Road Map Towards a Knowledge-Based Economy

Khalid A. Al-DakkanDirector of Innovation and Commercialization SectorDirector of the National Technology Development Center

Knowledge-based economies rely heavily on the production and management of knowledge, rather than simply physical products

Knowledge-Based Economies (KBE)

Drive Economic Growth

1

Create New High Value Jobs

2

Globalize Local Economy

3

Facilitate Knowledge Transfer

4

Foster Innovation & Entrepreneurship

5

PolicyEducation

Networks NationalInnovation System

Four Pillars of KBE Benefits of KBE

Source: World Bank; Asian Development Bank; OECD(Organization for Economic Co-operation and Development); Booz & Company analysis

The National Science, Technology and Innovation Plan provides KSA with the strategic vision to join knowledge-based economies …

§ Establish infrastructure for science, technology and innovation– Development of

national eco-system– BADIR program– SBIR– Technology

Innovation Centres– Tawteen – Taqnia

§ Become a leading country in science, technology and innovation in the region

§ Become one of the leading countries in science, technology and innovation in Asia

2025

2020

2015

2010

1st 5-Year Plan 2nd 5-Year Plan 4th 5-Year Plan

§ Transform to a knowledge-based economy

3rd 5-Year Plan

Saudi Arabia

Qatar

LebanonIsrael

Middle East

Asia

Global

Source: KACST

…and regroups all key elements necessary to achieve the transition

Technology Innovation, Entrepreneurship and Incubation

Economic and Social Systems and Laws

Universities &Research Organizations

Human Resources

Financial Resources

Innovation Entrepreneurship

Incubation

Source: KACST; Booz & Company Analysis

The plan will enable Saudi Arabia to address its most pressing socio-economic issues today

Socio-Economic Challenges in Saudi Arabia

Source: SAMA; The Conference Board of Canada; U.S. Patent and Trademark Office; Booz & Company analysis

Econ

omic

Mix

Popu

latio

n G

row

th

Inno

vatio

n R

anki

ng

Tale

nt p

ool

30

20

10

020102005200019951990198519801975

+4% Other15%

Oil85%

40289

509743

SaudiUSGermanySweden

KSA Population (MM) KSA Revenues

Number of Granted PatentPHD Graduates

(per100,000 of population)

Diversify the Saudi economy by focusing on value-adding technology sectors

Provide unique job opportunities in technology sectors for the young Saudi population

Position Saudi Arabia as a leadinginnovative nation

Support capacity building for the Saudi talent poolin technology areas

58

0

20

40

60

2006 2008

+25%

2002 20102004

Regu

lation

s

Financial

Resources

Human

Resources

Strategic

TechnologiesTechnology Transfer

R&DCapabilities

Infrastructure

Administration

NSTIP implementation throughout the Kingdom Institutions….

NSTIP Framework

Private Sector

Society

National Science,

Technology, & Innovation

Plan (NSTIP)

Ministries and Governmental

Institutes

Research & Educational Institutes

Source: KACST; Booz & Company analysis

In regards to innovation, KACST will keep on focusing on 15 technological areas that have been identified as critical for KSA

Advanced Technologies Program

Technology Priorities for KSA Examples of KACST R&D Achievements

King Abdullah Initiative for Water Desalination

King Abdullah Initiative for Arabic Content

Design of Next Generation Electronic Chips

Date Palm and Camel Genome Projects

Gravity Probe - B Space Experiment

WaterOil and GasPetrochemicalsNanotechnologyBiotechnologyInformation TechnologyElectronics and CommunicationsSpace and AeronauticsEnergyEnvironmentAdvanced MaterialsMathematics And PhysicsMedical and HealthAgriculture TechnologyBuilding and Construction

Source: KACST; Booz & Company analysis

KACST established Joint International Centers of Excellence with World Leading R&D Organizations

KACST Joint Centers of ExcellenceInternational Universities and Institutes

Source: KACST; Booz & Company analysis

IBM (2) (USA)Intel (3) (USA)Boeing(2) (USA)Clariant (Germany)Selex (UK)Synopsys (USA)

MIT (USA)Stanford (USA)Oxford (UK)Cambridge (UK)UCLA (USA)UCSD (2) (USA)Northwestern (USA)Chinese Academy of SciencesBelarus Academy of Sciences CSIR (South Africa)C-DAC (India)NASA (USA)

International Companies

Fraunhofer (Germany)EMPA (Switzerland)

CENTER FOR COMPLEX ENGINEERING SYSTEMS (CCES)

CCES Vision

The Center for Complex Engineering Systems (CCES) at KACST and MIT is intended to be a world-class international research program that will uncover fundamental principles and will develop new methods and tools such that complex systems can be modeled, designed, and managed more effectively than is possible today. 40 researchers from both sides.

