Mr.S.P.agarawal Paper for China Workshop

8/7/2019 Mr.S.P.agarawal Paper for China Workshop

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AN INNOVATIVE POLICY FRAMEWORK

FOR

TECHNOLOGY CAPACITY BUILDING OF SMEs IN ASIA

PACIFIC REGION

By

DR. S.P.AGARWALPROF. & HEAD, CITT, INDIAN INSTITUTE OF FOREIGN TRADE,

NEW DELHI, INDIA

NATIONAL WORKSHOP ON SIS AND TECHNOLOGY

CAPACITY BUILDING POLICIES TO ENHANCE

COMPETETIVENESS OF SMEs

ORGANISED By

UNITED NATIONS ECON0MIC AND SOCIAL COMMISSION FORASIA AND THE PACIFIC,

CHINA COUNCIL FOR THE PROMOTION OF INTERNATIONALTRADE

UNITED NATIONS ASIAN AND PACIFIC CENTRE FOR TRANSFEROF TECHNOLOGY

UNITED NATIONS ASIAN AND PACFIC CENTRE FOR

AGRICULURE ENGG. AND MACHINERY

BEJING, CHINA

27-30 OCT. 2006

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An Innovative Policy Framework For Technology Capacity Building OfSMEs In Asia Pacific Region

By

Dr. S.P. Agarwal, Professor & Head, CITT, IIFT, New Delhi

ABSTRACT

Asia Pacific region is characterized by economies of vast disparities in naturalresources, capabilities and development levels. Key issues for SMEs in globalizingeconomies in the region continue to be financing, marketing, technology, human resourceand external environment including policy framework. SMEs are currently going througha transition phase and process of restructuring for competitiveness and growth, in thelight of emerging world trade rules (WTO etc) and fast technological changes, amongother factors. The increasing influx of transnational corporations (TNCs) and foreigndirect investment (FDI) in manufacturing and services in the region have opened up large

business opportunities and also threats, needing more advanced technological inputs, andabsorptive and innovative capabilities for enhancing productivity and efficiency ofSMEs.

This paper is intended to provide additional information, review of literature,analysis, and thought provoking material, to that contained in earlier report andpresentation made by the author for ESCAP in early 2006, on the subject.

The policy marking for technology capacity building for SMEs is viewed as acomplex and multidimensional process, to be integrated with other policies andmechanisms related to industry, trade, finance, and society. The enterprise level

strategies for business and technology also need to be integrated. The paper brieflyoutlines the present status of R&D and innovation, technology trade competitiveness andS&T indicators, FDI and related technology transfers, existing policy for SMEs etc.

It is argued that the technology policy framework need to be based on dualstrategies - for traditional SMEs, and high technology based SMEs, besides evolvingshort term and long term approaches and differentiating manufacturing and servicesectors. Also, these policies would widely differ for various countries, depending ontheir state of development and resources. The education and training deserves graterattention for developing technological capacity as we move on to knowledge baseddevelopments, besides developing global partnerships. Entrepreneurship, easier access to

technology and finance are the main areas of concerns, in most developing countries.Innovation models for information technology and auto component sectors in India, havebeen developed to illustrate the technology capacity building process in SME sector. Themind set and continuous training programmes for policy makers are also important formore effective delivery of results from the policies and mechanisms. Internationalorganisations such as ESCAP need to review their existing programmes and strategies forthe promotion and development of SMEs. Finally, a policy framework, in line with thecurrent technological, commercial, social and economic needs has been suggested forenhancing the technological capacities and competitiveness of SMEs in ESCAP region.

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1. INTRODUCTION

1.1 A report, based on literature review, desk research, field visits to selectdeveloping countries, and compilation and analysis of data, on strategies for enhancingtechnological capabilities for competitiveness of SMEs in Asia Pacific region, wasprepared by the author for ESCAP, and presented in a regional consultative meeting heldby ESCAP at Seoul, Republic of Korea (RoK) in Jan. 2006. this paper is based on furtherresearch work done by the author, essentially developing a theme that technology andinnovation capacity building policy framework, needs to be an integrated and coordinatedeffort, with other policies and support mechanisms related to education, industry, andcommerce and society. The World Competitiveness Report 2006 has identified followingnine pillars for determining the competitive index of 125 countries.(23)

Institutions

Infrastructure

Macroeconomy

Health and Primary Education

Higher Education and Training

Market Efficiency

Technological Readiness

Business Sophistication

Innovation

1.2 Technology and innovation capacities are closely related to each other but maynot be sufficient by themselves for competitiveness and growth unless tuned with otherpolicies and mechanisms at enterprise and national levels, specially in the context ofglobalisation and knowledge based economies under the emerging world trade rules.

