A Política de Ciência, Tecnologia e Inovação no Brasil –

perspectivas e necessidades de avaliação

José Eduardo CassiolatoSeminário Internacional sobre Avaliação de Políticas de Ciência, Tecnologia e Inovação

Diálogo entre as Experiências Internacionais e Brasileiras

Rio de Janeiro, 03 Dezembro 2007

1. Some data

2. The Policy Evolution

3. Evaluating what?

1 - Some data

Number of PhD Graduates – 1980-2005

0

5 000

10 000

15 000

20 000

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

Brazil – Number of MSc and PhD courses – 1960-2005

Brazil – Articles published in international journals (indexed at ISI) Total and World percentage – 1981-2004

Brazil Number of graduates by region – 1988-2002

Brazil – Higher Education by Region - 2001

Region Higher educatio

nInstitutions

(%)

Lecturers (%) Students* (%)

Total MSc PhD

North 4.4 4.2 4.1 2.0 4.7

Northeast 15.2 15.5 16.1 11.7 15.2

Southeast** 53.3 51.7 49.5 62.9 51.7

South 15.5 20.6 22.6 18.0 19.8

CentreWest 11.6 8.0 7.7 5.4 8.6

Total Brasil (number)

1,391 219,947 72,978 46,133 3,030,754

* Enrolled students** São Paulo and R de Janeiro cities with 15.5 % and 11.7%Of MScs and 27.0% and 12.3% of PhDs respectively

Brazil – Post-grad (MSc & PhD) students by region and

scientific areas (– 1999 (%) Region Earth

ScComputing/IT Biological

ScEngineering Agricult. Total

North 2.2 - 3.8 0.5 1.7 1.6

Northeast 12.6 12.0 6.7 6.5 8.0 8.3

Southeast 68.5 52.4 71.2 70.4 69.8 69.0

South 12.6 33.8 13.7 20.5 18.1 18.1

CentreWest 4.0 1.8 4.5 2.1 2.4 3.0

Total Brasil (number)

7.232 2.358 7.300 14.188 7.774 38.852

Brazilian Innovating Firms - R&D/Sales – Selected Sectors – 2000/2003/2005

0,00%

0,20%

0,40%

0,60%

0,80%

1,00%

1,20%

1,40%

1,60%

1,80%

2,00%

Apparel Chemicals Pharmaceuticals Comum. Equipment Auto

R&

D /

Sal

es

2000 2003 2005

Innovation Rate (New Products to the Market)

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

Manufacturing Apparel Chemicals Pharmaceuticals Auto

2000

2003

2005

Brazilian Innovating Firms – Expenditures on training over sales – 2000/2003/2005

0,00%

0,02%

0,04%

0,06%

0,08%

0,10%

0,12%2000

2003

2005

% of Innovating Firms that Cooperate with University and Res. Institutes/Total Innovating Firms – 2000-2003-2005

0%

5%

10%

15%

20%

25%

%

2000

2003

2005

Government Support to Firms:

0%

5%

10%

15%

20%

25%

30%

35%

Total ManufacturingIndustry

Apparel Chemicals Pharmaceuticals Telecom Equip Auto

20032005

0,0%

0,5%

1,0%

1,5%

2,0%

2,5%

3,0%

3,5%

4,0%

Total ManufacturingIndustry

Apparel Chemicals Pharmaceuticals Telecom Equip Auto

20032005

Firms that Received Support/Total Innovators

Firms that received R&D incentives/Total Innovators

Structure of GDP: the increasing role of services

Brazil - valeu added by sector (% of GDP)

0

10

20

30

40

50

60

70

80

1983 1993 1999 2000 2001 2002 2003

Agriculture

Industry

Services

China - valeu added by sector (% of GDP)

0

10

20

30

40

50

60

1983 1993 1999 2000 2001 2002 2003

Agriculture

Industry

Services

India - value added by sector (% of GDP)

0

10

20

30

40

50

60

1983 1993 1999 2000 2001 2002 2003

Agriculture

Industry

Services

South Africa - value added by sector (% of GDP)

