the challenge of the knowledge economy for el salvador: preliminary assessment robert whyte world...
TRANSCRIPT
The Challenge of the Knowledge Economy for El Salvador: Preliminary Assessment
Robert WhyteWorld Bank Institute
San Salvador, El Salvador
November 24, 2003
Why focus on Knowledge Economy?
• A “knowledge revolution”! Reflected in the speed-up in creation and dissemination of knowledge.
• Opening up opportunities for leapfrogging, but also raising risks that developing countries may fall behind
• All countries need to develop explicit strategies to take advantage of this new knowledge to avoid being left behind.
• There are many definitions of the “Knowledge Economy”, many of which focus only on information technology and high technology sectors
A broader definition:
“An economy that creates, acquires, adapts, and uses knowledge effectively for its economic and social development.”
0
2
4
6
8
10
12
14
1965 1970 1975 1980 1985 1990 1995 2000
Knowledge Explains Differences in economic performance
Argentina
GNP/headThousands of Dollars (1955 constant value)
Difference attributed to knowledge
Difference associated to physical and human capital
© Knowledge for Development, WBI© Knowledge for Development, WBI
Rep of Korea
GNP per capita: Korea v. Argentina
The Four Pillars of the Knowledge Economy
• Economic incentive and institutional regime
• Educated, creative and skilled people
• Dynamic information infrastructure
• Effective national innovation system
Knowledge Assessment methodology (KAM)
• Based on the four Knowledge economy pillars• 76 structural/qualitative variables• 121 countries • Benchmarks performance for two points in time: 1995 and
2002• Each variable is normalized from 0 (weakest) to 10
(strongest)• www1.worldbank.org/gdln/kam.htm
• Basic (simplified) scorecard for 14 key variables
• Aggregate knowledge economy index (KEI): - Ranging from 0 (weakest) to 10 (strongest)
Benchmarking El Salvador
Latin America
Latin America AverageChile
Costa RicaNicaraguaGuatemala
Rest of World
Republic of KoreaThailandLatvia
Bulgaria
Costa Rica
Latvia
Thailand
Bulgaria
Korea
Chile
Guatemala
Latin America
El Salvador
Knowledge Economy Index 2002
Strong Correlation: GDP/Capita & KEI
R2 = 0.67
• El Salvador is below middle ranking globally on the Knowledge Economy Index (3.94), having improved its position slightly since 1995 (3.29)
• Ahead of most countries in the immediate region but falling some way behind the average for Latin America (4.34) and well behind regional leaders such as Chile (6.32) and Costa Rica (5.47)
• Falling behind a number of countries with similar income levels: For example:
> Bulgaria 5.93 > Latvia 6.77 > Thailand 5.83
El Salvador’s Position on Overall KEI
Econ. Incentive Regime
Innovation
Education
Information Infrastructure
most recent 1995
ECON. INCENTIVE REGIME:-Tariff & Non-tariff barriers-Rule of Law-Regulatory Quality
INFORMATION INFR.:- Tel. Lines per 1,000 people- Computers per 1,000 people- Internet users per 10,000 people
EDUCATION:- Adult literacy rate- Secondary Enrollment- Tertiary Enrollment
INNOVATION:-Researchers in R&D / mil pop- Patents granted by USPTO / mil- Scient. & Tech. Publications / mil pop.
