OECD Work on Innovation and Southeast Asia

OECD WORK ON INNOVATION AND SOUTHEAST ASIAOECD ROUNDTABLE ON INNOVATION POLICY IN SOUTHEAST ASIA, BALI, 24 MARCH 2014

Molly Lesher, Counsellor, OECD Directorate for Science, Technology and Industry

• OECD work on innovation generally• Highlights of OECD work on

innovation in Southeast Asia– Regional review– IP framework– Inclusive innovation

• How can OECD help Southeast Asia achieve its innovation policy goals?

Overview

Innovation in science, technology and industry• Since 2005, the OECD has undertaken a

demand-driven programme of Country Reviews of Innovation Policy.

Completed: Luxembourg, Switzerland, New Zealand, South Africa, Chile, Norway, China, Hungary, Korea, Greece, Mexico, Russian Federation, Peru, Slovenia, Sweden

Recently completed: Colombia, Croatia, Vietnam, Southeast Asia

On-going: France, Netherlands

Upcoming: Malaysia

• Scope: Comprehensive analysis of the respective national innovation system (with a focus on the role of government policy)

See: www.oecd.org/sti/innovation/reviews

The policy domains covered by the reviews

Framework conditions for innovation(Functioning of markets, regulation, corporate governance,

education, communication infrastructures, etc.)

Science, technology and innovation policy

Policies to support

investment in science &

R&D

Policies to strengthen

linkages within innovation

systems

Demand-side measures

Supply-side measures

e.g. Procurement policies

e.g. R&D tax incentivesGrants

e.g. Public-private partnerships

e.g. Promotionof innovation

in SMEs

Policies to enhance

innovation competencies

of firms

Innovation in science, technology and industry (continued)

• Innovation for development • Contribution of innovation to economic growth and well-

being;• Impact of globalisation on development and innovation;• Inclusive innovation;• Education, skills and human capital;• ICTs for development; and• Institutional frameworks for innovation policy.

• Inclusive innovationExploring ways to leverage innovation to address high rates of social exclusion and poverty.

• Science, technology and industry working papersCover a broad range of topics including definition and measurement of science and technology indicators, global value chains, and research on policies to promote innovation.

• Innovation Policy Platform (IPP) Web-based tool providing state-of-the-art information relevant to STI policymaking, including statistics, case studies and policy briefs: www.innovationpolicyplatform.org.

• Innovation strategyMinisterial Mandate (May 2007): Boosting innovation to promote sustainable growth. Final report delivered to the OECD Ministerial in 2010.

Innovation in science, technology and industry (continued)

Valu

e cr

eati

on

Activities Source: Based on Shih (1992), Dedrick and Kraemer (1999), and Baldwin (2012).

R&D

Design

Logistics

Production

Marketing

Services

Boosting innovation helps countries move up the value chain

Logistics

OECD work on measuring trade in value added and GVCs is extensive

TiVA database covers 58 countries, including Southeast Asia

• oe.cd/tiva• oe.cd/gvc

OECD also produces indicators of science, technology and industry

OECD Review of Innovation in Southeast Asia

• This review is the first OECD innovation mapping of science, technology and innovation (STI) developments in a trans-national region

• The review assesses the STI capabilities, and analyses the strength, weaknesses, opportunities and threats through detailed country profiles of Cambodia, Indonesia, Malaysia, Singapore, Thailand, and Vietnam

• It represents a first step in better understanding the innovation policy setting in Southeast Asia

Framework conditions for innovation: Infrastructure

• Infrastructure can both carry and enable innovation

• Lack of basic infrastructure is an issue in parts of the region, although some higher income countries have made impressive strides in developing their infrastructure over the last 30 years

Internet users as a percentage of the population (2011) (ITU)

Percentage of population without electricity, 2009 (World Bank)

0102030405060708090

100

0

10

20

30

40

50

60

70

80

Framework conditions for innovation: Regulation (World Bank “Doing Business” indicators for start-ups)

2013 Rank

Procedures (number) Time (days) Cost (% of income

per capita)Paid-in Min. Capital (% of income per

capita)

2004 2013 2004 2013 2004 2013 2004 2013

Singapore 4 7 3 8 3 1 0.6 0 0Hong Kong, China 6 5 3 11 3 2.4 1.9 0 0Chinese Taipei 16 8 3 48 10 5.9 2.4 210.8 0Korea 24 10 5 17 7 18.4 14.6 347.7 0Malaysia 54 10 3 37 6 33.1 15.1 0 0Laos 81 7 6 153 92 23.9 7.1 32.1 0Thailand 85 8 4 33 29 8 6.7 0.4 0Viet Nam 108 12 10 59 34 31.9 8.7 0 0Japan 114 11 8 31 23 10.7 7.5 74.9 0China 151 13 13 48 33 17.8 2.1 1,236.50 85.7Philippines 161 17 16 49 36 28.6 18.1 2.3 4.8Indonesia 166 12 9 168 47 136.7 22.7 69.1 42India 173 11 12 89 27 53.4 49.8 428 140.1Cambodia 175 11 9 94 85 534.8 100.5 438.9 28.5

Human capital for innovation

PISA Educational Attainment of 15-year olds, 2009 (OECD, 2011)

