THE PANEL OF THE UNITED NATIONS COMMISSION ON SCIENCE AND TECHNOLOGY FOR DEVELOPMENT

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1 THE PANEL OF THE UNITED NATIONS COMMISSION ON SCIENCE AND TECHNOLOGY FOR DEVELOPMENT 9-11 November 2009 Geneva IMPROVEMENT AND INNOVATIONS IN EXISTING FINANCIAL MECHANISMS: PAKISTAN - STATUS OF INITIATIVES By Shehryar Khan. Joint Technological Adviser Ministry of Science & Technology, Government of Pakistan, Islamabad The views presented here are the participants and do not necessarily reflect the views and the position of the United Nations or the United Nations Conference on Trade and Development 1

2 IMPROVEMENT AND INNOVATIONS IN EXISTING FINANCIAL MECHANISMS: PAKISTAN - STATUS OF INITIATIVES By Shehryar Khan. Joint Technological Adviser Ministry of Science & Technology, Government of Pakistan, Islamabad E Mail: jta@most.gov.pk The major economies in 21 st century are knowledge based economies characterized by high levels of skills and education, life long learning and innovation, in all areas of S&T industrial and commercial competitiveness. Pakistan is fully conscious of meeting the requirements of development through the use of modern tools and technology. Therefore, Science, Technology and innovation are being given high priority. The on-going Medium Term Development Framework launched by the Government of Pakistan in July, 2005 presented the vision of a developed, industrialized, just and prosperous Pakistan through rapid and sustainable development, in a resource constrained economy by deploying knowledge inputs. Vision 2030, which has been prepared in consultation with all the stakeholders, was launched in August It acknowledges a national consensus on the following fundamentals: To build a nation whose development is measured by economic growth as well the quality of life enjoyed by its people; To encourage freedom of enterprise and innovation in the market place together with state responsibility for the provision of basic services to all citizens, including education, healthcare, water and sanitation, shelter and security under law; To generate and absorb knowledge and harness technology for the good of all while promoting social sciences and humanities as an essential branch of knowledge; 2

3 To take advantage of globalization through enhanced competitiveness in a global economy relating to commerce, manufacturing and services, with increased diversity and quality of content; To achieve significant breakthrough in the sectors of education, employment and energy while consolidating and expanding the gathering momentum in infrastructure and service sectors. All these objectives will be achieved through consensus of all stakeholders in a graduated but timely fashion. The Budgetary process of Government of Pakistan includes appropriation/allocation to different Ministries including Ministry of Science and Technology and the final budgetary proposal are approved by the Parliament. The budget allocation can broadly be classified as non-development and development. The non-development expenditure mainly comprises of pay, allowances and utilities and general day to day expenditure. The development budget of the Federal Government specifically caters for Public Sector Development Programme (PSDP). The essence for Public Sector Development Programmes (PSDP) encompasses the view that a sense of mission and purpose and a strong spirit of development are required to accomplish improvements in the public sector. Thus belief also reinforces the government s commitment to the programmes that will sustain the principles of developmental, whilst improving the public sector performance. Principally, government s developmental policy is driven by a philosophy that makes the interest of the people in public policy as a dominant concern. PSDP is perceived as a compelling mandate of government for advancing the process of creating a just society by home-grown, participatory and tailor-made projects to meet local needs and investment. While the focus of earlier development plans was on a growing public sector with massive investments in basic industry and heavy industries, the current focus is on increasing 3

4 productivity in agriculture, value addition, infrastructure and social development, with increasing involvement of the Private Sector. Notwithstanding the deteriorating economic scenario, the economic growth was 2 percent during fiscal with the overall size of PSDP at Rs.646 billion. There is a separate process for allocation of funds of development projects in PSDP programmes based on the national development priorities which is overseen by Planning Commission. The national priorities are approved by National Economic Council (NEC) headed by Prime Minister/Finance Minister and include respective Cabinet Ministers of Federal Government, members of Planning Commission as well as Chief Executives of Provinces. The budget allocation/approval process for the determination of specific development programs is common for all ministries. However, Science and Technology sector over a period of time has initiated a number of steps to encourage R&D and innovation in public sector and to develop linkage between S&T and economy. Some of the actions being taken in this context include: Research organizations are being made autonomous and self sustaining for a closer liaison with the industrial sector and to align R&D to the requirements of the industry and thereby generating increasing funds through provision of technical services to industry and reducing burden on national exchequer. Measures are also being taken to activate SMEs. Action is being taken to Identity, classify and assess technology needs and capabilities, increase indigenization to foster public/private partnership in commercializing locally developed technologies. The concept of financing R&D activities through a technology development fund to improve the quality of existing products and processes as well as development and commercialization of new products and processes has been introduced. 4