1.3 Technology capacity building for SMEs is largely influenced by the overallnational S&T climate and policies, mechanisms and support structures, though there arespecific policies and mechanisms for SMEs, within the overall framework. SMEs wouldcontinue to play a significant role in national industrial and social development, and arepresently passing through a transition phase and process of restructuring due to need forenhancing global competitiveness and faster technological developments. The new worldtrade rules and increasing operations of transnational corporations (TNCs) are opening

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business opportunities as well as posing challenges for SMEs, including an active role ininternational supply chain management, rural development, innovation management,services sector, etc.

1.4 This paper briefly discusses about the policies and mechanisms for technologycapacity building of SMEs in the Asia Pacific region, with special reference tocompetitiveness, trade and economy. Indian experiences are illustrated through

developing technology capacity building (TCB) models for informationtechnology (IT) and auto components sectors, as examples. A few suggestionsare made for TCB of SMEs in Asia Pacific region, which is characterized byvarying levels of development in various countries, towards sustainable growthand competitiveness of enterprises, keeping in view their strengths andconstraints.

1.5 The author is grateful to ESCAP, in particular to Mr. Xuan Zengbei, Director,TID; and to Mr. park Pill-Hwan, NRL Expert on Investment and EnterpriseDevelopment, TID; for supporting the studies and inviting as a resource person, inan international ESCAP Workshop in China to be held in Oct. 2006 at Beijing.

2. TECHNOLOGY CAPACITY

2.1 Characteristics

2.1.1 Developing countries are characterized by varying technology capacities andstages of development. Their relationship to global S&T is described as analogous to ahighway with three groups of developing countries as traffic on that highway accordingto their abilities(20)

Fast moving vehicles : India, China, Brazil

Slower Moving traffic : Mexico, Argentina, some countriesin Middle East and South East Asia

Pedestrians : Sub-Saharan Africa, small Island states

2.1.2 A more formal characterization has been in the United Nations DevelopmentProgramme (UNDP)technology achievement index in which various countries aregrouped as(20)

Leaders : Developed Countries

Potential Leaders : Spain, Bulgaria, Mexico, Argentina, etc.

Dynamic Adaptors : China, India, Sri Lanka, Thailand, etc.

Marginalised countries : Sub-Saha African countries, Pakistan, Nepaletc.

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3. R&D AND INNOVATION

3.1 R&D expenditure, patents, number of publications, number of S&T qualified people, etc. are some of the indicators for technology capability. There are vastdifferences in the technological capabilities of SMEs in advanced and developingcountries. In advanced countries, many SMEs are innovative, technology based andoperate in new or high technologies, while SMEs in most developing countries generallyoperate in traditional sectors, and look for easier access to technology elsewhere, whichcan be absorbed, re-engineered and updated. The R&D expenditures and capabilities arelimited. Nevertheless, the innovative or absorptive or re-engineering capabilities largelydepend upon the national technology climate. A survey of few thousand SMEs in USAhas revealed that small firms consistently and significantly produce a higher number ofpatents per R&D dollar spent (Fig.1)(12)

3.2 The total R&D expenditure and Business R&D expenditures for select countriesare given in Table I, which shows that Business R&D expenditures are substantial as apercentage of total, in case of advanced countries and some developing countries such asChina, RoK, Singapore, while the same is small in case of other developing countriessuch as Thailand and India. Similarly number of scientists per million of people is smallin case of India (157) as against 545 in China, 2319 in RoK, and 4097 in USA. Thenumber of PCT patents filed by India is only 678 in 2005 as against 2500 in China, and4685 in RoK, in the same year.(4)

4. WORLD OUTPUT GROWTH

4.1 Annual percentage change in world output growth rate has increased from 2.9 in1990-2000 to 3.6 in 2006, while that of USA decreased from 3.5 to 3.1, increased for EUfrom 2.2 to 2.3, 4.9 to 6.2 for developing countries, and 7.0 to 7.3 for East and SouthAsia(22). These growth rates do not show any correlation with the national S&Tcapacities, while technology is regarded as a key driver for development. This indicatesthat there are other factors too, along with technology, for development.

5. EDUCATION

5.1 The expenditure on higher education ranges from 1.41% of GDP (US $ 36,006per capita) for USA to 0.5% for China ($ 989 per capita), 0.37% for India ($487 percapita), most other countries are in this range. There is a strong correlation betweenexpenditures on education and technology capacities(14).

