final global best practice presentation powerpoint (7.5 mb)

Global best practice in productivity improvement – lessons for Northern Ireland

May 2009

| 2

Contents

▪ What we have done1

▪ Implications for Northern Ireland3

▪ Discussion of case studies– Singapore (in depth)– Republic of Ireland– Costa Rica– Finland– Sweden– Portland, Oregon– Others

2

| 3

Contents



▪ Discussion of case studies– Singapore – Republic of Ireland– Costa Rica– Finland– Sweden– Portland, Oregon– Others

2

| 4 SOURCE: ConferenceBoard, OECD, US Department of Commerce

To develop a long-list of examples to examine we used a simple ‘funnel’

1 Based on the area’s best results from either 2003-2008 or 1998-2003 for countries and either 1996-2001 or 2001-2006 for regions

Relevance

Performance

NUTS 2 regions in Germany, France, Italy, US, Korea and Canada Countries of the world

PolandBarbadosHungaryRussiaCroatiaSaudi ArabiaBulgariaThailand+67 others

KuwaitNew ZealandNorwayArgentinaNetherlandsAustriaMaltaAustralia

LuxembourgDenmarkCyprusChileSwitzerlandBelgiumPortugalSpainUruguay

United StatesChinaIndiaJapanGermanyUKFranceRussia

All French regionsAll other German regionsItaly: LombardiaItaly: ToscanaItaly: AbruzzoItaly: VenetoItaly: Emilia-RomagnaItaly: SardegnaItaly: Valle D’AostaItaly: Marche

Germany: SachsenGermany: Sachsen-AnhaltGermany: ThueringenGermany: BrandenburgGermany: M-burg-Vorp.Italy: MoliseItaly: BasilicataItaly: Puglia

Italy: CalabriaItaly: SiciliaItaly: CapaniaKorea: GyeonbukKorea: Capital regionKorea: JeollaKorea: GangwonKorea: Jeju

Italy: LiguriaItaly: PiemonteItaly: Friuli-Venezia G.Italy: UmbriaItaly: PA di TrentoItaly: PA do B-BozenKorea: GyeongnamAll other US statesAll other Canadian provinces

US: New HampshireUS: WashingtonUS: IdahoCanada: NewfoundlandCanada: AlbertaCanada: Nova ScotiaCanada: Saskatchewan

US: New YorkUS: CaliforniaUS: District of ColumbiaUS: North CarolinaUS: VermontUS: LouisianaUS: Virginia

Italy: LazioKorea: ChungcheongUS: South DakotaUS: OregonUS: ColoradoUS: ArizonaUS: Massachusetts

IcelandEstoniaSloveniaLatviaSlovak RepublicCzech RepublicBelarus

BrazilItalyIndonesiaSouth KoreaMexicoCanadaVenezuelaMalaysia

Regions with GDP per capita <85% of Northern Ireland

Countries with GDP per capita <85% of Northern Ireland or total GDP greater than Spain

Regions that have not recently achieved >2% CAGR GDP per worker improvement in a 5 year period1

Countries that have not recently achieved >2% CAGR GDP per worker improvement in a 5 year period1

AzerbaijanArmeniaLithuaniaKazakhstanHong KongSingaporeIreland

SwedenFinlandTaiwanSouth KoreaIsraelGreeceUnited Arab EmiratesQatar

| 5

These are the six cases that have been examined in detail

SOURCE: Literature review; press search; expert interviews

Singapore

Republic of Ireland

Finland

Costa Rica*

Sweden

Oregon

* Originally filtered out on income

Targeted approach to capturing FDI through independent marketing agency

Success founded in establishing pro-business environment and aggressively pursuing FDI through a high performance agency

Built on low tax rate with flexible approach to attract FDI, bring in anchor investors and move up the value chain

Built R&D capability around Nokia as an anchor and successfully developed

Deregulation and creation of pro-business environment to drive competition and productivity

Built on anchor firms and proximity to West Coast to create hot spot for entrepreneurial spinoffs

| 6

Which have different sources of advantage and disadvantage (1/2)

Note: Data for Oregon (US) data is for United States as a whole. Oregon offers tax exemptions and other fiscal incentives lowering the effective tax rate* % of total population** 2006

SOURCE: WMM; IMF Global Insight; OECD; World Economic Outlook database

R&D expenditure, % GDP

Students graduating p.a., %*

Engineers graduating p.a., %*

Corporation tax rate, %

Ease of doing business rank

Use of Zonal tax exemptions

Disadvantage/worst performer Best in class/ Advantage

2.3**

N/A**

0.13**

18

1

YES

1.3**

1.40**

0.17**

12.5

7

YES

<1.0**

N/A**

N/A**

10-30

117

YES

3.5**

0.77**

0.16**

26

14

NO

3.7**

0.67**

0.13**

28

17

NO

2.6**

0.9**

0.06**

US: 35

3

NO

1.8**

1.06**

0.09**

28

6

NO

| 7

Broadband penetration, %

Which have different sources of advantage and disadvantage (2/2)

* No consistent datasource for languages ** 2006*** Annual Wage 2009 for Chief Computer Analyst

SOURCE: IMD; WDI, CINDE, Costarica.com, Language data: Eurobarometer 2005, US Census Data, EU Commission, Singapore 2000 census data

Average wage (engineer, GBP annual)

Electricity costs (GBP per KWH)

Average wage (manufacturing,GBP per hour)

Size of public sector (% GDP)

71*

13.70

42**

98*

35.44

19**

25,000***

n/a

0.06

n/a

3**

63*

47.24

31**

89*

52.57

32**

96*

35.36**

26**

98*

43.13**

28**

English-speaking (% population)

Disadvantage/worst performer Best in class/ Advantage

2.27**

36,447

4.64**

62,308

14.07**

60,385

16.21**

59,717

17.25**

54,048

12.93**

61,054

14.68**

0.05 0.07 0.04 n/a 0.03 0.06

| 8

For each example we have built a case study around four questions

1. What was the context for this region’s productivity improvement?

2. What institutions, programmes and policies were used to drive it?

3. What were the key success factors for these institutions, policies and programmes?– Strategically?– Organisationally?– Operationally?

4. What are the lessons for Northern Ireland from this region?


| 9

To address these questions we carried out primary and secondary research

Over 30 interviews conducted Literature and Research reviews

▪ Conducted 8 interviews with experts for Singapore, Finland, Sweden, Ireland, US, Israel

Country experts

Agency employees

Functional experts

▪ 7 interviews with current or former employees of government agencies (FDI/Export promotion) in Costa Rica, Singapore, Finland, Ireland

▪ 2 Offshoring specialists▪ 3 Productivity experts▪ Industrial policy expert

Country specific information

Economic strategyliterature

MGI

▪ Government and agency reports for 6 case study countries from 2000-2009)

▪ National press searches ▪ Business school case studies on

country competitiveness (Ireland, Costa Rica, Estonia)

▪ Academic literature

▪ OECD, World Bank, IMF reports and academic research on – FDI policies – Country competitiveness – R&D and Cluster strategy– Industrial policy– Government efficiency

▪ McKinsey Global Institute knowledge incl. 15 country productivity reviews

Investor perspective

▪ 6 Investor perspectives on Ireland, Singapore, Eastern Europe and Northern Ireland

▪ Conducted interviews with Invest NI, Bombardier, Citigroup, Almac, All State

Northern Ireland


| 10

Contents



▪ Discussion of case studies– Singapore– Republic of Ireland– Costa Rica– Finland– Sweden– Portland, Oregon– Others

2

| 11

Introduction to Singapore

Background Key achievements

▪ Small city-state situated on 63 islands and connected to the Malaysian peninsula

▪ Population 4.8m (~70% of Chinese origin)▪ Land area 710.2 km2 (~5% of NI)▪ Official languages: English, Malay, Mandarin,

Tamil▪ 5th wealthiest country in the world in terms of

purchasing power adjusted GDP per capita▪ Self-governed since 1959, independent from

Malaysia since 1965▪ Parliamentary Republic▪ Single Party (People’s Action Party PAP)

dominates political process▪ Limited natural resources (no freshwater)

▪ Real GDP growth has averaged 8.1 percent since independence in 1965

▪ Productivity grew by a 4.0% between 1980 and 2008, over three times faster than the OECD

▪ Attracted major > 7,000 international investors from broad range of industries, including for example Infineon, Exxon, GSK, Merck

▪ Succeeded in building sectors “from scratch” such as Health Care

▪ Rated #1 in Ease of Doing Business by World Bank in 2008


| 12

Why are we interested in Singapore?

ApplicabilityRelevance

Small island economy▪ 2007 GDP 250% of NI

Openness to investment and trade▪ 2007 Exports 246% of GDP

Developed▪ 2007 GDP per capita 90% of

NI

Successful▪ Achieved 3.0% productivity

growth from 1995-2008 compared to UK average of 1.7%

Aspects NI could learn from▪ Integrated economic strategy of Singapore where

“packages” to attract FDI aims at creating lasting benefits

▪ Customer-focus of the EDB through tailoring to individual investor needs and efficient end-to end process

▪ Focus of government agencies in serving all customer needs conveniently (online) and through “one-stop-shops”

Aspects NI is unlikely to learn from▪ Semi-authoritarian government in Singapore facilitated

alignment and “top down” implementation▪ Creation of state-owned enterprises ▪ Strong use of trade policy and financial incentives

– Early import substitution phase to industrialise– Customised financial incentive package to attract

FDI

SOURCE: Economist Intelligence Unit; UNESCO Statistics; World Bank “Ease of doing business” reports; IMF International financial statistics; WMM/Global Insight; World Economic Outlook database; IMD World Competitiveness online

| 13

Singapore developed through ambitious planning and outward-orientation

1990s 2009

1959 - Self-government of Singapore, led by the People’s Action Party (PAP) Became independent from Malaysia is in 1965. Lee Kuan Yew is first Prime Minister. Government declares itself “pragmatic” (~capitalist and semi-authoritarian)

1960s

1961 - Creation of the Economic Development Board (EDB). Created the Jurong Industrial Estate, Singapore’s first industrial estate. EDB open offices in NY and Hong Kong. Attract Shell, National Iron and Steel Mills

1991 - Creation of EDBI - the independent equity investment arms of the EDB which invests in companies in new strategic industries Has invested in 240 companies since its creation

1997 - Asian Crisis hits Singapore, but country recovers already starting in 1999. Re-orientation of economic policy with more focus on knowledge economy

1970s - Start of the electronics industry in Singapore – Texas Instruments investment of 6m USD is secured within 6 months and operations start 90 days after investment decision

1970s

1980s - Singapore’s high-wage policy to force move to knowledge economy fails in context of world economic crisis. Economic review by MTI recommends PCs and disk drives as “sunrise sectors”

1980s

1983 - Creation of the Trade Development Board (TDB) to promote Singapore’s exports. Rebranded IE Singapore in the early new millennium

2000s Continuing emphasis R&D and knowledge economy. Focus on attraction of foreign talent to Singapore and positioning of Singapore as destination for R&D research facilities and regional headquarters of multinationals

2001- Creation of A*STAR- The agency of Science Technology and Research focusing on Biomedical Sciences and Engineering/Science, promoting research and public-private collaboration

2000


| 14

0

50

100

150

200

250

1980 1985 1990 1995 2000 2005 2010

Singapore

UK

0123456

1980 1985 1990 1995 2000 2005 2010

Singapore

UK

0

0.5

1.0

1.5

2.0

2.5

1980 1985 1990 1995 2000 2005 2010

Singapore

UK

Singapore’s productivity growth was associated with FDI, export and R&D growth

* 10-year rolling average

Exports

% GDP, excluding tariffs

R&D

% GDP, all R&D

Productivity growth

Change in real GDP per employed worker, % p.a.*

FDI

Total stock inward FDI, % GDP

0

50

100

150

200

1980 1985 1990 1995 2000 2005 2010

Singapore

UK

SOURCE: WMM / Global Insight (GDP, exports, productivity); OECD (R&D expenditure); IMF

| 15

Singapore’s success is built on strategic planning and the creation of a business-friendly environment that enabled FDI-driven growth

Rigorous policy planning

Creation of a business-friendly environment inc.

low taxation

▪ Long-term analysis and planning for direction of economic policy carried out by MTI, economic reviews led to re-orientation (e.g. focus on PC and disk drives in 80s post oil crisis)

▪ Dedicated planning unit in the EDB with ~10 employees in Strategic Planning and Knowledge and 60 in Planning and Policies

▪ EDB Annual reviews help to bring together market intelligence and trends, identify focus sectors and areas and re-allocate resources accordingly

▪ Strategic clarity that FDI matters for growth as Singapore’s lack of natural resources and small insular position constrained endogenous wealth creation

▪ EDB “makes things happen” to attract FDI, e.g. set-up of university courses, infrastructure investment

▪ Strong support by leadership to attract investors - Lee Kuan Yew used to gather CEOs of potential investors to reassure about doubts and assert commitment

