Advocacy Panel for an Innovation Policy Agenda Innovation in Lebanon: Progress achieved and Way forward Dr. Maryse Louis, General Manager, FEMISE and Ms. Dalia Seif, Economist ERF/FEMISE 25 September, 2018, Lebanon
The presentation will address the following points: I. Lebanon s Positioning in the Global Innovation Map II. Lebanese Innovation Ecosystem III. Progress achieved IV. Challenges, achievements and way forward.
Introduction Lebanon is a small country with a population of 6 million, a GDP of $51.8 bn and a per capita GDP of $8523 Prior to the Arab spring (2011), Lebanon experienced a rather strong economic growth reaching 8.5% in 2009. After the war in Syria, economic growth has substantially dropped reaching 2% in 2017 Influx of Syrian refugees added pressure to their economy and resources (More than 1 million refugees) Economic challenges: economic slowdown, unemployment, poverty, inequality and brain drain At the same time, the country is characterized by a growing human capital, which is younger and better educated than ever before In the last years, innovation became one of the most important concepts in the world and in Lebanon. It is considered the new way to face these challenges using existing resources efficiently.
I. Lebanon s Positioning in the Global Innovation Map 1. The Global Innovation Index (82 Indicators: quantitative (58), composite (19) and qualitative (5) in 2 subgroups: innovation input and Innovation output) Global Innovation Index ranking 2011-18 160 140 120 2011 2012 2013 2014 2015 2016 2017 2018 90/127 in 2018 100 80 60 40 20 0 Algeria Egypt Jordan Lebanon Morocco Tunisia Source: Global Innovation Index Reports, multiple years Note: the total number of countries could vary.
I. Lebanon s Positioning in the Global Innovation Map 1. The Global Innovation Index 140 120 100 114 GII Efficiency Ratio 119 87 98 1 0.9 0.8 0.7 Innovation Efficiency ratio 2011-18 80 69 0.6 60 40 20 41 0.5 0.4 0 2013 2014 2015 2016 2017 2018 0.3 0.2 0.1 Algeria Jordan Lebanon Morocco Tunisia Egypt 0 2011 2012 2013 2014 2015 2016 2017 2018 Source: Global Innovation Index Reports, multiple years Note: the total number of countries could vary.
I. Lebanon s Positioning in the Global Innovation Map 2. The Global Competitiveness Index: (12 Pillars and one Pillar on Innovation) The overall ranking shows the country at rank 105 th (over 137) in 2017/18 It had dropped 4 rankings from last year Lebanon s second best ranking out of the 12 pillars is that of Innovation ranking 58 after the Business Sophistication 52. Source: Source: Global Competitiveness Reports, several years, World Economic Note: the total number of countries could vary.
I. Lebanon s Positioning in the Global Innovation Map 2. The Global Competitiveness Index: (12 Pillars and one Pillar on Innovation) 160 140 120 100 80 60 40 20 0 GCI: Innovation Pillar Ranking 2006-2017 58/137 in 2017 Algeria Egypt Jordan Lebanon Morocco Tunisia 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Source: Source: Global Competitiveness Reports, several years, World Economic Note: the total number of countries could vary.
