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Future innovation platforms in industrialization and the diversifica- ways will become a benef it. Saudi
Saudi Arabia cannot be isolated from tion of its economy. The Saudi form Arabia is gradually taking part in
the changes that are now reshaping of Dutch Disease made the manufac- the globalization of R&D. The
the Saudi economy, which has long turing sector less competitive than countrys growing resource incomes
been known for its chronic heavy it could otherwise have been, and are increasingly driving the trans-
dependence on the countrys natural although figures on R&D expendi- formation of the economy towards
resources. This is especially apparent tures by private firms are not being a knowledge-based system. In 2012
when we consider the proportion of collected, they are assumed to be Saudi Arabia was one of three new
export revenues that is attributable very low by international standards. emerging economies to appear on
to the oil sector (see Figure1). R&D programmes remain limited the world R&D map for first time
largely to the large industrial compa- (Malaysia and Indonesia are the
nies. Saudi investments have always other two) according to Battelles
Saudi Arabia in the global research tended to be risk averse and less 2012 Global R&D Funding Forecast.2
and development scene: Context and favourable towards extending funds Although Saudi Arabia is not now
economic rationale to new technology-driven compa- one of the global science and technol-
Saudi Arabia is not the only nation nies that have a high-risk profile. ogy (S&T) supply countries where
with natural-resource wealth that Moreover, efforts to stimulate multinational enterprises (MNEs)
affects its economy in many ways, innovation and enhance competi- choose to locate their offshore R&D
including its research and develop- tiveness at the national level have centres, and is not now a natural tar-
ment (R&D) levels. The continued confronted serious human resources get for R&D-related foreign direct
deep reliance on natural resources for challenges. Although the number investment (FDI), a multitude of
the past several decades has taken its of engineers and scientists in Saudi multibillion-dollar developmental
toll on todays Saudi industry. Large Arabia has increased in the last few projectsmainly in the petroleum
corporations dominate the indus- years, it remains low when compared upstream/downstream processing
try landscape; these include Saudi with those of other industrialized and the construction and engineer-
Aramco, which has a monopoly on countries. According to research ing fieldshave brought multina-
upstream oil development, and Saudi from the International Development tional R&D centres of international
Basic Industries (SABIC), which is Research Centre,1 Saudi Arabia has industrial corporations (see Box1).
currently the worlds seventh-largest the lowest total early-stage entre- International research collabora-
petrochemical producer and the larg- preneurial activity rate of all the tion is now acknowledged to be an
est non-oil company in the Middle factor-driven economies in its study. important transmission mechanism
East. The Kingdoms development Only 4.7% of the adult population through which technology can be
remains largely in the investment are actively involved in the start-up diffused between f irms and across
THE GLOBAL INNOVATION INDEX 2012
stage, although there are potential of a new business or own a young regions and countries. FDI plays a
pockets of innovation. business that has existed for less than major role in the process of global-
The National Plan for Science, three and half years. izing R&D, and MNEs are the
Technology and Innovation (NPSTI It seems the wealth of resources main actors. MNEs are seen as the
20102025) highlighted the major that was once argued to have been primary driver of global R&D, and
challenges facing the advance- an obstacle to Saudi Arabia diver- the worlds biggest multinationals
ment of Saudi Arabia towards sifying its economy in innovative are increasingly happy to locate their
90
3: The Case of Saudi Arabia
350
Q Oil export revenues
Q Total export revenues
300
250
Saudi riyals, billions
200
150
100
50
0
2004 2005 2006 2007 2008 2009 2010 2011E 2012F 2013F
Source: Compiled by the authors from data presented in Jadwa Investment, 2012.