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5.2 It is important to note that formal and structured academic programmes at graduateor post graduate levels in technology and innovation management are yet to be generallyappreciated by industry and policy makers, in most developing countries. A preliminarystudy at Indian Institute of Foreign Trade (IIFT) under an EU supported researchprogramme, has revealed that technology intensive organized sector is keen to engage suchqualified people if available as per their needs, while most SMEs are yet to appreciate thesame. Field studies show that there are few takers for existing TM courses. The Departmentof Scientific & Industrial Research (DSIR) and Asia Pacific Centre for Transfer of

Technology (APCTT) have taken some initiatives to enhance awareness and improvecourse contents in India, but are far from satisfying the needs on ground level. Thedeveloping countries in the region need to enhance the level and quality of education fordevelopment of S&T capabilities.

6. GLOBAL COMPETITIVENESS

6.1 The competitiveness is perceived to be closely related to technology capabilitiesand innovations. World Competitiveness Report 2006(23) has ranked India at 43, whileChina at 54, USA at 6, and Switzerland at No. 1, among 125 countries. The innovationindexes are at 26, 46, 2 and 3, and technology readiness at 55,46,8 and 5. This data doesnot tend to show any definite correlation between competitiveness and innovation andtechnology readiness of a country.

6.2 The UNCTAD report(22) on Trade and Development, 2006, has focused on privatecapital formation, productivity growth, and technology upgradation, with the theme ofglobal partnership, and has emphasized on the need for policy reforms towards thisobjective. It has made several recommendations for R&D capacity building. In anotherreport on ToT,(21) financing of transfer of technology (ToT), FDI, matching andinformation, training, venture capital, and international alliances, are identified as themain issues for SMEs. The absorptive and technology capacity of a host country areimportant, incase of FDI inflows with technologies. The World Bank has also mountedseveral programmes towards technology capacity building of SMEs, and eleven facilitieshave been set up around the world, with grant funds for innovation projects. (24) The National Research Council in Canada has launched a programme A NationalCompetitiveness Technology Intelligence Capacity Building to help SMEs, with graterfocus on commercializing R&D, and promoting collaborations between SMEs and R&D.An integrated management approach has been adopted in Japan.

7. FDI

7.1 FDI and technology capacity building in host countries has been discussed in alarge volume of literature, with really no conclusive experiences for developingcountries.(25) Nevertheless, FDI is considered to be an important mechanism fortechnology and management capacity building, if domestic policies are appropriatelytuned. While China received US $ 79.1 b, and RoK received US $ 4.3 b.(26). Theoutward FDI has been US $ 11.0B, as against that of China at US $ 49.6 b in 2005. (26).The outward FDI from countries such as India is a relatively recent phenomenon. Thereis a need to examine the changing needs and role of SMEs in this context as well in the

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context of increasing mergers and acquisitions since these are important players in thesupply chain management. For example, the cross border M&A purchases by Indiaincreased from 1133 m in 2004 to $ 2110 m in 2005, while that of China increased from$ 1302 m to $ 4083 m.(26)

7.2 A study of SMEs in India has revealed that the R&D expenditures of domesticenterprises has generally increased in various sectors such as pharma, engineering, bio-

tech, while that of MNE affiliates was generally lesser than domestic enterprises in thesame sectors. (Table 2)(18)

8.0 FOREIGN R&D CENTRES

8.1 Establishing of R&D centres by TNCs in developing countries is a relativelyrecent phenomenon. The nature and extent of R&D carried out in host countries mayhowever vary, depending on the needs and objectives of TNCs and the technological andother capabilities in host countries. FDI in R&D in developing countries has been on the

increase in recent years(24).The total R&D expenditure in the world is estimated at $ 676.5b in 2002. The R&D expenditures of foreign affiliates worldwide in host countries isestimated at $ 67 billion in 2002, 16% of global business R&D i.e. 450 b. Table I givesR&D data for select countries and that of foreign affiliates.