▪ Singapore comes top in the World Bank’s Ease of doing business rankings 2007 and 2008▪ Eliminating unnecessary red tape is constant government concern. For example, businesses can

submit suggestions online to Pro Enterprise Panel to cut red tape (e.g. outdated regulations)▪ Effort to create a pro-businesses environment: EnterpriseOne Portal which centralises all relevant

information, e-services, walk-in centers of government agencies

Prioritisation of FDI

Culture of excellence

Government agencies as

efficient one stop shops

▪ Talent recruitment – high performing students and graduated are attracted to public sector▪ Talent retention – incentives through performance-based pay (15-50% performance-dependent

bonus) and fast promotions▪ Talent development – emphasis on functional and managerial training. Early on-job responsibilities

including client relationships

▪ Public services mainly provided through government agencies (e.g. EDB ~500 employees, IE ~370 employees vs. 200 employees in the MTI) which are operated similarly to private entities

▪ Government agencies (EDB, Spring, IE) set up as “one-stop-shops” where all customer needs can be addressed (capital, capability-building, advisory services, market intelligence)

▪ Customer services centre for initial point of contact


| 16

Four major agencies drive Singapore’s development, lead roles are taken by the EDB and IE Singapore

ROLE▪ Key government agency in

charge of attracting FDI and creation of favourable business environment

▪ EDBI is Investment arm investing in new industries

▪ Government agency▪ One-stop-shop for foreign

investors▪ 500 employees of which ~ 100

in one of 19 international offices

STATUS▪ Government▪ 2008 Expenditure: USD 400m

▪ Promotion of exports of Singapore-based enterprises

▪ Financing options and capability building focus (skill-building)

▪ Government agency▪ One-stop-shop for firms

seeking to export▪ ~500 employees of which ~50

in 30 offices abroad

▪ Government▪ 2008 Expenditure: USD 117m▪ Payment by companies for

selected customised services

▪ Agency supporting SMEs and start-ups with overall mission to “Enable Enterprises” and create a competitive SME sector through financing

▪ Skill building

▪ Government agency▪ ~370 employees

▪ Government▪ 2008 Expenditure: USD 96m ▪ Payment by companies for


▪ Agency for Science, Technology and Research in charge of promotion of research and innovation

▪ Focus on life science and engineering/IT

▪ Government agency▪ ~ 150 employees

▪ Government▪ 2008 Expenditure: USD 710m▪ Payment by companies for


FUNDING

▪ Online information portal serving the business community by centralising all relevant information to start, sustain and grow a business

▪ SPRING (Government agency) in collaboration with 44 partner agencies involved in the Enterprise One project

▪ Government

SOURCE: EDB, MTI, Spring, A*Star

| 17

The EDB is a high-performing, customer-focussed government agency delivering significant benefits to Singapore’s economy

SOURCE: EDB, expert interviews

SCOPE ANDAPPROACH

PROGRAMMES AND POLICIES

ORGANISATION AND CULTURE

▪ 500 employees, budget of 410m USD (0.3% of GDP) of which $330m is spent on grants▪ Provides input to other government agencies on how to make Singapore an attractive business location -

has led Singapore’s to be first in ease of doing business worldwide (World Bank)▪ ~15% of staff located in 19 international offices which develop mainly contacts with new potential

investors ▪ Headquarter staff manages relationships with foreign and domestic companies within a “cluster”▪ Annual strategic reviews of targeted sectors and companies serve to re-focus efforts and identify

opportunities based on existing strengths.

▪ EDB recruitment targeted at high potentials – scholarships are offered to high performing high school students to study abroad and then return to work for the EDB

▪ Incentives for EDB employees are significant: financial incentives (15-50% of salary) and fast promotions▪ The organisation is focused around seven vales: Care, Integrity, Team, Imagination, Courage, Excellence

and Nation - losing a deal to another country is seen as shameful▪ Junior staff get responsibilities for managing day-to-day client relationships early on and account directors

own client relationships and are empowered to create flexible deals to meet investor needs and to start deals moving while formal processes and approvals get completed

▪ Focus on training programmes. EDB employees learn financial and other functional skills as well as managerial skills in workshops on creativity, teamwork and risk-taking

▪ Customised assistance and incentives schemes are provided throughout the investment process– Working in Singapore and registering business: easy access to visas, step-by-step guides – Business location: List of science parks provided, EDB staff will look for suitable land– Setting up the business - Financial incentives and assistance schemes* range from assistance in

manpower development, technological/equipment upgrading, to R&D, intellectual property and industry development.

– Recruitment and Staff – EDB funds on the job training and overseas training of Singaporeans in MNCs– Attractive taxation policy: 17% corporate income tax, capital gains not taxed, GST 7%– Conditional grants: payments against milestones, if conditions not met re-negotiation or claw-back

* Detail on different schemes available in Back-Up

| 18

The organisation of the Economic Development Board is aligned with its key tasks and emphasizes importance of planning

SOURCE: EDB, expert interviews

EDB Board

International Operations

Cluster Development

Enterprise Eco-system and

Planning

Corporate Services

International Advisory Council

▪ Enterprise Ecosystem

▪ Incubation Unit▪ Intellectual Property▪ International Policies▪ Planning▪ Resource

Development

▪ Business Knowledge Group

▪ Client Services▪ Finance &

Administration▪ Human Resources▪ Information Systems▪ Legal▪ Marketing

Communications▪ Organisation

Excellence

▪ 4 Executive Directors lead division with area responsibility

▪ 19 international offices with ~ 100 EDB employees

▪ Senior executives from MNCs advising EDB (e.g. COO of P&G, CEO of 3M)

▪ Development of sector clusters of local firms and foreign investors in Singapore

EDBI

▪ Independent investment arm created in 1991

▪ Invests in companies in new strategic industries (over 250 to date)

Clear dedicated support functions (Admin, HR, CIO) account for ~40

employees but additional support staff is probably within divisions

| 19

Structure of the EDB Board brings together international private sector expertise and public sector leadership

Cha

irmen

Mem

bers

Name Job/Background

SOURCE: EDB, Expert interviews

Lim Siong Guan EDB Chairman (full time), former Permanent Secretary to the Primer Minister

Leo Yip Seng Cheong EDB Deputy Chair (full time)

Ashwin Muthiah Chairman Proteus Petrochemicals Pte Ltd.Beh Swan Gin Managing Director, EDBDeborah Henretta Group President Asia, Procter&Gamble

Erik Peyrer VP, Business Development APME

Francois Guibert Corporate CP, CEO Asia/Pac ST MicroelectronicsGautam Banerjee Exec. Chairman, PWCGeorge Goh Executive Chairman, MeibanGroup

Goh Chye Boon Deputy Secretary Ministry of TradeIain John Lo VP New BD Ventures, ShellJonathan Asherson Regional Director SE Asia, Rolls RoyceJon Niermann President Asia, Electronic ArtsLui Pao Chuen Advisor National Research FoundationShunsuke Ohtsu Chief Executive Asia and Chair, Hitachi Asia

▪ Mixed group of private and public sector professionals

▪ Executives from foreign companies

▪ Singaporians and non-Singaporians

▪ Role is to give strategic guidance, external perspective, industry expertise

Board members and roles

| 20

Singapore’s financial assistance and other incentive schemes

SOURCE: EDB Website

Examples Purpose of the schemes

Equipment and Technology

▪ Approved Foreign Loan Incentive (AFL)▪ Investment Allowance (IA)

▪ AFL provides full/partial exemption on interest payments to non-residents

▪ IA provides capital allowance for new equipment on the condition that it introduces new technology or contributes to industry efficiency

▪ Investors pay lower taxes in Singapore; reduces tax liability

Business Development

▪ Development Expansion Incentive (DEI)▪ Script to Screen (S2S)

▪ DEI provides preferential corporate tax rates▪ S2S provides grants to support the

development of creative and technical talents in content production

▪ Reduces tax liability/Assist companies to move towards higher value-added business activities

Innovation, R&D and Intellectual Property

▪ Approved Royalties Incentive▪ Further Deduction for R&D Expenses

(S14E)▪ Innovation Development Scheme ▪ Research Incentive Scheme for Companies▪ Technology for Enterprise Capability

Upgrading▪ Writing Down Allowance for Cost Sharing

Agreement

▪ Tax incentives and grants are given to promote R&D capability (technical + manpower)

▪ Technology transfer must take place▪ R&D should be conducted in Singapore

(S14E)▪ In many cases, schemes are open to

companies with at least 30% local equity or ones registered in Singapore

▪ Non-resident recipients of payments pay lower taxes

▪ Meets the cost of R&D; assists companies in technology and knowhow transfers

▪ Helps local enterprises build in-house R&D capabilities

Benefits

Headquarters Management

▪ Regional/International Headquarters Award (RHQ/IHQ)

▪ Encourage companies to use Singapore as a base

▪ Customised package of tax incentives or grants are provided

▪ Customised support for qualifying projects

Industry Development

▪ Development Expansion Incentive▪ Initiatives in New Technology▪ Local Industry Upgrading Programme▪ Locally-based Enterprise Advancement

Programme▪ Pioneer Incentive▪ Venture Capital Fund Incentive

▪ Activities must lead to the development or introduction of new capabilities for companies or industry

▪ Projects must generate significant economic benefits for Singapore

▪ Reduces tax liability▪ Helps meet costs of technology transfer,

introduction of new capabilities, manpower and operating costs etc

▪ Foster closer ties with industry contacts

Local Govern-ment Incentives

▪ Programmes cater to the needs of startup, local enterprises, global companies with large-scale needs such as the set up of regional headquarters in Singapore

▪ Help businesses improve efficiency, strengthen capabilities and explore new opportunities in their business

▪ Loans, grants, tax incentives, equity financing and non-financial assistance etc

| 21

International Enterprise offers a one-stop-shop serviceto promote exports

SCOPE ANDAPPROACH



▪ ~ 370 employees of which ~50 in the 30 offices worldwide (IE employee sometimes in embassy)▪ Objective to provide a “one-stop-shop” services to all Singapore-based companies seeking to export▪ IE Advisory Centre as a point of contact for businesses serves and as shop where firms get generic

information (general enquiries, access to databases) and customised services▪ Important information and range of services can be accessed online via Enterprise One Portal▪ Customised services are available to all companies (no minimum size or export potential)

▪ 35,000 companies benefited from IE Singapore services in 2007 across all activities (+60% vs. the previous year)

▪ Activities of IE are within three areas: CONNECTIONS, CAPABILITIES and CAPITAL▪ CONNECTIONS:

– Organisation of Singapore’s participation in major trade fairs in key sectors including 50-70% subsidy to Trade Associations’ costs (all companies eligible, subject to approval by involved trade association)

– Facilitation of search for export partners base through online platform BuySingapore which automatically matches exporters and buyers across over 100,000 business members, basic membership is free but enhanced membership has annual subscription fee (250 SD)

▪ COMPETENCY: – Development of managerial capabilities of business to operate abroad (e.g. Scholarships for

international management courses abroad for Singaporean executives)– Identification of selected areas where companies need help (Manpower, appropriate branding and

design for international expansion, intellectual property)▪ CAPITAL:

– Provides top up trade insurance and subsidies for firms purchasing commercial trade insurancee– Subsidised credit for purchases of overseas facilities– Subsidised loan insurance

▪ Most services are provided for free to companies (IE Concierge service, use of databases and portals (BuySingapore), seminars but payment for customised services

▪ Competitive pay levels for employees▪ 5-year career plan and attractive incentive schemes▪ Design of training roadmaps ▪ Participation in Singapore-wide competitions for service-level quality of agencies/public institutions

SOURCE: IE Singapore

| 22

Enterprise One is the online portal for Singapore’s business community

CONCEPT

CONTENT

OPERATION AND MANAGEMENT

▪ Online-Portal launched in 2006 which centralises information required by businesses▪ Aims to help local enterprises find the answers they need to start, sustain and grow their businesses▪ Points towards available e-services and relevant government agencies▪ 44 participating partners (government agencies and Ministries)

Key features of the online portal▪ Industry Guides: Topics are grouped by industries and organised in sections so that information relevant

to business sector is easy to find.▪ Quick Find (Online Interactive Tools) for

– Funding options customised for one’s business – Government assistance based on needs – Market statistics released by Government agencies – Business-related Government e-Services – Licences and permits based on relevant business needs

▪ Frequently Asked Questions (FAQs)▪ How-To Guides: More than 150 How-To Guides, Checklists and Flowcharts to make it easier to apply for

government assistance schemes, licences, permits, approvals and other registrations.▪ Case Stories▪ RSS Feed

▪ Managed by the government agency SPRING in close conjunction with 44 partners (including EDB, A*STAR, SPRING, MTI)

▪ Available 24/7▪ Phone hotline offers additional support▪ Constantly updated FAQ database

SOURCE: SPRING SINGAPORE, Enterprise One Portal

| 23

Enterprise One is the online portal for Singapore’s business community

SOURCE: Enterprise One

Single web presence across all agencies and government departments

Sophisticated online help system and single helpdesk contact point

Complete listing of policies and incentives (over 70 schemes)

Questionnaire to identify government schemes applicable to your business

| 24

Potential lessons from Singapore for Northern Ireland

▪ Foresight in economic policy making and long term approach of EDB in measuring FDI benefits

▪ Relentless focus on creation of a business-friendly environment through “One-stop-shop” government agencies (EDB, International Enterprise, Spring), e-services and online portal for businesses

▪ Performance-oriented agency attracting FDI with incentive schemes for talent recruitment, development and retention based on financial and non-financial incentives


| 25

Singapore

Republic of Ireland

Finland

Costa Rica*

Sweden

Oregon

* Originally filtered out on income

Success founded in establishing pro-business environment and aggressively pursuing FDI through a high performance agency

Built R&D capability around Nokia as an anchor and successfully developed

Deregulation and creation of pro-business environment to drive competition and productivity

Built on anchor firms and proximity to West Coast to create hot spot for entrepreneurial spinoffs


Targeted approach to capturing FDI through independent marketing agency

Built on low tax rate with flexible approach to attract FDI, bring in anchor investors and move up the value chain

These are the six cases that have been examined in detail

| 26

Contents




2

| 27

Introduction to the Republic of Ireland


▪ Small country on edge of Europe▪ Population 4 million ▪ Total land area 82,000km2

▪ Member of the EEC/EU since 1973▪ Member of single currency zone (using

the Euro) since 1999▪ Youngest population in Europe

▪ GDP per capita trebled between 1985 and 2008

▪ Strong productivity growth of 3.2% between 1990 and 2007, as opposed to 1.3% in OECD

▪ Rapid FDI growth, of 10x EU 15 average, resulting in 4x UK FDI level as % of GDP by 2003

▪ Attracted major global multi-nationals in pharmaceuticals and IT, including Intel, Microsoft, Google, Pfizer and Wyeth


| 28

Why are we interested in Ireland?

