Geneva 2013 Annual Ministerial Review United Nations Economic and Social Council - ECOSOC ”Science, Technology and Innovation, and the potential of culture for promoting sustainable development and achieving the Millennium Development Goals” Gladys Triveño Chan Jan Minister of Production of Peru National Voluntary Presentation (NVP) 1

1.Economic context of Peru – Relationship between poverty, industry and innovation. 2.Context of the Science, Technology and Innovation (STI) in Peru 3.Instruments available for the development of STI 4.The future CONTENTS 2

1.Economic context of Peru – Relationship between poverty, industry and innovation. 2.Context of the Science, Technology and Innovation (STI) in Peru 3.Instruments available for the development of STI 4.The future CONTENTS 3

EVOLUTION OF GPD (US$) ECONOMIC CONTEXT 4 Source: BCRP Between 2000 and 2012, the GDP grew at an average annual rate of 5.8%, representing an increase of GDP per capita of 70.1%. This growth was driven by private investment, primarily in the mining sector, as well as by the dynamism of the export sector in a context of trade liberalization and well handled macroeconomics. These elements strengthened the domestic markets, which was reflected in a greater number of shopping centers and residential projects.

ECONOMIC CONTEXT 5 EVOLUTION OF TOTAL POVERTY (% OF THE TOTAL POPULATION) Source: INEI- Encuesta Nacional de Hogares (ENAHO) This growth allowed the significant reduction of total poverty from 58.7% in 2004 to 25.8% in 2012.

ECONOMIC CONTEXT 6 Fuente: BCRP, INEI Despite this growth, the share of industry as part of GDP has not grown at the same rate, having stalled its share between 13% and 14% in recent years. This is an industry which is highly concentrated in consumer goods, with low levels of sophistication. Source: BCRP INDUSTRY SHARE AS PART OF GDP

7 RELATIONSHIP BETWEEN POVERTY AND INDUSTRY 1/ UNIDO (2010) 2/ World Bank (2009) Country Competetive Industry Perform Index 1/ Poverty headcount ratio at $1,25 a day (PPP) (% of total population) 2/ Germany0,520 France0,310 Malasy0,180 Thailand0,170,37 Chile0,071,35 Costa Rica0,053,12 Peru0,045,54 Cambodia0,0218,6 Less industrialized countries are those with higher levels of poverty, and vice versa.

8 Less industrialized regions of Peru are also the poorest: Apurímac, Huancavelica, Cajamarca, Huánuco, Ayacucho. RELATIONSHIP BETWEEN POVERTY AND INDUSTRY Poverty Share (%) Industry Employment Share (%) Source: BCRP, INEI- Encuesta Nacional de Hogares (ENAHO) POVERTY SHARE AND INDUSTRY EMPLOYMENT IN PERUVIAN REGIONS

1.Economic context of Peru – Relationship between poverty, industry and innovation. 2.Context of the Science, Technology and Innovation (STI) in Peru 3.Instruments available for the development of STI 4.The future CONTENTS 9

10 Fuente: BID 2010 y Encuesta Nacional de Innovación en la Industria Manufacturera 2012 From global experience, it is well known that a sustainable industrialization process has one of its basis in technological innovation. In Peru, the industry invests only 0.1% of its sales in R & D, which is reflected in a low number of patents filed by residents: 116 invention patents and 54 utility models in In Brazil, more than 4,000 patent applications are filed each year, while in countries like Japan this number is over the 300,000 applications. RELATIONSHIP BETWEEN INDUSTRY AND INNOVATION Intensity of R&D Expenditure (%) Source: IADB 2010, Encuesta Nacional de Innovación en la Industria Manufacturera

GLOBAL COMPETITIVENESS INDEX While the "global competitiveness index" ranks Peru at position 61 out of 144 countries (upper half), in the innovation pillar, the country is ranked at 117, i.e. the lowest quintile. Source: Global Competitiveness Index Report

 Investment in R & D is very poor: Peru invests only 0.14% of its GDP in R&D, while the Latin American average is 0.5% and the OECD countries average is 2.2%.  Main Investment in R & D is not carried out by the private sector. Investment in R&D is carried out mainly by universities, the public sector and NGOs (> 70%) with a low degree of linkage to industry. In the rest of Latin America, this investment is mainly performed by the private sector (55% on average).  The trade balance of knowledge is clearly insufficient. While exports based on primary products and natural resources in Peru have grown to 80% of total exports in the last 20 years, in countries like Colombia and New Zealand - also abundant in natural resources- this figure went from 82% and 86%, to 65% and 75%, respectively, with exports increasing in technological content. STI INDICATORS 12 The low level of innovation is evident from the following indicators:

