Science, Technology and Innovation Policy: A Cross-Country Comparison

Robert Martinez April 2011

Introduction The attention of the comparative study will be focused on small countries at different stages of economic development. These countries are: Botswana, Israel, Mauritius, Norway, New Zealand and Singapore. While many of the worlds most innovative countries have small populations, this is not the primary reason for basing my analysis on them. The variance of innovation performance in small countries is a more important reason for this selection, since it suggests that policy can have a strong impact on country performance, for better or for worse. In addition, the factors affecting innovation and growth in small and large countries differ, to some extent. In large countries, industrialisation is often the result of physical capital accumulation, expansive land use and the exploitation of scale economies so-called low-hanging fruit (Cowen, 2011), which are usually not available to small countries. By contrast, small countries must rely on human capital development, foreign direct investment and technology transfer, among other things. For each of the six countries observed, I outline the reasons for their inclusion in this study, by showing their relevance to the Trinidad and Tobago context. Next, I conduct a brief review of the countrys policies to support science, technology and innovation (STI)1. Finally, I offer some general conclusions based on the review of these countries policies and, having reviewed draft STI policies for Trinidad and Tobago, I suggest some of the implications for Trinidad and Tobago as it develops a policy framework for STI issues.

Wherever possible, I have attempted to use the latest version of each countrys STI policies. However, some countries policy documents do not appear to be available online, and where this is the case, I have based my analysis on reliable secondary sources, such as European Commission STI policy reviews.
1

Botswana

Figure 1 - Time series comparison of GNI per capita at Purchasing Power Parity, between Botswana and Trinidad and Tobago. Source: World Bank, World Development Indicators.

Figure 2 - Botswana's STI Strengths and Weaknesses, based on the 2009-10 Global Innovation Index. Source: INSEAD, Global Innovation Index.

Rationale for Inclusion Botswana is ostensibly poorer than Trinidad and Tobago (see Figure 1), but is usually classed in the same middle-income bracket of nations. The two countries share some fundamental economic characteristics, such as a historical dependence on primary-product exports and government spending as drivers of economic growth. For some time, both countries have been attempting to diversify their economies by growing high value-added industries, thereby reducing vulnerability to commodity price shocks. In addition, T&T and Botswana are, in many respects, at a similar stage of STI development, with relatively high rates of ICT take-up but low rates of innovation given each countrys middle-income status. Policy Review Since independence (1966), governments have drafted sequential National Development Plans (NDPs), which chart, in great detail, the countrys short-to-medium-term policy course. Such continuous policy planning is facilitated by uninterrupted power enjoyed by the ruling Botswana Democratic Party (BDP), which has won every general election since independence. NDP 10 is the most current version of the development plan, and was last revised in January 2010. Its macroeconomic focus is on lessening dependence on traditionally-dominant industries (diamonds,

other minerals, beef, and tourism) and on government spending, as drivers of GDP growth. The countrys most recent S&T Policy was developed and approved in 1998, part of NDP 8. Botswana is in the process of developing a governance structure to deal with science, technology and innovation issues. The Ministry of Communication, Science and Technology (MCST) was established in 2002, and the Department of Research, Science and Technology was established under it in 2004. However, this Ministry was then subsumed under the Ministry of Infrastructure, Science and Technology in 2009. A brief examination of the governance structure for Botswanas innovation suggests that it is in a constant state of flux, though plans based on NDP 10 show that it has restructured in order to centralise responsibility in two main ministries: the Ministry of Infrastructure, Science and Technology and the Ministry of Transport and Communications, with each ministry housing several departments related to the development of an STI framework and infrastructure to support it. It is unclear whether such organisational changes will bring more effective service delivery, since NDP 10 states no performance targets for this particular activity. 2007s National ICT Policy (Maitlamo) includes initiatives on: ICT education for youth; e-Government; e-Health; and legislation on electronic business. Key features of Botswanas Science and Technology Policy (1998) include: A clear desire to see S&T touch upon all sectors of the economy and society. Expanding access to and familiarity with technology and Sectoral focus on: Agriculture, Commerce and Industry, Education and HR Development, Energy, Environment, Meteorology, Mining, Population Planning, Tourism, Transport, Water and Wildlife. A very strong emphasis on providing opportunities for rural development, given the demographic and geographic characteristics of the country. Sectoral analysis each sector is given a short background, policy objectives and long lists of generic strategies. However, there is little to no analysis of how the policy interventions are aligned with local capabilities. Sector strategies which are very similar to those which are being pursued or have been suggested for T&T, including, inter alia: agricultural and pharmaceutical biotechnology, support for small and medium-sized enteprises (SMEs); science, technology, engineering and mathematics (STEM) education; development of renewable, especially solar, energy; development of downstream industries from the traditional resource extraction (diamond-mining) sector. Overall impressions of the 1998 STI policy are that it is quite generic, with strategies that are not targeted to local conditions. Botswanas S&T policy also goes far beyond traditional ideas about the scope of a STI policy, including family planning. Because of the massive sectoral scope of the document, it seemed less like a focused STI Policy than a general policy framework for Botswana, and may be criticised for being over-ambitious in its aims. Looking at Figure 2, it appears that several basic aspects of technology diffusion, such as general Internet access, business use of the internet and tertiary education enrolment, are lacking in Botswana, which have hindered the countrys performance in the 13 years since the original Policy was developed. Botswanas 10th National Development Plan (NDP 10) includes a section on the Knowledge Society, which states the following STI Policy initiatives: Botswana Innovation Hub (BIH) A feasibility study on the BIH project was done during NDP 9, with the project aimed at fostering university-industry linkages, similar to science and tech park initiatives in T&T and in other countries around the world. The Hub has an ambitious goal, namely to promote innovation by establishing an incubator for start-up companies, facilitate networking between universities and businesses located at the Hub and between the businesses themselves, with partners both locally and internationally. Considerably less is said on the incentives universities and businesses have for networking with each other, and how the businesses will attract partners. Government is the leading investor in the Hub, and according to