tion of exploring developmental efforts at The Saudi triple helix arrangement includes
the KAUST Research Park and Innovation the Saudi Universities, the Saudi mega build global marketing and sales
Cluster. industries, and the MNEs. support presence at their technol-
ogy market locations (among many
other reasons). The offshoring of
R&D in developing countries has
involved internationally known
MNEs such as Ericsson, GE, IBM,
91
2017 and 2015. The Saudi economy the economic base and achieving standards, a failing that ref lects
is part of the worlds changing por- balanced development among the negatively on R&D.
trayal of R&D, and is considered to countrys sectors, such as mining, The major roles open to Saudi
be one of the emerging economies ICT and petrochemical projects. industry in building the future
that are slowly (and steadily) increas- During the last decade, the picture knowledge-based economy were
ing their annual investment in R&D has gradually changed. The 8th and highlighted by the 9th Development
9th Development Plans included Plan. Saudi Aramco and SABIC
92
and the companies of the Offset academia-enterprise innovation resources to generate wealth and
3: The Case of Saudi Arabia
Arabia. These included two inter- In 2011, TICs were established initiateprogramme is mandated
twined dimensions: (1) directing the at three major Saudi universities: to support a network of five national
countrys investment in R&D and KFUPM, KSU, and King Abdulaziz technology-focused incubators
innovation towards areas important University (KAU). The centres are that assist emerging-technology
to the national economy and (2) geared towards developing advanced companies with specialist accom-
the needs for developing effective technologies that secure demanded modations. BADIR incubators
advanced products and give new will focus mainly on the priority
93
Industry
Universities
technologies of ICT, biotechnology, development structure according to effective and well-designed regula-
advanced materials, manufacturing, their levels of technology readiness tory regimes and policies. Special
and energy technologies and work (Figure2). The university-industry arrangements are needed to coor-
closely with aff iliate incubators in innovation linking system was dinate activities of the university-
national universities. The work is designed to operate mission-driven industry cooperative TICs and the
near completion and is expected to environmentsthe elements of the R&D centres of the MNEs at the
be implemented under the auspices system will receive ongoing support research parks at universities. Also,
of the NSTP. from the government and lever- there are no clear links between the
age significant funds from industry developmental initiatives that take
(both national and multinational). It place at the newly established eco-
Enhancing academia-industry innovation is assumed they will have transforma- nomic cities and the research clusters
links in Saudi Arabia tive effects on the industrial base of that have started to emerge at the
The industrially oriented NSTP- Saudi Arabia during coming decades. campuses of the Saudi universities.
funded R&D projects, the research Consolidating these initia-
parks at major universities, the coop- tives requires a special type of
erative TICs, and the focused tech- engagementknown as triple- Regulatory regimes and policies needed
nology incubation centres constitute helix engagementthat fosters for Saudi Arabia to enhance current
jointly a large-scale national effort dynamic exchanges among Saudi academia-industry linkages
THE GLOBAL INNOVATION INDEX 2012
for aligning universities research universities, national funding (and The R&D centre environments of
with the future strategic needs of the policy-making) organizations, and the large industriesrepresented
Kingdom and transitioning public local/global f irms. Coordinating by both national and multinational
R&D results to production and among the intermediary organiza- enterprisesrequire advanced engi-
service sectors. These programmes tions and numerous Saudi national neering and manufacturing support
and intermediary organizations have knowledge-based economy initia- services. Petroleum R&D processes
been positioned in the technology tives and knowledge nodes requires are typically known for their
94
heavy demands for high-precision is offering fiscal incentives to cover Creating more favourable condi-
3: The Case of Saudi Arabia
mechanic work, which Saudi Arabia patenting costs. This support may tions for bringing a larger portion
currently lacks. The deficit in engi- be of interest to foreign investors of the worlds R&D-related FDI
neering design skills and the inability in R&D. Ensuring the presence of is also needed. The World Banks
of the labour force to execute small adequate skills in IP is necessary as Doing Business 2012 data for Saudi
devices or provide specialized shops well; this can be done, for example, Arabia indicates that the country
