T H E K N O W L E D G E - B A S E D E C O N O M Y I N T H E G C C

O C T O B E R 1 0 - 1 1 , 2 0 1 2

D O H A , Q A T A R

Jamal Al-Kibbi World Bank Program Manager - GCC

The Knowledge and Innovation Road

Main Messages

Knowledge and Innovation-based Economy: key for coping with the job challenge

Low KE competitiveness, but notable efforts

Need for ambition and pragmatism (low-hanging fruits)

Adapt to countries’ own circumstances and capabilities

Importance of regional-global integration

Youth Unemployment by Region

KE and Growth

Algeria

Morocco

Brazil

China Egypt, Arab Rep.

Ethiopia

Finland Germany

Ghana India Indonesia

Ireland

Jordan

Korea, Rep.

Lebanon

Oman

Poland

Qatar

Russian Federation Saudi Arabia

Singapore

Slovenia

South Africa

Sudan Thailand Tunisia

United Arab Emirates

United Kingdom

United States

Yemen, Rep.

R² = 0.8334

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10000

20000

30000

40000

50000

60000

70000

80000

0 2 4 6 8 10

GN

I p

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pit

a,

20

10

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(C

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ent

Inte

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)

KEI 2012

Estimating Employment Effects of Knowledge

KnowledgeEconomic Growth

Employment Growth

Estimating Employment Effects of Knowledge

Employment Effects due to Knowledge

(via economic growth)

Employment Elasticity to KEI

0.0

0.3

0.2

0.4

0.2

0.4

0.2 0.2

0.3

0.1

0.20.2

0.10.2 0.2

0.23

1.3

0.8

0.60.5

0.3

0.2

1.1

0.9

0.8

0.6

0.90.8

0.6 0.50.5 0.4

0.69

0.0

0.5

1.0

1.5

Employment Elasticity to KEI - MENA Countries

1991-1999

2000-2009

Oil Exporting Developed Oil Exporting Developing Oil Importing Developing

Reshaping the Growth Model

From comparative to competitive advantage

Shifting competitiveness from resource- or location-based sectors (rent economies) to knowledge-based ones.

Knowledge-based significantly contribute to higher valued added, faster growth and consequently job creation, notably for the youth.

Green Growth is a real opportunity Can secure 10% of the jobs needed to keep unemployment from

rising.

Example: Solar Energy

Decreasing costs & increasing electricity demand

High demand from Europe – By 2030, the European Union foresees about 45 percent of total energy demand will be met by renewables.

An investment of $1 million in clean energy is estimated to produce 16.7 jobs, compared with only 5.3 jobs for the same amount spent on fossil fuel industries (PERI and AAM 2009).

KBE sub-plan with just the main KBE pillars

0

20

40

60

Pillar 1: Business environment + Governance performance

Pillar 2: Innovation ecology + entrepreneurship

Pillar 3: Education and life-long learning system

Pillar 4: Telecom and IT infrastructure and usage pattern

Pillar 5: Trust-based society, networking capability

National development plan with myriad themes

Focus Integration

Futu

re-s

hapin

g p

ote

ncy

Successful KEs focused on a few, especially future-shaping pillars and treated them in an integrated manner

Promising Niches through FDI Lens in the Mediterranean Area (Number of Jobs created per Million Euros Invested)

• Call center function: 299

• R&D center function (in IT + auto): 211

• Textile (production): 196

• Consulting and services to companies: 136

• Software (services): 103

• Electronic components (production): 103

• Agribusiness (production): 77

• Logistics platforms: 67

• Automotive and aeronautics: 63

• Green techs: 39

Source: 2011 Anima Background Report for CMI

Knowledge and Innovation Ecology

MENA Governance rankings, 2010 compared with 2005

Economic and Institutional Regime

0

1

2

3

4

5

6

7

8

2012

2000

More entrepreneurial economies with a dynamic private sector should be the source of wealth, jobs, and personal and collective accomplishments.

Some pertinent reforms were carried out in several countries before the Arab Spring, but, major constraints remain:

• rigid regulations on product and labor markets,

• competitive conditions burdened by monopoly and privilege,

• restrictions on external trade and foreign direct investment,

• lack of development and venture capital,

• bureaucratic hurdles of all kinds.

Promoting the emergence of a dynamic private sector

Strength of investor protection in the Arab World

6 5.7

5.4 5.1 5

4.8 4.5

0

1

2

3

4

5

6

7

Source: Author’s calculation based on World Bank and IFC (2012).