0

10

20

30

40

50

60

70

1983 1993 1999 2000 2001 2002 2003

Agriculture

Industry

Services

And finally --- an indecent income distribution

0,56

0,57

0,58

0,59

0,6

0,61

0,62

0,63

0,64

1976 1977 1978 1979 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1992 1993 1995 1996 1997 1998 1999 2001 2002 2003 2004 2005

Year

0

10

20

30

40

50

60

70

1976 1977 1978 1979 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1992 1993 1995 1996 1997 1998 1999 2001 2002 2003 2004 2005

Year

Sh

are

in

Ho

use In

co

me (

%)

10% Richest 50% Poorest

2 - Evolution of S&T policies

S&T Policy

1950

Individual Support

Institutucionalization ofResearch & pos-grad

Market Friendly policies

Industrial Policies

Based on Foreign TechnologyC

NP

q C

apes

Funt

ec/

BN

DE

SFI

NE

PFN

DC

T

MS

&T

MarketOrganizes

1960 1970 1980 1990 2000

Evolution of Brazilian Industrial and S&T policies

Recent Changes

From the 1950s to the mid 1960s

• ISI – based on foreign investment ....and technology

• CNPq and Capes – Support to individuals

• Failed attempt to create MS&T

• New institutions in some important areas (air space, for example) that led in the long run to important capabilities

From the mid 1960s to the late 1970s

• Under ditactorship: ISI based on foreign technology BUT strategic role of S&T

• Transformation of CNPq into an agency to set up and implement a S&T policy

• Setting up of FUNTEC at BNDES and Finep (financial arm of S&T policy)

• Small tensions with foreign capital (the setting up of National Institute for Industrial Property to control remittances for technology)

Capital and tech flows of some MNCs in Brazil

up to 1975 (US$ million)

From the mid 1960s to the late 1970s

• Embrapa and technology in the agro-industrial sector

Important achievements of the period

• A rapid increase in S&T capabilities– Setting up of Postgrad and Research

• Initial attempts to foster technology in industry– Incentives (negative real interest rates)– Using procurement as a policy tool– Some programmes with long run effects (eg ethanol)

• First program on U/I linkages in 1974• 1st and 2nd National Plans for S&T (organizing

S&T activities)

The 1980s – Macroeconomic Crisis and Return to Democracy

• The ealy 1980s - Budgetary Crisis – rapid decrease of Federal Resources

• The mid 1980s - Democratization and the setting up of the Ministry of S&T– Recovery of level of expenditures– Policies for HiTech and Human Resources

• The late 1980s Deepening of crisis – high inflation and several institutional changes in S&T policy

Crisis in Funding Disbursements of FNDCT (National S&T Fund)

1970 - 2006

0

100

200

300

400

500

600

700

800

900

1970

1973

1976

1979

1982

1985

1988

1991

1994

1997

2000

2003

2006

Sectoral Funds

The 1980s

• The World Bank loans and changes in management of resources – introduction of public tenders

From the1990s – Macroeconomic policies determine S&T policies

• The Collor Government and the abandonment of active policies– Changes in Regulatory Framework (New

Industrial Property Code, etc.)

• The Real Plan – controlling the inflation

Macroeconomic Context

1994 – implementation of Real Plan 1995-1998 – After the success of Real Plan, government maintained the

macroeconomic austerity policy, based on restrictive fiscal and monetary policies, with an exchange rate anchor. Imports assumed an important function as one of the mechanisms to regulate national prices. The implementation of this exchange rate policy meant that imports increased more than exports, making current account deficits – the balance was increasingly negative after 1995. This choice of economic policy resulted in a increasing vulnerability to the global economy and a very low real growth rate of Gross Domestic Product (GDP).

1999-2002 – Successive international crisis (Mexican, Asian, Russian, etc.) and the increasing fragility of the trade balance and of the Balance of Payments resulted in the transformation of exchange rate regime in January of 1999, towards a floating exchange rate regime. The macroeconomic policy adopted the inflation-targeting regime having, again, as the main mechanisms the (high) interest rates and the rigorous fiscal adjustment.