8.2 India, China, and Thailand appear to be among the preferred destinations forR&D for TNCs. Various studies tend to show that the R&D centres and internationallinkages in R&D favourably impact the innovation and technological capacities in hostcountries. This is illustrated through the examples of foreign R&D centres in India andChina. (4,15, 28)

8.3 India

8.3.1 It is estimated that there are more than 200 foreign R&D centres in various sectorsincluding ICT, drugs & pharma, auto, chemicals, and agro(4,15) . It is estimated that R&Dinvestment world of $ 1.3 bn has flown into India during 1998-2003, and plannedinvestment is at $ 4.65 bn. US is the biggest and wider investor followed by Germany.22980 R&D workers are estimated in 100 FDI companies in R&D sector. Nearly half ofFDI companies are cases of relocation of in-house R&D in home country to offshorelocation in India. FDI majors are working on latest technologies, at least 415 patents arefiled from India in US. It is also revealed that partnerships with local companies aregood at the start but partnerships are not forever. 56% of FDI companies prefer to workalone in India, with 100% foreign equity, without local partners in equity.

8.3.2 IIFT studies(4) have revealed that availability of skilled manpower is mostfrequently cited as the main reason for choosing India. Proximity of markets, S&Tinfrastructure, and other infrastructural facilities including policy framework, are cited asother reasons for R&D in India. These R&D centres seem to have helped in

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strengthening local innovations and technology capacity building, through contractresearch, collaborative research, supporting their own manufacturing activities, andtraining programmes for R&D employees. These studies have also maderecommendations to promote foreign R&D in India, which include setting up ofdatabases, more incentives for R&D, promoting development and education of highlyqualified including Ph.Ds in sectors such as computer science and biotechnology.

8.4 China

8.4.1 UNCTAD Report 2005 indicates that there are over 300 TNC R&D centres inChina, out of which 140 are located in Shanghai. However, a study for foreign R&Dcentres or FDI in R&D in China since the mid 1990s indicates that more than thirty largemultinational corporations (MNCs) have located their wholly-owned R&D centres inShanghai because of its rich knowledge assets, competitive market, agglomeration of ITindustrial cluster, and effective and flexible local governance.(28) More importantly, thelocalization of these R&D centres does not result in an isolated high-tech colony, buttechnology spill over in the form of new spin-offs, the mobility of trainer engineersbetween MNCs and local firms, and the creation of a new technology research field

through MNCs-university joint research labs. This in-turn enriches and restructuresShanghais existing innovation systems. The foreign R&D centres are : technologydriven, market driven, production driven, and cost driven. The study argues that the trendof foreign R&D in developing countries is a possible way to actively intervene andengage in global innovation networks dominated by MNCs.8.4.2 Table 1 does not show any definite correlation between total R&D, businessR&D, and R&D expenditures of foreign affiliates in various economies, which are, in away, are the indicators of the technological and innovation capacities(29). Therefore, thereis a need to carry out more studies of this nature for major developing countries, andevolve guidelines based on experiences and practices followed for foreign R&D centres,as to how the technological capabilities and innovation systems could be strengthened.

ESCAP could consider to take an initiative in this direction and promote R&Dcooperation the region. These studies would also be useful in the context of GATS ofWTO.

9.0 HIGH TECHNOLOGY EXPORTS

9.1 High technology exports is another indication of technological capabilities. Theseexports are reported to have increased from 4.3% of manufactured exports in 1995 to 5%in 2003, while that of China increased from 10.05% to 27%, Malaysia from 46.10% to58.0% and of Singapore from 55% to 59% (Table 4)(24)

9.2 Data for receipt & payment of royalty and licence fee of select countries in Table4(24) for 2001, 2002 and 2003 indicates that the receipt decreased from $ 83 m in 2001 to$ 29 m in 2003 for India, while the payment increased from $ 306 m in 2001 to $ 356 min 2003. In case of China, the receipts decreased from $ 110 in 2001 to $ 107 m in 2003while the payments increased from $ 1938 m to $3548m This data tend to show that thetechnology transfers to India and China have increased during the period 2001 to 2003while technology transfer through licensing etc. decreased from India and China during

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the same period, though the magnitudes have been different. In other words, one couldinterpret from the above data that the manufacturing technology capabilities, based onimported technologies shows an increasing trend while the R&D capabilities ordevelopment of indigenous exportable technologies have been rather given lesserattention.

