Transcript Going for Smart Growth

J. Gabriel Goddard
Senior Economist
World Bank
Sofia Arsenal Museum
of Contemporary Art
February 7, 2012
Main questions
• What are the opportunities to
strengthen Bulgaria’s growth by
investing in research and innovation?
• Which public policies could help
Bulgaria to move up the value chain
and expand high-tech exports?
• What are the options to improve policy
design and implementation?
2
Economic context
• Robust economic growth up to 2008,
driven by strong FDI and credit growth
• Innovation was not the major driver of
growth… yet some knowledge-intensive
industries have done well
• Post-2008: Economic downturn → lower
private investment… and fiscal
consolidation → cuts in public R&D
• At the same time, increased
competition from emerging economies
3
Increasingly export-oriented economy…
Room to increase high-tech contribution
• Exports are about 58% of GDP (2010), mostly directed to the EU market
• Only 3% are high-technology exports, while EU average is 16%
• Past performance may not be a good predictor of the future
Source: Staff estimates, based on UN COMTRADE 2010 .
4
R&D-intensity is too low…
Potential to step up private innovation
Extensive product upgrading but
limited long-term R&D
• Bulgaria invests 0.48% of GDP
on R&D vs. 1.85% in EU
60
• Ratio of private to public R&D
is 30:70; the inverse of OECD
40
• Why invest more in R&D?
Innovative firms in Bulgaria
grew 1.5 times faster and
create more jobs than noninnovative firms
20
55
Percentage of firms
50
40
28
30
10
0
Upgraded a Introduced a
product or new product
service
Invested in
R&D
Source: BEEPS (2008).
5
Building on Bulgaria’s competitive industries…
Potential for faster growth in IT
• IT industry - 15,000 specialists and 2%
of GDP
• Attracts large amounts of FDI
• Increasing sophistication
Bottlenecks for future growth:
• Shortage of skilled specialists
• Regulatory burden
• Low internet penetration
• Low demand for EU-funded
instruments
6
Recovery in patenting linked to IT sector
120
100
80
60
40
20
0
1981-1990
1991-2000
2001-2010
Chemical
Drugs & Medical
Electrical & Electronic
Mechanical
Others
Computers & Communications
Source: USPTO.
7
An expanding pharmaceutical industry…
Potential for more homegrown R&D
• Bulgaria’s Pharma industry
exports tripled in recent years,
generating ca. 25,000 jobs
• Produces mainly generics,
forcing it to compete on price
• Spends about 5% of turnover
on R&D, less than peers
Bottlenecks for future growth:
• Producers face admin. hurdles
after patent expiry
• Low-quality imports of medical
products
• Demand for public innovation
programs is weak
Exports tripled in recent years
Source: UN Comtrade.
8
Priorities
for Research and
Innovation Policies in Bulgaria
9
Finding new models to finance research and innovation
Key Issues: Low R&D spending; low absorption of EU funds and
inefficiency of national funding instruments
Short –term actions
Medium-term actions
• Frontload planned increases in
public R&D spending
• Introduce counter-cyclical R&D
spending policies
• Channel future increases in public
R&D via competitive mechanisms
• Introduce an R&D Satellite
Account for more active
monitoring of R&D
• Target international and publicprivate collaboration
10
Introducing reforms that promote research excellence
Key Issue: Fragmentation of funding mechanisms for research and
innovation in different ministries
Short-term action
• Develop synchronized strategies
on research and innovation up
to 2020
Medium-term actions
• Introduce a system-wide
evaluation of research
organizations
• Provide additional support to
high performers
• Establish a grant program for
high-impact researchers
11
Strengthening public entities to achieve better results
Key Issue: The National Science Fund (NSF) and National Innovation Fund
(NIF) are too small and do not operate as efficiently as they could
Short-term actions
• Prepare an evaluation of the
effectiveness of innovation
funding instruments
Medium-term action
• Consider merging NSF and NIF
into a single specialized agency
• Work with beneficiaries to sustain
the quality of proposals and
enlarge the project pipeline
12
Faster absorption of EU funds within high-impact projects
Key Issue: EU funding is a major source of innovation financing but
absorption has proved challenging
Short-term actions
• Improve admin. capacity of the
teams supervising the calls
Medium-term action
• Consider creating a dedicated
OP for Research and Innovation
for 2014–2020
• Develop a rating system for
consultants that work with
beneficiaries of OP Competitiveness
• Channel part of existing EU funds to
large-scale projects such as
Technology Parks
13
Developing sector-specific innovation policies
for priority industries: IT, pharmaceuticals,…
Key issues: Public research does not respond fast enough to private sector
dynamics; brain drain and increasing shortage of skills
Short-term actions
• Train more highly-qualified
specialists
• Establish grants to retain young
Bulgarian scientists and attract
international experts
Medium-term actions
• Scale-up national funding
instruments with new funding
windows for priority sectors
• Improve the business
environment for IT and
pharmaceuticals industries
• Support the development of
R&D centers in partnership with
international companies
14