in 2003 by leading
newspaper Helsingin Sanomat
1990
Government began to
align around a hightech strategy. The
Science &
Technology Council,
featuring the Prime
Minister and several
key Ministers, was
founded in 1983, to
provide central
leadership
Collapse of Soviet
Union contributes
to deep
recession in
1990 and 1991.
Government R&D
subsidies through
TEKES and other
channels credited
with saving Nokia
from bankruptcy
2000
Mid-1990s –
Nokia becomes
one of the world’s
largest mobile
telecoms players.
By 2004, the firm
accounted for
3.5% of Finland’s
GDP and almost
25% of its
exports
| 52
Finland’s success has primarily been driven by R&D and export
growth
FDI
Exports
Total stock inward FDI, % GDP
% GDP, excluding tariffs
60
50
50
UK
40
Finland
Finland
40
30
UK
30
20
20
10
10
0
1980
1985
1990
1995
2000
2005
2010
R&D
0
1980
1990
1995
2000
2005
2010
Productivity growth
% GDP, all R&D
3.5
Finland
Change in real GDP per employed worker, % p.a.*
3.5
3.0
3.0
2.5
2.5
2.0
UK
1.5
2.0
Finland
1.5
UK
1.0
1.0
0.5
0.5
0
1980
1985
1985
1990
1995
2000
2005
2010
0
1980
1985
1990
1995
2000
2005
2010
* 10-year rolling average
SOURCE: WMM / Global Insight (GDP, exports, productivity); OECD (R&D expenditure); IMF
| 53
Central leadership and the intelligent use of R&D subsidies to
promote co-operative research were key to Finland’s success
▪
Committed to
support Nokia’s
development
▪
▪
Explicit co-operation
requirements placed
on R&D incentives
▪
▪
▪
▪
Technology policy at
heart of national
political agenda
▪
▪
Practical support
services for
exporters
▪
Nokia’s radio-telephone development in Oulu stemmed from the award of a
government defence contract. In awarding the contract, the government required
Nokia to work closely with Oulu University, encouraging links to be forged
The government continued to support Nokia, in particular during the recession of
the early 1990s, when its R&D subsidies of up to 40% of Nokia’s total spend were
credited with helping the company avoid bankruptcy
R&D support in Finland is explicitly focussed on driving co-operation, e.g. VTT
encourages smooth moves of staff between research and private sector (e.g. Nokia)
Tekes funding prioritises firms who are co-operating with academic institutions
Over half of funding goes to companies who are subcontracting research to academic
institutions or SMEs (there is no straight tax incentive for R&D)
The government contract that drew Nokia to Oulu was conditional on their
commitment to work with the university
The Science & Technology Council (now Research and Innovation Council) drives
national policy and is led by the Prime Minister, publishing reports every two years
on the entire Finnish “national innovation system” and drives policy across
departments of education and the economy, with a remit that encompasses
education, infrastructure, research and industrial support
Ministry of Employment and the Economy controls Research Institute VTT which
has 660 research projects and 2,700 staff in key sectors
Finpro provides consultancy services to clients on a paid for, demand-led basis,
with a resulting strongly customer-oriented culture including the aggressive pursuit
of feedback and a deep network of 300 staff (mostly overseas)
Finpro’s services are separate from the financial support (export credit
guarantees) provided by Finnvera
SOURCE: Literature review; press search; expert interviews
| 54
Finland has a set of institutions to support development
GOAL
STATUS
FUNDING
▪
Provide central strategy and
direction on Finland’s
“Technology Policy”
▪
▪
Government funded
▪
Government council including
Prime Minister
3 full-time secretariat members
Support ability of Finnish firms
to export
▪
▪
▪
Private registered association
300+ employees
52 international offices
▪
▪
Spend of €20m
60% government funded, 40%
privately funded
70% of private funding comes
from consultancy fees
▪
▪
▪
Funding for Finnish R&D
▪
▪
▪
Government body
290 employees
6 international offices and 16
locations across Finland
▪
▪
Spend of €300m
Government funded
▪
Conducts R&D activity on
behalf of government,
universities and firms
▪
▪
State-owned, non-profit,
Research Institute
2,900 employees (mostly
researchers)
▪
▪
Spend of €250m
Funding is 30% commercial,
20% direct from government,
50% from other sources
Investment promotion agency
for FDI
▪
N/A
▪
N/A
▪
SOURCE: Expert interviews; “What Next? Finnish ICT Sector and Globalisation”, Steinbock; “the Oulu Phenomenon”, Morris; “Oulu: A
Five Star Technology Cluster”; “Finland and Nokia”, HBS case; “Ease of doing business” report, 2008
| 55
Finpro is a fee-charging export promotion organisation
▪
SCOPE AND
APPROACH
▪
▪
▪
▪
▪
PROGRAMMES
AND POLICIES
▪
▪
ORGANISATION
AND CULTURE
▪
▪
▪
▪
SOURCE:
Run as private registered association with requirement to meet cost recovery targets set by Minister of
Finance
Over 300 “internationalisation professionals” located in 52 offices around the world, with two-thirds of
personnel based overseas
Government provides support-in-kind, such as:
– Locations in Finnish embassies and diplomatic support
– Funded graduate interns
Support concentrated in seven broad sectors: Energy and Environment, Life Sciences, Forest, Software
and Digital Media, Services, Construction and Logistics, Machinery
“A small economy [such as Finland’s] is like a mouse surrounded by big fat cats. The key to success
does not lie in volume or efficiency, but in the ability to move more quickly than the others.”
Consultancy services: provides internationalisation strategies, market research and partner searches and
project consultancy report (e.g. helping company prepare a business plan for new market entry)
Support to ~550 firms per year, with ~800 subscribing members Larger firms receive support at cost, SMEs
at subsidised rates (~50% discount)
“Charges have brought about better relationships with customers who see them as more professional and
customer focussed”. Breakdown of charges:
▫ Annual membership fee of ~£350. Membership grants access to a newsletter and networking events
▫ Finpro charges for services that require a tangible investment of time. SME’s pay around £600 for a
senior consultant and around £350 for a market analyst per day. Lareg companies pay £700 £1,100 per day
Customer oriented culture based on requirement to provide value for money
“Finpro is a multicultural and multi-disciplinary team of professional experts. By definition, it is a
complicated set of individuals to manage, requiring plenty of room for professional individualism at the
same time as it is vital to glue the team together into an organisational backbone”
Highly competitive salaries to attract talent such as top graduates and many Nokia alumni
Feedback culture with 6 monthly performance reviews for all staff (including two-way feedback with
managers) which determine bonus supported by Balance Scorecard around “Client Relationships”,
“Services and processes”, “Competence”, “Financial efficiency”
Expert interviews; “What Next? Finnish ICT Sector and Globalisation”, Steinbock; “the Oulu Phenomenon”, Morris; “Oulu: A Five Star
Technology Cluster”; “Finland and Nokia”, HBS case; Expert interviews; “Ease of doing business” report, 2008
| 56
Tekes is oriented to promoting co-operation through R&D
SCOPE AND
APPROACH
▪
▪
▪
▪
▪
▪
PROGRAMMES
AND POLICIES
▪
▪
▪
•
ORGANISATION
AND CULTURE
•
•
•
SOURCE:
Government organisation responsible for dispersing R&D funding
Employs 290 individuals with 6 international offices, in Silicon Valley, Washington DC, Tokyo, Shanghai,
Beijing and Brussels and 16 locations across Finland
Tekes aims to share in R&D risk and accept greater uncertainty than other financial backers
Tekes looks to promote co-operation, and explicitly required joint working from various organisations:
– Universities are generally required to show that R&D projects are commercialisable
– Companies showing their projects will involve input from other firms or universities are prioritised
Focus around 8 industry areas (Telecommunications and Electronics Industries, Software and Digital
Media Industries, Forest and Chemical Industries, Mechanical Engineering Industry, Real Estate and
Construction Industries, Energy and Environment Industries, Services and Well-being Industries, Life
Science Industries) and 11 research areas
The organisation is shifting its focus to the services sector which now receives ~50% of all funding
(although they have a hard time finding applicants!)