the plan, firms in several sectors (biotech, minerals and energy) are interested in establishing operations at the BIH when the project is completed. Full liberalisation of the telecommunications sector during NDP 10. There is a high rate of takeup in mobile telephony, with three national mobile carriers. However, expanding access to the Internet remains a challenge, and has created problems for developing e-government readiness. In addition, an ICT Development Programme aims to develop the countrys ICT infrastructure, which is a very important initiative, as the government aims to diffuse general-purpose technologies such as the Internet, across Botswana. R&D Policy In 2005, the MCST developed a National Science and Technology Plan, which identified five priority areas for research funding: ecosystems; manufacturing, engineering and infrastructure; processing and mining; geomatics; and biosciences. It is important to note that the priorities in this plan were far narrower than that pursued in the original 1998 S&T Policy, indicating that the earlier plan was too broad, and would have spread the countrys research resources too thin. The 2005 Plan was substantially more focused on making use of the countrys natural resources in a more innovative way, with proposed research ideas on catchment area management, cosmetics based on local products (e.g. aloes), improvements in mining efficiency, among others. However, it should also be acknowledged that plans for bioscience research still seem quite vague and untargeted. Neither the S&T Policy nor NDP 10 make mention of venture capital (VC). While this may be considered unambitious, in the context of a developing country at an early stage of STI development, it may be wiser to prioritise more fundamental issues such as access to technology and STEM education. It is true that the rise of clusters in Silicon Valley and Tel Aviv have been aided by VCs, in both cases, the ICT industries came first, and the VCs followed when they were alerted to potential high returns. When countries attempt to establish VC funds in the absence of high-growth industries and energetic start-up companies, failure inevitably results.

Israel

Figure 3 - Time series comparison of GNI per capita at Purchasing Power Parity, between Israel and Trinidad and Tobago. Source: World Bank, World Development Indicators

Figure 4 - Time series comparison of high-tech exports (as a percentage of total manufactured exports) at Purchasing Power Parity, between Israel and Trinidad and Tobago. Source: World Bank, World Development Indicators

Rationale for Inclusion Israel has a slightly higher per capita GNI than Trinidad and Tobago (US $27,110 to US $24,960 in 2009), so the two countries can be considered at a similar stage of economic development, in the broadest possible terms. However, while T&T derives much of its wealth from natural resource extraction, Israel has few such resources to exploit. As a result, much of its economic output must be driven by knowledge-based industries; the success of the modern Israeli economy is partially due to the success of its governments innovation policies. In addition, while its well-developed venture capital market suffered in Q1 and Q2 of 2009 (with a 50% fall from its 2008 peak), the overall Israeli economy emerged relatively unscathed from the financial and economic crises of 2007-09 (see Figure 3). This suggests that its policies, along with a fairly conservative banking sector, have created a stable environment for innovation, and largely protected the economy from the speculative financial

bubbles, which caused havoc in many developed economies. These factors, coupled with its thriving start-up sector and its high-tech export industry (see Figure 4), mean that Israel may be an example of best practice for innovation policy, though many of its policy interventions may not be reproducible in the T&T context. Policy Review Israel is a country without a formal innovation policy methodology, (European Commission, 2009a: 8) i.e. its innovation policy is not embedded in one unified policy document. Therefore, I will refer to secondary sources that address the main aspects of Israeli policies, such as venture capital and funding for education and research, which support STI. Israel has seen some large pharmaceutical and biotech firms develop internally, with Teva Pharmaceuticals among the top 20 pharmaceutical firms worldwide. While many countries that have shown an interest in developing biotechnology industries without demonstrating any source of comparative advantage in the area, some potential success factors exist in Israel: Israel is first worldwide in medical device patents per capita, fourth worldwide in biopharma patents per capita, seventh in the absolute number of medical device patents, and first worldwide in the share of life science patents in total patents. (European Commission, 2009a: 15). The problem facing most Israeli biotech companies at the moment is finance, as both private-equity and public (stock market) investors find the very long product development pipeline too much of a risk, especially when new companies would be competing primarily against giant American-based firms. Therefore, the government decided that the mid-2000s was an appropriate point at which it could intervene to kickstart the Israeli biotech sector. As a result, the main recent development in Israeli innovation policy has been the development of a dedicated venture capital fund for biosciences. It is interesting to note the rationale for this change This government decision to enter the private equity market, results from a clear and evident market failure of innovative firms in these industries. (European Commission, 2009a: ii) Only after the private sector was seen to have failed in funding and managing biotech start-ups was the government compelled to offer assistance. This strategy contrasts with one in which government commits investment funding before technical and commercial capabilities are established in the private sector. Such a strategy is exemplified by the following statement: The share of private sector investment in innovation in Israel is very high, some 80%, and the government has for a long time now tended to rely on the private sector to provide the finance for promoting innovation. One example of this is the growth period of 2004-2007: during these years, business sector financing of civilian R&D jumped by a very significant 44.8%, while the government increased its financing by only 17.9%. (European Commission, 2009a: 4) In addition, Israeli policy is focused mainly on industrial innovation and much less on basic research in universities. Despite this, Israel maintains a world-class university system, which, given the countrys tiny population, generates a disproportionate amount of cutting-edge, Nobel Prize-winning research2. The Office of the Chief Scientist (OCS) allocates public funding for industrial R&D within firms, and is part of the Ministry of Industry, Trade and Labour (MITL). Since the global recession began, more OCS funding has been directed towards small firms, with the goals of helping small R&D-intensive firms survive and keeping R&D projects afloat. It is important to note that the Israeli venture capital industry took off nearly 30 years after the Israeli high-tech industry began in the 1960s. The Israeli VC program, Yozma, which began in 1991, offered large tax incentives to foreign venture capital investors in Israel, with a government promise to double the private equity investments of the VCs, based on a matching fund of USD $100m by the government. Once Yozma had attained a sufficient rate of take-up in Israel, it established 10 separate
Tel Aviv University has been ranked number 11 worldwide in citations per faculty in 2010 a truly staggering resultIt is, in fact absolutely amazing that the research at Tel Aviv University is so highly ranked. The total annual budget of Tel Aviv University is less than Harvard raises just from its alumni year after year. Carlo Strenger, Haaretz, 18th March, 2011.
2

