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 ProjectManager - 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 entrepreneurshiptechnology and

internationalisation 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 TechnologyMinistry of the

Economy• Research and development•Innovation

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Proactive Industrial Policy- Starting point

1. Competitive position of Slovenian economyBy 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 requirementsFull 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.

POLICY

PROGRAMS

LEARNING

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Proactive Industrial PolicyBasic 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.

POLICY

PROGRAMS

LEARNING

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Proactive Industrial PolicyAim 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.

POLICY

PROGRAMS

LEARNING

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Proactive Industrial PolicyOrientation and Programs

POLICY

PROGRAMS

LEARNING

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, supportinfrastructure

3. Rescue and restructuring aid for individual companies

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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

PROGRAMS

LEARNING

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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

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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

PROGRAMS

LEARNING

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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.

POLICY

PROGRAMS

LEARNING

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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

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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.

POLICY

PROGRAMS

LEARNING

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POLICY

PROGRAMS

LEARNING

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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POLICY

PROGRAMS

LEARNING

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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POLICY

PROGRAMS

LEARNING

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”

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External evaluation proved the cluster program as one of the most successful policy measures

THE WHAT

THE HOW

LEARNING

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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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POLICY

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

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Cluster Program Design

THE HOW

THE HOW

LEARNING

THE WHAT

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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 chainDevelopment of technology networksDevelopment of local clusters

TARGETS Cooperation cultureConcentration of industryKnowledge about new business concepts

Direct support for development of clusters

First year –Initiation:

Strategy Action planManagement and

organization

Two more years:

ManagementJoint R&D projectsCommon platforms and infrastructure

Support for:

Internationa-lisation:R&D projectsInnovationinfrastructureCapacitybuilding

TARGETSCluster hubs- critical mass of firms, skills, resourcesCluster strategies - vision, needs, interests Action plan - identification of gaps in skills,knowledge, needs and potentialInvestment in R&D and infrastructure

TARGETSGrowth CompetenciesOpen innovationsystems

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POLICY

PROGRAMS

LEARNING

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)

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POLICY PROGRAM - 20 KEYS TO

WORKPLACE IMPROVEMENT (2000 – 2003)

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Two yeras of implementation 2002

Start of the Program 2000

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POLICY

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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POLICY

PROGRAM

LEARNING

What did we learn

What makes policies effective:Shared and understood visionClear and consistent priorities

Implementation tools, knowledge of what worksEffective management

AccountabilityContinuous 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 improvements.

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POLICY

PROGRAM

LEARNING

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.

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THE WHAT

THE HOW

LEARNING

The key to successful implementation is broad national consensus and trustful environment

This requires:

- Constant communication, promotion and awareness raising among all shareholders

- Broadly accepted programming documents

- Clearly presented processes and implementation structures ensuring transparency

- Balance between long term strategic investment and short term results (proof of concept)

- Open access to all information and results of the programs

And last but not least, it is a long process and it requires a strong commitment and a lot of persistence.

A lot of success !

Mateja Mešl

mateja.mesl@gov.si