Industrial Policy Strategy
- Case Study Slovenia
TAIEX Seminar on Industrial Policy Belgrade, February 4, 2011
Mag. Mateja Mešl
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Mag.Mateja Mešl
• Diploma in Sociology, Masters in Regional and Urban Planning
• Governement of RS, Ministry of Higher Education, Science and Technology
• Professional Career:
• - 2006-2010, Private Consultant and Project Manager - RSG, Venture Capital Fund
- 2004-2006, Vice-president – Slovenian Chamber of Commerce and Industry
- 1999 – 2004, State Secretary – Government of RS, Ministry of the Economy
- 1990 – 1999, Founder and Manager - Nov’na d.o.o., Ravne
- 1979 – 1990, Researcher - Economic
Institute Maribor
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PRESENTATION
Industrial policy in Slovenia….
• Industrial Policy – policy transformation process, design and principles
• Implementation – programs and
instruments, organizational structures, monitoring and evaluation
… results, best practices and learning.
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Policy transformation process
From 1990 – Privatization and restructuring, “traditional”
industrial policy
1999 the first Industrial Policy Strategy - pro-active industrial policy with clear distinction between the horizontal development
support and direct rescue and restructuring support for companies.
2000 new organization of the ministries - integration of policies in support of entrepreneurship, R&D, investment, internationalization . 2002 Comprehensive Competitiveness and Entrepreneurship Policy- measures to support investment in knowledge and skills,
technology development and internationalization
2004 National development Program - industrial policy measures as priority for investment of the EU structural funds.
2010 National Research and Innovation Policy – integration of R&D and competitiveness policy measures.
Industrial Policy was an important part of the economic policy through-out the transition period
POLICY
PROGRAMS
LEARNING
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TRANSFORMATION PROCESS AND ORGANIZATION
Privatization, restructuring -
rescue and restructuring
aid to avoid social problems
Ministry of Econ.
Activities Ministry of Econ.Relations Ministry of Small Business and Tourism Ministry of Science and
Technology
Proactive Industrial Policy
-horizontal amd sector specific
measures (textile, steel)
Ministry of the Economy
•Competitiveness - SME, Industry,
Technology
• Internal Market
•International Relations
Competitiveness Policy promoting entrepreneurship
technology and internationalisati on of enterprises
Ministry of the Economy
•Entrepreneurship, Competitiveness, innovation,
•Internal market
•International Relation
1990 1999 2002
Innovation Policy promoting
R&D investment,
knowledge transfer and
innovation
2010
Ministry of Higher Education, Science
and Technology Ministry of the
Economy
• Research and development
•Innovation
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Proactive Industrial Policy - Starting point
1. Competitive position of Slovenian economy
By the end of 1990’s the overall performance of the country improved but the competitive position remains weak:
- Strategic gap in productivity (in 1999 VA per employee 17.000€, EU 15 65.000€)
- High share of traditional industries, low investment capacity - Low investment in R&D and technology transfer
- Low share of high educated work force….
2. EU accession and requirements
Full compliance with the state-aid rules was the most important topic:
- Evaluation of the Rescue and Restructuring Aid Granted - Clear distinction between RR and development aid
- Institution building, adequate implementation structures
3. New trends and policies
- New technologies, competitive markets,
- New industrial policy in EU, active role of the state in promoting key factors of competitiveness
Slovenia prides itself for sound macroeconomic situation but microeconomic indicators are less favorable.
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Proactive Industrial Policy Basic Principles
1. Changing role of the state
- Catalyst - ensuring macroeconomic and framework conditions for economic growth (public finance, education and labor market, public R&D investment, open and competitive internal market,…)
- Agent of change - active role in acquisition of knowledge and investment in key factors of competitiveness, being knowledge, technologies and
entrepreneurship.
2. Horizontal policy
- Governmental policy -Inter-action with all different policies influencing competitiveness of the industry (internal market, education, R&D, labor market, environment and regional development,…)
- Horizontal measures – equal access for all industries and enterprises, non- selective in terms of sectors and companies
- Economic impact – impact on the overall nation’s competitive capability, policy is selective in terms of investment focus and anticipated impact.