5 Technology Clusters Cenrtres are being set up with the help of industry to help promote public/private partnerships and provide services to SMEs for training, product development, and consultancy and quality improvement. Some examples are Fan cluster center Gujrat, Bed Sheet and upholstery Centre Multan etc. Pakistan Standards and Quality Control Authority (PSQCA), Pakistan National Accreditation Council (PNAC) and Industrial Analytical Centres have been established to maintaining quality standards for industrial products and processes. R&D laboratories located in major industrial cities have been strengthened to provide state of the art analytical facilities to industry for certifying their products for export. TUSDEC (Technology Up gradation and Skill Development Company) has been established to upgrade technology and skills of key and strategic industrial clusters and connect Pakistan to the global value chain. With focus on common or shared technology development, Common Facility Centres and Technology Upgradation Centres are being run by a cluster-based public-private partnership. A Technology Incubator Centre has been established at the National University of Science and Technology (NUST). This initiative is aimed at identifying opportunities of collaboration between industry and academia for the purpose of finding solutions to industry specific problems and new product development. One of its major programs is to incubate technology based start-up companies. Agricultural technology and its development, transfer and adoption are fundamental for increasing productivity, rural incomes, and growth and subsequently in contributing to poverty reduction. The agricultural development by using S&T can enhance productivity of crops through new technologies, high yielding, diseases resistant varieties, scientific methods of farming an improved management practices. The growth in agricultural products can be better utilized for export purposes after necessary value addition. Therefore, raising the 5

6 knowledge contents in Agriculture provide better opportunity to generate income and help sustainable development. Research efforts have produced agricultural technologies that are potentially very profitable. Crop varieties have been developed that are high yielding. This is a major contribution towards poverty alleviation, food security enhancement and nutrition improvement. Programmes in genetic engineering and biotechnology are particularly important in this regard. As far as Human Resource Development is concerned, the Ministry of Science and Technology, is working to dove tail with the Higher Education Commission s Plan. While the issue of critical numbers is being addressed through greatly enhanced funding for faculty development and Ph.D enrollment by the HEC, the focus on quality needs to be further strengthened. Private sector is expected to play an increasing role in economic activity and is to be supported through difference schemes for research and accreditation. Pakistani scientists and engineers are now playing an important part in building up a broad research base in energy and its related new technologies. Because of the energy crunch, this sector offers opportunities for industrial growth as well as employment. Innovations Innovation is essential to spark sustainable economic growth in Pakistan. Fostering innovation requires attention to all components of the innovation ecosystem. This requires a comprehensive National Innovation Strategy that can stimulate public-private-university dialogue around specific measures to take full advantage of Pakistan s potential for innovation that results in economic growth The benefit of innovation could be achieved through stimulating dialogue around policies and strategic interventions that boost productivity, and economic 6

7 . growth with the aims to improve the overall competitiveness of the national economy and its constituent industries. Technology Promotion and investment: Pakistan has continued to build on its foundation of technology incubation. In the light of global trends, and based on Pakistan s current position relative to global best practice in technology acquisition and business model adoption, there is a need to develop a comprehensive strategy to improve the country s ability to spark innovation. In addition, a framework should be developed to ensure there is an effective legal framework that ensures continuity of policies, heavy public sector investment in the form of endowments in research and development, affordable financing and utilities for operations, and increased university-industry interaction at the national and international level. Some of the initiatives involving technology promotion and investment are given below: 1. Competitive Support Fund: The Competitive Support Fund (CSF) has been established as a joint initiative of Government of Pakistan and United States Agency for International Development (USAID). The main aim of CSF is to reposition of Pakistan economy on a more competitive global footing through financing and promoting innovation. The concept of CSF is based on similar funds established in other countries to make the private sector more competitive and to improve the policy framework needed for innovation-based competitiveness. The CSF will concentrate its efforts on fostering innovative public-private partnerships, providing input into policy decision and working to improve regulatory and administrative framework vital to an efficient commercial environment. The CSF will also provide technical assistance and co-financing for initiatives related entrepreneurship, business incubators and private sector land initiatives with research institute and universities that contribute to creating knowledge 7

8 given economy. The operation and structure of the financial facilities of CSF comprises of; (i) technical assistance (ii) matching grants (iii) business incubators/venture capital (VC) programme 2. The National Information and Communication Technologies (ICT) R&D Fund The National ICT R&D Fund has been created to transform Pakistan s economy into a knowledge based economy by promoting efficient, sustainable and effective utilization of Information and Communication Technologies (ICT) through synergic development of industrial and academic resources,. The ICT Fund along with its Policy sets out Pakistan s road map in terms of the vision, objectives and policy priorities for developing Pakistan s information society and economy. The ultimate objective is to: accelerate Pakistan s socio-economic development process towards the realization of the vision to transform Pakistan into a high income economy and society that is predominantly information-rich and knowledge-based within the next two decades or less. In the initial phase of its functioning, the Fund will concentrate the major portion of its resources in Human Resource Development. This investment will be expected to give returns to the industry in the immediate or short term time frame. Second Priority will be given to National Productivity Enhancement for identification of comparative advantage and capitalizing on this advantage through development of indigenous industry. Simultaneously, investment will also be made in Product and Market Development and Multi-Sectoral Development via ICT proliferation, however, initially a very small portion of the funds will be dedicated to these areas. In later phases of operation, when R&D fund has successfully laid strong foundations of capable human resource and has caused sufficient exhaustion of the existing comparative advantage, more funding will be allocated to areas of product and market development in ICT sector. 8