CENTER FOR COMPLEX ENGINEERING SYSTEMS (CCES)At KACST & MIT

Example: KACST-MIT Joint Center of Excellence

CENTER FOR COMPLEX ENGINEERING SYSTEMS (CCES)

CCES Projects

TransportationEnergy

UrbanismWater

ICT

Sustainable Infrastructure Rating System (SISRS)

Urban Traffic System (UTS)

Integrated Energy Decision Support System (IEDDS)

CCES Domains

CCES Domains & Projects

The problems addressed by CCES will touch on several domains as well as on the interactions amongst those domains.

Funded Projects 2011 -2008 based on Technologiesratio to the total

budget (%)Budget (SR) Ratio to the total

(%)Number of

funded projectsTechnologies

4.1 51,867,936.00 4.5 32 Water

1.8 22,400,580.00 1.8 13 Oil & Gas

1.2 15,174,700.00 2.0 14 Petrochemicals

11.7 147,184,765.00 13.7 97 Nanotechnology

8.0 100,481,372.00 8.1 57 Advanced Materials

3.9 49,044,485.00 4.8 34Electronics &

Communication & Photonics

20.9 261,854,306.00 20.7 146 Biotechnology

6.3 78,697,429.00 8.4 59 Information

2.1 25,732,250.00 2.4 17 Space & Aeronautics

6.4 80,908,698.00 7.9 56 Energy

8.5 106,098,258.00 9.9 70 Environment

1.9 23,363,320.00 2.0 14 Agricultural

0.2 2,406,000.00 0.3 2 Building

1.2 15,131,671.00 1.7 12 Mathematics and Physics

21.9 274,492,506.00 11.8 83 Medical & Health

100% 1,254,838,276.00 100% 706 Grand total

R&D Funding - 706 Projects

Innovation in Saudi Arabia has begun to show early signs of success – a momentum that we aim to further boost

3.2

3.9

4.1

4.3

5.1

5.4

5.6

5.8

0 2 4 6

SaudiArabia

Japan

Kuwait

Oman

Singapore

UAE

Finland

US1

18

33

43

50

6

3

(Out of 139)Ranking

Minimal or Nonexistent Intensive and Ongoing

96

Source: The Global Competitiveness Report (2010-2011),WEF; SCImago. SJR SCImago Journal & Country Rank ;Booz & Company analysis

Extent of University-Industry Research Collaboration(2010)

Research Papers Published Regionally(1996 to 2010)

Compared to 50 at2008

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

5,000

5,500

6,000

1996 1998 2000 2002 2004 2006 2008 2010

Saudi ArabiaKuwaitUAEJordan

Via BADIR, KACST will setup 80 incubators in the Kingdom by 2025 to create over 20,000 jobs…

BADIR Program Long-Term Targets and Achievements

BADIR Supported Incubators

Number of Clients

Employment in Client Companies

Number of Graduate

Companies1

Graduate Employment2

Total Employment

280 560

2,240 4,480

95 333

836 3,596

3,076 8,076

2015 2020

Number of Incubators 20 40 80

1,120

8,960

761

9,740

18,700

2025

1) Cumulative and 15% business failure2) Cumulative and 5% annual growthSource: NSTP Long Term Objectives

BADIR Program Long-Term Targets

Yanbu

Al QassimPrincess Noura

Taibah

Al KharjAl Baha

Om Al Qura

King Khalid

BADIR ICT BADIR BIO BADIR AMI

Currently, BADIR is supporting 54 clients– double the 2009 figure - resulting in over 112 new jobs created

BADIR Client Base

25

12

766

+350%

ICT

BIO

AMI

Jul-11

54

30

17

Jun-11

48

27

15

May-11

45

28

11

Apr-11

43

27

115

Mar-11

45

30

105

Feb-11

44

29

105

Jan-11

42

28

104

2010

43

28

105

20092008

Clients and Affiliates by Incubator

Source: BADIR Monthly reports

ICT AMI BIO Total

Jobs Created# Generating

Revenues# Generating

Profits

100

9

2

7

0

0

16

0

0

112

9

2

2011 Client Status

Selected Success Stories

§ S-me is a highly successful SMS based social network for young Saudis boasting some 600,000 members