Areas to improve: The economic and institutional regime

• Strengthen governance

• Improve government efficiency

• Improve the business environment

• Integrate into the global economy

Education - Enrollments Measures Adult Literacy Rate, Secondary Enrollment, and Tertiary Enrollment

0

1

2

3

4

5

6

7

8

2000

2011

Education - Performance: Results on 2009 PISA test

Areas to improve: Education

• Enrollment vs. Quality

• Correct the mismatch between the skill needs of the economy and the outputs of the education/training system

• Link higher education to employment – some Arab countries started to do so.

• Invest in technical and vocational education and training

• Align the governance, management, financing, and performance incentives of the education system to produce better learning outcomes

ICT pillar Measures the number of telephones per 1,000 people, computers per 1,000 people, and the

number of Internet Users per 10,000 people

0

2

4

6

8

10

12

2000

2011

Mobile and Internet penetration in MENA, 1999–2009

Source: International Telecommunications Union; Rasmala (2011).

Areas to improve: ICT infrastructure

• Strengthen competition in the ICT market and improve broadband access

• Make more effective use of ICT applications for more growth and better delivery of government services (e.g. YESSER in Saudi Arabia)

• Improve IT skills among the labor pool to increase productivity and employability (e.g. Jordan Education Initiative)

Innovation

Improving the innovative climate implies: • Develop programs to support innovators

• Connect innovators with sources of human and financial capital and with market channels (e.g. Kafalat in Lebanon)

• build vibrant innovative sites by improving existing sites, such as techno‐parks and industrial clusters, and opening new ones.

• Change traditional, theoretical R&D approaches to be practical and to serve the economy and society

• tap into global knowledge through research cooperation, foreign direct investment, and well‐organized diasporas

A number of relatively inexpensive measures would have a strong impact of the creativity and dynamism of the academic and business communities

innovation policy

research

education

finance

industry

others

trade

Arab Countries’ Total Exports by Technology Level (2005-2009)

0%

10%

20%

30%

40%

50%

60%

70%

2005 2006 2007 2008 2009

Pe

rc

en

tag

e o

f to

tal

Ma

nu

fac

tur

ing

E

xp

or

ts

Resource-based exports Low-technology exports

Medium-technology exports High-technology exports

Areas to improve: The innovation system

• Broaden the concept of innovation policy

• Bring R&D structures into the service of the economy and society (RDI Program in Egypt)

• Tap into global knowledge and technology

• Educate for innovation (Rabat International University) • • Build innovation sites (Berytech in Lebanon & Knowledge and

innovation cities in Saudi Arabia)

• Support innovators. (Yomken.com)

Regional Integration: Selected Actions

Strengthen integration in education

Develop joint qualification and certification mechanisms

Scale up scholarship programs (ERASMUS)

Expand networks of engineering and management schools

Develop learning and evaluation mechanisms for university management

Increase cooperation in the innovation and research space

Mobilize actors through sector task forces and online platforms

Develop networks of incubator managers, business angels, and R&D program leaders to share good practices

Establish multi-country and multi-partner R&D platforms and programs

Stimulate FDI and strengthen linkages for technology transfer, business management practices, etc.

Mobilize diasporas through efficient networks and good policy practices inspired by international experience

Regional Integration: Selected Actions

Promote the information society in the Mediterranean

Cooperate to develop ICT applications (e-government, e-business, etc.)

Assist in efforts to liberalize telecommunication markets and improve regulatory frameworks

Promote industrial and local development in the Mediterranean

Reinforce cooperation in the development of growth sectors through joint projects (solar, energy saving, water management, transport, etc.)

Stimulate city networks for good practice exchanges and mutual assistance in innovative urban development and related policy measures (techno-parks, city planning, smart cities, etc.)

Conclusion

Multi-instrument approach combining a set of key actions

Supportive measures for R&D to encourage product development (e.g. Turkish tax exemption on R&D activities)

Shortage in domestic skills can be reversed by: increasing capabilities of technology absorption at the firm level Linking curricula with market needs (notably for vocational education)

Niche opportunities are available in many segments of the value chain. Challenge is to benefit from the comparative advantage and enhance them through knowledge and innovation to become a competitive advantage.

First Step: Start with pilot programs (at a local, national, or even regional level) to act as catalyst and to gain quick wins

By time, this can attract more investment, more demand for change, and other positive side-effects.