Distributed €518m in 2008, across 1983 projects, with an average spend per project around €250,000
TEKES provides R&D funding in three forms:
– Grants to companies (~40%)
– Loans to companies (~20%)
– Grants to universities and research institutes (~40%)
Over 50% of funding is given to small and micro companies
“Technocratic” culture, detached from political influence (e.g. funding given to telecoms was politically
highly unpopular in Tekes early years)
Very close connections to private sector companies and strong business understanding, which they
consider key for being able to be effective in setting priorities
Prior to the creation of TEKES, Government R&D subsidies were controlled by the Ministry of Industry,
which tended to favour heavy industry due to the political benefits. TEKES was explicitly tasked with
distributing R&D grants to promote “innovation and economic benefits”
Tekes closely performance-manages grant and loan recipients, and reports on impact and success rates
Expert interviews; “What Next? Finnish ICT Sector and Globalisation”, Steinbock; “the Oulu Phenomenon”, Morris; “Oulu: A Five Star
Technology Cluster”; “Finland and Nokia”, HBS case; Expert interviews; “Ease of doing business” report, 2008
| 57
Tekes’ funding has increased rapidly, as has its focus
on services and co-operative projects
TEKES funding
Expenditure on collaborative projects
€million
€million
120
400
350
Companies’ subcontracting from
universities and
research institutes
100
TEKES funding
300
80
250
200
60
150
40
Large companies’
subcontracting from
SMEs
100
20
50
0
0
83
85
87
89
91
93
95
97
99
01
03
05
07
09
98
99
00
01
02
03
04
05
06
Expenditure by sector
Expenditure by recipient size
€million
100 % = €295m
200
180
160
140
120
100
80
60
40
20
0
2003
07
08
Micro companies
75 million euros
Services
Industry
Large
companies
105 million
euros
Small
companies
78 million
euros
Other sectors
2004
2005
2006
2007
2008
Midsized companies
35 million euros
SOURCE: Expert interviews; “What Next? Finnish ICT Sector and Globalisation”, Steinbock; “the Oulu Phenomenon”, Morris; “Oulu: A
Five Star Technology Cluster”; “Finland and Nokia”, HBS case; Expert interviews; “Ease of doing business” report, 2008
| 58
VTT has been a key agent for promoting co-operation in research
SCOPE AND
APPROACH
▪ State-owned, non-profit, Research Institute, which conducts R&D activity
▪ Institute comes under the control of the Ministry of Employment and the Economy
▪ 2008 turnover of €250m
▪ Employs around 2,700 staff, mostly as researchers
▪ Around 30% of VTT’s revenue comes from commercial activities
▪ VTT’s key technology fields are:
– Applied materials
– Bio- and chemical processes
– Energy
– ICT
– Industrial systems
– Microtechnologies and electronics
– Technology in the community
– Business research
▪ VTT is currently leading 660 research projects
▪ Produced 47,000 publications and 1,200 patents over the past 20 years
▪ Following a 2006 strategy review, VTT chose to concentrate resources on a smaller number of major
projects. In 2007, around half of the organisation’s publicly and jointly funded research was carried out in
research programmes with a budget of over €3m
▪
ORGANISATION
AND CULTURE
VTT acts as a way for people to move smoothly between academic and commercial roles - for example
the Mobira software development unit hired multiple people directly from VTT Oulu and then retained
VTT to supervise R&D within the university
SOURCE: Expert interviews; “What Next? Finnish ICT Sector and Globalisation”, Steinbock; “the Oulu Phenomenon”, Morris; “Oulu:
A Five Star Technology Cluster”; “Finland and Nokia”, HBS case; Expert interviews; “Ease of doing business” report, 2008
| 59
VTT spends around €250m each year across a range of sectors
VTT funding
Expenditure by industry
€million
100% = €240m
Commercial activities
jointly funded projects
Energy
Electronics
Real estate and
construction
Chemistry and environment
External funding
Basic governmental funding
ICT
Biotechnology, pharmaceuticals and food industries
Machines and vehicles
Metal refining
Forest industry
Services and logistics
Self-financed projects
250
200
1
6 3
6
150
18
10
100
15
50
13
0
2004
2005
2006
2007
2008
13
SOURCE: Expert interviews; “What Next? Finnish ICT Sector and Globalisation”, Steinbock; “the Oulu Phenomenon”, Morris; “Oulu:
A Five Star Technology Cluster”; “Finland and Nokia”, HBS case; Expert interviews; “Ease of doing business” report, 2008
14
| 60
The matrix below is used to ensure research has a clear economic or
social use
| 61
What were the key success factors for Finland that Northern Ireland
could learn from?
▪ Close collaboration between local business community and the government, with
initiative for government support frequently coming from companies themselves.
▪ Strong central leadership from the Science and Technology Council drove
alignment around a clear vision – yet government traditionally seen as an enabler
and collaborator to local businesses
▪ Government defence contracts were instrumental in bringing an anchor firm, Nokia,
to partner with the University of Oulu and form the hub of a high-tech cluster
▪ An independent organisation, TEKES, with close business connections was
created to administer R&D funding according to strict, apolitical criteria
▪ Both TEKES and the Government research organisation VTT have a strong focus
on promoting co-operation between organisations, and typically make funding
contingent on partnership working
SOURCE: Literature review; press search; expert interviews
| 62
Contents
1 ▪ What we have done
2 ▪ Discussion of case studies
– Singapore
–
–
–
–
–
–
Republic of Ireland
Costa Rica
Finland
Sweden
Portland, Oregon
Others
3 ▪ Implications for Northern Ireland
| 63
Introduction to Sweden
Background
Key achievements
▪
▪
▪
▪
▪ Productivity grew by 2.8% p.a. between
Largest Scandinavian country
Population of 449,964 km sq
GDP of $350 billion
Historically heavily-regulated, with a large
welfare state
1990 and 2000 – almost twice the OECD
average
▪ Private sector productivity growth of 3.3%
p.a. was even greater
▪ Limited natural resources (forests)
▪ Member of the EU since 1995
▪ Elected president and independent
assembly with legislative powers
▪ History of excellence in
▪ R&D expenditure of 4.25% of GDP in
2001 second highest in OECD
▪ Exports doubled from 1978 to 2008
education and training
SOURCE: Literature review; press search; expert interviews
| 64
Why are we interested in Sweden?
Relevance?
Applicability?
Small?