Singa

pore

Taipei,

ChinaJap

anKorea

Hong Kong,

China

United St

ates

Malaysi

a

Thail

and

Indonesia

0

100

200

300

400

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600

Mathematics Science

TIMSS Science and Mathematics Scores of Eighth-Grade Students, 2007

Secondary Gross Enrolment Rates (2010 or nearest year) (Source: World Bank)

• Many skills sets important for innovation

• At the basic level, adult literacy rates are high in most SEA countries

• Secondary enrolment rates are more mixed; engineering skills are particularly important in catching-up, but remain under-developed

• TIMSS and PISA 2009 Plus results indicate performance in mathematics and science

0102030405060708090

Reading Mathematics Science250

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450

500

550

600

Malaysia OECD average Singapore Japan Korea Hong Kong, China

Tertiary education

• Tertiary education – both in academic and vocational skills – is essential for technological upgrading

• Enrolment rates in tertiary education vary significantly within the region with the level of development, with Thailand, Malaysia in the leading group

• Reflecting the state of development in many countries, the proportion of public expenditure on tertiary education from education budgets tends to be rather low. Singapore and Malaysia are leading in the region on these terms

Tertiary Gross Enrolment Rates (2010 or nearest year) (Source: UNESCO)

Percentage of public expenditure on education devoted to the tertiary level

(2010 or nearest year) (Source: UNESCO)

0

5

10

15

20

25

30

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Southeast Asia’s Innovation Policy Challenges

• Framework conditions for innovation• Infrastructure• Relatively low overall investment in S&T

and innovation• Indigenous innovation capabilities remain

relatively weak overall in the majority of countries (compared to 1st generation East Asian “Tiger economies”: Korea et al.)

• Lack of regional or global brands

IP, innovation and development

• A new framework that identifies strengths and weaknesses in the IP system from the perspective of contributions to national innovation performance

• The framework has been applied to Indonesia (2014)

Critical dimensions in the IP framework

Organisation of IP systems and “legal quality”

Taking into account development challenges

Access to a wider group of users

Putting IP policies into the wider innovation context

Recommendations to enhance Indonesia’s IP system

Improve the quality of the IP system via legal and administrative reforms

Institute policies to include smaller entities and businesses in remote geographic areas (high potential gain from use of IP)

Remove barriers that inhibit public research institutes from playing a larger role in the innovation system

Enhance co-operation on IP policy among all stakeholders to improve policy design

• Benefits of growth do not automatically trickle down to generate more equal societies

• Inclusive development is also important for policy agendas as inequalities can negatively affect growth

Knowledge and Innovation for Inclusive Development

→ Innovation policies have been examined to date essentially with regards to their impact on the growth of aggregate income – what about impacts on inequalities (distributional impacts)?

Summary of Project Framework

Territorial Inclusiveness(Places)

Social inclusiveness

(People)

Industrial inclusiveness

(Firms)

Policies

Characteristics of the

Innovation System

DistributionalImpacts

Policies affecting mainly

industrial inclusiveness

Policies affecting

industrial and social

inclusiveness

Policies affecting mainly social inclusiveness

“Islands of Excellence”

Source: EC (2011), “Monitoring industrial research: 2011 EU Industrial R&D investment Scoreboard”, European Commission, Luxembourg; OECD (2012), OECD Science, Technology and Industry Outlook 2012, OECD, Paris.

Firm Sector of activity Economy

R&D investment

(million USD)

Employment (thousands)

1 Huawei Technologies Telecommunications equipment (9578) China 2392 110

2 PetroChina Oil & gas producers (53) China 1774 553

3 China Railway Construction Construction & materials (235) China 1407 229

4 Hon Hai Precision Industry Electronic equipment (2737) Chinese Taipei 1314 n.a.

5 ZTE Telecommunications equipment (9578) China 1188 85

6 Taiwan Semiconductor Manufacturing Semiconductors (9576) Chinese Taipei 1006 33

7 Petroleo Brasiliero Oil & gas producers (53) Brazil 980 80

8 Vale Mining (177) Brazil 867 71

9 MediaTek Semiconductors (9576) Chinese Taipei 789 5

10 Gazprom Oil & gas producers (53) Russia 781 393

11 China Petroleum & Chemicals Oil & gas producers (53) China 724 373

12 HTC Telecommunications equipment (9578) Chinese Taipei 438 13

13 Tata Motors Automobiles & parts (335) India 413 n.a.

14 CSR China Commercial vehicles & trucks (2753) China 366 80

15 Wistron Computer hardware (9572) Chinese Taipei 335 n.a.

Next steps in the project

• Global Forum on Development, 2 July 2014– Debate how innovation policies can support developing and

emerging countries’ quest for competitiveness without compromising industrial, social and territorial inclusiveness

– Explore some concrete policy solutions to support countries in reconciling their innovation and inclusive development agendas

• High-level policy conference and report– A publication will bring together the analysis and policy

recommendations and will be disseminated in various ways, including at a conference in India (Q4 2014 or Q1 2015).

Looking ahead…

• How can OECD help Southeast Asian partners boost innovative capacity?– Country reviews of innovation policy

• Vietnam (release forthcoming)• Malaysia (about to begin)

– IP framework case studies• Indonesia

– Inclusive innovation• Indonesia

– Statistics – regional network on S&T indicators?• How can we best partner with regional

organisations with similar aims and objectives?

Learn more and stay informed

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