10. WTO

10.1 Various agreements of WTO including those related to TRIPs, GATs, TBT,TRIM, SPS, Agriculture have wider technological implications for trade and business ofSMEs and corporates in manufacturing and service sectors. Since, there is a wide gapbetween the technological capabilities of developing and advanced countries, the WTOAgreements tend to favour the advanced countries with higher technological capabilities.Various agreements include clauses related to capacity building, technology transfer,information flows, etc. for developing and least developed economies. However, theimplementation has been far from satisfactory. On repeated representations from

developing and least developed countries, a technology transfer group has been set up toidentify the issues and take necessary measures, but again, it seems to yet take-off inpractice. At the same time, several new Free Trade Agreements (FTA), Regional TradeAgreements (RTA), etc. are being made among various economies. The technologytransfer implications of these trade mechanisms are yet to be really understood andstudied for SMEs, and SMEs need to be prepared for the same. In post WTO, marketaccess and technical assistance are the main concern. National policies and mechanisms,international support system, and MNCs strategies to promote growth and capabilities inhost countries, could be identified as major areas in post WTO scenario.

11. SMEs

11.1 Realising the role and importance of SMEs in national economies, almost allcountries have evolved policies, mechanisms, and incentives of varying nature andvarying degree of implementation, and the same have been discussed in detail in earlierreport submitted to ESCAP in Feb.2006. Therefore, only salient issues have been very briefly mentioned here. It may be noted that international agencies such as ESCAP,World Bank, regional development bodies, and aid or support programmes of developedcountries have catalysed and accelerated the technology capacity building of SMEs indeveloping countries. However, there seems to be limited awareness about theseprogrammes among SMEs, and perhaps a relook is required to make them more useful.

11.2 An empirical study, based on field data, through 1869 questionnaire sent out tomainly manufacturing enterprises in Malaysia, Singapore and Thailand in 1999-2000,and 374 suitable responses, tends to establish that technological capabilities are correlatedto firms innovative activities and national or regional innovation system.(11)

Technological capacities at firm level for late industrialization strategies based onimported technology, are classified as(11) :

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Production capabilities

Investment capabilities - knowledge and skills

Minor change capabilities

Strategies marketing capabilities

Linkage capabilities

Major change capabilities

Further, the transition of late comer firms is classified as :

Manufacturing arm of a parent company MA

Original equipment manufacturing OEM

Original Design Manufacturing ODM

Original Brand Manufacturing OBM

12. TECHNOLOGY CAPACITY BUILDING IN INDIA- ILLUSTRATIVE EXAMPLES

12.1 Technology capacity building is closely linked to and is a component of theinnovation systems. Information technology and auto component industry are taken asexamples of models of innovation systems evolved, consciously or unconsciously, toreflect the building of technology capacities, in India.

12.1.1 Information Technology

Status(6)

Output of IT and Electronics in 2004-05 US $ 32.61 b

Employment in IT and ITES March 2005 10.5 m

Exports in 2004-05 US $ 17.2 b

Project exports by 2008 US $ 50.0 b

Growth 2005-06 30-32%

No. of companies ~ 3,000

No.of countries of export ~ 150

Share in Indias GDP ~ 4%

FDI in IT & Telecom, 2005 ~ US $ 9b

Global Investment in India

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ITES BPO Industry

USA 59%Europe 22%Asia-Pacific 15%

No. of Foreign R&D Centres ~ 80

R&D Expenditures as % of ~ 1.4Annual Turnover

No. of recognized major R&D ~ 30Units in IT & Telecom

12.1.2 IT industry in India has grown during last about three decades, essentiallydriven by entrepreneurship innovation and export markets, complied with qualified,pool of technical people. The initiatives of the entrepreneurs were then supported bythe government through various policies, mechanisms and infrastructural facilitiesset up at central and state levels. Various fiscal incentives, tax concessions, setting upof R&D and academic institutions, training and retraining facilities, etc. fuelled the

growth and competitiveness of this sector. The initiatives at state levels encouragedgeographical dispersal and growth. The IT activities however remained at lowerspectrum of technology and R&D, and the sector is dominated by the SMEs, some ofwhich have growth to global operations. Some of the major companies are nowincreasingly developing strategies towards supply of services and products throughhigher levels of technologies and innovations, mergers & acquisition, and FDI etc. forgrowth and competitiveness. The domestic markets are also now opening up whichhave encouraged IT companies for more efficient acquisition and up gradation oftechnologies. Infrastructure and policy implementation continue to be road blocks.Figure 1 shows emergence of Bangalore as a multi tech global centre perhaps a rolemodel for innovations. Fig. 2 shows an innovation model for IT industry in India.

Fig.3 shows the emergence of Bangalore as a hub for IT industry mainly.