Aggregate Changes Basic Scorecards(Four Pillars)
El Salvador – Basic Knowledge Scorecard
Basic Scorecard: El Salvador comparedwith Nicaragua and Guatemala
Latin America2002
Basic Scorecard: El Salvador compared with Costa Rica and Chile
2002
El Salvador: Economic Regime
Latin America
El Salvador: Governance Variables
Latin America
Based on the benchmarking:• El Salvador scores very well on tariff and no-tariff
barriers, regulation and the soundness of its banks• It is at the 50th percentile for the protection of intellectual
property rights and for government budget balance• In terms of governance variables, political stability,
corruption and government effectiveness score very highly for El Salvador
• However, the rule of law remains a weaker area, and there needs to be more focus on strengthening levels of gross capital formation
Benchmarking the EIR for El Salvador
El Salvador : Education Variables
Latin America
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000
100%
80%
60%
40%
20%
0
Secondary (gross) Enrolment rates 1990 - 2000
Chile
Nicaragua
Latvia
Guatemala
Costa Rica
El Salvador
Thailand
Bulgaria
Literacy Rates 2002: Adult Total (% of people 15 and older)
Less than 60%60 – 80%80 – 91%91 – 97%97% and aboveNo data available
Latvia 99.8%
Bulgaria 98.6%
Chile 96.0%
Thailand 95.8%
Korea 98.0%Costa Rica 95.8%
El Salvador 79.7%
Nicaragua 67.1%
Based on the benchmarking:• El Salvador has improved its literacy rate and is
maintaining its lead over most other countries in the immediate region
• But has not yet caught up with countries such as Costa Rica and Chile
• Similarly, El Salvador is lower than the average for Latin America for school enrolment, average years of schooling, and adult literacy levels
• Public spending on education is 2.3% of GDP in El Salvador, compared with 3.8% on average for the whole of Latin America
Benchmarking Education for El Salvador
El Salvador: ICT Variables
Latin America
1200
1000
800
600
400
200
0
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001
Telephone Penetration
Telephone (fixed mainlines plus mobile lines) per 1,000 people 1990 - 2001
Chile
Nicaragua
Latvia
Guatemala
Costa RicaEl Salvador
Korea
Mexico
Computer Penetration
Personal Computers (Per 1,000 people), 1990 - 2001
300
250
200
150
100
50
0
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001
Chile
Nicaragua
Latvia
Guatemala
Costa Rica
El Salvador
Korea
Mexico
120
100
80
60
40
20
0
Internet Penetration
Internet Hosts (per 10,000 people), 1994 - 2000
Chile
Nicaragua
Latvia
Guatemala
Costa Rica
El Salvador
Korea
Mexico
1994 1995 1996 1997 1998 1999 2000
Based on the benchmarking:• El Salvador needs to do more to strengthen its
information infrastructure• It does relatively well on radios (per 1000)
persons• But it has relatively low telephone connectivity
(fixed and mobile), computer penetration, and Internet hosts
Benchmarking ICTs for El Salvador
El Salvador : Innovation Variables
Latin America
• El Salvador is strong in terms of R & D expenditure as a % of GNP, and the % of engineering enrollments in tertiary education.
• However, it is weak in a broad range of areas of innovation:– Private sector expenditure on R and D– Entrepreneurship amongst managers– Publications in scientific journals– Royalties paid and received for technology– University–business collaboration
• El Salvador needs to increase its focus on innovation: For example:– Dedicating more funding for R&D– Encouraging patenting– Attract more and diversified sources of FDI– Disseminate lessons of local innovation efforts– Strengthen public-private partnerships
Benchmarking Innovation for El Salvador
El Salvador: Summary of Strengths & Weaknesses
STRENGTHS WEAKNESSES
Economic & institutional Regime
• Macroeconomic stability• Reform oriented govt. • Trade as a % of GDP• Tariff & non-Tariff barriers• Soundness of banks
• Gross capital formation• Rule of law – crime rates, legal system, courts
Innovation
System
• Total expenditure on R&D• Science and engineering enrolment rates in tertiary education
• FDI as % of GDP• Private sector spending on R&D• Entrepreneurship• Public-private partnerships• Researchers in R&D, royalties for technology
Education & Human resources
• Significant improvements over 1990s - enrolment rates, literacy, average years at school
• Public expenditure on education• Literacy rates still relatively low• Average years of schooling• Secondary and tertiary enrolment
Information & communication
Infrastructure
• Rate of adoption increasing• Build on growing consumer demands
• Low ICT penetration ratios – individual; and business• Low levels of application and use
OPPORTUNITIES THREATS
Economic & institutional
Regime
• Opportunities of CAFTA• Attract FDI by improving investment climate
• Regional and global competition is heating up
Innovation
System
• Tapping into global knowledge more effectively• Harness S&T base in tertiary education
• Falling behind global advances in knowledge• Loss of scientific talent• Enterprises lose competitiveness
Education &
Human resources
• Launch major re-skilling program• Institute LL learning • Reform higher education to market needs
• Continued brain drain• Resistance from established institutions• Unresponsive universities
Information & communication
Infrastructure
• Expand penetration ratios• Especially in enterprise sector• Focus on applications
• Risk of digital divide• Difficulty of changing processes to use ICT
El Salvador: Summary of Opportunities and Threats
Very dynamic global situation - risk of some countries falling further behind
Performance depends on coherent strategies focusing on how to use knowledge effectively for development
Finding advantageous ways of participating in globalization
Now critical to engage and and move up in global value chains
This requires strengthening ability to acquire, adapt, disseminate, and even to create knowledge
Raising awareness among policy makers, private sector and civil society on challenge/opportunities of the knowledge revolution
Adopting an integrated approach to policy is critical
Setting monitorable goals and constant evaluation is key to improving performance
The Way Ahead …..