3. Bottom-up and pragmatic approach
Consultation with the private sector, learning about best practices and adopt them to suit the national environment.
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Proactive Industrial Policy Aim and Objectives
The aim:
-Ensure stable macroeconomic conditions and environment supportive for entrepreneurship
-Enhance key factors of global competitiveness - knowledge, technology and entrepreneurship
Objectives:
-Attaining economic structure comparable to that of the EU which will require fast growth and an increase share of activities with high added value
-Improving the competitive capacity of enterprises, in particular reducing the productivity lag
-Creating balanced economic capacity across the regions of Slovenia.
Two challanges for Slovenia: to catch up and to adapt
-to the future demands.
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Proactive Industrial Policy Orientation and Programs
POLICY
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1. Improvement of the regulative environment (deregulation, competition)
Open and competitive market Internal market, state aid regime, competition regime Labor market and education Employment regulation, life-
long learning, R&D policy,…
2. Improvement of the competitive capacity of industry
Capabilities Business models, management
tools, life-long learning
Technology development R&D, technology, value chain and cluster development
Internationalization In-ward, out-ward investment, strategic partnerships
Entrepreneurship and
innovation Start-up , SME growth, support
infrastructure
3. Rescue and restructuring aid for individual companies
Entrepreneurship and Competitiveness Program Design
1. Analytical background and studies
- International studies and reports (IMD, WEF, EU Innovation Scoreboard, EU, Observatory, EU BEST Report,…)
- In-depth analyses (Slovenian Manufacturing, Position of Slovenian Textile and Foot Wear Industry, Benchmarking Slovenia-
Competitiveness Strengths and Weaknesses, Study on Potential Clusters in Slovenia)
2. Organization
- Merging of the ministries (SME and Tourism, Economic Affairs and Economic Relations) and departments (Technology) under the new Ministry of the Economy
- Formation of the Department for Entrepreneurship and
Competitiveness as the responsible body for proactive industrial policy
3. Consultation and public-private partnership - Public awareness, presentation of the studies
- Formation of the PP consultation bodies i.e. Strategic Council on Competitiveness
- Inter-ministerial task groups i.e. R&D and Technology Council POLICY
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Entrepreneurship and Competitiveness Program Structure
POLICY
PROGRAMS
LEARNING
Improving Enterprise Competitive Capacity
Strengthening key factors that are determining competitive advantages of enterprises, technology,
innovation, organization.
Knowledge for Development Strengthening enterprise
capacities for use of technology advances as the
main source for higher competitiveness.
Entrepreneurship Promotion and Enterprise Creation
Encouraging entrepreneurship, promoting new values, new ventures and
growth of SME’s.
SKILL FORMATION
Sub-program; Knowledge for Development
Strategic objectives:
- Increased investment in R&D from 1,5 to 2% GDP
- Increased share of innovative companies from 28 to 40%
Measures and instruments:
- Stimulating transfer of knowledge from R&D institutions to industry; co financing joint R&D projects
- Stimulating employment of young researchers in industry;
employment subsidies
- Stimulating participation of Slovenian companies in EU research programs; co financing and technical assistance
- Supporting development of industry related infrastructure; co- financiering activities of the Technology Centers
- Stimulating creation of high-tech business from universities;
establishment of business incubators and technology transfer offices
POLICY
PROGRAMS
LEARNING
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Sub-program; Improving Enterprise Competitive Capacity
Objectives:
- Productivity increase, lowering the leg behind EU - Increase of the high tech export from 26% to the EU
average
Measures and instruments:
- Stimulating enterprise investment in R&D and innovation; co- financing applicative research projects and investment in new technologies
- Promoting internationalization; development aid for FDI and out ward investment of Slovenian companies
- Stimulating strategies to increase productivity; co-financing introduction of quality standard and continuous improvement systems (i.e. 20 keys, 6Sigma,..)
- Stimulating networking and development of clusters; co-financing projects on development of value chain, clusters and technology networks.
POLICY
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Sub-program; Entrepreneurship and Enterprise Creation
Objectives:
- Increasing net growth of new enterprises per year - Increasing amount of new investment in SME.
