1. Knowledge-based Economy – a Key Process for Sustainable Development Prof. Edvins Karnitis Republic of Latvia Paris, February 19-22, 2002

2. Key indicators of the national economy GDP growth rate, 2001 (estimated)7.4% Consumer price index, 20012.5% Budget deficit as % of GDP, 20011.8% Central government external debt as % of GDP, end 20008.0% Foreign direct investments as % of GDP, 20005.7% Progress of Latvia in global ranking (UNDP)

3. Development Strengths location in active region liberal market economy highly skilled labour force interest of the society in education strong banking sector Opportunities integration in European society knowledge-based products development of infrastructure emergence of a middle-class in the society Weaknesses modest economic potential a lack of raw materials grey economy, bureaucracy educational system not oriented towards industry needs Threats insufficient growth rate small capacity of the country a lack of investments enlargement of EU does not occur Stagnation

4. From vision to action Long term development of national economy National program Informatics eLatvia Innovation E-business E-governance E-documentsID-cards Industry Libraries Schools Education & research E-procurement

5. Emergence of a knowledge-based development Knowledge management – the Modus operandi on a national scale A man as an owner of knowledge becomes the key factor for economic growth Unified development trends of the national economy, governance, education, social policy and other sectors Reindustrialisation of traditional branches Development of knowledge-intensive branches: high knowledge base of specialists, capacity of the education system demand for products and international market niche that could be conquered high added value of goods and services small consumption of energy resources and raw materials

6. Potential of the IT cluster No. of companies in the IT cluster, end 200115 No. of programmers in the IT cluster, end 20011000 Contribution to GDP per employee of software industry as % of average in the economy695% Industrial clusters – competition & cooperation (information systems, composite materials, forestry, engineering) Synergy effect to increase competitiveness of the Latvias economy: knowledge sharing and professional training for cluster participants resource sharing policy and procedures, common technologies reduction of various costs joint R&D activities common customers and/or distribution channels, joint marketing activities forming the critical mass to enter foreign markets

7. 5 th FP projects success rate, 1999-200127.5% 5 th FP programme Innovation & SMEs projects success rate, 1999-200152% 5 th FP financing from EC funds as % of Latvias contribution fee, 1999-2001187% R&D and innovation Internationally acknowledged potential of Latvian fundamental and applied research Innovation -- strengthening links between the enterprises and universities Improvement of key interfaces in the innovation system (education, research, entrepreneurship, legislation, financing) Encouragement of the creation and growth of innovative enterprises, development of technological/business centres Increase of the number of issued patents (biosynthesis, biotechnology, pharmaceuticals, magnetohydrodinamics and plasma technologies, etc.)

8. Business in Internet environment E–business – integration of all types of commercial activities into the Internet environment to increase competitiveness in the global scale: establishing internationally harmonized ground rules building trust among participants maximizing benefits for all individuals Spread of various teleworking principles Electronic financial transactions and services Remote public services, both for individuals and businesses Electronic documents and identification cards as tools for remote contacts and transaction services

9. Regional development Weakness: unbalanced development: economic, social, cultural differences extra supported areas according to specific criteria borderland – outskirts effect and cross border cooperation a monocentric state Diversification of economy -- condition for territorial development, competitiveness of regions, growth of welfare level: development of knowledge hubs: technological/business/industrial centre + university/college + library/information centre cities as the focal points of knowledge economy; knowledge, information, social and culture centres for ambient rural areas virtual enterprises and teleworking – the base for diversification of economy in rural areas

10. General participation: to enable everybody and every company in every region to promote formation, development, spread and introduction the basic principles and processes of the information society and knowledge- based economy to create opportunities for every citizen and business to participate fully in the processes of information society and knowledge-based economy to promote the increase of welfares level and thus to encourage civil harmony in the country, the economic and social cohesion

11. Internet users10.2 TV sets89.1 Cable TV subscriptions24.5 Satellite TV10.1 Telephone main lines30.6 Digital lines as % of main lines68.6% Mobile telephones25.4 Personal computers10.9 Internet hosts2.7 Cheaper, faster and secure connection to ICT infrastructure qualitative connection to telecommunications and data transmission networks installation of public Internet terminals in libraries, schools, municipalities establishing the regulation of Internet domain and services, liability of service providers multisectoral regulatory body – Public Utilities Commission Development of infrastructure (per 100 inhabitants), end 2001

12. Education and general information literacy Accomplishments: the highest adult literacy rate in the world – 99.8% of age 15 and above, 1999 accelerated informatization of learning processes in schools, end 2001: designed electronic textbooks – 80 000 A4 pages 68% of total number of teachers has been trained in IT usage number of primary and secondary level students per PC -- 21.7 obtaining the European Computer Driving Licence Weakness: insufficient contribution of universities toward the resolution of national priorities; tertiary enrolment in technical and life sciences -- 16.5% of gross tertiary enrolment, 2000/2001 insufficient training the highest-skilled specialists (masters and doctors degrees)

13. Transnational information systems Regional library Libraries of state significance Public and private sector information systems Rural librarySchool library No. of public libraries per million population, end 2000432 Libraries with Internet connection as % of total No. of libraries, end 200115% No. of licensed radio broadcasting programmes, end 200137 No. of licensed TV broadcasting programmes, end 200129 No. of licensed cable TV broadcasters, end 200137 Daily newspapers per capita, 200076 Availability of information

14. Public information processing and services Accomplishment: Development of mega-system – integration of public sector information systems: quality of data interoperability of all national information systems, data exchange complex processing data from various components united and user-friendly access to information integration into the Transeuropean corporate telematic networks

15. Gini index, 20000.34 Salaries of the employed in software industry as % of average salaries177% Tertiary graduated working age people as % of total working age, end 200119.4% Tertiary graduated unemployment as % of total unemployed, end 20017.2% Higher social and societal welfare level as a final target of co-ordinated policy for economic and social development of the country and society Investments in education -- important factor in increasing the quality of human capital The significance of culture; maintenance, development, functional perfection of national language Conjunction of social programs with national economic possibilities, increased responsibility of every individual for himself/herself Knowledge economy and social factors

16. Cabinet of MinistersIS National Council Min. of Transport Dep. of Informatics Coord. Board Informatics Min. of Education Min. of Interior Min. of Finance Min. of Justice Min. of Culture Min. of Economy Libraries Procurement eLatvia ID cards E-business E-governmentE-documents Schools Innovation National progr. Informatics

17. E-regions and E-cities

18. Information society: informatization or innovation Innovation: advanced processes qualitative changes opportunities maximum benefit Informatization: traditional processes quantitative changes awareness prompt benefit Final modelTransition model