▪ 2007 GDP 700% of NI
Aspects NI could learn from
▪ Using financial crisis to build alignment around need
for change
▪ Specific actions taken by central government to
promote competition
▪ Grant-matching requirement of R&D agency drives
co-operation around research and innovation
Open?
▪ 2007 Exports 54% of GDP
Developed?
▪ 2007 GDP per capita
125% of NI
Successful?
▪ Achieved 2.8% productivity
growth from 1990-2000
compared to UK average
of 2.3%
~


Aspects NI is unlikely to learn from
▪ Highly regulated, non-EU economy was able to
achieve significant benefits by removal of product
market regulations and EU accession

SOURCE: Economist Intelligence Unit; UNESCO Statistics; World Bank “Ease of doing business” reports; IMF International financial
statistics; WMM/Global Insight; World Economic Outlook database; IMD World Competitiveness online
| 65
Sweden introduced reforms to increase competition in key
domestic sectors, resulting in significant productivity growth
1989-91: Sweden experienced
deep economic crisis with two
successive years of negative
growth and a collapse of the
financial system, leading to a
widespread acceptance that the
economic strategy of the 1980s
had failed
1985
1991-95: Sweden underwent
significant measures to
increase competition across
the retail, automotive, food
processing and retail banking
sectors. The ensuing
increase in competition in
these sectors contributed to
substantial productivity
growth over the next decade
SOURCE: Literature review; press search; expert interviews
2003: Driven by a burgeoning
telecoms sector, Swedish R&D
expenditure reaches record level of
4.25% of GDP, second only to Israel
among OECD countries.
Government R&D expenditure, at
1.08% of GDP, is second only to
Finland
1995
1993-95: In preparation
for Sweden’s 1995
accession to the EU, the
country undergoes a
significant process of
macroeconomic and
regulatory harmonisation
and reform
2004: Sweden
experiences 5th
highest productivity
growth in OECD
over period 19902004, at 3.3% p.a
2005
2001: 7.4km bridge built
across Baltic Sea in
Øresund, connecting
Malmö, Sweden with
Copenhagen, Denmark
in an attempt to boost
regional co-operation.
Within 5 years, 17,000
people are commuting
between the two cities
| 66
Sweden’s productivity growth has been driven by growth in R&D ,
exports and FDI
FDI
Exports
Total stock inward FDI, % GDP
70
60
50
40
30
20
10
0
1980
% GDP, excluding tariffs
Sweden
UK
60
Productivity
50
Sweden
40
30
UK
20
10
1985
1990
1995
2000
2005
2010
R&D
0
1980
1985
1990
1995
2000
2005
2010
Productivity growth
% GDP, all R&D
Change in real GDP per employed worker, % p.a.*
5
3.0
2.5
4
Sweden
2.0
Sweden
3
1.5
UK
2
1.0
UK
1
0
1980
0.5
0
-0.51980
1985
1990
1995
2000
2005
1985
1990
1995
2000
2005
2010
2010
* 10-year rolling average
SOURCE: WMM / Global Insight (GDP, exports, productivity); OECD (R&D expenditure); IMF
| 67
Sweden’s high R&D expenditure spurred productivity growth,
which further benefited from increased product market competition
▪
Political momentum
to push through
change
▪
▪
Sweden’s accession to EU-member status in 1995 required the country to
harmonise regulation and remove product and labour market barriers, which had
the effect of stimulating competition and driving productivity growth
▪
In addition to the policy harmonisation required by EU accession, Sweden
introduced a series of policies aimed at increasing competition in the early 1990s
Two sectors in particular were targeted:
– Retail, in which a change in zoning laws helped stimulate competition and
productivity growth of 4.5% p.a. from 1990-2003, 3 times that of the OECD
– Retail banking, which experienced rapid productivity growth following
government interventions to increase competition
Access to a larger
market provided by
EU accession
Reforms to increase
competition in
underperforming
industries
▪
▪
R&D co-operation
driven by matching
requirements
Sweden experienced a deep economic crisis between 1989 and 1991, which led
to a widespread acceptance that the “Swedish social welfare model” of the 1980s
had failed
The government was able to capitalise on the crisis and its effects to generate
cross-party political support to push through a widespread series of regulatory
reforms aimed at increasing competition and preparing the country for accession
to the EU
▪
At close to 4%, Sweden has one of the highest rates of R&D expenditure in the
world
Distinctive element of Swedish R&D policy is the extent to which it involves cooperation between institutions. This is largely driven by the requirement of the
R&D funding association, VINNOVA, that research grants be matched by other
organisations – usually firms or universities
SOURCE: Literature review; press search; expert interviews
| 68
Reforms to increase competition in the retail and retail banking
sectors drove significant productivity growth in Sweden
Retail reforms
▪
▪
▪
Following the crisis of 1990-93, there was broad acceptance
that product market reforms to increase competition were
required to restore economic competitiveness. In the retail
sector, this was largely achieved through an easing of
municipality planning restrictions. Prior to 1992, planning
applications from aspirational market entrants were
considered by a committee including representatives of from
incumbent firms, and were seldom successful
In 1992, the government changed the municipality guidelines,
requiring them to “consider the competitive landscape” when
deciding whether or not to award planning permission to new
retailers
This led to a significant increase in competition in retail, and a
large increase in large, high-productivity out-of-town stores
(see chart to right), which resulted in sectoral productivity
growth of 4.5% p.a. (OECD 1.5%)
Retail banking reforms
▪
▪
▪
SOURCE: Expert interviews; “Öresundsregionen – the human capital of Scandinavia”;
“Territorial review of Öresund, 2003”; “Årets svensk 2007: Sven-Erik Bucht”
The financial sector also experienced significant
reforms, including the creation of a government-backed
mortgage lender to drive competition. As a result, the
market share of the “Big 4” banks fell from 82% to 69%.