Measures and instruments:
- Development of supportive environment for SME: voucher system for consultancy and training services, public investment in
industrial cones, technology parks and business incubators
- Stimulating enterprise creation: incentives for start-up companies in business parks and incubators
- Investment promotion and growth of SME; co-financing new investment in SME investment in growth stage
- Access to finance: Small Business Fund, credit lines and guarantee schemes.
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Implementation
Implementation structure - Ministry of the Economy
- Ministry of Higher Education, Science and Technology - Ministry of labor and Social Affairs
- Implementing Agencies – Public Agency for Entrepreneurship, Public Agency for Technology , Entrepreneurship Fund.
Funding:
- 2000-2004 - app. 42mio€ from the national budget
- After the accession, the funds increased significant, nearly 40%
of the EU structural fund (ERRD) being dedicated to the program:
- 2004-2006 app. 100 m EUR - 2006-2013 app. 900 m EUR . POLICY
PROGRAMS
LEARNING
Monitoring and Evaluation
Monitoring:
- On the project basis - re-funding principle, state funds available after the successful implementation of the project
- On the program basis - internal monitoring and financial control, state aid system
Evaluation:
- Internal evaluation of the projects supported and direct results
- External, independent evaluation of the objectives achieved for the programming period.
First external evaluation was developed in 2004.
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Results and Learning
Efficiency of the implementation less satisfactory because of - high fragmentation of instruments, a lot of small scale
incentives
- lack of coordination and synergies between different implementing structures
Effectiveness of the program proven by the
- Overall investment stimulated; public funds represents 5% of the total investment, every € from the budget attracted nearly 20€ from the private sector
- Increased performance and competitiveness of the enterprises involved
Impact shown in important changes of the overall industrial structure but some important challenges remain
- Inflow and growth of innovative SME’s
- Productivity gap and technological structure.
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Results and Learning
Development support is justified when having impact on individual company and the industry as a whole!
It is therefore important to design policy measures in a
comprehensive way, not only as a financial incentives for individual companies but:
- To invest in knowledge transfer and access to best practices (train the trainers)
- To define evaluation, promotion and dissemination of knowledge as an important part of the program
- To ensure capacity building, organization and competencies for the implementation and sustainable development.
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Best Practices
Counter Factual Evaluation proved the changes in the overall industrial structure that would not happened without the state support.
Measures that were found most effective in reaching objectives set for the program and had the most recognizable impact on the desired changes were:
1. Business Cooperation and Cluster Development , improving cooperation between businesses and knowledge providers , networking and value chain development
2. Promoting development of common R&D
infrastructure, development of technology centers,
technology platforms and centers of competence/excellence 3. Continuous Improvement Systems , implementing new
business models and management systems - “20 Keys to Workplace Improvement”
External evaluation proved the cluster program as one of the most successful policy measures
THE WHAT
THE HOW
LEARNING
MEASURES - (1) % of overall budget, (2) % of probability for the projects not happened without the state support
(1)
%
(2)
% Stimulating transfer of knowledge from R&D institutions to industry, Stimulating mobility of
researchers
17 21
Strengthening international R&D cooperation 1 36
Promoting development of commonn R&D infrastructure 6 68
Stimulating creation of high-tech business from universities 1 50
Promoting enterprise investment in technology and innovation 6 58
Promoting internationalization of enterprises 16 30
Introducing strategies to increase productivity – “20 Keys Program” 2 58 Stimulating networking and development of clusters 15 75
Promoting entrepreneurship and the development of supportive environment 8 38 Promoting the creation and development of SME’s and investment promotion 9 44
Promoting development of tourism 19 21
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PROGRAMS
LEARNING
Cluster Development
1999 – Mapping, Identification of potential clusters 2000 – Start with the pilot projects
2001 – 2005 - Program design and implementation
STEP 1: Analyses of the existing inter and intra-firm co-operation, identification of the potential “strategic” clusters for Slovenia.