Applicability?Relevance?Small?▪ 2007 GDP 380% of NI

Open?▪ 2007 Exports 80% of GDP

Developed?▪ 2007 GDP per capita

140% of NI

Successful?▪ Achieved 3.2%

productivity growth from 1990-2007 compared to UK average of 2.0%

Aspects NI could learn from▪ Long term focus on targeting anchor investors▪ FDI-driven growth performance▪ Entrepreneurial as opposed to compliance

oriented agency

Aspects NI is unlikely to learn from▪ Ability to use corporate tax rate to encourage

inward investment and establishment of profit centres


| 29

Early on, the Republic of Ireland succeeded in attracting anchor companies

1985 1995 2005

1985: Microsoft founds first European base in Ireland 1989: Intel establishes first operations in Ireland – both after many years’ cultivation as IDA’s policies became more focussed on key targets

1994: Enterprise Ireland spun off from IDA to increase focus on developing indigenous firms

1992: Culliton report published encouraging increased focus on areas increasing productivity, reduced reliance on grants and a bringing together of multiple factors/institutions across the economy (e.g. role of education, infrastructure)

2003: 12.5% corporate tax rate established on universal basis

2000: Technology Foresight fund and Science Foundation Ireland created giving €646m over five years to R&D

1998-1991Creation of “Programmes for Advanced Technology” to support key areas of R&D through partnership between government, business and universities

1999: Euro established including RoI

2003: Google invest in RoI

1987: Ratification of the Single European Act to join the Single Market


2000

1973: Ireland joings the European Economic Community

1970

1970:Pfizer sets up its first manufacturing plant in Cork harbour

| 30

Productivity

The Republic of Ireland’s productivity growth has been driven by FDI


020406080

100120

1980 1985 1990 1995 2000 2005 2010

RoI

UK

0

1

2

3

4

5

1980 1985 1990 1995 2000 2005 2010

RoI

UK

0

0.5

1.0

1.5

2.0

2.5

1980 1985 1990 1995 2000 2005 2010

RoIUK

Exports

R&D Productivity growth

FDI

0

50

100

150

1980 1985 1990 1995 2000 2005 2010

RoI

UK


% GDP, all R&D Change in real GDP per employed worker, % p.a.*



| 31

The Republic of Ireland was successful in attracting FDI combining a customer-oriented agency with attractive financial incentives

Moved early on FDI and focussed on

attracting key anchors

Overall economic system aligned to

attract the right investment

Dedicated, dynamic investment agency

▪ Ireland focussed early on FDI and maintained this focus despite growing calls to provide more support to indigenous firms, which meant it was able to attract key anchor investors early on (Intel, Microsoft) and establish itself in the FDI market

▪ Key anchor investors were pursued over very long periods (10 years plus) and the IDA dedicated high levels of resource to attracting them (e.g. interviewing 300 Irish semiconductor engineers working abroad within 5 weeks for Intel)

▪ Long term success of the Republic as a destination for FDI has required an increasing focus on R&D support and building collaborative research projects (for example with government support of up to 80% for R&D expenditure carried out in partnership)

▪ Skills have also been aligned to investor needs, with colleges creating new courses specifically to meet local investors’ skills gaps

▪ The IDA, despite being a government agency, has developed its own, customer-focussed culture based on pride in attracting companies to Ireland and respect from across the political system

▪ Culture is focussed on “seizing opportunities” and “creating jobs” which has helped gain political alignment

▪ The IDA’s customer-focussed culture and risk-taking of employees has been enforced by staff being measured based on outcomes of work rather than targets

▪ Technologists have been recruited to enhance capability to attract R&D intensive firms

Low corporation tax combined with EU

membership

▪ The Republic of Ireland was able to build on its strength as an EU member with low corporation tax rate to encourage MNCs to establish their European base in the Republic and to book profits there


| 32

Institutions in the Republic of Ireland

GOAL

▪ Attracting and embedding FDI in the Republic of Ireland

▪ 2007 turnover of €180m,▪ Of this, €80m was given to

firms in grant funding

▪ Government agency with considerable autonomy

▪ 16 international offices situated across 4 continents

▪ 10 offices across the Republic

▪ National advisory body for Enterprise and Science

▪ -▪ Policy advisory body in the Department of Enterprise, Trade and Employment

▪ Sits at heart of national-level planning of enterprise and science strategy

▪ Promoting the indigenous business sector, with a particular focus on exporting firms

▪ 2007 turnover of around €270m, of which €150m was spent on financial support to industry

▪ Government agency with▪ 31 international offices in 24

countries, with support services provided in another 39 countries

▪ Attracting and supporting world class scientific researchers in the Republic of Ireland

▪ Awarded €157m in grants in 2007

▪ Public organisation responsible for distributing research grants to recruit and retain research groups

STATUS FUNDING


| 33

The IDA helps attract investors to the Republic of Ireland

SCOPE ANDAPPROACH



▪ Created in 1949, state-sponsored agency that is funded through a government grant under the National Development Plan

▪ Focused entirely on attracting and embedding FDI to the Republic of Ireland (incl. marketing the Shannon Free Zone abroad)

▪ 2007 turnover of €180m, of which around €80m was given to firms in grant funding▪ 16 international offices situated across the US, Europe, Asia and Australia, 10 offices across the Republic – 48% of

projects in 2007 came from US companies▪ Initially the IDA initially was responsible for both the attraction of foreign inward investment and the development of

indigenous firms; the spin-off of Enterprise Ireland from the IDA in 1994 was aimed at separating the development of indigenous firms (through Enterprise Ireland) from FDI activities. The separation was driven by a need for greater transparency of the different performance of the two sides and a perceived need for greater focus on indigenous firms

▪ In 2007 26% of projects were with new clients▪ Identifies and builds long-term relationships with firms it wishes to attract to the Republic, and maintains an ongoing

dialogue with companies. Opportunity-driven in its targeting▪ Builds on incentives including:

– 12.5% corporation tax rate– 25% R&D tax credit applicable to R&D and buildings where at least 35% of activity is R&D– Grants to R&D (52%), capital (15%), employment (28%) and training (1%) that are capped overall on an

amount per job and amount per unit capital basis▪ Is responsive to the needs of target firms. To “seal the deal” with Intel for example, the IDA interviewed 300 Irish

engineers within 5 weeks who were living abroad and presented Intel a list of 85 qualified candidates▪ Follows a rigorous evaluation process for investment, taking into account cash flows to the state as well as broader

economic benefits of the project. Algorithm updated constantly (e.g. in times of full employment, job creation of project is less important).

▪ Purchases and develops Business & Technology Parks with (e.g.) broadband telecommunications network, on site childcare facility, new office & production buildings

▪ Lobbies other government organisations on policies to support its mission, such as the maintenance of a low rate of corporation tax

▪ Highly entrepreneurial culture, with a pragmatic focus on “getting things done” within the overall grants cap rather than adhering to strict processes and rule

▪ Staff are incentivised through strong mission and sense of purpose and through recognition of past success of IDA ▪ Staff performance is measured on results rather than fix targets giving them more autonomy (no bonuses paid,

public sector pay)


| 34

Structure of the IDA

SOURCE: IDA

Business Development

Marketing~50 heads

Influencing agenda, planning and regions~90 heads

Corp Services

CEO

▪ Structured by division, “hub of operations”, responsible for new and existing investors

▪ Each division also paired with a region to ensure close connection

▪ Staff lead identification of priority sectors/firms, negotiations with investors

Marketing, Personnel and Org Dev

▪ Structured by region of the world

▪ Staff make presentations, attend conferences, liaise with other Irish agencies overseas, monitor competitors

▪ Works in partnership with skills development and R&D organisations to meet investor needs

▪ Structured by region of Ireland

▪ Staff refine regional messages, work with infrastructure providers, represent IDA on regional bodies

▪ Includes property department that buys and sells property

▪ Also contains Planning & Ecosystem division that develops IDA strategy

▪ Handles communications, legal, IT, accounts etc

As of 2006

▪ Total ~300 staff

| 35

Enterprise Ireland is responsible for supportingindigenous firms

SCOPE ANDAPPROACH


▪ Enterprise Ireland is the government agency responsible for the development and promotion of the indigenous business sector

▪ 31 international offices in 24 countries, with support services provided in a further 39 countries▪ 10 offices across Ireland▪ 2007 turnover of around €270m, of which €150m was spent on financial support to industry

▪ Increasing sales from exports (key priority)– Provides firms with customised support,

▫ Helping new exporters validate market opportunities and secure first sale reference customers (EI initiated 7,724 client-buyer meetings in 2007, 405 large sales contracts signed with EI support)

▫ Supporting clients in establishing an in-market presence and providing advice on acquisition and partnering strategies (83 international mentors appointed to provide expertise and advice to clients)

– Support is primarily practical (export credit guarantees are provided privately by Irish Exporters Association) with the exception of the Going Global Fund launched in 2008– grants up to €50,000 to fund 50% of expansion costs given out competitively

▪ Investing in research and innovation through multiple grants programmes including:– R&D fund supplies grants of up to €450,000 to fund up to 45% (depending on firm size) of R&D expenditure,

with an additional 5% funding available for collaborative projects– Innovation Partnership initiative, funding 80% of costs for collaborative research projects led by HE institutions– Pilot funding for small R&D projects from firms who have not previously undertaken R&D

▪ Competing through productivity– Training grants to support (e.g.) supply chain management training

▪ Encouraging foreign firms to use indigenous firms as suppliers (use of local suppliers is never condition for FDI investment deals, e.g. through grant conditionalities)


| 36

Potential implications for Northern Ireland

▪ Illustrates the potential benefits of a long term focus on FDI and attracting major anchor investors

▪ Provides a possible institutional model in the IDA – closely linked to central government but with a sales-oriented culture and flexible mindset

▪ Demonstrates some success in government R&D expenditure driving R&D excellence in the economy


| 37

Contents




2

| 38

Introduction to Costa Rica


▪ Central American country with borders to Panama and Nicaragua, coastlines with Pacific and Carribean sea

▪ Capital: San Jose▪ Population 4.1m▪ Land area 51,100 km2 ▪ Official language: Spanish▪ Constitutional democracy since 1953▪ 4th country in Latin America based on the Human

Development Index but 16% of population living below poverty line

▪ Natural resources: coffee, bananas and other tropical plants

▪ First country in the world to abolish its army▪ President: Oscar Arias 1986-1990 and 2006-

present (Nobel Peace Prize winner)

▪ Productivity grew by 2.5% between 1990 and 2000, as opposed to 1.8% OECD average

▪ Growing higher value-add sector (high-tech, electronics) through attraction of FDI. 51 foreign companies operate in electronics sector in 2006

▪ Increasing enrolment of students in engineering and science degrees

▪ Attracted major investors including Intel, GlaxoSmithKline, Procter & Gamble and Amazon to Costa Rica

▪ Development of local supplier base and clusters around foreign companies through government programs


http://images.google.com/imgres?imgurl=http://aceproject.org/regions-en/ife/CR/CR_flag/image&imgrefurl=http://aceproject.org/regions-en/ife/CR/CR_flag/image_view_fullscreen&usg=__XAw5UGOyFJfF5F41o4F4K3OGXf8=&h=240&w=360&sz=8&hl=en&start=1&um=1&tbnid=sAkZSY1NnPO5_M:&tbnh=81&tbnw=121&prev=/images%3Fq%3Dcosta%2Brica%2Bflag%26hl%3Den%26sa%3DN%26um%3D1

| 39

Why are we interested in Costa Rica?

Applicability?Relevance?