VC funds by 1996, with USD $20m of capital each. It was successfully privatised in 1998, and now manages two funds with capital of USD $170m. More than 800 companies have been funded by VC capital in Israel, and nearly all of its VC activity comes from the private sector. In 2009, biosciences received the largest share of VC funds (24%), followed by software (23%), and communications (20%), from a total of USD$1.12b. One of the Israeli governments main goals is to encourage more organic growth of its successful start-up companies, since there is a tendency of entrepreneurs and venture capitalists to sell their R&D-intensive companies to multinational corporations at a relatively early stage. (European Commission, 2009a: ii) This is an enviable problem for a countrys national innovation system to have. While there were large declines in VC investment in 2009, due to the global financial crisis, there was no significant change in its composition, with foreign VC investment comprising upwards of 60% of the total, and local VCs contributing the rest. Israels national innovation system is at a stage where new policy problems have emerged from the undoubted successes of previous policies: The success of the venture capital industry, which began in 1993, have led to an overdependence of some sectors on VC funding, which is highly volatile and very short-term in outlook. The rapid growth of the ICT sector in Israel has led to other sectors of the economy losing competitiveness, with the result that government is attempting to boost new industries, such as biotechnology - supported by the 50m fund, which was approved in late 2009. The success of encouraging private investment in industrial R&D has created the long-term problem that Israel is losing its competitive edge in terms of public and university research. With respect to many of the initiatives that T&T is interested in pursuing ICT sector development, venture capital, and private investment in innovation Israel is far ahead of us. However, as highlighted in a 2007 presentation by Manuel Trajtenberg (of the Israeli Office of the Prime Minister and the Tel Aviv University Department of Economics), there is a bandwagon effect in this area, as many developing countries try to replicate the policy successes of nations that have vastly different characteristics from themselves. Predictably, these examples of policy transfer often meet with disastrous effects. One major difference between Israels approach to STI policy and that of the other countries being studied is that its government takes a problem-oriented approach to innovation policy (Brunner, 1991). This means that policy interventions are based mainly on current emergent problems, with less emphasis on overarching goals and grand strategies, which often become obsolete by the time policy documents are approved. For example, the development of a Venture Capital fund should be a specific response to a specific problem, namely that there are several competing start-up companies which lack access to capital. In addition, there is a clear idea of which organization (OCS) is responsible for innovation policy in Israel. It is known for its quick, efficient delivery and rigorous pre-funding evaluation for research projects. A similarly streamlined approach in T&Ts STI policy could be beneficial, though potentially difficult to arrange. To some extent, Israels technological leadership stems from military spillovers, not only of physical capital but also of human capital. Because of Israels unique geopolitical situation, it has invested heavily in high-tech military hardware, and has therefore developed one of the most technologically sophisticated armies in the world. However, while some technological breakthroughs may have crossed over from military to civilian use, such as digital encryption, the human and social capital aspects of recruitment and conscription in the Israeli Defence Forces seem to have made a larger contribution to entrepreneurship in the country. As Senor and Singer (2009) have showed,

several of the most successful technological entrepreneurs in Israel acquired the skills necessary for civilian business leadership while serving in elite regiments of the IDF. Obviously, this is not a policy initiative, nor is it something that can be copied by Trinidad and Tobago. However, it has been included here to illustrate the ways in which the social and economic institutions of a country can condition its innovation performance in unexpected ways.