Strategic decision:
- “bottom-up approach”, development of cluster policy while learning together in pilot projects
- supporting the process of clustering, not “strategic clusters”
STEP 2: Selection of pilot projects - three groups selected, automotive, tool and die, transport and logistics
STEP 3: Implementation - public tenders
- 17 national cluster initiatives supported , more than 500 companies and 50 R&D institutions involved with 130 joint technology
development projects
- More than 70 local cluster groups organized and supported in training and strategy development
Cluster Program Design
THE HOW THE HOW
LEARNING THE WHAT
Broader set of measures designed to cover the process
:Promotion of clustering Initial phase Early growth Growth
Promotion,
international experiences, awareness raising:
Supporting projects on specialization in value/
production chain
Development of technology networks
Development of local clusters
TARGETS
Cooperation culture
Concentration of industry Knowledge about new business concepts
Direct support for development of clusters
First year –Initiation:
Strategy
Action plan
Management and organization
Two more years:
Management
Joint R&D projects
Common platforms and infrastructure
Support for:
Internationa- lisation:
R&D projects
Innovation infrastructure
Capacity building
TARGETS
Cluster hubs- critical mass of firms, skills, resources Cluster strategies - vision, needs, interests
Action plan - identification of gaps in skills, knowledge, needs and potential
Investment in R&D and infrastructure
TARGETS Growth
Competencies Open innovation systems
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Continuous Improvement Systems
Stimulating strategies to increase productivity; Introduction of new management tools and improvement systems - “20 keys”
project
Project design:
1) Transfer of knowledge (trained consultants)
2) Selection of enterprises for a pilot project (60 firms in three years) 3) Evaluation and promotion of the system.
Overall public investment in three years time 3 m €.
Results:
- Output Indicators – public funding generated 5.times as much private investment
- Result Indicators – amount of direct savings 3 m €, number of inventions and improvements registered 1747, approximation of added value 22 m
€, average productivity increase 14,7%
- Impact Indicators (Self Assessment) - increased investment in human resource 88%, new technologies 60%, added value 79%
- Promotion of good practices, knowledge providers (80 highly trained trainers) dissemination of knowledge (the role of CCI)
POLICY PROGRAM - 20 KEYS TO WORKPLACE IMPROVEMENT (2000 – 2003)
0 1 2 3 4 5 1
2
3
4 5
6
7
8
9 10
11 12
13 14
15 16
17 18
19
20
Two yeras of implementation 2002 Start of the Program 2000
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PROGRAM
LEARNING
Investment in R&D and Infrastructure
Stimulating private investment in R&D and stronger
cooperation between industry and knowledge institutions.
2000 – 2006 - Investment in R&D and infrastructure
- R&D projects, technology centers , technology parks, university incubators
2006 - Technology Platforms ; initiative of the Chamber of
Commerce and Industry; 22 platforms /over 500 companies and RD institutions) developed strategic research agendas
- Key technologies and investment priorities identified ; ICT, advanced materials and nano technologies, manufacturing
technologies, biotechnologies, food and health, sustainable energy and sustainable construction
2008 on - Investment in infrastructure on the priority fields - Development of centers of excellence and competence centers
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What did we learn
What makes policies effective:
Shared and understood vision Clear and consistent priorities
Implementation tools, knowledge of what works Effective management
Accountability Continuous learning.
Source: UK Government Performance and Evaluation Unit
•Success depends on getting all these right. Failure of one can
jeopardize the whole process. Policies and implementation can not be divided.
•Collection of tools is crucial. There are no models, selection depends on the national circumstances, objectives, priorities and
implementation capabilities.
•Continuous learning. Delivery is not one-off task nor a linear
process. It requires constant learning, adoption and improvement
s.
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What we failed to achieve
• Social/political consensus and integrated approach Policy limited to one Ministry’s effort/responsibility
Not recognized as a national growth model; missing “policy cluster”
• Sustainability and long-term orientation Changing , short term orientations and priorities Sustainability not stressed enough
• Institutionalization
Attempts to create a strong implementing Agency failed Missing opportunity for learning from cross-border and international initiatives
Failed to build on the strengths of clusters to develop innovation infrastructure.
THE WHAT
THE HOW
LEARNING