§ AceBiotech aims to provide kits and reagent for PCR, DNA/RNA Isolation, Cloning, Electrophoresis and Buffers

§ Ataalam provides a learning environment, training virtual Women through virtual classrooms, and interactive whiteboards

To produce a critical mass of high-quality patents , KACST launched the Technology Innovation Centers (TIC) program

Source: KACST; Booz & Company analysis

Technology Innovation Centers (TIC)

Technology Innovation Centers

§ Address economic and social goals of the Kingdom

§ Promote university industry research collaboration and technology transfer in the Kingdom

§ Strengthen university research and science and engineering education in KSA

Objectives

§ Established 3 technology innovation centers in collaboration with Saudi universities with a cost of SAR 150 million

Achievements

RiyadhAl-Madinah

Eastern Province

Al-Qassim

Asir

Tabouk

Jeddah

Hail

Northern Borders

JazanNajran

Al-Jawf

Carbon Retain &Sequestration

Individual Diagnostic

medicine

Dhahran

Radio Frequency

&Photonics

Through SBIR, KACST will support the development of Saudi businesses by funding innovative research

SBIR Program

Encourage the foundation and growth of technology-based companies

Commercialize promising technologies from universities and research centers

Catalyze high tech employment in the kingdom

Ability to Produce Sustainable Jobs

SBIR Program Objectives

Phase II§ Provides the core funding

necessary to develop a prototype

Activities

Phase I§ Provides preliminary funding

for feasibility studies

Phase III§ Supports the transition to

private sector finance, and product development

§ Graduation from the program Phase III

SBIR Program Phases

Source: KACST; Booz & Company analysis

…that will significantly support in overcoming the commercialization chasm

16

Commercialization Chasm

Research and Development

Idea g

enera

tion

Basic

rese

arch

Conce

pt de

velop

ment

Proof

of co

ncep

tPro

totyp

e

Produ

ct de

velop

ment

Manufa

cturin

gMar

ket in

trodu

ction

Marke

ting

Dissem

inatio

n

Production and Dissemination

Current Gap

Value Add of Incubators in Addressing Commercialization Chasm§ Incubator programs provide significant add-on funding to the commercialization initiatives, examples include– Norway: FORNY program designed to commercialize research based business; most of the FORNY

supported spin-offs receive significant support from Innovation Norway through the incubator grant scheme

– Canada: The Industrial Research Assistance Program (IRAP) supports a significant share of spin-offs. In combination with tax deductions these funds can add up to 70% of the total project costs

Taqnia will capture the potential of emerging technologies and support the national strategy to deliver impact

Taqnia value chain

Taqnia

Attract / Make Investment

Improve NationalCompetitiveness

Grow sustainably Improve LocalCapability

Manage a Growth Portfolio

CorporationsCreate jobs

Create adequate regulation

Illustrative

Gaps and overlaps in current stakeholder support to SMIs

Bu

sin

ess

Req

uir

emen

ts

Stage of Growth (in months)

Facilitation with Govt.

Licenses / Approvals

Funding

Mentorship & Training

Infrastructure Support

T-12 T0 T12 T24 T36 Tn

SIDF, National Commercial Bank, Saudi Credit & Savings Bank, private banks

NICDP

Council of Saudi Chambers3

HRDF1

Saudi Industrial Property Authority (MODON)

Centennial Fund

PIF4

Early stage infrastructure support limited

Support not beyond the first few months of business start-up

Limited facilitation once setup

Multiple sources of funding

Ministry of Commerce & Industry, SAGIA2

1: HRDF subsidizes 50% of wages for new Saudi hires for the first 2 years2: SAGIA’s focus is FDI (with or without local partners) 3: CSC also facilitates financing for SMIs4: PIF primarily focuses on large scale investments 5: Provides skilled graduates based on the needs of the market6: Research grants, incubation support, office space7: KACST provides incubator support through the Badir program

TVTC5

KACST

Sources of funding may be challenging due to limited history of SMI

….Tawteen is KACST-MCI Initiative helps in Supporting Small, Medium Industries (SMIs) in KSA

…..deciding where Tawteen could and should play is a key strategic question

Start UpStage

GrowthStage

ExpansionStage

SustainStage

• R&D Incubator• R&T Incubator• Manpower and Labor• Assurance of Raw Materials

Supplies• Support Infrastructure

• Certification and Standards• Technical Assistance• Automated Process and Efficiency and