This resulted in 4.6% p.a. productivity growth in retail
banking, as opposed to the OECD average of 3.0%
These developments contributed to Sweden’s high
private sector productivity growth of 3.3%, as opposed
to OECD average of 2.2% between 1992 and 2004
Sweden was particularly successful at using the
economic crisis of the early 1990s to align the country
around a clear vision of change, and driving through
reforms by citing national interest
| 69
The increase in R&D expenditure has been driven by nongovernment R&D
Research and Development expenditure
% GDP, all R&D
4.5
4.0
3.5
Total R&D
3.0
2.5
2.0
1.5
1.0
Government R&D
0.5
0
1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006
SOURCE: WMM / Global Insight (GDP); OECD (R&D expenditure)
| 70
Sweden has a set of institutions to support development
GOAL
STATUS
FUNDING
▪
Funding multi-disciplinary
research
▪
Government agency that
provides funding for scientific
research in all disciplines
▪
Distributed grants of SEK 3 billion
(€300m) in research support in
2007
▪
Supporting innovation by funding
R&D
Strengthening research
cooperation between academia,
companies and the public sector
▪
Government agency that funds
co-operative R&D projects under
the Ministry of Industry,
Employment and Communication
▪
2008 budget of €180m (excluding
overheads)
Supporting Swedish companies’
international growth
▪
Jointly owned by government and
industry
508 employees in more than 50
countries, 380 of whom wok
abroad
▪
71m USD from mix of
government and private funding
Attracting FDi to Sweden to
increase competitiveness and
promote growth
▪
Government agency, with 77% of
funding directly from government
70 employees in 5 international
offices
▪
Annual budget of SEK 78m
(€8m)
Swedish Research Council
▪
Agency for Innovation Systems
▪
▪
SOURCE: Annual reports; Expert interviews
▪
▪
| 71
Vinnova has a remit to increase co-operation among
research and innovation organisations
SCOPE AND
APPROACH
▪
▪
▪
▪
▪
▪
▪
PROGRAMMES
AND POLICIES
▪
▪
▪
▪
▪
ORGANISATION
AND CULTURE
Government agency responsible for disbursing funding for projects to boost innovation
Explicit mandate to promote co-operation and strengthen networks between organisations across the public, private
and university sectors – “Moving beyond Public-Private Partnerships to the “Triple Helix” of Public-Private-University
Partnerships
2008 budget of €180m (excluding overheads)
All projects are jointly-funded by VINNOVA and other organisations to encourage co-operation
6-pronged approach to innovation:
– Strengthening the functions for commercialisation of research at universities
– Development of the institute sector
– Support for R&D aiming at radical innovations in SMEs
– Supporting international cooperation
– Knowledge and research about innovation system
– Informing the broader public about research and innovation
Strong focus on commercialisable “needs-driven research”, with a practical application
All projects are jointly-funded by VINNOVA and other organisations to encourage co-operation. Example
programmes:
VINNVÄXT - a competition among regions for the development of internationally competitive research and innovation
environments in specific growth fields, with a prize of €14-22m over 10 years (50% from VINNOVA, rest from regions)
VINN Excellence Centres – Centres for research collaboration between universities, industry and the public sector.
Each awarded €2.2m per year (matched by industry)
Institute Excellence Centres – Top Research Institutes receive project grants from VINNOVA (grants matched by
industry)
“Do Research & Grow” grants to SMEs provide small firms with grants of up to €300k (matched by firm) to
“Strengthen the company’s capacity to compete on the global market and thereby contribute to the generation of
economic growth”. Over two-thirds of recipients co-operate directly with universities
Strong focus on understanding both research and commercial aspects, with over a quarter of employees possessing
a PhD
SOURCE: Annual reports; Expert interviews
| 72
Vinnova works with Universities, Institutes and private
companies with a focus on 5 key sub-sectors
Distribution of funding, type of institution, 2008
Distribution of funding, field of research, 2008
100% = €180m
100% = €180m
Others
Other
10
Companies
10
40
20
Universities
ICT
20
Automotive 20
10
20
30
Research Institutes
SOURCE: WMM; IMF Global Insight; OECD; World Economic Outlook database
Manufacturing
& Materials
Services & IT
Implementation
20
Bio-tech &
Life Sciences
| 73
Invest in Sweden works with domestic and foreign firms
to encourage FDI
SCOPE AND
APPROACH
▪
▪
▪
▪
▪
▪
▪
Three-pronged approach to supporting FDI growth:
– Increase awareness of business opportunities in Sweden among foreign firms through presentations,
trade fairs and publications
– Work with Swedish organisations in the public and private sectors to increase awareness of FDI
opportunities and equip companies to work with foreign investors
– Provide the government and other relevant players with investment analysis of the Swedish and
international economies
▪
▪
High-performing culture; 80% of employees are academics, while most have private sector experience
Strong emphasis on client satisfaction, including continued contact with firms after they have invested in
Sweden
PROGRAMMES
AND POLICIES
ORGANISATION
AND CULTURE
Government agency responsible for attracting FDI to Sweden to enhance Swedish competitiveness
70 employees in 6 countries
Annual funding of SEK 78m (€8m), 77% of which is direct from government
International sales function specialises across industry and services:
– Industry: Automotive, Cleantech, ICT; Life sciences; Packaging
– Services: Contact centres, Financial services, Logistics, Retail, Tourism
Regional function works with municipal, county and regional-level organisations in Sweden to provide:
Skills and expertise development, After care, Regional cluster development
Support provided along the “investor pathway” (see below)
SOURCE: Annual reports; Expert interviews
| 74
What were the key success factors for Sweden that Northern
Ireland could learn from?
▪ The government used a financial crisis to build alignment behind a reform strategy
that involved politically-unpalatable reforms
▪ Sweden introduced a sweeping wave of deregulation in the early 1990s, including
relatively minor changes to planning guidelines for municipalities, which
substantially increased competition and productivity
▪ By requiring that research grants be matched by other organisations, Sweden’s
R&D organisation VINNOVA has contributed to Sweden’s high levels of R&D cooperation between firms, universities and research institutes
SOURCE: Literature review; press search; expert interviews
| 75
Contents
1 ▪ What we have done
2 ▪ Discussion of case studies
– Singapore
–
–
–
–
–
–
Republic of Ireland
Costa Rica
Finland
Sweden
Portland, Oregon
Others
3 ▪ Implications for Northern Ireland
| 76
Introduction to Portland, Oregon
Background
Key achievements
▪
Portland is the largest city in Oregon, with
575,000 of the state’s 3.8m residents
▪
▪
The region is renowned for its quality of life and is
known as the “Greenest city in the US”
Annual productivity growth of 4.1% p.a. since
1990, more than twice the US average rate,
drove productivity more than 10% above the US
level
▪
High-tech employment increased 4-fold from
1976 to 2000, with over 65,000 people currently
employed in the sector (6% of Portland’s labour
force)
▪
Oregon’s “GDP” of $102 billion is almost 3 times
as large as that of Northern Ireland
▪
The state’s economy was historically driven by
natural resources such as timber
▪
▪
The region boasts several regional universities,
including Portland State University, University of
Oregon and Oregon State University
Vertical integration of the semiconductor industry,
with 24 manufacturing sites located in the region,
across silicon wafer fabrication, chip production
and semiconductor equipment and supplies
▪
Intel opened first branch plant outside of
California in the region in 1976
▪
Infrastructure
– 3rd largest port on
the West Coast
– Airport hosts 14
million
passengers/year
SOURCE: Literature review; press search; expert interviews
| 77
Why are we interested in Portland, Oregon?
Relevance?
Comparably small
▪ GDP is 2.7x bigger than NI
GDP
Developed?
▪ 2007 GDP per capita
146% of NI
Successful?
▪ Achieved 4.1% productivity
growth from 2000-2005
compared to UK average
of 2.3%
Applicability?



SOURCE: Literature review; press search; expert interviews
Aspects NI could learn from
▪ Successful development of large high-tech cluster
despite the absence of a major research University
in the region
▪ Portland benefited from its status as a cheaper
“second city” located relatively close to larger urban
centres, along with its quality of life, to attract highproductivity firms
Aspects NI is unlikely to learn from
▪ Long history of electronics firm Tektronix in the
region
▪ Very low rate of corporate taxation
| 78
In Portland a successful high-tech cluster developed around two
firms – Tektronix and Intel
Portland economy
traditionally focused
on forestry and
wood products, with
the high-tech sector in
1975 making up less
than 1% of the
region’s employment
1970
Intel opens its first
branch plant outside
California in Portland in
1976. The silicon chip
production plant will
become the region’s
largest high-tech
employer with over
15,000 jobs by 2008
Large electronics firm Tektronix
present in Portland from 1946,
with employment peaking at
16,000 in 1981. Sweeping
redundancies in early 1980s led
to a sudden release of a large
number of skilled technicians and
engineers into the labour market,
and contributed to the wave of
start-ups in early 1980s
1980
Venture capital boom
in mid-1980s drives
creation of large wave of
start-up firms, with 39
new ventures from
1983-5. Around 50% of
these are closely linked
to Tektronix and a
further 25% have
connections with Intel
SOURCE: Literature review; press search; expert interviews
Portland hit hard by
national slump of
late 1980s.