Mauritius

Figure 5 - Time series comparison of GNI per capita at Purchasing Power Parity, between Mauritius and Trinidad and Tobago. Source: World Bank, World Development Indicators

Figure 6 - Time series comparison of high-tech exports (as a percentage of total manufactured exports) at Purchasing Power Parity, between Mauritius and Trinidad and Tobago. Source: World Bank, World Development Indicators

Rationale for Inclusion An island with a diverse population, Mauritius is another of Africas under-reported success stories. Currently, its major industries include textile manufacturing and sugar. The Government of Mauritius is looking to diversify the countrys export base, into higher value-added industries. It is at a similar stage of STI development as Trinidad and Tobago, with relatively high levels of ICT take-up, an extremely conducive business climate and strong creative industries, but very low levels of scientific publication and patenting activity, and a lack of trained scientists and engineers. In order to kick-start its innovation system, its Ministry for Industry, Science and Research (MISR) published a Science, Technology and Innovation Policy in 2010. Policy Review Mauritius is currently establishing institutions and coordinating mechanisms to develop its National Innovation System. Its two main policy measures in this regard are the establishment of a National Advisory Commission for Science & Research (NACSR), which will coordinate and develop STI policy frameworks, and a National Research Infrastructure and Equipment Policy Committee (NRIEPC), which will advise the government on funding of research infrastructure, with a view to optimal use. These new institutions will support the existing Mauritius Research Council, which currently allocates public research funding.

Like many other countries, Mauritius aims to increase its investment in R&D to a substantial extent, with a target of 1% of GDP spent on R&D by 2015. To this end, it aims to establish a National Innovation Fund, which will support STI projects and policy assessments, and a Venture Capital fund, aimed at investing in R&D-intensive start-up companies. It also aims to direct resources from its Corporate Social Responsibility Fund towards R&D. An extremely ambitious Small Business Grants program is also mentioned, which will target small high-tech firms: Grants will be provided to qualified companies in a phased manner, to first carry out basic research in high-priority areas, and subsequently to transfer the technology developed into commercial products and services. (MISR, 2010: vii) Other initiatives include: changes to secondary education making one science subject compulsory up to Form 5 level; strengthening tertiary research institutions; and a Mauritian STI Diaspora program, which aims to involve Mauritian STI experts working abroad to collaborate with local institutions. The ambitious Diaspora program includes initiatives like creating a database of Mauritian experts working abroad, facilitating workshops and seminars by Mauritian experts, creating incentives for the Mauritian diaspora to collaborate with Mauritian institutions. Since the brain drain is an issue with which T&T also contends, it could be highly beneficial to track the progress of the STI Diaspora Program. The MISR has also targeted STI sectors for attention, though specific sector initiatives were not identified in the Innovation Policy. These sectors include, inter alia: Energy, ICT, Sugar, Textiles, Agriculture, Marine and Coastal Resources, and Biotechnology. Its marine resources seem especially promising, with a current of very cold water (50 to 60C) of high purity at a depth of more than 1000m past the coasts of Mauritius, with potential applications in cooling, sea salt production, cosmetics and health products. (MISR, 2010: 41-42) Though investment thus far has been low, R&D in the sugar industry has shown promise, and it has been proposed that research should go into sugar as a renewable energy source. Interestingly, R&D in Mauritius thus far has been concentrated on agriculture, with fisheries, oceanography and sugar each having dedicated research institutes. While the choice of targeted industries seems well-justified, a lack of identified support measures for these sectors means it is difficult to assess the impact of policy on their future performance.

New Zealand

Figure 7 - Time series comparison of GNI per capita at Purchasing Power Parity, between New Zealand and Trinidad and Tobago. Source: World Bank, World Development Indicators

Figure 8 New Zealands STI Strengths and Weaknesses, based on the 2009-10 Global Innovation Index. Source: INSEAD, Global Innovation Index.

Rationale for Inclusion New Zealands innovation performance relative to its fellow OECD members has been slipping for some time, despite its highly successful education system and strong research base. A 2007 OECD review of innovation policy suggested that its difficulties lie in the commercialisation of research, an area often neglected by policy experts who subscribe to a linear model of innovation, where basic research funding is assumed to flow smoothly through science, technological development and eventually innovation. It may be useful to observe New Zealands performance to illustrate that increasing public R&D spending may not be enough to ensure sustained improvements in innovative output. Policy Review STI Policy in New Zealand is largely under the purview of the new Ministry of Science and Innovation (MSI), which brought together the Foundation for Research, Science and Technology and the Ministry of Research, Science and Technology (MoRST) in February 2011. It appears that the government is attempting to streamline the governance of its STI policies. Despite this, the countrys Ministry of Economic Development (MED) is also a key player, and developed a Growth and Innovation Framework in 2002, which was reviewed in 2005 and updated with an Innovation System framework in 2006. MoRST released an STI strategy document in 2010, entitled Igniting Potential.