12.2 Auto-Components

12.2.1 Status

The Indian Automotive Industry has now attained a turnover of US $ 34 billion(2005) and an investment of about US $ 12 billion, and similar investment is inpipeline. The industry provides an employment, direct and indirect, to 13.1 million

people. The export earnings are US $ 4.08 billion out of which the share of autocomponent sector is US $ 1.8 billion. The passenger and commercial vehicles havecrossed production figure of 1.5 million a year in 2005-06, with a share of 2.37% ofworld production. The export constitutes only 0.3% of global trade.(13) The FDI intransportation industry accounted for about 16% of total FDI inflows in 2003, whilethe same was only about 5% in 2004. there have been about 700 foreign technicalcollaborations, accounting for about 9% of total, during 1991-2004. Further, there areabout 15 Foreign R&D centres set up in the sector in India, out of total of about 200

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centres, besides the in-house R&D activities of TNCs, and other R&D relatedactivities. Today, almost all major brands are operating in India or have planned todo so. The R&D expenditures are at about 1.1% of annual turnover. About 20companies, most in organized sector, have government recognized R&D units,incurring expenditures more than Rs. 1 m per year. Table 2 shows that R&Dintensities of local firms in auto sector is 1.33, while that of TNCs affiliates is only0.784 over the period 1992-93 to 1998-99.

The government has now evolved an Automotive Mission Plan (AMP) (13) inSept.2006, by taking the turnover to US $ 145 in 2016, with special emphasis onexport of small cars, MUVs, two wheelers and auto components. It emphasises onenhancing the quality standards, productivity, R&D and technology capacity in themanufacturing sector, among other measures. A number of new technical designengineering, and R&D facilities and institutional mechanisms have been proposed tobe built up. The Indian Auto Component sector has over 500 organised players andabout 5000 unorganised sector players. Mergers and acquisition are order of the day.

12.2.2 Innovation System

The automotive industry in India, including the auto component sector, has reallygrown during last about two decades, since the opening of the markets andintroduction of liberalised policies and other measures aimed at globalizing theeconomy. The primary driving force appears to be the proactive policies, the supportmechanisms, large domestic markets, and improvement in infrastructural facilitiesincluding ICT services. The capabilities and brand image in IT seem to havecatalysed the growth. These policy initiatives and support measures encouraged thegrowth of entrepreneurship and innovations in the manufacturing, based on thecompetitive pool of technical, research and management skills and human resourcefor the industry.(13,16,19) The research and technology based continues to be weak in

the sector but there is a growing awareness in industry and government, to enhancetechnology related capacities for competitiveness and growth. Non-availability highlevel of technical and scientific skills is considered an area of serious concern, inaddition to training and re-training facilities. Figure 4 show a conceptualizedinnovation system for auto component industry in India, based on the pastdevelopment and future strategies. The proposed innovation models for IT and autocomponent sectors is only an effort to understand the process and are subject todiscussions.

13. Some Suggestion and Concluding Remarks

13.1 Based on the additional research work, surveys, and studies, afterJan.2006, a few suggestions have been made in brief, towards enhancingtechnological capacities of SMEs in Asia Pacific region. Recent trends in growthrates of developing economies tend to indicate the need for a relook at the variousaspects of technological developments and applications. It appears that innovationcapabilities and new business models are emerging important factors for growth andcompetitiveness, mainly based on acquired technologies. SMEs in traditional sectors,and new and high technologies as well as manufacturing and service sectors, may

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require differentiated policies for SMEs. Large R&D is likely to continue to bemainly confined to advanced countries and large corporates at this stage, but wouldbe important when advanced levels of development are reached in fast developingcountries. Business research facilities for policy studies for SMEs would benecessary, as in USA. At the same time, development of human resource , in general,and particularly in IM/TM, through structured courses would need to be initiated inmany developing countries besides preparing SMEs for new world trade rulesincluding WTO. China and India should take a lead, and harness the cooperation

potential to mutual advantage through collaborations and partnerships, for technologycapacity building of SMEs in the Asia Pacific region.

13.2 Policies And Mechanisms For SMEs

Policies

Investment Policies

Industrial & Trade Policies

Financing Policies

S&T Policies

Sectoral Policies

Central And Regional Or State Policies

Other Policies

Mechanisms

Administrative Ministries And Departments, Commissions,Councils

Industrial Estates, Clusters, Growth Centres, Parks, Incubators,

Innovation Centres

Design & Engg. Centres, Training And Prototype Centres,Standardisation And Testing Centres Mechanisms

R&D Institutions, TT And Advisory Services, IPR & InformationServices

Marketing And Trade Facilitation Services

Banks, VCs, Investors, Stock Exchanges, Micro Financing,

Industrial Associations

International Agencies Incentives

Tax Concessions, Duty Exemptions, Subsidies, Priorities InServices Loans, Govt. Procurement, R&D Services