2003-2006 – continuation (or deepening) of the same macroeconomic policy,

establishing even more rigorous fiscal adjustment, now under more favourable

external conditions (The China effect and consequent surplus in Trade Balance).

Sources: IBGE - Sistema de Contas Nacionais; Ipeadata.

Macroeconomic Context GDP - real growth rate - (% p.a.)

4,42

2,15

3,38

0,040,25

4,31

1,31

2,66

1,15

5,71

2,94

3,7

0

1

2

3

4

5

6

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006

1995-1998 - Macroeconomic policy-makers were against ideas about industrial (and innovation) policy – a ‘radical neo-liberal agenda of development’. S&T policy continued to struggle (maintaining infrastructure alive); changes in IPR regime (new Patent Law, TRIPS, New Industrial Property Law)

1999-2002 - Recognition of the importance of innovation by Ministry of Science and Technology ignited the process of setting up a new legal framework to stimulate R&D and innovation in firms. Market failures justified the intervention of the State Market failures led to underinvestment in innovation by firms enterprises and harmed possible

partnerships between firms and scientific and technological organizations. So State was justified to intervene creating new tax (and other) incentives for firms to innovate

and specific funding and supporting instruments to stimulate partnerships between firms and universities and other S&T organizations.

2003-2006 - two policies related to innovation were launched: the National Science, Technology and Innovation Policy, coordinated by the Ministry of Science and Technology, and the Industrial, Technological and Foreign Trade Policy. These policies preserved the main strategies developed during the last government creating new tax incentives to firms´ innovation, and grants to firms; also Innovation Law was introduced.

Innovation Policy – main guidelines

Enterprises and Organizations

Innovation Policy – Institutional Framework

Ministry of Agricultural – MAPA Ministry of Science and Technology – MCTMinistry of Finance - MFMinistry of Interior – MIMinistry of Development, Industry and Trade – MDIC

MF

MDICMCT

MI

Inmetro

BNDES

FNDCT CNPq

ADENE ADA

INPI

FINEP

MAPA

EMBRAPA

ABDI

CAIXA BB

SUFRAMA

FGPC / FND

FGE

FNO

FNE

FCOCODEVASF

• Innovation becomes a priority

• PITCE – Industrial, Technological and Foreign Trade Policy (2004) –

• Sectoral Funds (since 1999):• Univ-Industry Links but possibility of “Across the Board”

Actions (2004)

• New regulatory and legal environment (2005):• Innovation Law, Bio-security Law; SME Law

• Decentralisation of policy and support to local systems

• In the last few months:• The role of BNDES (innovation and local systems)

• Sectoral policies (health for example)

Most important recent policy changes

The 2 pillars of Recent policies

• Fostering R&D expenditures in firms

• Fostering University/Industry Linkages

Innovation Policy: Fostering R&D expenditures in firms

• Tax Incentives (PDTI and now automatic)

• Grants (a sectoral approach and a need to propose a “project”

• Equalization of interest rates

• Support to venture capital

• Incubators, etc

• The innovation Law

Number of PDTIs and PDTAs approved and Enterprises17,7

4,1

10,8

2,1

6,5

1,2

3,8

0,7

1,6

0,3

5,1

1,1

6,0

0,7

6,3

0,30,0

2,0

4,0

6,0

8,0

10,0

12,0

14,0

16,0

18,0%

1999 2000 2001 2002 2003 2004 2005 2006

Concedidos em relação ao Orçamento MCT Usufruídos em relação ao Orçamento MCT

Innovation Policy – Tax Incentives to Few (most Large) FirmsWould they invest in R&D without the Incentives???

Source: Ministry of Science and Technology – MCT.Note: In 2006, the numbers are referred to January to July period.