Access to information and communication technologies is widespread in New Zealand, and its worldclass education system exposes students to science and technology issues at an early age. Therefore, its key STI policy challenge is to transform the economy into one that takes advantage of its welldeveloped base of human capital. The OECD Review of New Zealands innovation policy noted that, despite a high degree of publication and patenting activity per capita, there is a low level of commercialisation of research, resulting from small scale and a relative lack of managerial and marketing skills in most firms. In addition, while there is a strong base of researchers in New Zealand, both public and private investment in R&D have been historically low, and a 2010 survey of scientists and technologists indicated that excessive bureaucracy and interruptions in research funding were the chief barriers to their research. The streamlining of the governments STI governance structure is a direct response to this issue, as outlined in Igniting Potential (MoRST, 2010). The underperformance of its Crown Research Institutes (CRIs), which are publicly funded but commercially-oriented, was also identified. Igniting Potential has acknowledged that New Zealand cannot afford to spread its STI resources across a wide range of areas, since it does not have the scale of resources available to the US, China or even the larger R&D intensive firms. As a result, its strategy is based upon identifying niche opportunities for research, so that priority will be given to investment where New Zealand has competitive advantage. (MoRST, 2010: 10) The government identified areas such as agritechnology, ICT, sustainable energy, healthcare and hazard infrastructure for further investment, while promising more general support for talent development, international partnerships and national research facilities. In order to raise the levels of business R&D activity, the New Zealand government has committed $250m of public funding over a 4-year period. In order to simplify the funding process, it will establish a one-stop shop for firms seeking funding support. It has also planned to allocate the new funds through a Technology Development Grant, which reimburses 20% of a business R&D activities for up to 3 years; and a Technology Transfer Voucher scheme, which supports linkages between firms and research organisations. TechNZ, the business investment arm of the MSI, coordinates these two programmes. There is also an initiative to develop a food industry development network, called Food Innovation Network New Zealand (FINNZ), with an allocation of NZ$21m (US$16.5m). One of the key aspects of New Zealands STI policy is that it also focuses on human capital and infrastructure. Sections are devoted to science in schools, science prizes, and importantly, career pathways for scientists and researchers. The latter area is a major issue for many countries, as graduates must have the incentive to pursue careers in research or entrepreneurial science, so that their skills are fully utilised. TechNZ piloted a Postgraduate Internship Programme, which gives graduates placements within relevant companies. With respect to infrastructure, a computational network has been proposed to link research organisations, universities, and government together.

Norway

Figure 9 - Time series comparison of GNI per capita at Purchasing Power Parity, between New Zealand and Trinidad and Tobago. Source: World Bank, World Development Indicators

Figure 10 Norways STI Strengths and Weaknesses, based on the 2009-10 Global Innovation Index. Source: INSEAD, Global Innovation Index.

Rationale for Inclusion While Norway is one of the richest countries in the world on a per capita basis, there are several surprising commonalities between its economy and that of Trinidad and Tobago. First, there is a very large state presence in the economy, with 30% of its employment coming from the public sector. In addition, it is a significant oil and natural gas exporter, and like T&T, it battles with issues stemming from its dependence on its offshore economy - its fishing and shipbuilding industries are also strong and the relative lack of dynamism of its mainland sectors, with few globally-known companies. In addition, its surplus petro-dollars go into a sovereign wealth fund the Government Pension Fund Global (GPFG) which, like T&Ts Heritage and Stabilisation Fund, is invested for future rainy day scenarios. Policy Review The Norwegian Ministry of Trade and Industry developed its first STI policy white paper, An Innovative and Sustainable Norway, in 2008. In this paper, it took a very different approach from most other countries innovation policies, by explicitly downplaying the role of high-tech industries in innovation, while making the case for employee-driven innovation: innovation does not merely encompass research, high-technology and products. The government believes that it also concerns

issues such as employees trust and participation, as well as low wage dispersion. Strong welfare schemes have crucial importance in our ability to adapt and innovate. (NMTI, 2008: 9) Strategy councils have been appointed for the tourism and maritime industries, with other industry councils to follow. No single ministry is responsible for STI policy in Norway, but the key agencies are the Ministry of Trade and Industry and the Ministry of Education and Research. While Norway is known as a highly developed economy, it has only just begun developing its STI policy framework, in response to its poor innovation performance relative to its fellow European countries. A 2009 review of Norways innovation policy performance summarises it thus:
In strong contrast to the excellent macroeconomic performance of the Norwegian economy, it has a low performance in comparison on a large number of standard R&D and innovation indicators. During the last five years, Norway has been part of the EIS grouping 'Moderate innovators' with innovation performance and average annual growth in innovation below the EU-27 average. In the European Innovation Survey (EIS 2008), Norway ranks 18th out of the 32 countries covered. While Norway remains in the 'Moderate innovators' category, it is among the poorer performers in this grouping, and now counted among the 'Slow growers' in the grouping. (European Commission, 2009b: i)

With the depletion of oil and natural gas being accelerated by rapidly rising demand from China and India, Norway is beginning to create an institutional framework to support its mainland economy. Another issue facing Norway is that it has a shortage of science and engineering graduates, which illustrates that this is a not only a problem that developing countries face. Without the availability of labour with the necessary skill sets, no firm, local or foreign, will invest in innovation-intensive industries. Of the countries studied so far, Norways innovation policy is the one that is most unconventional with less focus on R&D-intensive industries, and much greater focus on human capital development and comparative advantage. Norways approach to innovation policy differs from some of the other countries under observation, in that it explicitly acknowledges the role of low-tech industries as a source of innovation. Many countries, especially developing countries, conceive of innovation too narrowly, assuming that it takes place primarily in cutting-edge high-tech sectors, and therefore miss out on opportunities in less fashionable sectors. The Scandinavian countries are good examples of low-tech innovative success. Norway is known as a world-beater in shipbuilding, fishing and resource extraction, Denmarks most innovative industries are in bacon and cheese production, and Swedens most famous company, IKEA, is known for its highly innovative approach to retail. While these innovative sectors all vary in kind, one thing they all have in common is very low R&D intensity. Therefore, the performance of these countries national innovation systems may be underestimated by different performance indices, which place heavy weight on R&D spending. While other countries STI policies are mainly devoted to fostering research and innovation in firms and universities, Norways policy also places strong emphasis on improving public sector services through innovation, with clearly defined role for the government: the public sector is facing major challenges, which cannot be solved merely by increasing resources and personnel. It is also necessary to innovate new solutions and to organise work in a smarter way. This applies not least to the healthcare sector. (NMTI, 2008: 9) There are also plans for a product design-driven innovation programme, and, like Singapore, the Norwegian government plans to use the harmonious relationship between firms and labour to promote staff-driven innovation in collaboration with the Norwegian Confederation of Trade Unions and the Confederation of Norwegian Business and Industry. (NMTI, 2008: 13) Thus far, its tax support scheme for industrial R&D, the Skattefunn, has done little to raise the level of overall private R&D spending in the country. However, when it was evaluated in 2007, it seemed to have other beneficial effects, which have improved technology transfer and broadened STI access in Norway. It was said to be:
[S]trongest in small firms, firms in non-central areas, firms in which the employees have a relatively low level of education and firms in industries that are traditionally not research intensivehas not contributed much to raising the