Small?▪ 2007 GDP 110% of NI


Developed?▪ 2007 GDP per capita 46%

of NI



~

Aspects NI could learn from▪ Focus of a small agency on selected sectors and

priority companies where Costa Rica is competitive to attract FDI

▪ Positive externalities on domestic economy by limited number of FDI investments

Aspects NI is unlikely to learn from▪ Use of special export processing zones as

financial incentives to attract FDI▪ Workforce at very low cost▪ Relatively unproductive labour force in sectors

with no/low FDI



| 40

Costa Rica’s strategy to attract higher value FDI was supported by strong leadership

1980s 2000s

1994 – Election of President Figueres gives new momentum to Costa Rica’s economic policy. Priority is shifted towards higher value add economic sector while deprioritising investments seeking low-cost manufacturing.

1990s

1982 – Creation of CINDE as a non-profit, non-governmental agency by businessmen in collaboration with US-Aid to attract foreign investment to Costa Rica. 1984 – government acknowledges CINDE to be of public interest. Initial focus on a broad range of sectors

1996 – FIAS report on competitiveness of Costa Rican electronics sector recommends pursuing FDI in sub-sectors requiring relatively high inputs of skilled labour: power technologies, PC cards and surface mount technologies, system integration technologies and call centres (to the electronics industry).

Early 1980s – Costa Rica creates several Export Processing Zones (Zonas Francas) where importers can import inputs free of duties and are exempted of tax for 8-12 years

Early 1990s – CINDE loses part of US-Aid funding and has to focus efforts (higher value add)1995 – Active pursuit of Intel investment and involvement or President. Creation of “Intel task force”.

2000 Creation of PROVEE program aimed at developing local supplier base for foreign companies and creating linkages in the economy. 2000 - Creation of R&D matching grants system Fondo de Recursos Concursables to develop Costa Rica’s focus on knowledge economy

1997 – 300m Intel Investment is secured

1996 – Creation of Procomer as government agency aimed at promoting exports

. Today - Assessment of HC capabilities and existing private and public research in Costa Rica on which R&D intensive FDI can be built. Led by CINDE with other institutions.



| 41

Costa Rica’s performance was driven by rapid growth in FDI and exports

* 10-year rolling average** Recent fall in productivity may be due to falling agricultural productivity and dependence on performance of US economy*** Gaps in Costa Rican R&D Data sourced from WDI

Exports

Productivity growth

FDI

0

1020

3040

5060

1980 1985 1990 1995 2000 2005 2010

Costa Rica

UK

0102030405060

1980 1985 1990 1995 2000 2005 2010

Costa Rica

UK

-0.5

0

0.5

1.0

1.5

2.0

2.5

3.0

1980 1985 1990 1995 2000 2005 2010

Costa RicaUK




SOURCE: WMM / Global Insight (GDP, exports, productivity); OECD (R&D expenditure); IMF, WDI

0

0.5

1.0

1.5

2.0

1996 1998 2000 2002 2004 2006

Costa Rica

UK

R&D***

% GDP, all R&D


| 42

What were the key success factors for Costa Rica?

Identifying opportunities based on existing strengths

Agency focus on a small set of sectors

Strong leadership

▪ When losing competitiveness as a low cost manufacturer in the early 1990s Costa Rica made the conscious effort to understand its existing strengths and identify development opportunities

▪ The FIAS study was commissioned to assess competitiveness and opportunities in the electronics sector, CINDE carried out significant market intelligence and identified market trends

▪ Focus on building on existing strengths – Anchor companies: Use of Motorola, Intel for high tech sector, Baxter for medical devices

for “reference selling”: CINDE refers to large companies on its website and provides details on “investment story”, gives possibility to talk to large investors in country

– Existing human capital: Use of relatively skilled labour to build electronics/high tech sector; CINDE assesses available current and future capital and skill levels

– Leverage quality of life: Marketing of political stability, democracy quality of life and proximity to the US

▪ CINDE adapted its 1997 strategy on recommendations of the FIAS study and its internal market intelligence and focussed on selected sub-sectors– Services (Shared services, Advertising & Marketing, Software, Design) – Advanced Manufacturing (Telecommunications, Electric Assemblies, Electronic

Components, Semiconductors, Engineering and Software, Consumer Electronics, Engineering and PCB Repair)

– Medical devices▪ Strong focus: 29 out of 30 companies that invested in Costa Rica with CINDE support

were in these sectors, 99% of employment created with CINDE in these sectors▪ President Figueres shifts focus to higher value add sector priority of economic policy▪ Intel investment: When CINDE’s focus allows Costa Rica to be on Intel’s long list, attracting

Intel to Costa Rica becomes a government priority– Creation of an Intel task force includes Minister of Foreign Trade– President meets Intel team in person for 3 hours to discuss the project

▪ Today: CINDE has Minister of Trade or President attend important meetings 3-5 times per year. Requests for “VIP” are informal and Minister and President are highly responsive



| 43

Costa Rica has a set of institutions to support development

SOURCE: CINDE, Procomer, Literature review

ROLE STATUS

▪ Attracting investment to Costa Rica

▪ Policy advocacy to create a business friendly environment for investors

▪ Independent non profit, non-government agency

▪ 30 employees, one international office in New York

▪ Private. Originally from USAID, now partly from CRUSA foundation

▪ Budget 2.2m USD▪ Services provided for free

▪ Trade promotion and supporting exporting firms

▪ Non governmental public agency, linked to the Foreign Trade Ministry (COMEX)

▪ 5 offices in regions, 5 offices at major customs posts, 8 offices abroad

▪ Government

▪ Supporting SMEs and encouraging entrepreneurship

▪ Part of Ministry of Economy, Industry and Trade

▪ Government

▪ Supporting technology start-ups and firms with high innovative content

▪ ? Part of Ministry of Economy, Industry and Trade

▪ Government

▪ Financing R&D ▪ Part of Ministry of Science and Technology

▪ Government

FUNDING

CONCIT


http://www.pyme.go.cr/default.aspx

| 44

CINDE is an independent, non-profit organisation

SOURCE: CINDE, Expert Interviews

SCOPE ANDAPPROACH



▪ Two key service areas for potential investors– Information on Costa Rica (free of charge and highly customised)– Preparation of detailed and customised investment agendas

▫ Meetings with service providers, Government organisations, universities, real estate brokers, attorneys, accountants, industrial parks, and office parks. For large companies President of Minister of trade attend whenever possible

▪ Support to foreign companies post-establishment in the country– Policy Advocacy to improve business climate in Costa Rica (CINDE-supported initiatives are training programs for

bilingual workforce, technical training, ease of doing business: improvement in administrative processes)– After-care for businesses: help through establishment process, connect with institutions (universities to secure

human capital in the long run), encourage re-investment (e.g. Procter&Gamble upgraded from a shared service centre to its Business Transformation Centre)

▪ Independent non profit, non-government agency 30 employees International office in New York ▪ Budget: 2.2m USD▪ Focus on promotion of sub-sectors where strong growth is expected: advanced manufacturing, medical devices,

services▪ Constantly develops and refines sector focus. In 2008 orthopaedics and cardiology added as sub-sectors in medical

devices. Aim to reach a mix of stable and volatile industries to improve stability of investments▪ Focus: Targeting of companies based on a list of potential investors (metrics are used to prioritise, based on match with

strategy and investment potential). 50% of presentations are result of cold calls. In 2008 29 out of 30 new investments that had CINDE support and 99% of employment created through these investments were within target sectors.

▪ Trade fairs and investor targeting is limited to identified subsectors▪ Policy advocacy work in collaboration with Presidency to create favourable domestic environment to retain FDI. ▪ After-care: Assistance in establishment process and “after-care” to boos re-investment that is higher up in value chain.▪ Relationship are cultivated “forever” with potential investors

▪ Performance culture created through incentives. Financial incentive package (private sector pay levels) for employees depends on:– Internal evaluation: performance against agreed annual targets– External evaluation: performance assessment by companies served in investment process (detailed survey)

▪ Credibility of institution: Independence, stability and success in attracting FDI isolates CINDE from political pressures but creates strong links to Presidency and Ministry of Trade

▪ Ability to gain leadership support: Minister of Trade and President highly responsive to CINDE’s request to attend investor meetings “We ask them and they come unless they have a major crisis to solve.”

| 45

CINDE – Organisation

SOURCE: CINDE, Expert interview

CINDE Board

Investment promotion department

Investment Intelligence

“After-Care” department

International relations

▪ Policy Advocacy – cooperation with Presidency to improve business climate

▪ Establishment process▪ Inter-institutional

coordination▪ After-care process to

promote re-investment

▪ Contacts with potential investors abroad

▪ Media relations▪ Public relations to

public and private sector (e.g. consultants, research institutes)

▪ Identification of conferences CINDE should attend

▪ Investment promotion activities (targeting, presenting)

▪ Identification of new sectors and niche markets

Status : Private. Independent, recognised of public interest to Costa Rica. Funded by endowment fund.

▪ Analytics and statistics

▪ Response to customised request for potential investors

Head of CINDE is former Minister of

Trade

| 46

PROCOMER provides practical support to exporters

SOURCE: PROCOMER, expert interview

SCOPE ANDAPPROACH


▪ Run as non-governmental public agency linked to the Foreign Trade Ministry COMEX▪ International offices in New York, Miami, Houston, Los Angeles, Mexico, Guatemala, Panama, Puerto

Rico, Dominican Republic, China, Germany, Chile▪ Operates the Free Trade Zones (zones of temporary tax exemption for large investments by exporting

companies requiring $150m in fixed asset investment if physically inside the zone or $2m if physically outside the zone)

▪ Training support to exporting firms– Runs programmes on trade logistics and to improve trade capacity– Set-up of meetings with potential importers (e.g. provides addresses, phone numbers, schedules

meetings) in market of interest▪ Trade promotion for Costa Rica

– Organises participation in trade fairs etc; combining this with training and support for firms, e.g. exporters are offered lectures and fora on specific topics (negotiation, getting to know the market, access standards) one week prior to an event where they will be meeting a group of buyers

– Organises market visits for groups of exporters, with market studies are offered to provide participants with data about the region they will visit in order to plan their negotiation strategies prior to travelling and their subsequent sales follow-up.

▪ Market and trade research– Market research on sectors and products in specific markets (accessible online) for exporters

▪ Logistical support with exporting and investment– An online-portal (SIVUCE) for exporters to provide a “one-stop shop” for export administration and

documentation▪ Manages the 12 Free Trade Zones in Costa Rica in collaboration with COMEX▪ Close collaboration with CINDE on FDI investments in Free Trade Zones

| 47

PROCOMER has recently expanded to include support to suppliers of MNCs through PROVEE

SOURCE: Procomer

SCOPE ANDAPPROACH


▪ PROVEE (Supplier Development Project for High-Technology Multinational Companies)▪ Mission is to facilitate business deals between export companies and those with export potential and

domestic suppliers, thus contributing to enhance value added from Costa Rican industries, as well as the country's global competitiveness.

▪ 186 MNCs and >250 suppliers work through PROVEE▪ Focuses on three sectors:

– Communications & Information Technology / Electrical - Electronics / Metal Mechanics Sector – Medical / Chemical / Pharmaceutical Sector – Agribusiness / Textiles / Other Sector

▪ Business-making– Potential suppliers can register online– PROCOMER checks suitability and quality of suppliers and connects them with MNCs– Introduction of suppliers identified and analysed by Costa Rica Provee. TNCs are given the suppliers' diagnoses

carried out by the Management Office. ▪ After-care

– Issue resolution ▪ Training

– Manufacturing and supply chain training for suppliers▪ Close collaboration with government institutions and CINDE in the PROVEE program, e.g. CINDE

provides a potential investor with a list of qualified local suppliers

| 48

Multiple organisations work to support R&D and enterprise

SOURCE: Government websites

CONICIT

▪ CIE-TEC Enterprise Incubator of the Technology Institute of Costa Rica (in collaboration with the Ministry of Science and Technology). Focus on technology start-ups and firms with high innovative content– Provides management, communication and other training– Access to financing from international sources and national projects (World Bank, Proyecto Mermas,

connected ministries)

▪ PROPYME (administered by CONICIT)– Financing of research to develop new products, technology, processes and patents– 80% of R&D costs covered, non reimbursable– Financing from government budget on demand

▪ FORINVES (funded and administered by CONICIT– Venture fund, non-profit for investment in research and innovation. – Clear eligibility criteria for grants (academic qualification, past achievements, project, link to research

institutions)

▪ DIGEPYME Costa Rica (Support to SMEs) is an entity of the Ministry offering different types of support programs to SMEs, in cooperation with other ministries and with national banks– BN PYMEX program to for exporting SMEs (in cooperation with national development bank). 140

offices in Costa Rica as “one stop shops”▫ Technical assistance and market research, Logistical support, International payment support,

International finance, Loans▪ DIGEPYME Costa Rica (Support to SMEs) (cont.)

– CAAP-IMPROSA in cooperation with Banco Improsa offers financial services to SMEs. Legal, accounting, tax services, help with financial transaction, HR and financial advisory services.

– FODEMIPYME Development fund for SMEs▫ Provides guarantees for SMEs who seek loans▫ Provides credit to SMEs who want to invest in R&D, technical development, research and training


http://www.pyme.go.cr/default.aspx

| 49

What were the key success factors for Costa Rica that Northern Ireland could learn from?

