Innovation Policy: Peru
The innovation imperative for Peru’s sustainable development
•Peru recorded impressive economic growth over the last decade, based on sound macro economic management, structural reform and increased openness to international trade and investment
•Yet there are challenges for the sustainability of high performance in the future:
Sources of growth: Low level and lack of dynamism in Total Factor Productivity (no contribution to growth during 1995-2007)
Narrow export specialisation: natural resources exposed to high price volatility
Slow progress in diversification, despite some success in transforming agricultural production
Shortfalls in skilled human resources
•Fostering innovation throughout the economy is key for boosting productivity and international competitiveness, advancing diversification and addressing social needs
•High macro economic performance provides a unique window of opportunity for strengthening innovation in the Peruvian economy
•The Peruvian government has expressed its commitment to foster innovation and some initiatives have been taken already
•Yet investment in innovation needs to be stepped up significantly
Peru’s innovation system shows major weaknesses
•Lagging innovation performance – by international standards, and emerging economies
Low public and private investment in R&D and innovation and correspondingly
Low levels scientific and innovation output
•Weak overall innovation record of the business sector
•Weak performance of public research institutions (with some exceptions)
Low on output
Weak links, notably to business firms
High share of institutional funding
Inefficient governance and dysfunctional constraints
•Weak Higher Education sector (apart from a few universities)
Governance / incentive system does not reward excellence
Insufficient links to business sector
Lack of accreditation mechanisms
•Shortfalls in human capital and educational performance (PISA)
•… but these increases should go hand in hand with improvements of the governance of the innovation system in order to ensure that this investment will pay off and eventually increases social welfare
Innovation performance is also held back by weaknesses in governance and some institutional arrangements
•STI policy and institutions remain largely fragmented and poorly endowed with resources
•Weak governance
Lack of overarching inter ministerial coordination mechanisms for priority setting, policy orientation and budgetary allocations
Lack of clear institutional assignment of competencies in policy design and implementation which can create conflict of interest
Lack of monitoring and evaluation
•Weak institutions
Discrepancy between legal and actual responsibilities (e.g., Concytec)
Overly broad missions of some funds/institutions; frequent overlap of scope of action among institutions / funds
A fair degree of institutional inertia
Innovation performance is also held back by some regulatory arrangements
•Restrictions to the transfer of public funds to private sector institutions
reduce the leverage of public support on private innovation investment
•SNIP regulations on public expenditures for investment purposes
are ill adapted to the requirements of (intangible) investment in R&D and innovation … leading to delays and complex administrative procedures
•The tax regime
does not appear to be favourable to investment for R&D and innovation
•Rigidities in the use of Canon Law funds for regional universities
lead to inefficient allocation of resources
•Lack of autonomy combined with rigidities in labour laws
restrict human resource management in PRIs … leading to a need to recruit better qualified personnel as temporary workers
•Labour laws applicable to civil servants
restrict inter institutional mobility and revenues from services rendered to another institution … negatively affecting public university researchers’ engagement in collaborative projects
Recent innovation policy initiatives
•Development of technological innovation centres (CITEs) starting in 2000
•Establishment of two well endowed funds cofinanced by the Peruvian government and multilateral financing organisations
INCAGRO launched in 2001, promoting technology transfer and P/P collaboration in the agricultural sector
FINCYT launched in 2007, promoting a wide range of programmes, including strengthening the research and innovation capacities in firms, universities and PRCs and collaboration between them
•FIDECOM, a domestic fund established by MEF in 2006, promoting productive innovation, also emphasising collaboration
•Canon Law amended in 2004 to allocate part of the resources provided to regional governments to finance investment projects aimed at developing research capacities in regional public universities (with some dysfunctional regulatory constraints, however)
•Post graduate scholarships
Recent policy initiatives – positive but limited impact in a fragmented institutional setting
•Overall these are positive developments contributing to expanding
business investment in R&D and innovation (albeit moderately)
to some degree the knowledge base of research institutions, incl.
Universities receiving additional funding, and to a lesser extent their technology transfer activities
activity of technology transfer institutions aimed at fostering productivity growth
• But critical mass may still be lacking.
In particular the initiatives
have not been able to catalise a process of systematic technological upgrading
reach only a small number of firms
… and their impact has been weakened by a fragmented institutional setting , regulatory obstacles and major weaknesses in innovation policy governance (resulting in latent conflicts in implementation, duplications, and thus further dispersion of resources).
Recommendations: Governance architecture
•A stronger commitment to S&T and innovation and increased resources need to be accompanied by improved efficiency of governance mechanisms
•The Review discusses three design options for overarching governance
The creation of a new Ministry of Science, Technology and Innovation
A horizontal policy design with one principal implementation agency attached to a transversal ministerial body (with responsibilities similar to hose of CONACYT in Mexico in inter ministerial coordination and cofunding )
A coordinated policy design with several implementation agencies (an adaptation of the Chilean variant): Interministerial Committee, in with strong involvement of MEF complemented by an advisory council)
•A key role in steering the new governance system should be played by
the Presidency of the Ministerial Council (PMC)
MEF, with additional advantages as regards its competencies in budgetary allocation
Specific recommendations: Higher Education and Human Resources
•Initiate a reform of university governance that promotes excellence in research and facilitates retaining and promoting the most qualified personnel; to achieve this goal use institutional financing and move towards performance based and competitive funding
•Provide incentives to the private sector to hire S&T postgraduates
•Alleviate regulations that impede the participation of public university researchers to private enterprises’ S&T projects and interinstitutional mobility
•Promote the development of IPR management in the higher education sector
Specific recommendations: Public Research Institutes
•Reform the governance of PRIs to ensure that they fulfil their core missions efficiently; include major stakeholders in their boards; enforce accountability and performance agreements with feedback to the volume of institutional funding; set objectives for the share of competitive grants, contracts and revenues from technological services
•Define qualifying criteria for PRI status (e.g. share of S&T personnel); mitigate the negative effects of rigid labour rules and short term contracts for qualified researchers
•Consider streamlining the PRI system
•Provide incentives for the mobility of PRI S&T staff to the private sector and vice versa
•Develop IPR management capacities of PRIs
•Encourage the participation of PRIs in international research networks
Specific recommendations: Promotion of innovation in the business sector
•Review regulations governing transfer of public resources to the private sector in light of the legitimacy of such transfers to foster private S&T and innovation activities
•Give the business sector a more prominent role in the governance of the innovation system and the definition of strategic orientations and priorities
•Give more attention to impediments to innovation related to physical infrastructure bottlenecks (transport, ICT, logistics) as well as to S&T infrastructure (metrology, standards, IPR)
•Lift obstacles to the creation and growth of new technology based firms; consider specific support schemes in existing funds
•Continue to give a premium
to public private collaboration projects.
•Consider mission oriented or sectoral support programmes predicated upon collaborative arrangements; select programmes on the basis of criteria related to national interest and natural resource endowments (e.g. biodiversity).
Specific recommendations: Intermediaries
•Consider an expansion of CITEs in terms of:
sectoral coverage
strengthened capacity in applied research to better address firms with an innovation potential
raising the demand for technology / R&D by a larger set of firms or organisations and
provision of training services to those firms
•Strengthen institutions that provide intangible S&T infrastructure (technological information, IPR related services, metrology, certification, standards) and facilitate access to their services
Specific recommendations: Legal and regulatory reform
•Review and revise the SNIP procedures that apply to public investment in R&D and innovation activities (or public support to such activities); as regards the application of SNIP procedures to innovation fund projects, the rules that apply to FINCYT should be generalised
•Consider revising the tax code to set clear rules allowing investment in R&D to be written off against profits