level of privately funded R&D in Norway. The evaluation provides evidence that the Skattefunn scheme enhances the learning capacity and R&D orientation of firms with limited previous R&D experience. The scheme is perceived as user-friendly and is well known among eligible firms. (European Commission, 2009b: 27)

The White Paper identified the following as areas of competitive advantage for Norway: marine and maritime, tourism, services and environmental technologies. While the range of sectors identified was sufficiently narrow to allow for targeted investment, the policy was criticized as vague and overly descriptive, and lacking in specific measures to support or enhance the industries. (European Commission, 2009b: ii) STI policy cuts across several policy areas, including health, education and trade. However, the paper does not say whether future initiatives will be horizontally coordinated, or whether there will be a separate innovation policy for each policy area. Norways White Paper on STI policy should be considered a blueprint for further policy developments, which should include detailed plans on investment in its targeted sectors.

Singapore

Figure 11 - Time series comparison of GNI per capita at Purchasing Power Parity, between Israel and Trinidad and Tobago. Source: World Bank, World Development Indicators

Figure 12 - Time series comparison of high-tech exports (as a percentage of total manufactured exports) at Purchasing Power Parity, between Singapore and Trinidad and Tobago. Source: World Bank, World Development Indicators

Figure 13 Singapores STI Strengths and Weaknesses, based on the 2009-10 Global Innovation Index. Source: INSEAD, Global Innovation Index.

Rationale for Inclusion Singapore is globally acclaimed as a high-tech success story, with one of the fastest economic growth rates in the world over the past 50 years. Like T&T, it is a highly diverse and multi-ethnic society. Because of its lack of natural resources, its economy has had to depend on high levels of Foreign Direct Investment (FDI) as a source of physical capital, while the government has spent heavily on developing technologically capable human capital through its education system. Policy Review Like Israel, Singapore appears not to have a single, unified STI policy. Instead, its government has been committed to pursuing innovation and economic growth as core objectives since the countrys independence from Britain and separation from Malaysia in 1965 (Lee, 2000). As is the case in Botswana, policy continuity has been enabled by uninterrupted post-independence power for the ruling Peoples Action Party (PAP). Innovation policy has been spread across a number of state agencies, including: the Economic Development Board (EDB), the Agency for Science, Technology and Research (A*STAR), and the Ministry of Education (MOE). New Zealands Ministry of Economic Development commissioned a comprehensive overview of Singapores policies in support of innovation and growth, and an analysis of which policies would be applicable to the New Zealand context (MED, 2003). This document will be used to give an idea of Singapores education, investment and trade policies for innovation. Education in Singapore is widely acclaimed as world-class, and indeed it prepares students for participation in the local labour market, as evidenced by the countrys consistently low unemployment rate. While the MOE subsidises primary and secondary education to ensure access for all students, it is meritocracy, not egalitarianism, which characterizes the Singaporean system. Students are aggressively streamed by academic ability once they leave primary school. Top-performing students are intensively groomed for leadership positions from a young age, while less academically-inclined students are streamed into technical and vocational programmes. While clearly an effective system, two of its key weaknesses have been identified. At the top end, a focus on purely academic achievement has led to a relatively low level of entrepreneurship among Singaporeans, with most large companies in the country being foreign-based multinationals (Tan and Gopinathan, 2000). At the same time, there is a shortage of technical and vocational skills in Singapore, which is partly filled by a large number of foreign-born workers. This suggests a lack of effectiveness in the lower tier of Singapores education system. Singapore is known for having extremely business-friendly tax policy, which has encouraged inward investment by multinational firms throughout the countrys history. Firms that provide substantial technological upgrades to an industry can be granted Pioneer Status, which exempts them for up to 10 years from the (22%) corporate income tax. The Local Industry Updating Programme (LIUP) is another method used by Singapores EDB to accelerate the process of technology transfer, and to ensure that the benefits of foreign investment are shared in the local economy. New Zealands Ministry for Economic Development (2003) described the Programme in three stages:
The first phase is improvement of overall operational efficiency such as production planning and inventory control, plant layout, financial and management control techniques. The second phase introduces and transfers new products or processes. Finally, local enterprises progress to joint product and process R&D with MNC partners. (MED, 2003: 35)

Wong (1999) argues that the LIUP, among other government initiatives, helped to ensure the dramatic shift of hard-disk-drive manufacturing from the US to Asia between the 1980s and 1990s. As Seagate and other large US companies relocated production to Singapore, co-investment under the LIUP introduced technologies such as CAD/CAM and supply chain management to their local Singaporean suppliers, thereby helping many of them, such as MMI Holdings, to develop rapidly into global companies (MED, 2003).