▪ Success of small agency with limited resources in attracting FDI through clear focus and support from senior leadership

▪ Beneficial use of small number of foreign investors (Motorola, Intel) to create benefits in the economy and use of “reference-selling” to attract further investments

▪ Policy focus on embedding FDI through close collaboration of institutions and agencies in creation of a local supplier networks



| 50

Contents




2

| 51

Introduction to Finland


▪ Small country bordering Russia, Norway and Sweden

▪ Population 5.25m, land area 338,000 km2

▪ Languages: Finnish, Swedish, English

▪ Limited natural resources (forests)▪ Member of the EU since 1995▪ Elected president and independent

assembly with legislative powers▪ History of excellence in education and

training▪ GDP/capita of

$36,000 – 20th highest in the world

* On nominal basis

▪ Productivity grew by 2.8% between 1985 and 1995 – more than twice the OECD average

▪ R&D more than trebled in 25 years from 1981 to 2006

▪ Exports doubled from 1991 to 2008


| 52

Why are we interested in Finland?


Applicability?

Relevance?




125% of NI



Aspects NI could learn from▪ Close collaboration between companies,

governments, and universities in all public efforts to promote growth

▪ Government was very responsive to local company needs and looked for targeted support opportunities to embed and retail companies in local economy

▪ Creation of successful clusters through the use of formal mechanisms to encourage co-operation between sectors

Aspects NI is unlikely to learn from▪ Choice of sector and subsequent policies driven

very strongly by presence of Nokia▪ Finnish high-tech growth supported by skilled labour

available from world’s best education system

| 53

Finland used R&D agencies to build a successful cluster around Nokia

1970 1980 1990 2000

Government began to align around a high-tech strategy. The Science & Technology Council, featuring the Prime Minister and several key Ministers, was founded in 1983, to provide central leadership

In 1974, Government-owned Research Institute VTT opened a Laboratory of Electronics in Oulu. This was to become a centre for innovation over the next 3 decades, with significant co-operation between Oulu University, Nokia and other firms, and VTT. A number of key figures in the development of the ICT industry in Finland moved between these three organisations

Oulu development began in 1972 when Nokia was offered a government radio-technology contract on the condition it located in a “peripheral” area of Finland – a key factor in winning the contract was the promise to work alongside the University of Oulu in solving the technical issues

In 1983, Government R&D subsidies were reorganised from the “politically” controlled Ministry of Industry, favouring heavy industry, into a separate agency, TEKES, that allocated subsidies based on the anticipated innovation and growth benefits, and tended to favour high-tech firms. Early on, almost 30% of TEKES’ funding went to Nokia alone

Mid-1990s – Nokia becomes one of the world’s largest mobile telecoms players. By 2004, the firm accounted for 3.5% of Finland’s GDP and almost 25% of its exports

High tech employment in the municipality of Oulu, Northern Finland reaches 18,000 jobs (nearly 10% of the population), an increase from <1,000 high-tech jobs in 1975, making Oulu the fastest growing region in Finland. Oulu voted the “Best place to live in Finland” in 2003 by leading newspaper Helsingin Sanomat

Collapse of Soviet Union contributes to deep recession in 1990 and 1991. Government R&D subsidies through TEKES and other channels credited with saving Nokia from bankruptcy


| 54

Finland’s success has primarily been driven by R&D and export growth


Exports


FDI

0

1020

3040

5060

1980 1985 1990 1995 2000 2005 2010

Finland

UK

00.51.01.52.02.53.03.5

1980 1985 1990 1995 2000 2005 2010

Finland

UK

00.51.01.52.02.53.03.5

1980 1985 1990 1995 2000 2005 2010

FinlandUK

0

10

20

30

40

50

1980 1985 1990 1995 2000 2005 2010

Finland

UK


% GDP, all R&D Change in real GDP per employed worker, % p.a.*



| 55

Central leadership and the intelligent use of R&D subsidies to promote co-operative research were key to Finland’s success

Committed to support Nokia’s

development

Explicit co-operation requirements placed on R&D incentives

Technology policy at heart of national political agenda

Practical support services for exporters

▪ Nokia’s radio-telephone development in Oulu stemmed from the award of a government defence contract. In awarding the contract, the government required Nokia to work closely with Oulu University, encouraging links to be forged

▪ The government continued to support Nokia, in particular during the recession of the early 1990s, when its R&D subsidies of up to 40% of Nokia’s total spend were credited with helping the company avoid bankruptcy

▪ R&D support in Finland is explicitly focussed on driving co-operation, e.g. VTT encourages smooth moves of staff between research and private sector (e.g. Nokia)

▪ Tekes funding prioritises firms who are co-operating with academic institutions▪ Over half of funding goes to companies who are subcontracting research to

academic institutions or SMEs (there is no straight tax incentive for R&D) ▪ The government contract that drew Nokia to Oulu was conditional on their

commitment to work with the university

▪ The Science & Technology Council (now Research and Innovation Council) drives national policy and is led by the Prime Minister, publishing reports every two years on the entire Finnish “national innovation system” and drives policy across departments of education and the economy, with a remit that encompasses education, infrastructure, research and industrial support

▪ Ministry of Employment and the Economy controls Research Institute VTT which has 660 research projects and 2,700 staff in key sectors

▪ Finpro provides consultancy services to clients on a paid for, demand-led basis, with a resulting strongly customer-oriented culture including the aggressive pursuit of feedback and a deep network of 300 staff (mostly overseas)

▪ Finpro’s services are separate from the financial support (export credit guarantees) provided by Finnvera


| 56

Finland has a set of institutions to support development

SOURCE: Expert interviews; “What Next? Finnish ICT Sector and Globalisation”, Steinbock; “the Oulu Phenomenon”, Morris; “Oulu: A Five Star Technology Cluster”; “Finland and Nokia”, HBS case; “Ease of doing business” report, 2008

▪ Support ability of Finnish firms to export

▪ Funding for Finnish R&D

▪ Conducts R&D activity on behalf of government, universities and firms

▪ Investment promotion agency for FDI

GOAL

▪ Private registered association▪ 300+ employees▪ 52 international offices

▪ Government body ▪ 290 employees▪ 6 international offices and 16

locations across Finland

▪ State-owned, non-profit, Research Institute

▪ 2,900 employees (mostly researchers)

▪ N/A

STATUS

▪ Provide central strategy and direction on Finland’s “Technology Policy”

▪ Government council including Prime Minister

▪ 3 full-time secretariat members

▪ Government funded

▪ Spend of €20m▪ 60% government funded, 40%

privately funded▪ 70% of private funding comes

from consultancy fees

▪ Spend of €300m ▪ Government funded

▪ Spend of €250m▪ Funding is 30% commercial,

20% direct from government, 50% from other sources

▪ N/A

FUNDING

http://www.vtt.fi/index.jsp

| 57

Finpro is a fee-charging export promotion organisation

SOURCE: Expert interviews; “What Next? Finnish ICT Sector and Globalisation”, Steinbock; “the Oulu Phenomenon”, Morris; “Oulu: A Five Star Technology Cluster”; “Finland and Nokia”, HBS case; Expert interviews; “Ease of doing business” report, 2008

SCOPE ANDAPPROACH



▪ Run as private registered association with requirement to meet cost recovery targets set by Minister of Finance

▪ Over 300 “internationalisation professionals” located in 52 offices around the world, with two-thirds of personnel based overseas

▪ Government provides support-in-kind, such as:– Locations in Finnish embassies and diplomatic support– Funded graduate interns

▪ Support concentrated in seven broad sectors: Energy and Environment, Life Sciences, Forest, Software and Digital Media, Services, Construction and Logistics, Machinery

▪ “A small economy [such as Finland’s] is like a mouse surrounded by big fat cats. The key to success does not lie in volume or efficiency, but in the ability to move more quickly than the others.”

▪ Consultancy services: provides internationalisation strategies, market research and partner searches and project consultancy report (e.g. helping company prepare a business plan for new market entry)

▪ Support to ~550 firms per year, with ~800 subscribing members Larger firms receive support at cost, SMEs at subsidised rates (~50% discount)

▪ “Charges have brought about better relationships with customers who see them as more professional and customer focussed”. Breakdown of charges:

▫ Annual membership fee of ~£350. Membership grants access to a newsletter and networking events▫ Finpro charges for services that require a tangible investment of time. SME’s pay around £600 for a

senior consultant and around £350 for a market analyst per day. Lareg companies pay £700 - £1,100 per day

▪ Customer oriented culture based on requirement to provide value for money▪ “Finpro is a multicultural and multi-disciplinary team of professional experts. By definition, it is a

complicated set of individuals to manage, requiring plenty of room for professional individualism at the same time as it is vital to glue the team together into an organisational backbone”

▪ Highly competitive salaries to attract talent such as top graduates and many Nokia alumni▪ Feedback culture with 6 monthly performance reviews for all staff (including two-way feedback with

managers) which determine bonus supported by Balance Scorecard around “Client Relationships”, “Services and processes”, “Competence”, “Financial efficiency”

| 58

Tekes is oriented to promoting co-operation through R&D


SCOPE ANDAPPROACH



▪ Government organisation responsible for dispersing R&D funding▪ Employs 290 individuals with 6 international offices, in Silicon Valley, Washington DC, Tokyo, Shanghai,

Beijing and Brussels and 16 locations across Finland▪ Tekes aims to share in R&D risk and accept greater uncertainty than other financial backers▪ Tekes looks to promote co-operation, and explicitly required joint working from various organisations:

– Universities are generally required to show that R&D projects are commercialisable– Companies showing their projects will involve input from other firms or universities are prioritised

▪ Focus around 8 industry areas (Telecommunications and Electronics Industries, Software and Digital Media Industries, Forest and Chemical Industries, Mechanical Engineering Industry, Real Estate and Construction Industries, Energy and Environment Industries, Services and Well-being Industries, Life Science Industries) and 11 research areas

▪ The organisation is shifting its focus to the services sector which now receives ~50% of all funding (although they have a hard time finding applicants!)

▪ Distributed €518m in 2008, across 1983 projects, with an average spend per project around €250,000▪ TEKES provides R&D funding in three forms:

– Grants to companies (~40%)– Loans to companies (~20%)– Grants to universities and research institutes (~40%)

▪ Over 50% of funding is given to small and micro companies

• “Technocratic” culture, detached from political influence (e.g. funding given to telecoms was politically highly unpopular in Tekes early years)

• Very close connections to private sector companies and strong business understanding, which they consider key for being able to be effective in setting priorities

• Prior to the creation of TEKES, Government R&D subsidies were controlled by the Ministry of Industry, which tended to favour heavy industry due to the political benefits. TEKES was explicitly tasked with distributing R&D grants to promote “innovation and economic benefits”

• Tekes closely performance-manages grant and loan recipients, and reports on impact and success rates

| 59

Expenditure by recipient size

100 % = €295m

Tekes’ funding has increased rapidly, as has its focus on services and co-operative projects


Midsized companies35 million euros

Micro companies75 million euros

Largecompanies105 million

euros

Smallcompanies78 millioneuros

0

50100

150200

250

300350

400

83 85 87 89 91 93 95 97 99 01 03 05 07 09

Services

Industry

Other sectors

€million

020406080

100120140160180200

2003 2004 2005 2006 2007 2008

Expenditure by sector

TEKES funding

€million

TEKES funding

Expenditure on collaborative projects

€million

Companies’ sub-contracting fromuniversities andresearch institutes

Large companies’subcontracting fromSMEs

0

20

40

60

80

100

120

98 99 00 01 02 03 04 05 06 07 08

| 60

VTT has been a key agent for promoting co-operation in research


SCOPE ANDAPPROACH


▪ State-owned, non-profit, Research Institute, which conducts R&D activity▪ Institute comes under the control of the Ministry of Employment and the Economy▪ 2008 turnover of €250m▪ Employs around 2,700 staff, mostly as researchers▪ Around 30% of VTT’s revenue comes from commercial activities▪ VTT’s key technology fields are:

– Applied materials– Bio- and chemical processes– Energy– ICT– Industrial systems– Microtechnologies and electronics– Technology in the community– Business research

▪ VTT is currently leading 660 research projects▪ Produced 47,000 publications and 1,200 patents over the past 20 years▪ Following a 2006 strategy review, VTT chose to concentrate resources on a smaller number of major

projects. In 2007, around half of the organisation’s publicly and jointly funded research was carried out in research programmes with a budget of over €3m

▪ VTT acts as a way for people to move smoothly between academic and commercial roles - for example the Mobira software development unit hired multiple people directly from VTT Oulu and then retained VTT to supervise R&D within the university

http://www.vtt.fi/index.jsp

| 61

VTT spends around €250m each year across a range of sectors


Expenditure by industryVTT funding

€million 100% = €240m

0

50

100

150

200

250

20082007200620052004

External funding

Basic governmental funding

Commercial activities jointly funded projects

Self-financed projects

6

1015

18

13

1314

6 13

Machines and vehicles

ICT

Real estate and construction

Energy

Metal refining

Services and logistics

Biotechnology, pharma-ceuticals and food industries

Chemistry and environment

Electronics

Forest industry

| 62

The matrix below is used to ensure research has a clear economic or social use

| 63

What were the key success factors for Finland that Northern Ireland could learn from?

▪ Close collaboration between local business community and the government, with initiative for government support frequently coming from companies themselves.

