Remarks by Angel Gurría,
21 January 2016
World Economic Forum Annual Meeting
(As prepared for delivery)
Leaders, Ministers, Ladies and Gentlemen,
Thank you for this opportunity to give closing remarks at this important event. As our distinguished speakers have underscored, technology and innovation are critical to the continent’s future.
They can help us skip steps on the path to sustainable development.
They are the keys to unlock stronger, fairer, greener growth.
This is why the OECD has made strengthening innovation frameworks one of the key pillars of a report launched earlier this week called "Promoting Productivity for Inclusive Growth in Latin America".
To put the scale of the challenge in perspective with a single number: the rate of patents per capita in OECD countries is about 150 times that in Latin America! At the same time, Latin America is still the most unequal continent on the planet. This shows why what we are calling the ‘productivity-equality nexus’ is so important in the Latin American context.
Progress can only be made if policy makers put in place the right enabling environment. Let me mention five areas where action is particularly pertinent:
The first policy area relates to financial resources. For example, Brazil is the only Latin American country that spends more than 1% of GDP on R&D. One of the most pressing issues is that many firms in the region are not well integrated into their respective national innovation systems, in part because they lack capacity and have difficulties to access financing for R&D and innovation.
Many countries have recognized this problem and have started to tackle it. For example, in Colombia, firms can access a portfolio of funding schemes for innovation projects, including preferential credits at below-market interest rates, tax incentives for R&D investments, and other types of public support like non-refundable grants. In general, a well balanced mix of direct and indirect support measures is preferable in order to avoid disadvantaging young and innovative firms.
The second area relates to human resources. Latin American countries need to ensure that everybody, including children and youth from lower-income households, acquire the skills necessary to compete in the knowledge economy through the education system and lifelong learning. Again, countries are already moving in the right direction. In Brazil, for example, the Bolsa Escola school-allowance programme aims at reducing regional inequalities in education access and performance.
The third policy area in which action is urgently required is regulation. Administrative burdens on smaller firms are one of the main reasons for the productivity gap between SMEs and larger firms: SMEs account for 70% of employment in Latin America, but only 30% of GDP! Young SMEs in particular are an important source of radical innovations, and so policymakers should encourage SMEs in scaling up to spread the benefits of these innovations more widely through knowledge spillovers. Policies that can help SMEs to achieve a sufficiently large scale include lowering administrative barriers to entry and growth and barriers to exit such as bankruptcy laws that do not over penalize failure.
The fourth policy area I would like to mention is governance. Promoting innovation requires co-ordination of different actors at pan-regional, national, and sub-national levels, as well as across different ministries and agencies. In addition, consultations with the private sector are needed to facilitate implementation. Many Latin American countries have started to create competitiveness or innovation councils where different actors shape a shared agenda, such as Colombia, Costa Rica, and more recently Chile.
The final policy area relates to the Internet and ICTs which deserve special focus in the innovation debate. Enhancing access to broadband networks, for example, is an essential part of the enabling environment for innovation to flourish. Broadband provides a platform for small firms to engage in e-commerce, which can be a low-cost way for firms to engage in trade and thus benefit from knowledge spillovers. While in some countries such as the United Kingdom or Japan almost every adult is using the Internet by now, the share is less than half for countries such as Mexico or Brazil. Investment in infrastructure is critical here, to address mobile and fixed broadband penetration rates that still lag OECD averages by half.
Together with the IDB, the OECD is developing a Broadband Policy Toolkit for the LAC region which will help countries assess their own broadband policy settings and develop reforms to boost the region’s innovation potential. The upcoming OECD Ministerial Meeting on the Digital Economy, to be held in Cancun on 22-23 June 2016, is also an important opportunity to push forward the digital agenda at a high-level.
Ladies and Gentlemen,
Technology and innovation are crucial to solving Latin America’s twin challenges – low productivity and high inequality. The OECD is working intensively to bridge the two and Chile, the Chair of our next Ministerial Council Meeting, has selected the ‘productivity-equality nexus’ as the meeting’s core topic while this occasion will also see the launch of our Latin America Regional Programme. We look forward to deepening our work with the region in pursuit of better policies for better lives in Latin America.