Traditional industries
of forestry and
farming are
particularly affected
1990
Massive growth in
the semiconductor
industry, which
invests over $750
million in the region
during the 1990s.
Vertical integration
as suppliers also
locate in the region
By 2000, more
than 1,000 hightech firms in
Portland employ
over 65,000
people in Portland,
a 4-fold increase
from 1976
2000
Region experiences
strong productivity
growth of 4.5% p.a.
between 2000 and 2008,
driven by strong
performance in high-tech
sectors. Computing and
electronics manufacturing
alone contribute 2/3 of
total productivity growth
| 79
Portland’s rapid productivity growth has been driven by high
performance in computing and electronics
Portland Productivity Growth by Industry, 1990 – 1999 CAGR
Cumulative contribution to Productivity Growth, %
Labor productivity
3.7
0.6
0.2
0.1
0.1
0.3
0.4
1.2
0.8
Compu- Real
ting &
Estate
Electronics
Trade & ProfesTranspor- sional
tation
Finance Telecoms Agriculture
Other
Total
Portland Productivity Growth by Industry, 2000 – 2008 CAGR
‘000 Chained 2000 US$*
100
Portland
90
U.S.
80
70
60
50
40
30
1980 1985 1990 1995 2000 2005 2010
Productivity growth
% p.a., 5-year rolling average
0.3
0.3
0.2
0.1
0.6
4.5
5
0.4
3.3
6
0.6
4
While Oregon has experienced strong
growth in recent years, computing &
electronics contributed to two-thirds of the
city’s productivity growth between 2000 and
2008, demonstrating the importance of the
city’s high-tech cluster in its growth
Compu- Trade & Real
ting &
Transpor- Estate
Electronicstation
Profes- Finance
sional
Services
Publish- Internet Other
ing
Services
3
2
1
Total
Portland
U.S.
0
1980 1985 1990 1995 2000 2005 2010
1 Labor productivity is measured in real GDP (chained 2000 US$) divided by total employment
SOURCE: U.S. Bureau of Labor Statistics, U.S. Bureau of Economic Analysis, Moody's Economy.com, MGI Sunrise Database
| 80
In the absence of major universities, Portland capitalised on the
presence of large high-tech firms to build a high-tech cluster
Position as an
economical, high
quality of life location
near other West
Coast centres
▪
▪
▪
Spillovers from large
R&D intensive firms
▪
▪
▪
Fertile environment
for entrepreneurship
▪
Situated less than 100 miles from Seattle, a city with a considerable high-tech
presence, Portland was well-positioned to attract ICT workers and researchers
looking to experience a better quality of life
Portland was known for its high quality of life and a relatively cheap place to do
business. Both these factors encouraged businesses and employees to relocate
to Portland
Two large high-tech firms have a long-standing presence in Portland. Tektronix, an
early leader in the electronics industry, has had a presence in Portland since 1946
while Intel also opened its first branch plant to be located outside California in
Portland in 1976
Both firms conducted large amounts of R&D in the area, with Tektronix in
particular renowned for its sprawling and diverse research departments. These
firms acted as “surrogate universities” for the area, and attracted a large pool of
talent that drove the development of a high-tech cluster, with more than half of the
300 high-tech start-ups in the city between 1970 and 2001 founded by
entrepreneurs with strong links to Tektronix or Intel
Both firms were in the electronics/computing sector, which is particularly
conducive to the development of clusters due to:
– The growth of the sector
– The intensity of R&D expenditure in the sector
– Low barriers to entry in the spin-off software industry
The business climate in Portland was receptive, with a number of measures in
place to support start-ups, including:
– Tax breaks on corporate capital investments
– Transparent zoning laws
– Excellent telecommunication links
Venture capital firms moved to Portland early, providing the necessary networks
and finance for entrepreneurs
SOURCE: Literature review; press search; expert interviews
| 81
Portland has two key institutions to support development
GOAL
STATUS
FUNDING
▪
Promoting economic
development and urban
renewal
▪
Public organisation, with
over 200 employees
▪
Government-funded, with
an annual budget of around
$290m
▪
Promoting quality of life by
controlling planning in the
Oregon region of the
Portland metropolitan zone
▪
Directly-elected regional
body responsible for
planning and enhancing
quality of life in the Portland
metropolitan region
▪
Largely self-funding
SOURCE: Literature review; press search; expert interviews
| 82
Portland Development Commission focuses on attracting
new firms to the area
▪
SCOPE AND
APPROACH
▪
▪
PROGRAMMES
AND POLICIES
▪
▪
▪
▪
▪
ORGANISATION
AND CULTURE
Publicly-funded local government body with a tri-partite mission:
– Attract new businesses to Portland
– Support the growth of Portland businesses
– Administer urban renewal projects and improve the urban environment in Portland
Over 200 employees
Provides potential investors with detailed information on the attractions of investing in Portland, including
benchmarking against other US cities across a range of criteria, including tax rates, skill levels and labour
and property costs
Produces monthly briefings for potential investors outlining emerging opportunities within the region
Offers consultancy services and information to existing businesses and companies interested in
establishing or relocating facilities in the Portland metropolitan area
Provides “gap” funding for local businesses
Explicit focus on 5 industries:
– Activewear/Outdoor Gear
– Biosciences
– Cleantech
– Advanced Manufacturing
– Software
Strong emphasis on talent and experience, with range of academic, private sector and public sector
experience
SOURCE: Literature review; press search; expert interviews
| 83
Entrepreneurial activity in Portland was driven by the presence
of Tektronix and Intel
Others
New high tech start-ups by origin of founder,
# p.a.
Intel Family
Tektronix Family
28
24
16
16
14
13
12
12
14
13
12
12
11
11
10
9
8
7
7
6
6
5
4
3
2
1
2
1
2
1
2
1
1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001
SOURCE: WMM; IMF Global Insight; OECD; World Economic Outlook database
| 84
Clusters have been crucial in driving the vertical integration of
semiconductor firms and the development of the software industry
Semiconductor firms located in region, 2008
SOURCE: Literature review; press search; expert interviews
Portland software firms, by size and location, 2006
| 85
What were the key success factors for Portland that Northern
Ireland could learn from?