▪ Strong central leadership from the Science and Technology Council drove alignment around a clear vision – yet government traditionally seen as an enabler and collaborator to local businesses

▪ Government defence contracts were instrumental in bringing an anchor firm, Nokia, to partner with the University of Oulu and form the hub of a high-tech cluster

▪ An independent organisation, TEKES, with close business connections was created to administer R&D funding according to strict, apolitical criteria

▪ Both TEKES and the Government research organisation VTT have a strong focus on promoting co-operation between organisations, and typically make funding contingent on partnership working


| 64

Contents




2

| 65

Introduction to Sweden


▪ Largest Scandinavian country▪ Population of 449,964 km sq▪ GDP of $350 billion ▪ Historically heavily-regulated, with a large

welfare state

▪ Limited natural resources (forests)▪ Member of the EU since 1995▪ Elected president and independent

assembly with legislative powers

▪ History of excellence in education and training

▪ Productivity grew by 2.8% p.a. between 1990 and 2000 – almost twice the OECD average

▪ Private sector productivity growth of 3.3% p.a. was even greater

▪ R&D expenditure of 4.25% of GDP in 2001 second highest in OECD

▪ Exports doubled from 1978 to 2008


| 66

Why are we interested in Sweden?






125% of NI



Aspects NI could learn from▪ Using financial crisis to build alignment around need

for change▪ Specific actions taken by central government to

promote competition▪ Grant-matching requirement of R&D agency drives

co-operation around research and innovation

Aspects NI is unlikely to learn from▪ Highly regulated, non-EU economy was able to

achieve significant benefits by removal of product market regulations and EU accession

~

| 67

Sweden introduced reforms to increase competition in key domestic sectors, resulting in significant productivity growth

1985 1995 2005

1989-91: Sweden experienced deep economic crisis with two successive years of negative growth and a collapse of the financial system, leading to a widespread acceptance that the economic strategy of the 1980s had failed

1993-95: In preparation for Sweden’s 1995 accession to the EU, the country undergoes a significant process of macroeconomic and regulatory harmonisation and reform

2003: Driven by a burgeoning telecoms sector, Swedish R&D expenditure reaches record level of 4.25% of GDP, second only to Israel among OECD countries. Government R&D expenditure, at 1.08% of GDP, is second only to Finland

1991-95: Sweden underwent significant measures to increase competition across the retail, automotive, food processing and retail banking sectors. The ensuing increase in competition in these sectors contributed to substantial productivity growth over the next decade

2001: 7.4km bridge built across Baltic Sea in Øresund, connecting Malmö, Sweden with Copenhagen, Denmark in an attempt to boost regional co-operation. Within 5 years, 17,000 people are commuting between the two cities

2004: Sweden experiences 5th highest productivity growth in OECD over period 1990-2004, at 3.3% p.a


| 68

Sweden’s productivity growth has been driven by growth in R&D , exports and FDI


Productivity

Exports


FDI


% GDP, all R&D

010203040506070

1980 1985 1990 1995 2000 2005 2010

UK

Sweden

010

20

30

4050

60

1980 1985 1990 1995 2000 2005 2010

Sweden

UK

0

1

2

3

4

5

1980 1985 1990 1995 2000 2005 2010

Sweden

UK

-0.50

0.51.01.52.02.53.0

1980 1985 1990 1995 2000 2005 2010

SwedenUK




| 69

Sweden’s high R&D expenditure spurred productivity growth, which further benefited from increased product market competition

Political momentum to push through

change

Reforms to increase competition in

underperforming industries

R&D co-operation driven by matching

requirements

Access to a larger market provided by

EU accession

▪ Sweden experienced a deep economic crisis between 1989 and 1991, which led to a widespread acceptance that the “Swedish social welfare model” of the 1980s had failed

▪ The government was able to capitalise on the crisis and its effects to generate cross-party political support to push through a widespread series of regulatory reforms aimed at increasing competition and preparing the country for accession to the EU

▪ Sweden’s accession to EU-member status in 1995 required the country to harmonise regulation and remove product and labour market barriers, which had the effect of stimulating competition and driving productivity growth

▪ In addition to the policy harmonisation required by EU accession, Sweden introduced a series of policies aimed at increasing competition in the early 1990s

▪ Two sectors in particular were targeted:– Retail, in which a change in zoning laws helped stimulate competition and

productivity growth of 4.5% p.a. from 1990-2003, 3 times that of the OECD – Retail banking, which experienced rapid productivity growth following

government interventions to increase competition

▪ At close to 4%, Sweden has one of the highest rates of R&D expenditure in the world

▪ Distinctive element of Swedish R&D policy is the extent to which it involves co-operation between institutions. This is largely driven by the requirement of the R&D funding association, VINNOVA, that research grants be matched by other organisations – usually firms or universities


| 70

Reforms to increase competition in the retail and retail banking sectors drove significant productivity growth in Sweden

Retail reforms▪ Following the crisis of 1990-93, there was broad acceptance

that product market reforms to increase competition were required to restore economic competitiveness. In the retail sector, this was largely achieved through an easing of municipality planning restrictions. Prior to 1992, planning applications from aspirational market entrants were considered by a committee including representatives of from incumbent firms, and were seldom successful

▪ In 1992, the government changed the municipality guidelines, requiring them to “consider the competitive landscape” when deciding whether or not to award planning permission to new retailers

▪ This led to a significant increase in competition in retail, and a large increase in large, high-productivity out-of-town stores (see chart to right), which resulted in sectoral productivity growth of 4.5% p.a. (OECD 1.5%)

SOURCE: Expert interviews; “Öresundsregionen – the human capital of Scandinavia”; “Territorial review of Öresund, 2003”; “Årets svensk 2007: Sven-Erik Bucht”

▪ The financial sector also experienced significant reforms, including the creation of a government-backed mortgage lender to drive competition. As a result, the market share of the “Big 4” banks fell from 82% to 69%. This resulted in 4.6% p.a. productivity growth in retail banking, as opposed to the OECD average of 3.0%

▪ These developments contributed to Sweden’s high private sector productivity growth of 3.3%, as opposed to OECD average of 2.2% between 1992 and 2004

▪ Sweden was particularly successful at using the economic crisis of the early 1990s to align the country around a clear vision of change, and driving through reforms by citing national interest

Retail banking reforms

| 71

The increase in R&D expenditure has been driven by non-government R&D

Research and Development expenditure

% GDP, all R&D

0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006

Total R&D

Government R&D

SOURCE: WMM / Global Insight (GDP); OECD (R&D expenditure)

| 72

Sweden has a set of institutions to support development

SOURCE: Annual reports; Expert interviews

Swedish Research Council

▪ Funding multi-disciplinary research

▪ Supporting Swedish companies’ international growth

▪ Attracting FDi to Sweden to increase competitiveness and promote growth

GOAL

▪ Supporting innovation by funding R&D

▪ Strengthening research cooperation between academia, companies and the public sector

▪ Government agency that provides funding for scientific research in all disciplines

▪ Jointly owned by government and industry

▪ 508 employees in more than 50 countries, 380 of whom wok abroad

▪ Government agency, with 77% of funding directly from government

▪ 70 employees in 5 international offices

STATUS

▪ Government agency that funds co-operative R&D projects under the Ministry of Industry, Employment and Communication

▪ Distributed grants of SEK 3 billion (€300m) in research support in 2007

▪ 71m USD from mix of government and private funding

▪ Annual budget of SEK 78m (€8m)

FUNDING

▪ 2008 budget of €180m (excluding overheads)

Agency for Innovation Systems

| 73

Vinnova has a remit to increase co-operation amongresearch and innovation organisations

SCOPE ANDAPPROACH



▪ Strong focus on understanding both research and commercial aspects, with over a quarter of employees possessing a PhD


▪ Government agency responsible for disbursing funding for projects to boost innovation▪ Explicit mandate to promote co-operation and strengthen networks between organisations across the public, private

and university sectors – “Moving beyond Public-Private Partnerships to the “Triple Helix” of Public-Private-University Partnerships

▪ 2008 budget of €180m (excluding overheads)▪ All projects are jointly-funded by VINNOVA and other organisations to encourage co-operation▪ 6-pronged approach to innovation:

– Strengthening the functions for commercialisation of research at universities – Development of the institute sector – Support for R&D aiming at radical innovations in SMEs– Supporting international cooperation– Knowledge and research about innovation system– Informing the broader public about research and innovation

▪ Strong focus on commercialisable “needs-driven research”, with a practical application

▪ All projects are jointly-funded by VINNOVA and other organisations to encourage co-operation. Example programmes:

▪ VINNVÄXT - a competition among regions for the development of internationally competitive research and innovation environments in specific growth fields, with a prize of €14-22m over 10 years (50% from VINNOVA, rest from regions)

▪ VINN Excellence Centres – Centres for research collaboration between universities, industry and the public sector. Each awarded €2.2m per year (matched by industry)

▪ Institute Excellence Centres – Top Research Institutes receive project grants from VINNOVA (grants matched by industry)

▪ “Do Research & Grow” grants to SMEs provide small firms with grants of up to €300k (matched by firm) to “Strengthen the company’s capacity to compete on the global market and thereby contribute to the generation of economic growth”. Over two-thirds of recipients co-operate directly with universities

| 74

Distribution of funding, type of institution, 2008

10

20 40 Universities

30Research Institutes

Companies

Others

10

20

20 20

20ICT

10 Services & ITImplementation

Bio-tech &Life Sciences

Manufacturing& Materials

Other

Auto-motive

100% = €180m

Distribution of funding, field of research, 2008

100% = €180m


Vinnova works with Universities, Institutes and private companies with a focus on 5 key sub-sectors

| 75

Invest in Sweden works with domestic and foreign firms to encourage FDI

SCOPE ANDAPPROACH



▪ Government agency responsible for attracting FDI to Sweden to enhance Swedish competitiveness ▪ 70 employees in 6 countries▪ Annual funding of SEK 78m (€8m), 77% of which is direct from government▪ International sales function specialises across industry and services:

– Industry: Automotive, Cleantech, ICT; Life sciences; Packaging – Services: Contact centres, Financial services, Logistics, Retail, Tourism

▪ Regional function works with municipal, county and regional-level organisations in Sweden to provide: Skills and expertise development, After care, Regional cluster development

▪ Support provided along the “investor pathway” (see below)

▪ Three-pronged approach to supporting FDI growth:– Increase awareness of business opportunities in Sweden among foreign firms through presentations,

trade fairs and publications– Work with Swedish organisations in the public and private sectors to increase awareness of FDI

opportunities and equip companies to work with foreign investors– Provide the government and other relevant players with investment analysis of the Swedish and

international economies

▪ High-performing culture; 80% of employees are academics, while most have private sector experience▪ Strong emphasis on client satisfaction, including continued contact with firms after they have invested in

Sweden


| 76

▪ The government used a financial crisis to build alignment behind a reform strategy that involved politically-unpalatable reforms

▪ Sweden introduced a sweeping wave of deregulation in the early 1990s, including relatively minor changes to planning guidelines for municipalities, which substantially increased competition and productivity

▪ By requiring that research grants be matched by other organisations, Sweden’s R&D organisation VINNOVA has contributed to Sweden’s high levels of R&D co-operation between firms, universities and research institutes

What were the key success factors for Sweden that Northern Ireland could learn from?


| 77

Contents




2

| 78

Introduction to Portland, Oregon


▪ Portland is the largest city in Oregon, with 575,000 of the state’s 3.8m residents

▪ The region is renowned for its quality of life and is known as the “Greenest city in the US”

▪ Oregon’s “GDP” of $102 billion is almost 3 times as large as that of Northern Ireland

▪ The state’s economy was historically driven by natural resources such as timber

▪ The region boasts several regional universities, including Portland State University, University of Oregon and Oregon State University

▪ Infrastructure– 3rd largest port on

the West Coast– Airport hosts 14

million passengers/year

▪ Annual productivity growth of 4.1% p.a. since 1990, more than twice the US average rate, drove productivity more than 10% above the US level

▪ High-tech employment increased 4-fold from 1976 to 2000, with over 65,000 people currently employed in the sector (6% of Portland’s labour force)

▪ Vertical integration of the semiconductor industry, with 24 manufacturing sites located in the region, across silicon wafer fabrication, chip production and semiconductor equipment and supplies

▪ Intel opened first branch plant outside of California in the region in 1976


| 79


Comparably small▪ GDP is 2.7x bigger than NI

GDP


146% of NI



Aspects NI could learn from▪ Successful development of large high-tech cluster

despite the absence of a major research University in the region

▪ Portland benefited from its status as a cheaper “second city” located relatively close to larger urban centres, along with its quality of life, to attract high-productivity firms

Aspects NI is unlikely to learn from▪ Long history of electronics firm Tektronix in the

region▪ Very low rate of corporate taxation

Why are we interested in Portland, Oregon?


| 80

In Portland a successful high-tech cluster developed around two firms – Tektronix and Intel

1970 1980 1990 2000

Portland hit hard by national slump of late 1980s. Traditional industries of forestry and farming are particularly affected

Intel opens its first branch plant outside California in Portland in 1976. The silicon chip production plant will become the region’s largest high-tech employer with over 15,000 jobs by 2008

Portland economy traditionally focused on forestry and wood products, with the high-tech sector in 1975 making up less than 1% of the region’s employment

Venture capital boom in mid-1980s drives creation of large wave of start-up firms, with 39 new ventures from 1983-5. Around 50% of these are closely linked to Tektronix and a further 25% have connections with Intel

Region experiences strong productivity growth of 4.5% p.a. between 2000 and 2008, driven by strong performance in high-tech sectors. Computing and electronics manufacturing alone contribute 2/3 of total productivity growth

Large electronics firm Tektronix present in Portland from 1946, with employment peaking at 16,000 in 1981. Sweeping redundancies in early 1980s led to a sudden release of a large number of skilled technicians and engineers into the labour market, and contributed to the wave of start-ups in early 1980s

By 2000, more than 1,000 high-tech firms in Portland employ over 65,000 people in Portland, a 4-fold increase from 1976

Massive growth in the semiconductor industry, which invests over $750 million in the region during the 1990s. Vertical integration as suppliers also locate in the region


| 81

Portland’s rapid productivity growth has been driven by high performance in computing and electronics

Labor productivity

‘000 Chained 2000 US$*

30405060708090

100

1980 1985 1990 1995 2000 2005 2010

PortlandU.S.

