Innovation for Development: An Arab Perspective

1. Innovation for Development: An Arab Perspective Prof. Dr. Najib Harabi University of Northwestern Switzerland, Basel & Olten

2. Introduction “The strength of a country is no longer measured by its military might, size of population, geographical location or material resources. The strength of a country is measured by the wealth of scholars and its scientists, by its innovative capabilities and ability to discover, and apply.” Naguib Mahfouz 1994

3. Contents • Innovation has always been crucial for economic growth and development • Arab countries have largely been unprepared to deal with challenges related to innovation • It is not too late to catch up if appropriate innovation policies are implemented

4. Thesis 1 Innovation has always been crucial for economic growth and development

5. Concept of innovation • Research • Developmemt • Invention • Innovation • Diffusion (through dissemination or imitation)

6. Concept of Innovation “Innovation consists of all scientific, technical, commercial and financial steps necessary for the successful development and marketing of new or improved manufactured products, the commercial use of new or improved processes or equipment or the introduction of a new approach to a social service. R&D is only one of these steps." (Frascati Manuel, OECD 1981:15-16)

7. Concept of Innovation • Product versus Process Innovation • Major vs. incremental Innovation • Continous vs. discrete innovation

8. Measurement of Innovation • Input Indicators • Output indicators • Input-Output indicators, and • Process indicators

9. Innovation and Economic Growth • Classical economists (Adam Smith, Karl Marx etc.) • Neo-classical economists (Alfred Marshall, Robert Solow) • Austrian School of Economics: Joseph A. Schumpeter • New growth theory or endogenous growth theory (z.B. Romer, Lucas and Benhabib/Jovanovic) • Evolutionary growth theory (Neslon and Winter)

10. Innovation and Economic Growth • There is a consensus among economists: innovation is a central engine of economic growth an development. • What about the situation of innovation in Arab countries?

11. Thesis 2 Arab countries have largely been unprepared to dealing with challenges related to innovation

12. Introduction • Arab World: 5% world’s population, less 2% of world GDP • Several deficits: a.o. knowledge deficit at all levels: Production, dissemination and application • Focus here: innovation activities

13. Innovation Indicators • Up-to-date and accurate information about innovation activities in AC is hard to come by: lack of statistics and of political will to systematically gather those data. • A few data are available on R&D, scientific publications, and patents (input indicators)

14. Innovation Indicators

15. Innovation input indicators: R&D/GDP • R&D Expenditures in AC are relatively weak: 0.2% of GNP on average. • 89% of those expenditures come from government sources, only 3% from private sector (the rest from NGO and international organizations)

16. Innovation Input Indicators R&D Organizations (around 588); there are three categories: • Higher Education Institutes and their affiliated research centers (126) • Free-standing specialized centers of scientific research (278), mainly in agriculture, health and engineering • R&D units with links to industry. Small in number; their performance is below expectations

17. Innovation Input indicators: R&D Personal • Statistics on R&D personal is scarce and incomplete. There are, however, some telling indicators: • The total number of full-time researchers in AC is around 35 000. Half of this number works in Egypt

18. Innovation input indicators: R&D Personal • There is an average of 3.3 researchers holding masters and doctoral degrees of every 10 000 persons in the Arab work force (1996 statistics). This is a very low percentage, representing 3% to 10% of the rates of the same indicators in developed countries. • There are only 50 technicians for every one million citizens. In developed countries: 1000 • Women are significantly under-represented in scientific research institutions in AC.

19. Innovation input Indicators: Publications • Based on the number of scientific publications per million people, AC fall within the advanced group of LDC • Most of these publications were in applied fields, such as medicine, health and agriculture. • Research in advanced fields, such as ICT and molecular biology, is almost non-existent

20. Innovation input indicators: Publications • Among the indicators for measuring the quality of research are the several citations indices • On average only one paper each in Egypt, Saudi-Arabia, Kuwait and Algeria in 1987 was quoted more than 40 times (in USA: 10481, CH: 523 papers)

21. Innovation input indicators • Academic Research is mostly supply driven • Research projects often lack clear objectives, result-orientation and a sense of urgency • In terms of coverage, research activity continues to be far from innovative

22. Innovation Input Indicators: Patents • Indicators of the number of patents in AC confirm the weakness of R&D activities, which lags far behind that of developed and other LDC • For example, the number of patent application filed per million people in 1997: 7.9 (Algeria), 11 (Morocco), 17.8 (Egypt), 52 (Saudi-Arabia) • Comparisons: 48 (China) 2783 (Korea), 15674 (CH)

23. Innovation input indicators: Patents • A large number of patents registered in AC are by foreigners • The number of patents registered in the US from AC during the period 1980-2000 is much lower than those of non-AC

24. Innovation output indicators • Indicators related to the innovation output suggest that there is total absence of R&D-based product and process innovations. • R&D activities are not related to market activities.

25. What are the innovation challenges? • Weak human capabilities: education, training • Lack of services: information and management services in R&D, technology and innovation • Lack of funding: for industrial R&D, venture capital • Market and government failures: incentives and coordination • Culture and values

26. Concluding Remarks • There is growing innovation gap: production and diffusion of product and process innovation is relatively weak in comparison with the rest of the world • Substantial efforts are needed in order to upgrade the knowledge production and dissemination system. • This necessitates deep reforms not only of the educational and R&D-systems, but also in the underlying political, economic and social conditions

27. Thesis 3 It is not too late to catch up if appropriate innovation policies are implemented

28. Innovation Policy: Guiding principles • Innovation should be widely distributed over the whole spectrum of economic activity • Policies should be bottom up and not top down • Policies should alter the balance between innovations aim at rent creation versus rent extraction

29. Innovation Policy: Four areas of focus There are many ways by which those principles may be implemented. Here is the focus on four areas: • Skills • Incentives • Information, and • Availability of finance

30. Innovation Policy: Skills • Basic and advanced skills are required • Educational system (schools, colleges and universities) should be responsive to the needs of the market. • There is an urgent need to overcome the mismatch between skills supplied and skills demanded by firms (both private and public)

31. Innovation Policy: Incentives • Potential inventors and innovators should be able to anticipate sufficiently high rewards. • Intellectual property should therefore be protected both in theory and practice. • Barriers to innovation should be low. Inclusion and openness across firms, sectors and geographical area should be promoted.

32. Innovation Policy: Access to Information • Access to knowledge stocks and to up-to-date information flows is a necessary condition fore there to be innovation. • Especially access to information about technology and about markets for inputs and outputs • Broad Internet access to the population at large, rudimentary computer skills and search techniques and basic working knowledge of English may be sine qua non.

33. Innovation Policy: Availability of Finance • Providing funds for innovators by the government is a central piece of innovation policy. • The question is how to structure financial support so as provide incentives to innovators, while in the same time avoid the ills of corruption and moral hazard. • There exists a great deal of accumulated cross-country experience

34. Concluding remarks • Innovation has always been crucial for economic growth and development • Arab countries have largely been unprepared to deal with challenges related to innovation • It is not too late to catch up if appropriate innovation policies are implemented