Grants For Tech. Dev., Diffusion, Upgradation, Acquisition,Training Certification And Approvals, Export, PromotingCollaborations High Tech And Start Ups In Advanced

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14. Suggested Policy Framework

Policies Dual Track For Traditional And Hitech Or Emerging Areas

Long Term And Short Term Technologies Not Easily Available For Local Needs

Thrust On Capacity Building

Demand Driven, Transpatent, Efficient

Integration And Coordination

Specific Technology Policy For SMEs

Quality Education And Training

Preparing For Emerging World Trade Rules

Infrastructure

Different Policies For Various Groups Of Economies

Mechanisms

Review And Evaluate Exisiting Policies And Mechanisms

Awareness In Smes

Banks, VCs, Etc To Be More Transparent, Sensitive To Needs, RiskTaking Capacity, Trust

Public-Private Partnerships

Information Systems, Exchange Of Experiences, Collaborations AndNetworking, Quality Advisory Services, Access To Technologies AndRelated Services

Mind Set And Sensitisation Of Policy Markers Through RegularProgrammes

Take Advantage Of Institutional Mechanisms And Programmes OfInternational Agencies Such As ESCAP, These Also Need To Be MoreResponsive And Dynamic

Promote Technology Marketing And Branding Enterpreneurship Development And ICT

Incentives

Review Impact Of ExistIng Incentives

Encourage Development, Acquisition, Commercialisationa And TransferOf Technologies, Patenting And Patent Utilisation

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Skills Upgradation

Encourage Technology For Businesses And Technology Businesses

Encourage Internationalisation And Collaboration With TNCs

Sensitise To International Trends And Realities

Recognition And Awards

Encourage Academics And R&D Professionals To Interact With SMEs

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Table 1

Trends in R&D spending by Foreign Affiliates in Select Economies in 2003 Share

in Business R&D

Country Total R&D ($b)

Business R&D ($ b) Foreign AffiliateR&D(Percent of BusinessR&D)

USA (2002) 276.2 194.4 14.1

Japan (2001) 133.0 92.3 3.4

UK 29.3 19.6 45.6

China 15.6 9.5 23.7RoK(2002) 13.8 10.4 1.6

Canada 13.8 7.9 34.8

India (1999) 3.7 - 3.4

Singapore 1.9 1.2 59.8

Thailand - - 28.1

Total R&D Expenditure in the World $ 676.5 b (2002)

Total R&D Expenditure of foreign affiliates $ 67 b (2002)

Total Business R&D Expenditure in the World $ 449.8 b (2002)

(Source : WIR 2005, p.105,127)

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Table 2

R&D Intensities of Sample Enterprises Across Industries

(percentage)

1992-93 to 1994-95 1995-96 to 1998-99 1992-93 to 1998-99

Industry Local MNEAffiliates

Total Local MNEAffiliates

Total Local MNEAffiliates

Total

Textiles .38989 .8289 .4398 .300208 .70017 .33225 .326297 .7426 .36323

Automobile 1.3183

.6556

1.05139

1.33164

.872101

1.15265

1.33247

794157

1.12404

Machinery .9682

.8948

.936131

.889136

.96374

.915210

.92219

.937122

.923341

Electrical 1.13181

.92355

1.08236

1.13330

.8892

1.08422

1.13511

.90147

1.08658

Drugs andpharma

1.69128

1.0648

1.57176

1.74220

1.1280

1.58300

1.72348

1.10128

1.55476

Full Sample .901125

.766338

.8681468

. 8312169

.852577

.8352746

.8543294

. 818915

.8464209

Note : Parentheses show S.D.; the bottom figure represents number of observations

Source : Nagesh Kumar and A.Agarwal; Liberalisation, outward orientation, and in-houseR&D Activity of multinational and local firms; RIS, 2000, New Delhi

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Table 3

H IG

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Table 4

RECEIPTS & PAYMENTS OF ROYALTY AND LICENCE FEE OF SELECT

COUNTRIES

(2001 TO 2003)

(US$ million)