▪ Large high-tech firms can act as incubators for talent and innovation, with spill over
benefits that may lead to explosive growth of high-tech industry even in the
absence of excellent universities
▪ The firms most conducive to the development of start-ups tend to have large,
unfocused R&D departments
▪ The city was able to use its relative proximity to major urban centres, along with its
relatively cheap labour and high standard of living to attract high-productivity firms
and employees
SOURCE: Literature review; press search; expert interviews
| 86
Contents
1 ▪ What we have done
2 ▪ Discussion of case studies
– Singapore
–
–
–
–
–
–
Republic of Ireland
Costa Rica
Finland
Sweden
Portland, Oregon
Others
3 ▪ Implications for Northern Ireland
| 87
We also looked at 5 other cases in less depth, which reinforced some of
the lessons
Taiwan
Government-led development of clusters to create a competitive SME
sector, focussed on high tech
Korea
Successful development through careful economic planning and public
investment in education, R&D and ICT infrastructure to enable competitive
high tech sector
North Carolina
Successfully created long term R&D cluster around universities through
public private co-operation and first mover advantage
Estonia
Rapid creation of a business-friendly environment and government focus on
ICT sector to grow labour productivity through move to knowledge economy
Israel
Focus on commercializing military research and creation of VC industry
contributed to rapid development of successful high-tech sector
SOURCE: Literature review; press search; expert interviews
| 88
Taiwan’s government-led development of clusters created a
competitive SME sector focused on high-tech
Background
▪
▪
▪
▪
▪
▪
Population: 23m
Small island economy with very scarce
natural resources
Sudden population increase from
migration from mainland China
Lack of scale economies due to SME
structure (over 98% of companies
qualified as SMEs)
High economic growth – averaged 8.5%
GDP growth since 1950
Ranked #1 State for Cluster
development by WEF (2006/07)
Key success factors and challenges
Clear economic
strategy
and emphasis
on planning
▪
▪
▪
Successful
development of SMEs
in clusters
Four year plans to develop and
industrialize the economy until 1990s
Market Intelligence Centre supports
government in understanding trends
Careful planning and analysis of trends
Success of Hsinchu Science-based
Industrial Park in 1981
– Modelled after Silicon Valley by
–
government
Located next to Taiwan’s best
technical universities – domestic firms
should easily be able to leverage
international knowledge
– Firms have financial incentives to
–
▪
Current
challenges
SOURCE: Literature review; press search; expert interviews
▪
locate in science park (tax benefits,
low interest loans, R&D matching
funds, improved credit profile)
Attraction of Taiwanese-US. talent:
‘reverse brain drain’
Strong reliance on export markets (US,
Europe) that face crisis
Rise of China as low-cost manufacturing
location
| 89
South Korea’s rigorous economic planning and public investment in
education and R&D supported the growth of a strong high-tech sector
Background
▪ Population: 48m
▪ Area
▪ Lack of natural resources and small
▪
▪
▪
▪
▪
domestic market
Officially established in 1948
Poor infrastructure
Security issues and ongoing conflict with
North Korea
Average real GDP growth of 8% since
1948
Strong reliance on exports to US
Key success factors
▪
Creating a clear
national economic
strategy
Public investment
in R&D and
Education to enable
move to higher
value-added sectors
▪
▪
▪
▪
SOURCE: Literature review; press search; expert interviews
Five year plans to industrialize and grow
the economy with development of higher
value-add sectors
Careful planning and analysis of trends
National IT strategy and IT related
infrastructure investments enable
development of competitive high tech
sector
Prioritization of education policies
– Focus on teacher quality (top 5% of
cohort, good compensation)
– Government sponsored scientific and
technical education at Harvard and
MIT
Focus on R&D in sciences and IT
– Pohang Institute of Science and
Technology supported research and
commercialization of technology
– Targeting of top Korean scientists and
researchers working abroad
– Korea Institute for Electronics
Technology (KIET) supported
technology transfer
| 90
North Carolina successfully created long term R&D cluster around
universities through public private co-operation and first mover
advantage
Background
▪
▪
▪
▪
Population: 8m
Third lowest per capita income of any
US state in 1952
State economy historically dominated by
low wage manufacturing (furniture,
textiles and tobacco)
Dealing with significant brain drain as
graduates left state to pursue careers
elsewhere
Key success factors
▪
Long term
commitment
▪
▪
Private sector
involvement and
leadership
▪
Success of RTP park required long-term
collaboration between private sector, voluntary
sector, academia, state and federal government, for
example NC University has ‘Industrial Extension
Service’ to advise local businesses, local business
group (RTRP Partners) meets quarterly to solve
regional issues, campuses are often occupied by mix
of academic and commercial researchers
▪
Very clear focus on attracting R&D investments to
RTP given science and technology community
(positioned as ‘The State of Minds’) – strongly
positioned as best place for R&D
Multiple grants and loans programmes (particularly to
support R&D) with $3-4m p.a. devoted to cash grants
to strategic projects
Focus is on spurring innovation and providing VC
support through (e.g.) First Flight Venture Center
providing leasable space to entrepreneurs and NC
Biotechnology Center providing early stage funding
Focus on R&D
development
▪
▪
SOURCE: Literature review; press search; expert interviews
Early recognition of triangle universities (Chapel Hill,
Duke and NC State University) as key asset and
subsequent strategy ruthlessly focussed on exploiting
that as part of RTP
Particularly in early days of establishing park, strong
efforts were made to secure anchor tenants - for
example IBM courted for 7 years to 1965 before final
decision made
Consistent vision maintained despite 10 year start-up
phase, with ability to ‘take a long view’ seen as key to
success
| 91
Estonia created a business-friendly environment through rapid
deregulation and significant government investment in ICT infrastructure
Background
▪
▪
▪
▪
▪
▪
▪
▪
▪
Population: 1.3m
Heterogeneous population (64% Estonians,
29% Russians, 7% others)
Literacy rate of population close to 100%
Small country (45,000 km2, few natural
resources)
50 years of Soviet regime
Independence in 1991
Very rapid productivity growth of over 7%
p.a. between 1995 and 2005
Low GDP per capita at independence, small
manufacturing base and scarce
infrastructure
Underdeveloped banking sector and
obsolete infrastructure
Key success factors
Creating a
Business-friendly
environment
▪
▪
▪
Strategic focus on
developing
the ICT sector
▪
▪
▪
Attracting FDI
building on
existing strengths
▪
▪
SOURCE: Literature review; press search; expert interviews
Government transparency: E-government gives
access to public services to business and
citizens via Internet
Open economy
– Trade liberalization (FTEs, WTO, EU)
– Full convertibility of Estonian currency
– No capital movement restrictions
Creation of modern infrastructure
– Focus on education, science, IT and health
care
Government realizes the need at transition to
move to knowledge economy to increase
productivity
ICT sector is viewed as “enabling” move to
knowledge economy
Systematic investment in good ICT (fixed and
mobile) infrastructure and broadband and
subsequent deregulation of sector
Estonia built on strengths and opportunities:
ICT sector infrastructure, small electronics
sector, proximity to developed ICT sector in
Scandinavia
Attracted Nokia, Ericsson, Skype to Estonia
| 92
Israel’s focus on commercializing military research and creating a VC
industry contributed to rapid development of successful high-tech sector
Background
Key successes and challenges
▪
▪
▪
Population 7.4 million