 University-industry collaboration is low In Peru, only 11% of manufacturing firms, were associated with universities in the period to carry out innovation activities. Only 2.2% were related to public research institutes.  The personnel in industry is not necessarily suitable for innovation Only 1.5% of the staff have graduate studies, mainly in management functions, but not in innovation-related functions. Only 18% are skilled technicians, and a majority of 60, are workers with only secondary education  Percentge of patent applications filed by residents is extremely low There is no culture of protection and appropriation of innovation. Patent applications filed by residents per 100,000 inhabitants is 0.3 on average, while, for example, in Brazil this indicator is bordering 3 and in the U.S. is over 50 patent applications. 13 STI INDICATORS

 Main indexed scientific pulbications ( ) STI IN PERU 14  Patent applications 1/ filed by residents 1/ ( ) However, there are some improvements Source: RICYT Source: INDECOPI 1/ Includes invention patents and utility models

 Percentages of industry firms that carried out innovation activities ( ) 15  Impact of innovation activities in the firm ( ) Source: PRODUCE, INEI, BID- Encuesta de Innovación en la Industria Manufacturera 2012 STI IN PERU Carried out innovation activities Did not carry out innovation activities To improve products quality To maintain market share To increase productivity To improve market share To take advantages of personnel capacity To improve enviromental, health or safety conditions To reduce labour costs To accomplish national regulations or standards To increase flexibility of production To reduce the input comsumption To access new markets abroad To increase product catalogues To reduce energy comsuption To accomplish international regulations or starndards Others Firms (%)

1.Economic context of Peru – Relationship between poverty, industry and innovation. 2.Context of the Science, Technology and Innovation (STI) in Peru 3.Instruments available for the development of STI 4.The future CONTENTS 16

Other relevant policies to support STI policies: Against malnutrition: social programs for reduction of malnutrition, investing in new generations with better opportunities. Basic Education: New Public Educator Act improves quality primary and secondary education. Higher Education: Scholarship Program 18, works as a catalyst for greater opportunities for youth. Incorporation of researchers into the public career: Creation of the "scientists’" family as a category of officials in the public career within the Civil Service Law. Repatriation of researchers: Repatriation of professional researchers living abroad with the aim of hiring them to work in Public Research Institutes. RELEVANT POLICIES

PLANS AND POLICIES 18 National Agreement – State Policy N° 20- (2002) National Plan of Science, Technology and Innovation National Plan of Inclusive Industrial Development Strategic Plan of the Ministry of Production ( ) National Competitiveness Agenda ( ) Includes STI axis: They propose: a) To increase the state support for STI through increased budget, tax incentives and other forms of financing. b) Human capital formation and increasing number of researchers through STI education, graduate fellowships abroad, and training at technician level. c) Technology transfer, support for innovative projects, and dissemination of intellectual property. d) Meeting the social and economic demands at national and regional levels. Prioritization of areas of comparative advantage and leadership. Production chain. Building technology infrastructure and ICT development. e) Environmental Sustainability.

FUNDING 19 Competitiveness and Innovation Program for Peruvian Agriculture (INCAGRO) - Ministry of Agriculture: US$ 60 million ( ) Available Funds Time Science and Technology Program Peru-IADB (FINCYT I) - Presidency of the Council of Ministers: US$ 36 million ( ) Research and Development Fund for Competitiveness (FIDECOM) - Ministry of Production: US$ 77 million ( onwards) Science and Technology Program Peru- IADB (FINCYT II) - Presidency of the Council of Ministers: US$ 100 million (2013- onwards) National Fund for Science, Technology and Innovation (FONDECYT) of the National Council of Science, Technology and Innovation (CONCYTEC): US$ 38 million (2013 -onwards) Framework Fund for Innovation, Science and Technology (FOMITEC) of the Ministry of Production and National Council of Science, Technology and Innovation (CONCYTEC): US$ 115 Million (2013 -onwards) The State has made available STI funding to firms and universities, doubling in 2013 the funds available in the last decade. US$ 426 MILLONES

NORMATIVE INSTRUMENTS 20 Legislative Decree No. 1124, amending the Law on Income Tax, and allowing the deduction of expenditure on R&D (2012) Law No , "Act declaring of national interest the promotion of science, innovation and technology through public-private partnerships" (2012) Law No , "Law on the Promotion of the Use of Patent Information to Promote the Transfer of Innovation and Technology" (2013) Supreme Decree No PCM, which ascribes the National Council for Science, Technology and Technological Innovation (CONCYTEC) to the Presidency of the Council of Ministers - PCM (2012) Ministerial Resolution No PRODUCE, Rules of Organization and Functions of the Ministry of Production, whereby the Department of Innovation, Technology Transfer and Business Services is created and assigned to the Vice Ministry of MSE and Industry (2012) Technical Standards for R&D Management: Technological Surveillance Systems (2012); Requirements Management R & D (2011); Requirements of an R + D (2009); Terminology of R & D (2009) Legal and institutional framework for the promotion of STI activities and consolidation of a national STI system:

