Results of a diagnostics of Bulgarias exporting and innovation activities John Gabriel Goddard Economist, World Bank COMPETITIVENESS THROUGH RESEARCH AND INNOVATION: STRATEGIES, POLICIES AND INCENTIVES 21 June 2010 Sofia, Bulgaria Goal of the presentation The purpose of this presentation is to: Share the results of a World Bank diagnostics that analyses Bulgarias specialization within the global trade system and innovation community Propose recommendations to make public research and innovation more responsive to economic priorities and foster private R&D Contribute to the formulation of a national science, technology and innovation strategy 2 Background and key questions Bulgaria had experienced robust economic growth tied to the investment boom in construction, real estate and financial sectors But growth did not automatically lead to improving innovation capacity, nor did R&D play a central role in the growth process Knowledge economy indicators suggest Bulgaria is behind other EU countries, which could explain the growth innovation disconnect 3 Key questions: What do recent trends tell us about Bulgarian export competitiveness? What is the status of industry-science linkages? How can productivity and exporting opportunities be advanced through innovation policies? PART I. What do recent export trends tell us about Bulgarias industrial competitiveness? 4 Export intensity is increasing at a fast rate since 2000 Source: UN Comtrade Where do Bulgarias exports in goods go to? 5 Higher diversification of export markets after 1990: currently the EU is the top destination but highest export growth in Russia Export competitiveness is still concentrated in industries that were traditionally strong 6 Export growth is high in industries that process (imported) natural resources, labor-intensive manufacturing and agro-industry Source: Staff estimates Export dynamics point to growth potential in knowledge-intensive products 7 Export growth will need further investments by traditional champions and shifting resources to knowledge-intensive goods Source: Staff estimates There is room for Bulgarias export basket to diversify into more sophisticated products Bulgarias top exports are mostly less sophisticated than the global average Medicaments Cocks and valves Aluminum and aluminum alloys Switches, relays, fuses Zinc and zinc alloys Copper and copper alloys Wheat and meslin Steel rolled sheets and plates, thickness 4.75mm+ Steel bar, rods Copper and copper alloys Television, radio-broadcasting Printing paper and writing paper Passenger motor vehicle Paper and paperboard- coated Paper and paperboardrolls, sheets Telecom equipment Steel rolled sheets and plates, thickness below 3mm Chemical wood pulp, soda or sulfate Electric motors, generators Medicament Finland relies on natural resources, yet its exports have moved up the value chain Average sophistication of global exports Strong impact at a social level and for skills But only indirect impact on private productivity This depends on links to business demand Science and public R&D Potentially large return : 25% private return and 65% social return due to spillovers in OECD But pervasive market failures create role for government Private R&D Need for innovations to be implemented as new products and processes Technology absorption Learning-by-exporting Productivity and exports Part II. Opportunities for creating competitive advantages through science and innovation 9 Focus of Part II Contrary to exports, innovation capacity declined substantially and has not recovered 10 Big drop in innovations protected by patents since 1990, especially in mature fields connected to traditional industries As a result, Bulgarias intellectual property is weak and risks falling further behind 11 Bulgaria protects few innovations compared to EU-12, which as a whole is behind countries like Finland Not just the number of patents matters: Patents with high impact are all pre Patents with most citations granted at USPTO RankTitle Year granted US Patent class Cites up to Method and device for connecting a 16-bit microprocessor to 8-bit modules 1989 Electrical computers and digital data processing systems 52 2Polyvinyl chloride composition1986 Synthetic resins or natural rubbers 46 3 Device for the dispersion of cement solutions 1981Agitating44 4 Method of and device for synthesis of speech from printed text 1981 Data processing: speech signal processing, linguistics, etc 32 5 Method of producing molded parts with a smooth noncellular skin 1978 Plastic and nonmetallic article shaping or treating 29 Citations to Bulgarian patents suggest that without renewed R&D investment, the countrys innovation stock will fade One positive sign: most post-2000 inventions are connected to new industries 13 Patents granted at USPTO Patenting class Communications: Radio Wave Antennas4 Data Processing Database and File Management4 Internal-Combustion Engines3 Memory Electrical Computers and Digital Processing Systems3 CommunicationsRadio Wave Systems and Devices (e.g., Radar)3 Patenting class Metal Founding18 Organic Compounds15 Electrolysis: Processes, Compositions, etc14 Electric Heating14 Drug, Bio-Affecting and Body Treating13 Inventions protected in the US used to be in fields connected to established industries, but have now diversified into new fields Another positive sign: More co-innovation with international partners, especially firms 14 Based on patents granted at USPTO The intellectual property that is protected is a result of international cooperation, with stronger public-private links One way for Bulgaria to rebuild its innovation stock is by raising scientific capacity 15 More publications are produced by Bulgarias researchers, but this has not closed the gap with EU leaders and neighbors Besides enlarging the scientific system, promoting better quality of research 16 Source: Staff estimates Bulgarias science currently has below average impact and visibility compared to EU countries Intensifying links with European neighbors can support Bulgaria s scientific results 17 International collaborators RankTotal%RankTotal% GERMANY , USA , FRANCE , ITALY , ENGLAND SPAIN RUSSIA BELGIUM POLAND SWITZERLAND Total - ALL FIELDS-14,83921,340 Since 1990, there has been increasing co-authorship with international partners in the EU and the US Conclusions There is potential to boost export-led growth through diversification into higher value-added production and knowledge-intensive industries Reinforcing Bulgarias innovation capacity in the public and private sector can advance diversification and lead to improving competitiveness Policy ingredients could include instruments that: Foster business R&D and protection of IP Strengthen industry-science links International scientific cooperation with the EU 18 Thank you! 19 COMPETITIVENESS THROUGH RESEARCH AND INNOVATION: STRATEGIES, POLICIES AND INCENTIVES 21 June 2010 Sofia, Bulgaria