Productivity Improvements• Tax and Financial Benefits • Business & Market Development

• Technological capability• Management capability• ICT capability• Brand Development• Outsourcing• Distribution channels• Skills Develoment

• Design capability• Industrial Upgrading• Investment abroad

Ca

pa

bil

ity

Time

Globally Competitive

Inv

est

me

nt

SMI maturity curve

Global SMI agencies overview

MEP: Manufacturing Extension PartnershipEC: Enterprise ConnectIRAP: Industrial Research Assistance Program

SC: Steinbeis CentrePITRI: Public Industrial Technology Research Institute MAS: Manufacturing Advisory ServiceINTI: Instituto Nacional de Tecnología Industrial

FFG: Austrian Research Promotion AgencyInno.: Innovation Fund for Small Technology-based FirmsFEDIT: Federación Española de Entitades de Innovación

Represents 80% of total factories by volume

Analysis of current industry concentration in the kingdom….Fabricated metal products, rubber & plastics, food products and chemical & chemical products were the top 4 sectors by number offactories

51333434549666767899797

100107151

193331

359

501

556

598

3,653

86

Prin

ting

& R

epro

duct

ion

of M

edia

Mot

or V

ehic

les,

Tra

ilers

, Sem

i-Tra

ilers

Che

mic

al &

Che

mic

al P

rodu

cts

Food

Pro

duct

s

Rub

ber &

Pla

stic

s

Fabr

icat

ed M

etal

Pro

duct

s

Cok

e &

Ref

ined

Pet

role

um P

rodu

cts

Furn

iture

Woo

d, C

ork

(exc

ept f

urni

ture

)

Text

iles

Ele

ctric

al E

quip

men

t

Mac

hine

ry &

Equ

ipm

ent

Pap

er &

Pap

er P

rodu

cts

Total

Oth

er T

rans

port

Equ

ipm

ent

Pha

rmac

eutic

al P

rodu

cts

Bev

erag

es

Leat

her &

Rel

ated

Pro

duct

s

Wea

ring

App

arel

Bas

ic M

etal

s

Oth

er

Non

-Met

allic

Min

eral

Pro

duct

s

Com

pute

r, E

lect

roni

cs, O

ptic

al

Source: National Factories Database 2010 , Saudi Industrial Development FundClassification based on International Standard Industrial Classification (ISIC) codes

Number of Factories in the Kingdom classified by L0 industries

……Top 25% industries represent 70% of all factories by volume

1 01 01 21 31 61 71 81 81 91 92 02 12 12 72 72 82 92 93 74 24 44 55 05 85 96 76 97 37 8848 48 99 19 49 79 71 071 071 3 5

1 4 91 5 31 6 1

4 4 9

5 3 7

1 6 8

Tann

ing

& D

ress

ing

Oth

ers

Jew

elle

ry

Pro

cess

ing

and

pres

ervi

ng o

f mea

t

Pre

pare

d an

imal

feed

s

Wea

ring

appa

rel e

xcep

t fur

Spe

cial

-pur

pose

mac

hine

ry

Man

-mad

e fib

res

Ref

ined

pet

role

um p

rodu

cts

Dom

estic

app

lianc

es

Gla

ss a

nd g

lass

pro

duct

s

P&

A fo

r mot

or v

ehic

les

Rub

ber p

rodu

cts

Bas

ic ir

on a

nd s

teel

Oth

er fo

od p

rodu

cts

Gra

in m

ill p

rodu

cts

Wiri

ng a

nd w

iring

dev

ices

Pro

cess

ing

of fr

uit a

nd v

eget

able

s

Stru

ctur

al m

etal

pro

duct

s

Bas

ic c

hem

ical

s

Pes

ticid

es, p

aint

s, s

oaps

, etc

.