21 Industrial Technological Innovation Committee-CINTECIN (Chaired by the National Confederation of Private Business- CONFIEP and assisted by the Ministry of Production) National Program for Strengthening Innovation for Competitiveness (Chaired by CONCYTEC, and comprised more than 16 public and private institutions) Business-ECI Scientific Meeting (Chaired by Academia) Working Group of the National Competitiveness Agenda (Led by the Ministry of Economy and Finance, consists of more than 10 public and private institutions) PUBLIC – PRIVATE Sinergy ARTICULATION Triple Helix Improved funding conditions for innovation projects when the firm is associated with a university or research institute. FIDECOM Instruments (PIPEA, PIPEI) and FINCYT instruments (PITEA, PITEI) ARTICULATION INSTRUMENTS

 They become a technology support tool for industrial development and the generation of added value.  CITE Act No (2000)  Three public CITE: CITEvid, CITEccal, CITEmadera  13 private CITE: Agrobusiness, logistics, software, design and apparel, textile-camels, food, forest, tropical fruits, cocoa. 22 LIMA: CITE Madera CITE Ccal CITE Logística CITE Software CITE Confección PIURA: CITE Agroindustrial AREQUIPA: CITEconfecciones CITEagrondustrial CITEtextil camélidos CITEagroalimentario ICA: CITE Vid SAN MARTIN: CITE Cacao LORETO: CITEfrutas tropicales CITEforestal UCAYALI: CITE Madera TACNA: CITE Agroindustrial SUPPORT INSTRUMENTS Centers for Technological Innovation CITE

23 Reseach Public Institutes - IPI  National Institute of Agrarian Innovation (INIA)  Peruvian Sea Institute (IMARPE)  Research Institute of the Amazonia of Peru (IIAP)  Peruvian Institute of Nuclear Energy (IPEN)  National Institute of Health (NIH)  National Institute for Research and Training in Telecommunications (INICTEL)  Geological, Mining and Metallurgical Institute (INGEMMET)  National Geographic Institute (IGN)  Geophysical Institute of Peru (IGP)  National Commission for Aerospace Research and Development (CONIDA) SUPPORT INSTRUMENTS Industrial Research Security and Health Infrastructure and Institutes for knowledge generation Natural Resource Exploration and Exploitation IMPARPE INGEMMENT INIA IIAP IGN CONIDA INICTEL IGP INS IPEN ITP

 Created in 2012, it contributes to the increase of competitiveness of the productive sector through innovation promotion and technology transfer to firms. It incorporates 3 public CITE.  It has four specialized divisions that generate knowledge and technology.  It proposes innovation with added value approach for the industry. 24 The Technological Institute for the Production- ITP SUPPORT INSTRUMENTS Fisheries and aquacultur e Leather and footwear Wood VID/ Agroindustry

Transport Telecommunications Energy Industrial Parks/clusters Special treatment Zones Infrastructure Technology Trasnfer Centers Scientific and Technology Parks Startup Ecosystem STI Funding and tributary incentives for innovation Technology and Innovation Training (productive and technical, quality and management) Technical formation Graduate Programs in STI Human Capital Quality Institute Productive Developmente Agency Institutional Redesign Instruments of the National Plan for Inclusive Industrial Development SustainibilitySustainibility SUPPORT INSTRUMENTS

Quality Institute It includes national services of metrology, acreditation and technical standars 26 New Network of Scientific and Techonological Parks It includes the design and implementation of 50 Parks in PPP, within the implementation process of the National Plan of Inclusive Industrial Development TO GUARANTY AN ADEQUATE TECHNOLOGICAL AND SCIENTIFIC SUPPORT INFRASTRUCTURE FOR THE DEVELOPMENTE OF STI AND OF AN INCLUSIVE INDUSTRY New Network of Technology Transfer Centers CETT It includes the design and implementation of 50 CETTs in PPP, within the implementation process of the National Plan of Inclusive Industrial Development Instruments to be implemented by the National Plan for Inclusive Industrial Development SUPPORT INSTRUMENTS

1.Economic context of Peru – Relationship between poverty, industry and innovation. 2.Context of the Science, Technology and Innovation (STI) in Peru 3.Instruments available for the development of STI 4.The future CONTENTS 27

STI system articulation Institutions and appropriate governance system for STI are consolidated. State Support Instruments (CITES, IPIS, etc.) are oriented to industry. Sustantial improvement in the level of university- industry colaboration. STI for industry Industry with sophisticated services and products by application of scientific and technical knowledge. Innovation culture is part of the industry culture. Consolidate the support instruments for STI To consolidate, improve and expand the funding instruments. To get the private sector to invest in innovation. To consolidate a critical mass of scientists and engineers working on CTI. Institutions / Sustainibility FOR THE STI DEVELOPMENT

FOR THE INDUSTRIAL DEVELOPMENT Added Value To sophisticate industry through innovation. To diversify the production base. To increase the number of companies. To reduce gaps in quality and productivity. Productive Basis decentralized To boost regional economies. To promote private investment (domestic and foreign) in the creation of new jobs. Industry Growth Recovered To alleviate the most urgent problems that plague the industry today. To narrow gaps on competitive referents. To promote the internationalization of Peruvian firms. Institutions / Sustainibility