1 Labor productivity is measured in real GDP (chained 2000 US$) divided by total employment

Productivity growth

% p.a., 5-year rolling average

0

1

23

4

5

6

1980 1985 1990 1995 2000 2005 2010

Portland

U.S.

Portland Productivity Growth by Industry, 1990 – 1999 CAGR

Portland Productivity Growth by Industry, 2000 – 2008 CAGR

0.8

0.40.3

0.6

3.7

1.2

TotalCompu-ting & Electronics

Real Estate

Trade & Transpor-tation

Profes-sional

0.2

Finance

0.1

Telecoms

0.1

Agri-culture

Other

Cumulative contribution to Productivity Growth, %

0.6

0.6

0.4

4.5

3.3

Internet Services

0.1

Profes-sional Services

0.2

Total

0.3

Finance OtherCompu-ting & Electronics

Trade & Transpor-tation

Publish-ing

Real Estate

0.3

While Oregon has experienced strong growth in recent years, computing & electronics contributed to two-thirds of the city’s productivity growth between 2000 and 2008, demonstrating the importance of the city’s high-tech cluster in its growth

SOURCE: U.S. Bureau of Labor Statistics, U.S. Bureau of Economic Analysis, Moody's Economy.com, MGI Sunrise Database

| 82

In the absence of major universities, Portland capitalised on the presence of large high-tech firms to build a high-tech cluster

Position as an economical, high

quality of life location near other West Coast centres

Spillovers from large R&D intensive firms

Fertile environment for entrepreneurship

▪ Situated less than 100 miles from Seattle, a city with a considerable high-tech presence, Portland was well-positioned to attract ICT workers and researchers looking to experience a better quality of life

▪ Portland was known for its high quality of life and a relatively cheap place to do business. Both these factors encouraged businesses and employees to relocate to Portland

▪ Two large high-tech firms have a long-standing presence in Portland. Tektronix, an early leader in the electronics industry, has had a presence in Portland since 1946 while Intel also opened its first branch plant to be located outside California in Portland in 1976

▪ Both firms conducted large amounts of R&D in the area, with Tektronix in particular renowned for its sprawling and diverse research departments. These firms acted as “surrogate universities” for the area, and attracted a large pool of talent that drove the development of a high-tech cluster, with more than half of the 300 high-tech start-ups in the city between 1970 and 2001 founded by entrepreneurs with strong links to Tektronix or Intel

▪ Both firms were in the electronics/computing sector, which is particularly conducive to the development of clusters due to:– The growth of the sector– The intensity of R&D expenditure in the sector– Low barriers to entry in the spin-off software industry

▪ The business climate in Portland was receptive, with a number of measures in place to support start-ups, including:– Tax breaks on corporate capital investments – Transparent zoning laws– Excellent telecommunication links

▪ Venture capital firms moved to Portland early, providing the necessary networks and finance for entrepreneurs


| 83

Portland has two key institutions to support development

▪ Promoting economic development and urban renewal

GOAL

▪ Promoting quality of life by controlling planning in the Oregon region of the Portland metropolitan zone

▪ Public organisation, with over 200 employees

STATUS

▪ Directly-elected regional body responsible for planning and enhancing quality of life in the Portland metropolitan region

▪ Government-funded, with an annual budget of around $290m

FUNDING

▪ Largely self-funding


http://en.wikipedia.org/wiki/File:Metro-logo.png

| 84

Portland Development Commission focuses on attracting new firms to the area

SCOPE ANDAPPROACH



▪ Publicly-funded local government body with a tri-partite mission:– Attract new businesses to Portland– Support the growth of Portland businesses – Administer urban renewal projects and improve the urban environment in Portland

▪ Over 200 employees

▪ Provides potential investors with detailed information on the attractions of investing in Portland, including benchmarking against other US cities across a range of criteria, including tax rates, skill levels and labour and property costs

▪ Produces monthly briefings for potential investors outlining emerging opportunities within the region▪ Offers consultancy services and information to existing businesses and companies interested in

establishing or relocating facilities in the Portland metropolitan area▪ Provides “gap” funding for local businesses▪ Explicit focus on 5 industries:

– Activewear/Outdoor Gear – Biosciences – Cleantech – Advanced Manufacturing – Software

▪ Strong emphasis on talent and experience, with range of academic, private sector and public sector experience


| 85

Entrepreneurial activity in Portland was driven by the presence of Tektronix and Intel

1

1972

2

1973

1

1974

1

1975

2

1976

7

1977

3

1978

8

1979

4

1980

12

1981

6

1982

16

1983

11

1984

12

1985

9

1986

2

1987

6

1988

12

1989

13

1990

7

1991

10

1992

11

1993

13

1994

14

1995

5

1996

14

1997

16

1998

28

1999

24

2000

12

2001

Others

Intel Family

Tektronix Family

1

1970

2

1971

New high tech start-ups by origin of founder,# p.a.


| 86

Clusters have been crucial in driving the vertical integration of semiconductor firms and the development of the software industry


Semiconductor firms located in region, 2008 Portland software firms, by size and location, 2006

| 87

What were the key success factors for Portland that Northern Ireland could learn from?

▪ Large high-tech firms can act as incubators for talent and innovation, with spill over benefits that may lead to explosive growth of high-tech industry even in the absence of excellent universities

▪ The firms most conducive to the development of start-ups tend to have large, unfocused R&D departments

▪ The city was able to use its relative proximity to major urban centres, along with its relatively cheap labour and high standard of living to attract high-productivity firms and employees


| 88

Contents




2

| 89

We also looked at 5 other cases in less depth, which reinforced some of the lessons

Taiwan

Korea

Estonia

North Carolina

Israel Focus on commercializing military research and creation of VC industry contributed to rapid development of successful high-tech sector

Successfully created long term R&D cluster around universities through public private co-operation and first mover advantage


Rapid creation of a business-friendly environment and government focus on ICT sector to grow labour productivity through move to knowledge economy

Government-led development of clusters to create a competitive SME sector, focussed on high tech

Successful development through careful economic planning and public investment in education, R&D and ICT infrastructure to enable competitive high tech sector

| 90

Taiwan’s government-led development of clusters created a competitive SME sector focused on high-tech

Background

▪ Population: 23m▪ Small island economy with very scarce

natural resources▪ Sudden population increase from

migration from mainland China▪ Lack of scale economies due to SME

structure (over 98% of companies qualified as SMEs)

▪ High economic growth – averaged 8.5% GDP growth since 1950

▪ Ranked #1 State for Cluster development by WEF (2006/07)

Key success factors and challenges

Clear economic strategy

and emphasis on planning

Successful development of SMEs

in clusters

▪ Four year plans to develop and industrialize the economy until 1990s

▪ Market Intelligence Centre supports government in understanding trends Careful planning and analysis of trends


▪ Success of Hsinchu Science-based Industrial Park in 1981– Modelled after Silicon Valley by

government– Located next to Taiwan’s best

technical universities – domestic firms should easily be able to leverage international knowledge

– Firms have financial incentives to locate in science park (tax benefits, low interest loans, R&D matching funds, improved credit profile)

– Attraction of Taiwanese-US. talent: ‘reverse brain drain’

Currentchallenges

▪ Strong reliance on export markets (US, Europe) that face crisis

▪ Rise of China as low-cost manufacturing location

| 91

South Korea’s rigorous economic planning and public investment in education and R&D supported the growth of a strong high-tech sector

Background

▪ Population: 48m▪ Area ▪ Lack of natural resources and small

domestic market▪ Officially established in 1948 ▪ Poor infrastructure▪ Security issues and ongoing conflict with

North Korea▪ Average real GDP growth of 8% since

1948 ▪ Strong reliance on exports to US

Key success factors

Creating a clear national economic

strategy

Public investment in R&D and

Education to enable move to higher

value-added sectors

▪ Five year plans to industrialize and grow the economy with development of higher value-add sectors

▪ Careful planning and analysis of trends▪ National IT strategy and IT related

infrastructure investments enable development of competitive high tech sector


▪ Prioritization of education policies– Focus on teacher quality (top 5% of

cohort, good compensation)– Government sponsored scientific and

technical education at Harvard and MIT

▪ Focus on R&D in sciences and IT– Pohang Institute of Science and

Technology supported research and commercialization of technology

– Targeting of top Korean scientists and researchers working abroad

– Korea Institute for Electronics Technology (KIET) supported technology transfer

| 92

North Carolina successfully created long term R&D cluster around universities through public private co-operation and first mover advantage

Background

▪ Population: 8m▪ Third lowest per capita income of any

US state in 1952▪ State economy historically dominated by

low wage manufacturing (furniture, textiles and tobacco)

▪ Dealing with significant brain drain as graduates left state to pursue careers elsewhere

Key success factors

Long term commitment

Private sector involvement and

leadership

▪ Early recognition of triangle universities (Chapel Hill, Duke and NC State University) as key asset and subsequent strategy ruthlessly focussed on exploiting that as part of RTP

▪ Particularly in early days of establishing park, strong efforts were made to secure anchor tenants - for example IBM courted for 7 years to 1965 before final decision made

▪ Consistent vision maintained despite 10 year start-up phase, with ability to ‘take a long view’ seen as key to success

▪ Success of RTP park required long-term collaboration between private sector, voluntary sector, academia, state and federal government, for example NC University has ‘Industrial Extension Service’ to advise local businesses, local business group (RTRP Partners) meets quarterly to solve regional issues, campuses are often occupied by mix of academic and commercial researchers


Focus on R&D development

▪ Very clear focus on attracting R&D investments to RTP given science and technology community (positioned as ‘The State of Minds’) – strongly positioned as best place for R&D

▪ Multiple grants and loans programmes (particularly to support R&D) with $3-4m p.a. devoted to cash grants to strategic projects

▪ Focus is on spurring innovation and providing VC support through (e.g.) First Flight Venture Center providing leasable space to entrepreneurs and NC Biotechnology Center providing early stage funding

| 93

Estonia created a business-friendly environment through rapid deregulation and significant government investment in ICT infrastructure

Background

▪ Population: 1.3m▪ Heterogeneous population (64% Estonians,

29% Russians, 7% others) ▪ Literacy rate of population close to 100%▪ Small country (45,000 km2, few natural

resources)▪ 50 years of Soviet regime▪ Independence in 1991 ▪ Very rapid productivity growth of over 7%

p.a. between 1995 and 2005▪ Low GDP per capita at independence, small

manufacturing base and scarce infrastructure

▪ Underdeveloped banking sector and obsolete infrastructure

Key success factors

Creating a Business-friendly

environment

Strategic focus on developing

the ICT sector

Attracting FDI building on

existing strengths

▪ Government transparency: E-government gives access to public services to business and citizens via Internet

▪ Open economy– Trade liberalization (FTEs, WTO, EU)– Full convertibility of Estonian currency– No capital movement restrictions

▪ Creation of modern infrastructure– Focus on education, science, IT and health

care

▪ Government realizes the need at transition to move to knowledge economy to increase productivity

▪ ICT sector is viewed as “enabling” move to knowledge economy

▪ Systematic investment in good ICT (fixed and mobile) infrastructure and broadband and subsequent deregulation of sector

▪ Estonia built on strengths and opportunities: ICT sector infrastructure, small electronics sector, proximity to developed ICT sector in Scandinavia

▪ Attracted Nokia, Ericsson, Skype to Estonia


| 94

Israel’s focus on commercializing military research and creating a VC industry contributed to rapid development of successful high-tech sector

Background

▪ Population 7.4 million

▪ Area 22,000 sq km

▪ Productivity growth of 0.9% between 1990 and 2008 well below OECD average

▪ Very low employment rate driven by low labour market participation rates of religious minorities

▪ Lack of natural resources, with high dependence on imports of petroleum, coal, food, uncut diamonds and production inputs

▪ Economic crisis of 80s destabilized country and economy

▪ Large Defense Budget supported high-end research and training of skilled workers in technical areas

▪ Ongoing security issues with Palestine

Key successes and challenges

Successfully commercializing military research

Failed to improve productivity across domestic sectors

▪ Very high level of military research drives Israel’s R&D rate of 4.6% of GDP, the highest in the OECD

▪ Government created “Rafael Development Corporation” from a former defence company, with a sole remit of commercializing military research