▪
Very low employment rate driven by low labour
market participation rates of religious minorities
▪
▪
Lack of natural resources, with high dependence
on imports of petroleum, coal, food, uncut
diamonds and production inputs
▪
▪
Economic crisis of 80s destabilized country and
economy
▪
▪
Large Defense Budget
supported high-end
research and training of
skilled workers in technical
areas
▪
Area 22,000 sq km
Productivity growth of 0.9% between 1990 and
2008 well below OECD average
Ongoing security issues
with Palestine
▪
Successfully
commercializing
military research
▪
▪
Creation of strong
engineering skills
base
Failed to improve
productivity across
domestic sectors
▪
▪
▪
Very high level of military research drives Israel’s
R&D rate of 4.6% of GDP, the highest in the OECD
Government created “Rafael Development
Corporation” from a former defence company, with a
sole remit of commercializing military research
Incubator programme established under Office of
Chief Scientist to encourage commercialization of
knowledge in form of start up companies
Yozma venture capital fund created by state led to
influx of VC into country. By 2006, 80 VC firms
raised $1.6bn
Large high-tech sector developed, with high-tech
products constiuting over a third of all exporting
goods
Financial support for students opting to pursue
engineering degrees has resulted in large number of
engineering graduates
Continuous stream of ex-military engineers into
labour force
Very highly regulated product and labour markets
have greatly hindered productivity growth
Low labour market participation driven by very low
employment among religious minorities has
exacerbated skill shortage
| 93
Contents
1 ▪ What we have done
2 ▪ Discussion of case studies
– Singapore
–
–
–
–
–
–
Republic of Ireland
Costa Rica
Finland
Sweden
Portland, Oregon
Others
3 ▪ Implications for Northern Ireland
| 94
Across these cases, we see seven emerging themes
1
Successful regions have had a clear strategy based on
rigorous diagnosis of existing strengths
2
Leadership has come from the top to drive alignment
3
Productivity transformation takes a long time and requires the
creation of a competitive and attractive business environment
4
Successful regions place intense focus on attracting, retaining and
embedding anchor institutions
5
High performing investment agencies have cultures that are
responsive, fast-moving and work to overcome bureaucracy
6
To maximise impact, R&D incentives have been conditional on
co-operation between firms or between firms and other institutions
7
Non-financial support to make connections and build skills and
knowledge has helped differentiate best practice players
SOURCE: Literature review; press search; expert interviews
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1 Successful regions have had a clear national strategy based on careful
diagnosis of existing strengths
Costa Rica
▪
▪
Sweden
▪
▪
Finland
▪
▪
Estonia
▪
▪
▪
Careful analysis of existing strengths led Costa Rica to focus on sectors based on
existing strength
– Pre-existing foreign investment (Motorola, Baxter)
– Relatively skilled often bi-lingual workforce
– Leverage benefit of free trade zone, proximity to US and political stability
CINDE’s strategy to move into R&D intensive industries is strongly based on availability
of human capital and existing private and public R&D
Following the financial crisis of 1989-1991, there was widespread agreement that the old
Swedish “social welfare” model had failed
Political parties aligned around a new national strategy of maintaining labour protection
while pushing through a series of policies aimed at deregulating product markets
Early recognition of country’s world class education system led to policy of concentrating
R&D around universities
Clear understanding of potential of telecoms industry in 1980s encouraged government
R&D funding agency TEKES to focus on Nokia, which received 30% of its total funding
between 1981 and 1983
After fall of Soviet regime and independence in 1991, Estonia’s government realised fast
development would only be possible by evolving to a knowledge economy and initiated a
rapid towards creating a strong ICT sector
Rapid implementation of deregulation, opening economy and government transparency
through e-government created a business friendly environment
Policy focus on infrastructure upgrades for fixed communication and creation of a mobile
telecommunication network
SOURCE: Literature review; press search; expert interviews
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2 Leadership has come from the top to drive alignment
Costa Rica
▪
▪
Costa Rica’s President initiated a shift in economic policy towards focus on higher value
added sectors.
The commitment of senior leadership to this strategy leads the President and Minister of
Trade to dedicate significant time meeting with potential investors (illustrated by high
responsiveness to CINDE requests to attend meetings)
Finland
▪
The Science & Technology Council, featuring the Prime Minister and several key
Ministers, was founded in 1983, to provide central leadership of Finland’s emerging
“technology policy”. The Council was crucial in driving alignment across government to
support the growth of the high-tech sector
Singapore
▪
Prime Minister Lee supported Singapore’s FDI focus by personally meeting with groups
of CEOs to show his commitment to serving their businesses needs and to reassure
potential investors
▪
Social democrat-led coaltion succeeded in building cross-party support for reform of
business environment and removal of product market regulation, in wake of crisis on
early 1990s. Unlikely that full range of liberalisation measures could have been
implemented without support across the political spectrum
Sweden
SOURCE: Literature review; press search; expert interviews
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3 Productivity transformation has taken a long time and required the
creation of a competitive and attractive business environment
Israel
▪
▪
Sweden
Singapore
Israel has developed a large high-tech cluster, supported by the OECD’s highest rate of
R&D expenditure as a proportion of GDP
However, bureaucracy, slow-moving local government and highly regulated product and
labour markets have contributed to slow the country’s overall productivity growth over the
last 20 years to 0.9% p.a., well below the OECD average
▪
Sweden introduced a sweeping wave of deregulation in the early 1990s. Two sectors in
particular were targeted:
– Retail, in which a change in zoning laws helped stimulate competition and productivity
growth of 4.5% p.a. from between 1990 and 2003
– Retail banking, which experienced rapid productivity growth following government
interventions to increase competition
▪
The creation of a business friendly environment has been top priority for Singapore’s
government since the 1960s
Singapore’s Pro-Enterprise Panel (PEP) allows businesses to submit suggestions online to
change regulations and eliminate red tape
The EDB is responsible for the creation of a business friendly environment and its link with
foreign investors has helped to be responsive to demands and reach international
standards
▪
▪
SOURCE: Literature review; press search; expert interviews
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4 Successful regions place intense focus on attracting, retaining and
embedding anchor institutions
Costa Rica
▪
▪
▪
Ireland
▪
▪
▪
Finland
▪
▪
Portland
▪
▪
Attracting Intel - Presence of some large foreign investors in the electronics industry such
as Motorola and DSC Corporation (attracted in 1995) served as “references” to attract
Intel
Effort in retaining and embedding Intel was undertaken, e.g. through establishing
partnerships with universities (Intel-Associates) to develop skilled workforce
Intel’s presence itself has served Costa Rica to establish a strong electronics cluster
Intel’s investment in Ireland helped to subsequently attract major IT companies to Ireland
(Dell, Google, IBM, HP)
The attraction of Pfizer to Ireland served to rapidly expand Ireland’s presence in the
pharmaceutical industry.