9 3. Small and medium enterprise authority. SMEDA plays an important role in technology incubation through motivation and start-up financial help in power loom up-gradation, auto part vendors, carpet weaving program, agriculture credit services, ginning sector, ceramic and pottery sectors, etc. 4. Software Technology Park, Islamabad. The Software Technology Park of Islamabad is now well established. A covered area of about 40,000 sq ft infrastructural requirements is available for nominal rent. The Software Technology Parks provide conditions suitable for software shops; it provides large bandwidth communication with reliable power supplies, high flexibility buildings, minimized regulatory overheads, and maximum flexibility in the choice and use of space. The Park management is developing similar Parks at Lahore and Karachi. 5. Indus information technology park The Government of Sindh is working on the establishment of an Information Technology Park at Karachi, the largest industrial city of the Country. While the development work for the park is in progress, the park envisages the establishment of software houses. Incubation Centers, hardware manufacturing, and other related facilities. The park would be declared an export barrier free zone to encourage foreign investments and export of software. This would be the first complete IT Park in Pakistan providing all necessary facilities to the start-up companies and entrepreneurs of IT business. 6. Scientific and Technological Development Center (STEDEC). STEDEC has been established to facilitate R&D organizations in commercialization of the R&D results. STEDEC provides financing for strategic partnerships promoting incubation systems for SMEs matured projects. These soft loans with a long period of recovery are used for commercialization of these projects. Another such scheme has been launched by the MoST under the name 9

10 Contractual Research. Envisaged funds for private entrepreneurs for practicable ideas or schemes involving high priority commercial projects. The concept is to initiate the R&D infrastructure in the development of such commercially valued products that have definite sponsors. Projects on roses and citrus nursery have being executed by the University of Agriculture in Faisalabad are good, pioneer examples in the direction of commercialization of technologies and products. 7. Metrology, Standard, Testing and Quality Assurance System (MSTQ) Under the science and technology policy, Pakistan has initiated a comprehensive program for strengthening the MSTQ infrastructure. The following organizations are responsible for developing, implementing, and monitoring the standards in the country: Pakistan Standards and Quality Control Authority (PSQCA) and the Pakistan National Accreditation Council (PNAC), which accredits agencies/bodies for Quality Management System, i.e. ISO-9000, ISO and ISO PNAC also carries out a registration of auditors and conducts training courses on relevant fields. Also, the National Physical and Standards Laboratory is responsible for maintenance of national reference standards of measurements and materials in conformity with International Standards and their dissemination in the country. 8. Pakistan Council for Science and Industrial Research (PCSIR) PCSIR is planning to set up a variant version of Technology Business Incubators (TBIs). Through these TBIs, PCSIR is aiming to popularize its technologies in an innovative approach. These TBIs will function as pilot plants for the demonstration of technological processes developed by its scientists. These are anticipated to attract venture capital for SMEs in a science and technology cooperative mode. The approach is being designed to attract such SMEs which are either shy of investing technologies or do not have sufficient venture capital resources of their own. The other developments in this direction include (i) and agreement between Pakistan and China for active collaboration for setting up science and technology 10

11 parks and technology incubators at various sites in Pakistan, (ii) entrusting responsibility of strengthening the initiatives for incubation of IT/ITES (IT enabled services) companies in Pakistan, and (iii) development of a mindset for developing technology incubators in the future vision of organizations like PCSIR, UAF, NUST, HEC etc. Concluding Remarks: To sum up, R&D funding should be based on national developmental priorities, which should be defined keeping in view the latest developments in science and technology in the world and R&D budget allocated to different sectors accordingly. Surveys should be carried out to identify the demand for research in specific areas within sectors. Opinions of the leading market players must be incorporated in such surveys, to gear the R&D programs towards strengthening industrial competitiveness. The research bodies should function as individual entities operating according to modern management techniques. There should be increased decentralization in research institutes. Performance based evaluation mechanisms need to be installed in each project to increase their efficiency. External evaluation by a committee consisting of outsiders at the completion of a program should be used to formulate future R&D policy. Finally, proposals involving both public and private sectors should be solicited for R&D funding in order to increase their competitiveness of local research. Reference: The State of Pakistan s Competitiveness Report 2009, prepared by Competitive Support Fund (CSF), Government of Pakistan, Islamabad. 11