Innovation Policy – Legal Framework

Acts Main objectives

1993, Law 8.661 Stimulate the innovation process and research and development - This law created some fiscal incentives to stimulate the technological capabilities in manufacturing and farming enterprises that made the Program of Manufacturing Technological Development (PDTI) or the Program of Farming Technological Development (PDTA).

1997 - Law 9.532 Related to tax legislation - reduced the tax incentives established by the law 8.661/93, in approximately 50%.

2000 - Law 10.168

Determined a contribution to finance the Program of interaction between Universities and Enterprises to support innovation process.

2001 - Law 10.332 Reestablished the tax incentives established by the law 8.661/93 - this law created also the economic subvention to the enterprises which were participating of the PDTI or the PDTA, and the equalization mechanism for the interest rates.

2002 - Law 10.637 Created some new tax incentives.

During the 1999-2002 periods were launched 12 sector funds and two of them were not sector specific

Support partnership in innovation projects between enterprises and scientific and technological organizations. The specific funds were the fund to finance the Universities and Enterprises Interaction Program, and the infrastructure fund, to finance the modernization of scientific and technological organizations. The other funds were related to: energy; space technology; information technology; biotechnology; health; agribusiness technology; mineral technology; hidrotechnology; oil and natural gas; automobilist technology; and telecommunication technology.

2001 - Law 10.176 Related to information technology sector – it replaced the law 8.243 of 1991 and its objective was to stimulate research and development using the tax incentives.

2004 - The Innovation Law– the Law 10.973

Promote interactions between Scientific and Technological Organizations of Federal Government and enterprises considering the intellectual properties rights, and the role of researches of those organizations in a context of partnership with enterprises. This law also created new tax incentives to innovation process within enterprises, and created the economic subvention to enterprises that participated of some project of National Fund to Scientific and Technological Development.

2003 – Law 10.6642004 – Law 11.077

Related to information technology – Law 11.077 was known as the ‘New informatics Act’. This law replaced the laws no 8.248/01, no 8.387/91 and no 10.176/01. The main difference between the new act and the others was the tax incentives became automatic.

2004 were created more two sector funds

Related to Navy Sector and aquatic technology, and to the Amazonian Area, aiming to develop new technologies and stimulate the innovation process.

2005 - Law 11.196 Also connected to tax incentives to the technological innovation. This law replaced the law nº 10.637(2002) and the main instruments were: exemption of income tax, accelerated depreciation, accelerated amortization and the possibility of subvention to researchers, masters and PhDs. The difference between the new law and the old one was that the mechanisms for tax incentives became automatic – before it was necessary to participate of the Program of Manufacturing Technological Development (PDTI) or the Program of Farming Technological Development (PDTA)..

Innovation Policy – Fostering University/Industry Linkages (in R&D joint projects)

• Programs to support research in hi-tech areas

• The Sectoral Funds

• The innovation Law

Sectoral Funds for Supporting Scientific and Technological Development

• Set up in 1999

• Financial sources: contributions of firms’ earnings arising from the exploitation of natural resources belonging to the Federal Government

• Aeronautics; Agro-business; Amazon Region; Biotechnology; Energy; Informatics; Infra-structure; Mineral; Oil & Gas; Transportation; Health; Space Activities; Telecom; University-Industry Cooperation; Water Resources; and Water Transportation and Ship Building.

Innovation Policy – Main mechanisms and Instruments

Source: Ministry of Science and Technology – MCT and IBGE.

Evolution of Sector Funds

0,0100,010

0,0000,003

0,0210,025

0,000

0,011

0,035

0,050

0,0290,024

0,062

0,057

0,0230,021

0,078

0,0720,069

0,033

0,0730,073

0,042

0,031

0,0750,075

0,040

0,035

0,080

0,074

0,029

0,042

0,000

0,010

0,020

0,030

0,040

0,050

0,060

0,070

0,080

%

1999 2000 2001 2002 2003 2004 2005 2006

Collected Taxes Budgetary Law Contingency Reserves' Budget Implemented

(As a % of GDP)