▪ Incubator programme established under Office of Chief Scientist to encourage commercialization of knowledge in form of start up companies

▪ Yozma venture capital fund created by state led to influx of VC into country. By 2006, 80 VC firms raised $1.6bn

▪ Large high-tech sector developed, with high-tech products constiuting over a third of all exporting goods

▪ Very highly regulated product and labour markets have greatly hindered productivity growth

▪ Low labour market participation driven by very low employment among religious minorities has exacerbated skill shortage

Creation of strong engineering skills

base

▪ Financial support for students opting to pursue engineering degrees has resulted in large number of engineering graduates

▪ Continuous stream of ex-military engineers into labour force

| 95

Contents




2

| 96

Across these cases, we see seven emerging themes

Successful regions have had a clear strategy based on rigorous diagnosis of existing strengths1

Successful regions place intense focus on attracting, retaining and embedding anchor institutions

High performing investment agencies have cultures that are responsive, fast-moving and work to overcome bureaucracy

To maximise impact, R&D incentives have been conditional on co-operation between firms or between firms and other institutions

Non-financial support to make connections and build skills and knowledge has helped differentiate best practice players

Productivity transformation takes a long time and requires the creation of a competitive and attractive business environment3

4

5

6

7

Leadership has come from the top to drive alignment2


| 97

▪ After fall of Soviet regime and independence in 1991, Estonia’s government realised fast development would only be possible by evolving to a knowledge economy and initiated a rapid towards creating a strong ICT sector

▪ Rapid implementation of deregulation, opening economy and government transparency through e-government created a business friendly environment

▪ Policy focus on infrastructure upgrades for fixed communication and creation of a mobile telecommunication network

▪ Careful analysis of existing strengths led Costa Rica to focus on sectors based on existing strength– Pre-existing foreign investment (Motorola, Baxter)– Relatively skilled often bi-lingual workforce– Leverage benefit of free trade zone, proximity to US and political stability

▪ CINDE’s strategy to move into R&D intensive industries is strongly based on availability of human capital and existing private and public R&D

▪ Following the financial crisis of 1989-1991, there was widespread agreement that the old Swedish “social welfare” model had failed

▪ Political parties aligned around a new national strategy of maintaining labour protection while pushing through a series of policies aimed at deregulating product markets

Costa Rica

Estonia

Sweden

Finland

1

▪ Early recognition of country’s world class education system led to policy of concentrating R&D around universities

▪ Clear understanding of potential of telecoms industry in 1980s encouraged government R&D funding agency TEKES to focus on Nokia, which received 30% of its total funding between 1981 and 1983


Successful regions have had a clear national strategy based on careful diagnosis of existing strengths

| 98

Leadership has come from the top to drive alignment

▪ Costa Rica’s President initiated a shift in economic policy towards focus on higher value added sectors.

▪ The commitment of senior leadership to this strategy leads the President and Minister of Trade to dedicate significant time meeting with potential investors (illustrated by high responsiveness to CINDE requests to attend meetings)

Costa Rica

Finland

▪ Prime Minister Lee supported Singapore’s FDI focus by personally meeting with groups of CEOs to show his commitment to serving their businesses needs and to reassure potential investors

Singapore

▪ The Science & Technology Council, featuring the Prime Minister and several key Ministers, was founded in 1983, to provide central leadership of Finland’s emerging “technology policy”. The Council was crucial in driving alignment across government to support the growth of the high-tech sector


2

▪ Social democrat-led coaltion succeeded in building cross-party support for reform of business environment and removal of product market regulation, in wake of crisis on early 1990s. Unlikely that full range of liberalisation measures could have been implemented without support across the political spectrum

Sweden

| 99

Productivity transformation has taken a long time and required the creation of a competitive and attractive business environment

▪ Israel has developed a large high-tech cluster, supported by the OECD’s highest rate of R&D expenditure as a proportion of GDP

▪ However, bureaucracy, slow-moving local government and highly regulated product and labour markets have contributed to slow the country’s overall productivity growth over the last 20 years to 0.9% p.a., well below the OECD average

▪ Sweden introduced a sweeping wave of deregulation in the early 1990s. Two sectors in particular were targeted:– Retail, in which a change in zoning laws helped stimulate competition and productivity

growth of 4.5% p.a. from between 1990 and 2003– Retail banking, which experienced rapid productivity growth following government

interventions to increase competition

▪ The creation of a business friendly environment has been top priority for Singapore’s government since the 1960s

▪ Singapore’s Pro-Enterprise Panel (PEP) allows businesses to submit suggestions online to change regulations and eliminate red tape

▪ The EDB is responsible for the creation of a business friendly environment and its link with foreign investors has helped to be responsive to demands and reach international standards

Israel

Sweden

Singapore


3

| 100

▪ Two large high-tech firms in Portland, Oregon, Intel and Tektronix, drove the development of a large ICT cluster in the region

▪ More than half of the 300 high-tech start-ups in the region since 1970 were founded by individuals closely connected to one of the two “anchor” firms

▪ Attracting Intel - Presence of some large foreign investors in the electronics industry such as Motorola and DSC Corporation (attracted in 1995) served as “references” to attract Intel

▪ Effort in retaining and embedding Intel was undertaken, e.g. through establishing partnerships with universities (Intel-Associates) to develop skilled workforce

▪ Intel’s presence itself has served Costa Rica to establish a strong electronics cluster

▪ Intel’s investment in Ireland helped to subsequently attract major IT companies to Ireland (Dell, Google, IBM, HP)

▪ The attraction of Pfizer to Ireland served to rapidly expand Ireland’s presence in the pharmaceutical industry.

▪ Large companies facilitate setting-up collaborations with local institutions

▪ Nokia’s radio-telephone development in Oulu stemmed from the award of a government defence contract

▪ In awarding the contract, the government required Nokia to work closely with Oulu University, hence encouraging links to be forged

Costa Rica

Portland

Ireland

Finland

Successful regions place intense focus on attracting, retaining and embedding anchor institutions


4

| 101

High performing investment agencies have cultures that are responsive, fast-moving and work to overcome bureaucracy

▪ Strong customer-focus of EDB can lead to “atypical” agreements: – To attract a solar energy firm the Singaporian government agreed to use the company's

solar technology on part of its public buildings – Realising that Singapore lacked marine engineers in order to attract marine companies,

the EDB initiated the creation of a company-sponsored graduate degree at NUS▪ Strong performance culture of the EDB who recruits top performers at high school,

incentivises employees through bonuses (15-50%), gives early responsibilities, provides constant on-the-job training

▪ The IDA has created a high performing organisation with limited financial incentives. Its public sector employees are motivated essentially through respect and recognition inside and outside the organisation for attracting large companies and helping employment creation

▪ To “seal the deal” with Intel and address its concern not to find sufficient qualified engineers, the IDA provided Intel with a list of 85 Irish engineers working abroad with relevant qualifications willing to move to Ireland if hired by Intel

▪ CINDE performance manages its employees closely and assesses the performance of its employees both against internal targets (set at the beginning of the year) and an evaluation by its customers (part of compensation is performance-based)

▪ Customer-satisfaction is an important element determining the compensation of CINDE employees: a detailed survey to companies CINDE has served during the year is conducted and influences compensation and promotion. The survey asks about CINDE’s responsiveness, speed and help in easing administrative processes

▪ In CINDE’s policy advocacy role, CINDE collaborates with the Presidency to suggest policies increasing the “ease of doing business” in the economy

Singapore

Ireland

Costa Rica


5

| 102

To maximise impact, R&D incentives have been made conditional on co-operation between firms or between firms and other institutions

▪ By requiring that research grants be matched by other organisations, Sweden’s R&D organisation VINNOVA has contributed to Sweden’s high levels of R&D co-operation between firms, universities and research institutes

Finland

Sweden

Ireland

▪ TEKES, the Finnish R&D funding agency, looks to promote co-operation, and explicitly requires joint working from various organisations:– Universities are generally required to show that R&D projects are commercialisable– Companies which can show their projects will involve input from other firms or

universities are prioritised▪ Research Institute VTT acts as a way for people to moves smoothly between academic

and commercial roles, and works with partner organisations wherever possible


6

▪ Recently introduced Innovation Partnerships where up to 80% of R&D costs can be supported on condition the research is carried out under the leadership of a third tier educational institution. The institution makes the application and receives the grant but research is carried out for and on behalf of a specific firm or group of firms.

| 103

Non-financial support to make connections and build skills and knowledge has helped differentiate best practice players

▪ The services provided by Singapore’s government agencies (EDB, IE Singapore, SPRING) to businesses entail but go far beyond financial incentives– Specific needs of businesses identified (e.g. IE Concierge Service in IE Advisory

centre, contact of EDB employee with specific company)– Access to capability building is emphasised: IE and SPRING provide free seminars,

scholarships for young managers, recruitment support, advisory on branding– Connections are programme focus: promotion of Singapore on trade fairs, exporters

are matched with potential buyers on BuySingapore platform, companies are encouraged to collaborate to create scale for exports

▪ Costa Rica’s PROVEE programme provides practical support to link MNC’s with a local supplier base

▪ Procomer, the agency that manages PROVEE connects MNCs and local suppliers and provides “quality check”

▪ Assistance to local suppliers entails technical assistance, manufacturing and supply chain training– The online-portal SIVUCE Procomer administers provides a “one-stop shop” for

export administration and documentation

Singapore

Costa Rica

Finland ▪ Finland’s award-winning export-promotion agency FINPRO has succeeded by providing paid-for, demand led services to support exporters. Services include:– Provision of internationalisation strategies – Market research – Partner searches – Project consultancy report (e.g. helping company prepare a business plan for new

market entry)


7

| 104

ADDITIONAL MATERIAL

| 105

Free trade zones offer attractive benefits to trading companies (1/2)

SOURCE: Shannon Development, Business Singapore, CINDE, PROCOMER

Beneficiaries

Number of Free Trade Zones

% of Country TradeConcerned; # of companies

Duties on imports

Duties on exports

All traders, especially re-exporters and transshippers

5 (main ports and airports)

N/A

0% duties, no GST. Excl. liquor and cigarettes

0%

Companies with link to aircraft/transport industryCompanies with activities related to IP Rights (Pharma)

1 (Shannon Free Zone)

N/’A; 120 companies

0% for goods in process

0%

All traders, not for producers

12 (different industrial parks, close to ports)

N/A; 240 companies.

0% on raw materials, compo-nents and capital goods

0%

Description of Free Trade Zones

• Permit to use the FTZ is required (can be requested online)

• Reconditioning, Repacking and Sorting is allowed but permission needed (e.g. good from different shipments can be put together)

• Registrations avail. online

• Managed by Shannon Development (Irish government agency) which operates independently from IDA

• Marketing abroad of

• Managed by Procomer and Comex

• No more than 25% can be sold to local market

• Min. 15,000 USD fixed asset requirement in FTZ parks

• Possibility Sub-FTZ outside parks

• Preference to local suppliers

| 106

Free trade zones offer attractive benefits to trading companies (2/2)

Services provided by agencies

• Requests for FTZ benefits can be made online (TradeNet)

• Simplified customs procedures

• Training courses on customs procedures

• Single Administrative document

• Services provided by Shannon Development are similar to those provided by the IDA

• CINDE and Procomer assist companies

• On-site clearance of customs

• Online-services available

Additional Information

• EnterpriseOne provides access to different services (e.g. application for licenses premises in 5 min, submission of trade documents) and all information on free trade zones

• License has to be requested from Ministry of employment

• Eligibility to Shannon Free Zone comparatively limited (engineering/high tech/pharmaceuticals/

healthcare)

• Free Trade Sub Zones can be provided for companies unable to operate in existing zones (min 2 million USD investment)

• Length of tax exemptions can be extended for re-investments

Additional financial incentives

• No duties and charges for goods within FTZ

• Duties payable if local consumption

• 0% on VAT• No charges on local

services and goods if 75% for export

• All tax benefits available in Ireland (low corporate tax, R&D tax credit)

• Only 25% can be sold on local market (50% for services)

• No income tax• 10 years capital tax

exemptions• no restrictions on

capital/profit repatriation

SOURCE: Shannon Development, Business Singapore, CINDE, PROCOMER

| 107

Data sources

SOURCE: Team analysis

Population: Global Insight (Series WA0980001.A)Real GDP: Global Insight (Series WA1720003.A)Employment: Global Insight (Series WA1320062.A)Exports: Global Insight (Series WA1721449.A)FDI: IMF International Financial Statistics (Total stock inward FDI, % GDP)R&D: OECD Research and Innovation database (Total R&D spend as % of GDP)Tax rate: IMD World Competitiveness indexEase of doing bus.: World Bank rankingStudents graduating: UNESCO (Total graduates, Tertiary)Engineers graduating: UNESCO (Graduates in engineering, manf. and construction. Tertiary)Public sector: IMD World Competitiveness index 2.12Average wages: IMD World Competitiveness index 3.201English-speaking: Eurobarometer 2005 for European countries plus Singapore censusElecticity costs IMD World Competitiveness index 4.1.24Broadband pen.: OECD Broadband statistics (Broadband subscribers per 100 inhabitants)

final global best practice presentation powerpoint (7.5 mb)

Documents