that can build systems and compo- by sponsoring IP education and occupies an advanced position (12
nents to specif ications as required identifying specialized law firms and out of 183) in terms of the ease of
by the scope of research projects consultants that can be contacted by doing business. However, this envi-
are among the most challenging potential foreign investors. ronment remains mainly limited to
diff iculties facing the advanced An abundance of natural investments in economic develop-
research centres in the Kingdom. resources has been always one of ment projects. There are special
Encouraging small- and medium- the most important determinants of needs for handling important issues
sized enterprises in Saudi Arabia to FDI in Saudi Arabia, but indications hindering technology development
invest in these types of engineering of a gradual shiftfrom resource- by international companies and the
design and manufacturing services seeking to other types of FDIare R&D offshore centres of MNEs
will require a specially designed growing. This diversification of the in Saudi Arabia. New legislation is
favourable investment environment type of FDI should be encouraged. essential to facilitate the importa-
and new types of investment poli- Increasing the attractiveness of Saudi tion of special materials or ordering
cies. In the same way, encouraging Arabia as a location for offshored equipment. Plans for attracting FDI
industrial ventures in building inno- R&D centres and R&D-related should also include differentiated
vative prototypes that could become FDI requires policy makers to packages for R&D-related FDIs.
successful in international markets foster scientific excellence through To obtain greater gains from
was among the possible innovation the creation of both scientif ic and foreign technology transfer to local
paths recommended for Saudi Ara- technological networks of public Saudi firms and industries, several
bia by the World Banks innovation and private research not only within conditions must be met through
policy guide.6 Saudi institutions of boundaries of the country but also indigenous R&D. Foreign tech-
higher education need also to be with distant partners. In the end, nology can generate technological
encouraged to align their curricula Saudi Arabia is a developed coun- change and upgrading for local
with these developmental demands try entering the era of globalized f irms only insofar as suff icient
and to develop special training pro- innovation; this reality needs to be indigenous R&D activities and
grammes to bridge the skills gap in ref lected in its national policy for human capital are present. The
these particular sectors. science and technology. For this level of local absorptive capacity is a
In regard to the protection of reason, Saudi national policies for crucial determinant and depends on
intellectual property (IP) rightsa science and technology should be the human capital and the countrys
protection that is important for related to the integration and con- appropriation for R&D. Experiences
attracting the R&D activities of for- centration of resources to reach an from emerging economies suggest
eign companiesSaudi Arabia has internationally competitive critical that maximizing the benef its of
achieved significant progress, which mass. The small number of graduate innovation and accelerating catch
was a requirement of membership students remains an impediment for up requires parallel encouragement
in the World Trade Organization. knowledge generation in the King- for indigenous innovation and the
However, further work is needed in dom. To ameliorate this situation, acquisition of foreign knowledge.
this area to develop more transpar- policies are needed that stimulate Chinas modeland also the Indian
ent and enforceable regimes for IP Saudi institutions of higher educa- and Brazilian modelsof walk-
THE GLOBAL INNOVATION INDEX 2012
rights. From an MNE headquar- tion to continue engaging with ing on two legs ref lects prudent
ters perspective, among the main enterprises and to adopt a method strategy for maximizing benef its
drawbacks of R&D offshoring is of systematic and formal consulta- of developing countries. It is true
the potential loss of control over tion with industry in the develop- that the offshored R&D centres in
the results. In order to stimulate ment of structured Master and PhD Saudi Arabia are, so far, mainly for
the patenting activity of f irms, an programmes that address industrys Western-headquartered corpora-
instrument used by several countries requirements. tions, but selecting and shaping
95
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documents/2012/120131-jadwa-chartbook.
2 Batelle, 2011. pdf.
3 UNESCO, 2010. Narula, R. and J. Guimn. 2009. The Contribution of
Multinational Enterprises to the Upgrading
4 Batelle, 2010.
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5 World Bank, 2010. New Member States: Policy Implications.
THE GLOBAL INNOVATION INDEX 2012