Because of Singapores tiny size and dense population, the only way that industries could develop successfully was through cluster development. Most recently, the government has turned its attention to developing a strong biotechnology cluster. Through its first two National Technology Plans, for 1991-1995 and 1996-2000, developed by A*STAR3, Singapore has managed to produce many researchers who are employable biotech industries, and the government has spent heavily in developing favourable infrastructure and attracting foreign investment into its science parks. Its two main biotech parks are Biopolis and the Tuas Biomedical Park (TBP). Biopolis opened in 2006, and immediately attracted investment from U.S. firms and researchers who were attracted by a favourable tax climate and liberal regulatory environment regarding stem cell research. A favourable business environment has also contributed to the success of TBP, which currently houses divisions of major pharmaceutical and biotech firms such as Merck, GlaxoSmithKline, Pfizer, Genentech and Novartis. In 2010, Singapores biomedical production finally took off, with year-on-year growth of 163% from November 2009 to November 2010. As a result of this growth, pharmaceuticals now account for almost 20% of Singapores manufacturing output. While several of Singapores innovation policies have had great success, there have been some substantial failures including: the Innovation Development Scheme, which attempted to get firms to conduct patentable innovation activities in Singapore, and the E21 initiative (formerly known as Technopreneurship 21), which attempted to situate Singapore as a hub for venture capital activity. In addition, there are other important aspects of Singapores institutional structure which may contribute to its excellent innovation and growth performance, but which nonetheless cannot be copied in a democratic polity such as Trinidad and Tobago. First, Singapores government quickly coopted national trade unions to create a non-confrontational relationship between labour and the state, while at the same time restricting the power of unions to strike. In addition, Singapores high savings rate, which allowed large investments in education and infrastructure, was forced by mandatory citizen contributions to the Central Provident Fund. While favourable industrial relations and high savings rates would be beneficial to Trinidad and Tobagos STI aims, it would be unreasonable to expect a government to achieve those objectives through similar means.

Formerly the National Science and Technology Board.

Conclusions and Implications for STI Policy Development The countries being studied here vary in several ways, are all at different stages of STI development, and therefore would appear to have different needs with respect to STI policy. However, it is surprising to note that their STI policies and priorities show such a striking degree of similarity. Every country in this brief study has shown an inclination to develop a biotechnology industry or cluster, though only Israel and Singapore thus far have demonstrated physical capital, human capital or regulatory advantages in this area. While it is still possible for the other small countries to develop niche biotech clusters, currently their STI policies seem unclear as to how they will attract investment and talent into their fledgling industries. In addition, While research and development (R&D) are taken together as a whole in most countries national statistics, a distinction should be made between private and public R&D. Basic research is the primary output of public R&D, while technological development by firms is the primary output of private R&D. Basic research usually takes place in academic settings, and is published in scientific journals, divorced from market conditions, whereas technological and product development are done in firms, subject to success or (more often) failure in a market setting, and the results are almost always protected via intellectual property rights. This has important implications for innovation policy, especially as developed countries have a far higher share of R&D spending done by private firms than do developing countries (see Figure 14 below).

Figure 14 - Comparison of the distribution of R&D Spending in Developing and Developed Countries. Source: Government of Mauritius, Science, Technology and Innovation Policy, 2010.

While this analysis has used Global Innovation Index rankings to glean strengths and weaknesses of countries innovation systems, Trinidad and Tobagos STI policies should not be too concerned with the countrys overall ranking on this particular index, or on the World Economic Forums Global Competitiveness Index (GCI). The reason for this is that a majority of the performance ratings that comprise these indices are based on unreliable, subjective survey data, based on interviews with business executives in each country. Instead, There is no single best practice regarding the governance of STI policy. No institutional structure for the governance of innovation policy. In Israel, STI policy is based largely around R&D funding to solve problems arising from market failures as a result, there is a simple and clearly defined governance structure involving the Office of the Chief Scientist. However, in Singapore, STI issues are dealt with in a much broader fashion, involving education, cluster development, R&D incentives and industrial investment, and are spread over the relevant government departments. Other countries, such as Botswana, New Zealand and Mauritius, which are at less-advanced stages of STI development, are still building institutional structures that are appropriate to their contexts. However, based on this study, it appears that most countries are moving towards more streamlined, centralised governance systems, so as to reduce the amount of complexity and bureaucracy involved in accessing research funding.