Large companies facilitate setting-up collaborations with local institutions
Nokia’s radio-telephone development in Oulu stemmed from the award of a government
defence contract
In awarding the contract, the government required Nokia to work closely with Oulu
University, hence encouraging links to be forged
Two large high-tech firms in Portland, Oregon, Intel and Tektronix, drove the
development of a large ICT cluster in the region
More than half of the 300 high-tech start-ups in the region since 1970 were founded by
individuals closely connected to one of the two “anchor” firms
SOURCE: Literature review; press search; expert interviews
| 99
5 High performing investment agencies have cultures that are responsive,
fast-moving and work to overcome bureaucracy
▪
Singapore
▪
Ireland
▪
▪
Costa Rica
▪
▪
▪
Strong customer-focus of EDB can lead to “atypical” agreements:
– To attract a solar energy firm the Singaporian government agreed to use the company's
solar technology on part of its public buildings
– Realising that Singapore lacked marine engineers in order to attract marine companies,
the EDB initiated the creation of a company-sponsored graduate degree at NUS
Strong performance culture of the EDB who recruits top performers at high school,
incentivises employees through bonuses (15-50%), gives early responsibilities, provides
constant on-the-job training
The IDA has created a high performing organisation with limited financial incentives. Its public
sector employees are motivated essentially through respect and recognition inside and
outside the organisation for attracting large companies and helping employment creation
To “seal the deal” with Intel and address its concern not to find sufficient qualified engineers,
the IDA provided Intel with a list of 85 Irish engineers working abroad with relevant
qualifications willing to move to Ireland if hired by Intel
CINDE performance manages its employees closely and assesses the performance of its
employees both against internal targets (set at the beginning of the year) and an evaluation by
its customers (part of compensation is performance-based)
Customer-satisfaction is an important element determining the compensation of CINDE
employees: a detailed survey to companies CINDE has served during the year is conducted
and influences compensation and promotion. The survey asks about CINDE’s
responsiveness, speed and help in easing administrative processes
In CINDE’s policy advocacy role, CINDE collaborates with the Presidency to suggest policies
increasing the “ease of doing business” in the economy
SOURCE: Literature review; press search; expert interviews
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6 To maximise impact, R&D incentives have been made conditional on
co-operation between firms or between firms and other institutions
Finland
▪
▪
Sweden
Ireland
TEKES, the Finnish R&D funding agency, looks to promote co-operation, and explicitly
requires joint working from various organisations:
– Universities are generally required to show that R&D projects are commercialisable
– Companies which can show their projects will involve input from other firms or
universities are prioritised
Research Institute VTT acts as a way for people to moves smoothly between academic
and commercial roles, and works with partner organisations wherever possible
▪
By requiring that research grants be matched by other organisations, Sweden’s R&D
organisation VINNOVA has contributed to Sweden’s high levels of R&D co-operation
between firms, universities and research institutes
▪
Recently introduced Innovation Partnerships where up to 80% of R&D costs can be
supported on condition the research is carried out under the leadership of a third tier
educational institution. The institution makes the application and receives the grant but
research is carried out for and on behalf of a specific firm or group of firms.
SOURCE: Literature review; press search; expert interviews
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7 Non-financial support to make connections and build skills and
knowledge has helped differentiate best practice players
Finland
▪
Finland’s award-winning export-promotion agency FINPRO has succeeded by providing
paid-for, demand led services to support exporters. Services include:
– Provision of internationalisation strategies
– Market research
– Partner searches
– Project consultancy report (e.g. helping company prepare a business plan for new
market entry)
Singapore
▪
The services provided by Singapore’s government agencies (EDB, IE Singapore,
SPRING) to businesses entail but go far beyond financial incentives
– Specific needs of businesses identified (e.g. IE Concierge Service in IE Advisory
centre, contact of EDB employee with specific company)
– Access to capability building is emphasised: IE and SPRING provide free seminars,
scholarships for young managers, recruitment support, advisory on branding
– Connections are programme focus: promotion of Singapore on trade fairs, exporters
are matched with potential buyers on BuySingapore platform, companies are
encouraged to collaborate to create scale for exports
▪
Costa Rica’s PROVEE programme provides practical support to link MNC’s with a local
supplier base
Procomer, the agency that manages PROVEE connects MNCs and local suppliers and
provides “quality check”
Assistance to local suppliers entails technical assistance, manufacturing and supply
chain training
– The online-portal SIVUCE Procomer administers provides a “one-stop shop” for
export administration and documentation
Costa Rica
▪
▪
SOURCE: Literature review; press search; expert interviews
| 102
ADDITIONAL MATERIAL
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Free trade zones offer attractive benefits to trading
companies (1/2)
12 (different industrial
parks, close to ports)
Number of Free Trade Zones
5 (main ports and airports)
Description
of Free Trade Zones
• Permit to use the FTZ is
required (can be
requested online)
• Reconditioning,
Repacking and Sorting is
allowed but permission
needed (e.g. good from
different shipments can
be put together)
• Registrations avail. online
% of Country Trade
Concerned; # of companies
N/A
N/’A; 120 companies
N/A; 240 companies.
Beneficiaries
All traders, especially reexporters and transshippers
Companies with link to
aircraft/transport industry
Companies with activities
related to IP Rights
(Pharma)
All traders, not for producers
Duties on imports
0% duties, no GST. Excl.
liquor and cigarettes
0% for goods in process
0% on raw materials, components and capital goods
Duties on exports
0%
0%
0%
SOURCE: Shannon Development, Business Singapore, CINDE, PROCOMER
1 (Shannon Free Zone)
• Managed by
Shannon Development
(Irish government
agency) which operates
independently from IDA
• Marketing abroad of
• Managed by Procomer and
Comex
• No more than 25% can be
sold to local market
• Min. 15,000 USD fixed
asset requirement in FTZ
parks
• Possibility Sub-FTZ outside
parks
• Preference to local
suppliers
| 104
Free trade zones offer attractive benefits to trading
companies (2/2)
Additional financial
incentives
• No duties and charges for
goods within FTZ
• Duties payable if local
consumption
Additional Information
• EnterpriseOne provides
access to different
services (e.g. application
for licenses premises in 5
min, submission of trade
documents) and all
information on free trade
zones
Services provided
by agencies
• Requests for FTZ
benefits can be made
online (TradeNet)
• Simplified customs
procedures
• Training courses on
customs procedures
SOURCE: Shannon Development, Business Singapore, CINDE, PROCOMER
• 0% on VAT
• No charges on local
services and goods if
75% for export
• All tax benefits available
in Ireland (low corporate
tax, R&D tax credit)
• Only 25% can be sold on
local market (50% for
services)
• No income tax
• 10 years capital tax
exemptions
• no restrictions on
capital/profit repatriation
• License has to be
requested from Ministry
of employment
• Eligibility to Shannon
Free Zone comparatively
limited (engineering/high
tech/pharmaceuticals/
healthcare)
• Free Trade Sub Zones can
be provided for companies
unable to operate in
existing zones (min 2
million USD investment)
• Length of tax exemptions
can be extended for reinvestments
• Single Administrative
document
• Services provided by
Shannon Development
are similar to those
provided by the IDA
• CINDE and Procomer
assist companies
• On-site clearance of
customs
• Online-services available
| 105
Data sources
Population:
Global Insight (Series WA0980001.A)
Real GDP:
Global Insight (Series WA1720003.A)
Employment:
Global Insight (Series WA1320062.A)
Exports:
Global Insight (Series WA1721449.A)
FDI:
IMF International Financial Statistics (Total stock inward FDI, % GDP)
R&D:
OECD Research and Innovation database (Total R&D spend as % of GDP)
Tax rate:
IMD World Competitiveness index
Ease of doing bus.:
World Bank ranking
Students graduating: UNESCO (Total graduates, Tertiary)
Engineers graduating: UNESCO (Graduates in engineering, manf. and construction. Tertiary)
Public sector:
IMD World Competitiveness index 2.12
Average wages:
IMD World Competitiveness index 3.201
English-speaking:
Eurobarometer 2005 for European countries plus Singapore census
Electicity costs
IMD World Competitiveness index 4.1.24
Broadband pen.:
OECD Broadband statistics (Broadband subscribers per 100 inhabitants)
SOURCE: Team analysis
| 106