• Innovation Law (2005): strengthening the interaction between university and industry; promote the common use of S&T infrastructure by firms and S&T institutions (emphasis on MSMEs); stimulate the setting up of new technology based firms by researchers; create new financial mechanisms for grants to R&D and innovation in firms

• “Lei do Bem” (2005): creates new financial mechanisms for grants to HR (M.Sc./Ph.D.) in innovation activities in firms

• MSEs Law (2006): invest minimum of 20% in MSEs

• Regulation of FNDCT (2007): resources flexibility and diversification of instruments

New regulatory and legal environment

The Industrial, Technological, Foreign Trade Policy (PITCE)

• Set up in 2004

• industrial and technological issues are re-introduced in Governmental Policy Agenda

• Innovation is crucial for competitiveness

• Pioneering convergence of industrial and technological policies

• PITCE is one of the strategic axes of the ST&I Policy

• FINEP: responsible for PITCE implementation

• What about resources???

FNDCT - Disbursements 1970 - 2006

0

100

200

300

400

500

600

700

800

900

Sectoral Funds

FINEP investment in firms (innovation) (2003-2006)

0

200

400

600

800

2003 2004 2005 2006

Grants Investiments Coop STI/f irms Loans Total

FINEPs’ Programs – A wide range of mechanisms

Modality Programs Programs’ focuses

Line 1 - Firms’ innovative activities

Pro inovação R&D projects, innovation and technological capability

Juro Zero SMEs, production to commercialisation, under special conditions

PPGFOR Consultancy engineering activities for the energy sector

MDL Entrepreneurial pre -investment and financial support to

cooperative projects related to the reduction of pollution emission

Loans to firms and investment

(Reimbursable funds)

FINEPSUL Support to infrastructure projects of Brazilian firms of consultancy engineering within the context of South

America countries

PAPPE R&D projects, business plans and market studies,

focused on researchers and their activities within firms; creation of technologically intensive small and medium -sized firms by researchers

Economic Subvention PAPPE Subvention - Firms’ innovative activities in line with the Industrial, Technological and Foreign Trade

National Policy and strategic sectors (partnership with other regional and state agents)

Subvention for Innovation - Firms’ innovative activities in line with the Industrial, Technological and Foreign Trade National Policy and strategic sectors.

Grants

(Non-reimbursable funds)

Incubator National Plan (PNI) Business incubators and Tech Parks

Inovar (Incubator-Funds) Venture capital

Inovar (Forum) Capitalization of tech nologically intensive small and medium -sized firms

Investments

Inovar (Seed Money) Structuring of local seed money funds

FINEPs’ Programs – A wide range of mechanisms

Modality Programs Programs’ focuses

Line 2 - Cooperation between firms and scientific and technological institutions (STIs)

Coopera R&D projects and innovation activities

PPI-APLs R&D projects focusing on technological assistance and services to firms

RBT Suppliers and STIs (import substitution in selected productive sectors)

Grants to STIs

Assistec PROGEX E PRUMO - Assistance and tech consultancy to MSMEs

Line 3 - Scientific and technological institutions (STIs)

Proinfra Public scientific and technological institutions’ infrastructure modernization.

Modernit Qualification and modernization of public technological institutes

Grants

Promove Promotion and modernization of the Brazilian engineering

Line 4 - Scientific and technological support to social development

PROSAB Sanitation technology (low costs and easy applicability) HABITARE Housing technology (low costs and easy applicability)

PRONINC Tech incubators on popular cooperatives

Grants

PROSOCIAL Development and diffusion of technologies with social contents and interests, low costs, easy applicability and social impact

3 - Evaluating what?

• The narrow and the broad vision of the NSI

Conceptual Framework

Often policy makers and scholars have applied a narrow

understanding of the concept (of Innovation System) and this has given rise

to so-called ‘innovation paradoxes’ which leave significant elements of

innovation-based economic performance unexplained. Such a bias is

reflected in studies of innovation that focus on science-based innovation

and on the formal technological infrastructure and in policies aiming almost

exclusively at stimulating R&D efforts in high-technology sectors.