Country 2001 2002 2003

Receipts Payments Receipts Payments Receipts Payments

USA 38,660 16,360 44,142 19,258 48,227 20,049

Japan 10,462 11,099 10,422 11,021 12,271 11,003

UK 7,910 5,909 7,701 5,993 10,245 7,382

SouthKorea

688 3,221 826 2,979 1,325 3,597

China 110 1,938 133 3,114 107 3,548

Singapore -- -- -- -- 197 3,334

Thailand 9 823 7 1,104 7 1,268

Malaysia 21 751 12 628 20 782

India 83 306 12 350 29 356

Source : World Bank, World Development Indicators, 2003,2004 and 2005

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Em e r g e

Fig. 2

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Fig. 3

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Fig. 3

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REFERENCES

1) Agarwal S.P. and Ashwani Gupta; Policies and Infrastructural Facilitiesfor Technology Transfer to SMEs in Globalising Economy- Indian Experience,Asian Conference on Technology Transfer 2006, Seoul, RoK, 14-17 March, 2006

2) Agarwal, S.P.; Consulting Services : Technology Management, CourseMaterial on Technology Management (Draft), DSIR, New Delhi, 2006

3) Agarwal, S.P. and etal; Technology Transfer Trends : the IndianExperience; Tech Monitor, APCTT, New Delhi, May-June, 2004, pp. 36-41.

4) Agarwal,S.P.; Foreign Investment in R&D in India, International BusinessSummit, 2006, FIIE, New Delhi, 31st Oct.-2nd November, 2006

5) Agarwal,S.P, Strategy for Enhancing Competitiveness of SMEs Based onTechnology Capacity Building, ESCAP Regional Consultative Meeting on SIS,Seoul, RoK, 18-20 Jan. 2006

6) Agarwal and O.P. Wali; Indian IT Industry; Grenoble School of Management, France, Programme DESIGNER_28 of Nokia, New Delhi, 20-23March 2006

7) Annual Convention 2006, SIAM : India an automotive Hub, BackgroundPaper, 7 Sept. 2006, New Delhi

8) Annual Reports, Department of Scientific & Industrial Research, NewDelhi, 2004-05 & 2005-06.

9) Annual Reports of Ministry of Commerce, Govt. of India, 2004-05 &

2005-06.

10) Awny.M.M.; Technology Transfer in Developing Countries, InternationalJournal of Technology Management, vol.32, No.1/2, 2005, pp. 213-220

11) Berger Martin and Diez.J.R; Technological Capabilities and Innovation inSouth East Asia : Results from Innovation Surveys in Singapore, Benaug andBangkok; Science, Technology and Society 11:1 (2006), pp.110-148

12) Diana Hicks and Deepak Hegde; Highly Innovative Small Firms in theMarkets For Technology, Research Policy, 34(2005), 703-716

13) Draft Automotive Mission Plan 2006-2016; Ministry of Heavy Industries& Public Enterprises, Govt. of India, new Delhi, Sept. 2006

14) Draft Paper on Higher Education in India and GAT, Sept. 2006. Ministryof Commerce & Industry, new Delhi, www.comm.nic.in

15) FDI in the R&D Sector study for the Pattern in 1998-2003, TIFAC,DST, Government of India, New Delhi, 2006

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16) Global Competitiveness of India Capital Goods Industry, Report ofDepartment of Industrial Policy and Promotion, Govt. of India, 2006

17) Mein Dieter Van Dijk and Henry Sandae; Innovation and Small Enterprises in theThird World, Edward Elgar , UK 2002

18) Nagesh Kumar and Aradhna Agarwal; Discussion Paper on Liberalisation,

Outward Orientation and In-House R&D Activity of Multinational and LocalFirms; Nov. 2000; New Delhi

19) The National Strategy for Manufacturing, March 2006, National ManufacturingCompetitiveness Council, Government of India

20) Postnote, Parliamentary Office of S&T, UK, March 2004, No. 216

21) UNCTAD; Report on Technology Transfer, 2005

22) UNCTAD; Trade and Development Report, 2006

23) World Competitiveness Report 2006, World Economic Forum

24) World Development Report, 2005. World Bank

25) World Investment Report, 2005, UNCTAD

26) World Investment Prospects 2010; Report; Columbia University, NewYork, USA, 2006www.columbia.eduwww.epii

27) www.nstmis.dst.org

28) Yun-chung Chen; Changing the Shanghai Innovation System : The Roleof Multinational Corporations R&D Centres; Science, Technology andSociety, 11:1 (2006), pp. 68-107

29) Agarwal, S.P. etal; Exportable R&D Service from CSIR System in India;International Conference on Services, 4-6 Oct. 2006, New Delhi, FIEO,pp. 121-126.
http://www.columbia.edu/http://www.epii/http://www.columbia.edu/http://www.epii/

Mr.S.P.agarawal Paper for China Workshop

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