Innovations in Mongolia and innovative ways to

support themBCM Meeting 2016.09.22

Ch.Khashchuluun

Innovations as a part of knowledge economy (Knowledge economy index

KEI, World bank)4 pillars of measuring KEI

An economic and institutional regime to provide incentives for the efficient use of existing and new knowledge and the flourishing of entrepreneurship;

An educated and skilled population to create, share, and use knowledge well;

An efficient innovation system of firms, research centers, universities, consultants and other organizations to tap into the growing stock of global knowledge, assimilate and adapt it to local needs, and create new technology;

Information and communication technology to facilitate the effective creation, dissemination, and processing of information.

Mongolia’s performance over years

Comparing to other CA countries,

for example Kyrgyzstan

Global innovation index 2016Mongolia is 55th in the world

Institutions

Pretty much sums the real situation

• Access for credit is probably much more difficult than estimated in the GII index

• Overall, pretty grim situation

• Policies: Innovation Law 2012 (not so effective)

• what to do?

Chile: a mining economy• Chile: 38 percent of the world’s copper reserves

• largest copper producer: 33.6 percent of the world’s copper in 2009

• a leading supplier of molybdenum, rhenium, silver, gold, iron, natural nitrates and others.

• biggest source of income comes from the state-owned companies, the Chilean National Copper Corp. (CODELCO) and National Mining Co. (ENAMI)

Policies• import substitution policies generated a meager 2.1 percent average growth

level from 1934 to 1973

• Liberalizatoin reforms gave a pivotal role to the private sector - generated only 0.1 percent annual growth due to inadequate macroeconomic management

• Fundación Chile played a key role: find venture capitalists to invest in innovative projects promoting technology transfer and new business models that could benefit the country as a whole

• 1985 Reintegro simplificado (simplified reintegration): export subsidy to nontraditional exports in which exporters would receive a credit of up to 10 percent of the free on board (FOB) price.

• benefited nontraditional products that contained at least 50 percent of imported components. It allowed exporters to recover the dues paid to import those inputs

Success: pine trees, berries, salmons

• Specific target industries: pine trees/cash subsidies for up to 75 percent of the start-up costs, direct credit lines and other subsidies - now most important forestry export

• Fundación Chile adapted Norwegian technology in 1981 to grow salmon.

• From 1985 to 1986 salmon exports reached more than $1 million dollars, which rapidly increased to almost $159 million in 1991.

• Today Chile is the second largest salmon exporter in the world, having exported an all-time high of $2.4 billion FOB in 2008

• blueberries: Chile is the leading exporter of the fruit in the Southern Hemisphere and the main exporter to the Northern Hemisphere, having exported $164 million FOB

Openness• FTA with 57 countries

• Chile-United States FTA: tariff exemption - an increase in Chilean exports to the United States of 31.75 percent from 2003 to 2004, the year the agreement began. By 2006 total exports had more than doubled, reaching $8.9 billion.

• China—Chile’s main export market since 2007— exports increased by almost 100 percent to $9.6 billion

• Although most of the exports to the United States and China are mining products, the industrial and agriculture sectors have increased exports to these markets as well

• Stable, transparent legal environment

• wine quality program 55 private companies

• grape quality program 8 companies and 3 universities

• 24 consortiums in different fields

Innovation strategy and public private partnership

Financing• Total financing of all RD clusters was 147 million USD

• Fisheries program 10 million dollars

• Wine research 5.5 milllino dollars,

• Fruits quality program 5.7 million dollars

• Today Chile exports 5 billion dollars of fish

• fruits 4.7 billion

• wood pulp 3.9 billion

• wine 2 billion dollars

• Most amazingly, it exports fruits to India, wine to France and fish to UK

Fundación Chile• Fundación Chile (FCh) is a non profit corporation created in

1976 through a joint agreement between the Chilean government and ITT Corporation.

• worked successfully to foster Chilean business and industry growth through technological innovation and implementationis

• considered to be a “true institutional innovation” that played a major role in the export discovery process

• the importance of government support and public policies, the relevance of fostering entrepreneurship, the role of the private sector and industry associations

Implications for Mongolia

• FTA with Japan, soon possible FTA with Korea

• Lack of financing, venture funds, startup funds, etc

Innovations

Innovations financing will be equal to by 2020 2% of GDP, by 2025 it will reach 2,5%, by 2030 it will reach 3% of GDP becoming a source of economic growth and productivity increase But every jump starts with a small step.. Innovation funding has been removed from the Innovation law (however it is specified in the Investment Fund law)

Innovation fund Mongolia: MIF Seed financing: 10 mln dollars One way to ensure no losses for angel investors: government guarantee Foundation revenue: startup financing, office/laboratories rent Activities: • Mentoring • Investment banking • Innovation startup funding • Business planning advise • Ensuring university, business and government linkages • Startups’ fair • Business ideas meetings • Open lounge office for startups based on private offices

Possible model: Kashiwa business center