Fiscal incentives, such as R&D tax concessions or R&D subsidies, are only effective in spurring industrial research activity once R&D-intensive industries have a significant presence in the country. It would be unreasonable to expect R&D incentives alone to kick-start an industry, or a cluster of industries. If a country wishes to develop a foothold in sectors such as ICT, biotechnology and semiconductors, it would be better off investing in fundamental issues: human capital, through an effective education policy; access to technology, through government diffusion and Foreign Direct Investment; and an accessible, effective governance structure for innovation policy. Every country observed in this analysis, as well as Trinidad and Tobago, has indicated a desire to develop its own biotechnology industry. This is despite the fact that more than 20 years of massive biotech investment have failed to yield a profitable stream of new products. The US devotes nearly half of its research budget to biosciences, yet less than 10% of biotech firms were profitable in 2005 (DePalma, 2005). However, some countries biotechnology strategies seem to be based on generic ideas about the development of the industry, and fanciful notions of attracting large pharmaceutical investments. This was unfortunately the case in Botswanas 1998 STI Policy, and such thinking has continued through to the latest NDP for Botswana in 2010. However, as a 2009 report on the country stated, Botswana does not yet have a pharmaceutical manufacturing industry and thus, all drugs are imported. A more productive strategy would be to attract investment in niche biotech markets, based on the countrys comparative advantage, either in human capital, natural resources, or regulatory advantages. One observation of note is that the most successful, innovative countries in this study (Singapore and Israel) targeted far fewer industrial sectors for development than have the less successful countries, such as Botswana. While it may be too much to infer from such a small sample, it seems reasonable to suggest that a developing country cannot spread its investment resources too thin in assisting R&D or start-up industrial activity. There are enough difficulties in managing incentives and developing one new industry that it is unfeasible to approach sector support in a more widespread way, as Botswana attempted to do in 1998. For small, open economies such as those studied in this analysis, the pursuit of an innovation-based strategy can bring benefits, but can also be extremely risky, since exposure to global competition can be damaging if the country does not possess a clear competitive edge in the industries within which its firms compete. In this regard, developing economies should not ignore their local markets, since the existence of specific local conditions means opportunities for product differentiation, innovation, and therefore profit. At the same time, there are difficulties in creating new local markets with few buyers and entering global markets, with many competitors. In addition, many of the benefits of small-economy innovation can accrue to the large foreign firms that must necessarily be a part of their national innovation systems. A solution to this problem is for small countries to develop absorptive capacity (Cohen and Levinthal, 1990) so that the small country can appropriate the benefits of knowledge exchange. One example of this would be to encourage multinational companies to provide extensive technical training for employees, in exchange for tax concessions, sacrificing short-run revenue for long-run productive potential. Of the countries studied here, Singapore has been the most successful in developing such absorptive capacity, through technology transfer schemes such as the Local Industry Updating Programme.

Policy Comparison Matrix

Botswana Governance Structure
Diffuse (1998) Increasingly centralized (2010)

Mauritius
Simple, under development

Norway
Diffuse, under development

New Zealand
Previously diffuse, complex, being simplified

Israel
Simple, narrowly focused Private sector dominant in venture capital Problemoriented, targeted Intervention as response to market failure Support for Industrial R&D in biotechnology

Singapore
Diffuse, wellestablished

Policy Approach

Very broad (1998), (2010), Inwardlooking

Narrow, developmental

Broad, developmental, integrative (Government, business, labour) Support for creative industries, Public sector innovation, esp. in healthcare

Narrow, problemoriented

Technologyfocused, Outwardlooking

Key Policy Initiatives

Innovation Hub

New governance system, support for basic research, expansion of internet access

Primary Investment Source Widespread Access to ICT? Comparative Advantage

State

State

State

Expansion of R&D funding, Streamlined support mechanisms, Incentives for science and engineering graduates State, Private Sector Yes

Clustering, technology transfer, economic openness, STEM education

Private sector, FDI Yes

State, FDI

Partial

Partial

Yes

Yes

Not identified

Sugar, Textiles, Marine Resources

Government, Maritime, Fishing

Food processing, Tourism

ICT, Software Medical biotechnology

Electronics, finance, Pharmaceuticals

Bibliography Botswana Technology Centre. 1998. Science and Technology Policy for Botswana. Brunner, Ronald. 1991. The Policy Movement as a Policy Problem. Policy Sciences 24: 6598. Tan, J., & Gopinathan, S. 2005. Education reform in Singapore: Towards Greater Creativity and Innovation. In International Forum on Vietnam Education. pp. 271- 287. Cowen, Tyler. 2011. The Great Stagnation: How America Ate All The Low-Hanging Fruit of Modern History,Got Sick, and Will (Eventually) Feel Better. New York: Penguin Books. DePalma, Angelo. 2005. "Twenty-Five Years of Biotech Trends." Genetic Engineering News 25 (14): 1, 1423. Ministry of Industry, Science and Research (Mauritius). 2010. Science, Technology and Innovation Policy. Ministry of Research, Science and Technology (New Zealand). 2010. Igniting Potential. Ministry of Trade and Industry (Norway). 2008. An Innovative and Sustainable Norway. European Commission. 2009a. Inno-Policy TrendChart: Innovation Policy Progress Report for Israel (2009). European Commission. 2009b. Inno-Policy TrendChart: Innovation Policy Progress Report for Norway (2009). Lee, Kuan Yew. 2000. From Third World to First: The Singapore Story 1965-2000. New York, NY. HarperCollins. Senor Dan, and Saul Singer. 2009. Start-up Nation. New York: Twelve Books. Ministry of Economic Development, New Zealand. 2003. Innovation Policy in Singapore and Applicability to New Zealand. Wong, Poh-Kam. 1999. The Dynamics of HDD Industry Development In Singapore. Information Storage Industry Center, Graduate School of International Relations and Pacific Studies, University of California, San Diego.