Without a broad definition of the national innovation system encompassing individual, organizational and inter-organizational learning, it is impossible to establish the link from innovation to economic growth. (Lundvall, 2007, p. 1-2)

In Lundvall, B.-Å. (ed.) (2007), National Innovation Systems: Towards a Theory of Innovation and Interactive Learning, London, Pinter Publishers (2nd edition of the 1992 book).

NIS: The Narrow Version

Policy concentrates on R&D (in firms and U/I linkages)

Firms S&T infrastructure Demand

Narrow

S&T&I Policy

Very Narrow

NIS: the Broad VersionInnovation is much more than R&D

Subsystem Production/Innovation

Subsystem

Capacity-Building, Research & Technology Services

Demand (segmented)

Narrow

Wide

Geo-Political, Social, Political, Economic, Cultural & Local Context

Subsystem Policy, Promotion, Representation &

Financing

Very Narrow

Fiscal Incentives to R&D: the Australian experience

• R&D tax concession do not screen out R&D that would have happened anyway — the bulk of business R&D. This increases the costs to revenue from stimulating any additional R&D and reduces the magnitude of net benefits from the program. At present program settings, the net benefits of the program are not large and could be negative (p. XXVI)

• … firms should be barely receptive to subsidies directed at R&D alone, any more than people buying cars would respond to a reasonable subsidy on the tyres ( p. 35).

• The finding that other factors are also important for business innovation does not render R&D irrelevant. It simply means that innovation policy has to look at more than one explanatory factor and that these additional factors are of great importance. For example, governments have significant impact on the innovation system through policies relating to the creation of infrastructure and human capital (p. 36)

The Productivity Commission (2007) Public Support to Science and Innovation, Melbourne Australia

• The science and innovation policy discourse over the last decade has concentrated on– collaboration in R&D – “commercialisation” of research results– reducing the costs of R&D to firms

Some problems with Brazilian

• Support to innovation in industry (concentrated on R&D)

• Support to university/Industry linkages (concentrated on R&D joint projects)

Problems with Brazilian support to industry (concentrated on R&D)

• Brazil’s current suite of business programs do not target the rationales for public support (additionality and spillovers) effectively.

• It concentrates on R&D (narrow vision of NIS) and disregards problems associated with broad NIS (for example training, technical education)

• It disregards technical change in so-called traditional sectors (for eg. diffusion of ICT and relation to innovation in these sectors)

• R&D tax concession:– is available to all eligible firms whether or not the R&D would

have been performed anyway; and– it assists R&D that has low levels of spillover.

• Low risk innovators are the prime beneficiaries of Brazil´s support mechanisms for R&D????

The need to focus on learning and capacity-building and not R&D

• Within most OECD economies, policymakers remain heavily focused on ICT, biotech and nanotechnology issues (both in innovation and diffusion policy) to the exclusion of most of the areas of knowledge that are, in fact, producing change across major industries. Policy remains focused on a science-based model of innovation to the exclusion of a genuinely learning-based approach (Smith, 2004).

Problems with Problems with Brazilian support to U/I linkages

• More than 30 years of support and dysmal results

• Concentration in one aspect of U/I linkages (R&D projects)

Conclusions

• Historically: low interest in evaluating program and policies

• Difficulty in not envolving main stake-holders• The two main problems to be tackled

– Adressing the imbalances (regional and social dimensions of the policies)

– Adressing learning and capacity building (really abandoning the linear view of innovation and incorporating the notion that innovation is MUCH MORE than R&D)

Conclusions: Some general criteria for evaluation

• Evaluating the Program in its reasoning and evaluating the reasoning of the Program

• Outputs and intended outcomes should be defined in relation to the rationales for public support and to the benefits expected from that support.

• The importance of case studies of impacts.• Evaluation and assessment should be

independent from major stake holders (the role of some communities !!!)

• Evaluation should take into account the needs and interests of majority of population