Ref

ract

ory

prod

ucts

Fabr

icat

ed m

etal

pro

duct

s

Pla

stic

s pr

oduc

ts

Ele

ctric

ligh

ting

equi

pmen

t

Dai

ry p

rodu

cts

Text

iles

Mot

or v

ehic

les

Con

fect

iona

ry

Ele

ct. m

otor

s, g

en.,

trans

form

er

Pro

duct

s of

woo

d &

cor

k

Furn

iture

Bak

ery

prod

ucts

Cem

ent,

lime

& p

last

er

Prin

ting

& s

ervi

ce a

ctiv

ities

Bev

erag

es

Pap

er &

pap

er p

rodu

cts

Gen

eral

pur

pose

mac

hine

ry

Veg

etab

le, a

nim

al o

ils &

fats

Opt

ical

& p

hoto

grap

hic

equi

pmen

t

Mag

netic

and

opt

ical

med

ia

Pha

rmac

eutic

al P

rodu

cts

Foot

wea

r

Cok

e ov

en p

rodu

cts

Non

-fer

rous

met

als

Number of Factories in the Kingdom classified by L1 industries

Source: National Factories Database 2010 , Saudi Industrial Development FundClassification based on International Standard Industrial Classification (ISIC) codes

Fabricated metal products

Rubber & plastics

Food products

Chemical & chemical products

Non-metallic mineral products

Electrical equipment

Machinery & equipment

Paper & paper products

Motor vehicles, trailers, semi-trailers

L0 Classification Legend

The technology transfer ecosystem includes different stakeholders, governed by a regulatory framework

23Dec

Technology Transfer Ecosystem

Enabler Impact

Regulatory Framework

§ Govern the technology transfer ecosystem through public policies and regulations

§ Aim to ensure proper technology transfer

Technology Owners

§ Own a technology in form of patented or non-patented innovation, intermediate good, machinery, etc.

§ Negotiate technology transfer agreement with technology acquirer

R&D Institutions§ Conduct research and development across sectors to

develop innovation, in the form of concepts, prototypes, processes, formulas, etc.

Technology Transfer Facilitators

§ Support R&D institutions and technology owners in transferring technology to local firms and entrepreneurs

§ Initiate marketing activities, support entrepreneurs/firms in technology transfer efforts

Local Firms/ Entrepreneurs

§ Evaluate technology potential for commercialization§ Develop technology and disseminate product in the

market

Market§ Constitute the technology demand market across all

sectors§ Drive the need for innovation

Source: Booz & Company analysis

Regulatory Framework

R&D Institutions

TechnologyTransfer Facilitators

Local Firms/Entrepreneurs

Market

TechnologyOwners

(Local/ International)

Vertical Technology TransferHorizontal Technology Transfer

Incentives

§ Define all objects eligible for the technology transfer, and indicate technology’s ownership details

We will recommend enhancements to the interaction models and develop regulatory guidelines for the technology transfer in KSA

24Dec

Interaction Models and Regulatory Framework

Source: Booz & Company analysis

Regulatory Framework Categories

Technology Transfer Agreements

Revenue Sharing

Dispute Resolutionand Penalties

Taxation andFinancial Support5

3

2

4

Technology Ownership

§ Include obligations for a complete transfer of technology, and provide incentives to attract foreign talents and entrepreneurs

§ Include the rules regulating revenue distribution between all the technology transfer stakeholders

§ Define prohibited conducts during technology transfer activities, and set dispute resolution mechanisms

§ Clarify taxation rules and provide incentives for facilitating technology transfer

1

Regulatory Framework

R&D Institutions

TechnologyTransfer Facilitators

Local Firms/Entrepreneurs

Market

TechnologyOwners

(Local/ International)Incentives

Vertical Technology TransferHorizontal Technology Transfer

§ What are the best practices for technology transfer model and regulation?§ How do regulations vary from a country

to another?§ What are the regulatory framework

dimensions? What are the regulation implications on technology transfer?§ What are the lessons learned from the

benchmarking exercise?

Global Best Practices

§ How is technology transfer conducted currently in KSA?§ What are the involved entities in the

process?§ What are the existing regulations in

KSA related to technology transfer? § What are the existing challenges?

Current Situation in KSA

…..four step approach to develop KSA technology transfer interaction model and regulatory guidelines

2

Dec

1

§ What are the pain points in the KSA technology transfer ecosystem?§ How does the KSA technology transfer

interaction model compare to global practices? § What about KSA regulatory framework,

compared to benchmarks?§ Across each pain point, what are the

gaps of the technology transfer model in KSA?

Gap Analysis

§ What is the optimal technology transfer model in KSA?§ What are the key components that

should be covered in the KSA technology transfer regulation?§ What are the incentives for facilitating

technology transfer to KSA?

Model and Regulatory Guidelines3 4

25

5 weeks 7 weeks 9 weeks

Timeline

Source: Booz & Company analysis

The Way Forward …

… An Exciting and Challenging Time for Technology, Innovation, and Entrepreneurship

THANK YOU