II. Lebanese Innovation Ecosystem The Innovation ecosystem in Lebanon is small but diverse and includes many actors: Educational Institutions National Council for Scientific Research Innovation Ecosystem Investment Development Authority of Lebanon Domestic Players Ministry of Trade & Economy Private Sector
The Innovation Process goes through three stages:
1. Institutional and Legislative Environment New Higher Education Law, article 5, paragraph 3 states the allocation of 5% in the operating budget of private universities for scientific research. The Act need activation, not require additional legal action. Investment Promotion Law, No. 360/2001, noted the possibility for Investment Development Authority of Lebanon to contribute in the establishment of companies related to supporting technology innovators October 2003: The internal procedure of the Lebanese Parliament have established an Information and Communication Technology Committee. April 2006: Science, Technology, & Innovation Policy was launched (STIP) August 2014, Banque du Liban issued Circular 331 with the aim of injecting 400 million dollars into the Lebanese knowledge economy via investments made by Lebanese banks. December 2014: Lebanon initiated SME Strategy : Roadmap 2020 http://www.economy.gov.lb/en/news/moet-lebanon-sme-strategy-a-roadmap-to-2020
2. Political and Economic environment Lebanon is one of the smallest countries in the South Med region with 6 million of population. High-level GDP of 51.8 billion USD and a per capita GDP of 8523.75 USD in 2017 20 15 10 GDP, GDP per capita growth and FDI (%GDP) 2008-2017 Prior to the Arab spring (2011), Lebanon experienced a rather strong economic growth reaching 8.5% in 2009, 7% in 2010. After the war in Syria, economic growth has substantially dropped reaching 2% in 2017. The share of the FDI of the GDP is good compared to the regional average, 5.263% and 2.724% respectively. 5 0-5 -10 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 GDP growth (annual %) GDP per capita growth (annual %) Foreign direct investment, net inflows (% of GDP)
2. Political and Economic environment Political & Institutional Environment Lebanon Regional Average This has put pressure on the labour markets and raised unemployment rates to almost 6.6%. Political stability and safety 6.000 Youth unemployment in Lebanon is between the lowest rates in the region 17.5%, Jordan: 40%, Palestine: 44.5%, Morocco 18%. 25 Lebanon Unemployment Rates (2008-2017) Brain Drain: Capacity to retain its talent FDI (% of GDP) 5.000 4.000 3.000 2.000 1.000 0.000-1.000-2.000 Government effectiveness Regulatory qualit 20 15 10 5 GDP Growth Rate (Annual %) Rule of law 0 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Unemployment, total (% of total labor force) SL.UEM.TOTL.ZS GDP per capita growth (annual %) Unemployment, youth total (% of total labor force ages 15-24) SL.UEM.1524.ZS
3. Doing Business in Lebanon Lebanon lost 7 positions in the Ease of Doing Business rank from 126 in 2017 to 133 in 2018. It is the second lowest after Algeria (166). Morocco is the first (69), followed by Tunisia (88) and Jordan (103). Starting a business indicator moved back 4 positions to be the 143rd in 2018 instead of 139th in 2017. The procedures were and still 8 Steps and take 15 days (better than the regional average of 17.07 days) In 2018, registration of property became more difficult, it ranked 102 nd in 2018. It dropped severely in the Paying Tax indicator from 67 in 2017 to 113 in 2018. It made good achievements in protecting minority investors, it gained 7 positions and reached 138 in 2018. The cost to start a business (% of income per capita) is 42% for Lebanon while the the regional average was 20.343%.
3. Doing Business in Lebanon and Financing Resources Lebanon is characterized by a dynamic private sector from small and medium enterprises (SMEs). These SMEs financing is good compared to other countries in the MENA region. Kafalat is a successful example in this regard. The current financing system is not fully inducing innovation on the level of the overall economy. Gaps: 1- funding at the early concept stage where entrepreneurs need to develop their ideas into a viable concept and products. 2- the absence of early stage venture finance. 3- there are no specific tax schemes to encourage SMEs to spend on R&D. New rules have been introduced by the Central Bank of Lebanon that allow the financial institutions to invest more in startups and incubators to facilitate new businesses.
4. Investment in Human capital In the small countries with limited resources like Lebanon, Human Capital is an essential factor for growth In 2013, government expenditure on education represented 2.5% of GDP and government expenditure per secondary student is 6.0% of GDP per capita. Compared to the regional average, it is considered low (20.2%). The pupil-teacher ratio in secondary education is 8.2 compared to 15.678 for the regional average, this is considered a strength for the small populated countries. Lebanon Regional Average Graduates from tertiary in Eng., Manuf, Construct. or Science (%) Government expenditure per secondary student (% of GDP per capita) Education Resources Government expenditure on education as % of GDP (%) 40.0 35.0 30.0 25.0 20.0 15.0 10.0 5.0 0.0 School life expectancy, primary to tertiary (years) Pupil-teacher ratio i secondary education There is a big difference between the percentage of students enrolled in tertiary education (ISCED 7 &8, MA + PHD) in Lebanon and the regional average, 9.2 % and 14.5 % respectively. Students enroleld in tertiary education (ISCED 7 & 8) (%) Students enrolled in tertiary education in Eng., Manuf, Construct. or Gross enrolment ratio in tertiary (%)
4. Investment in Human capital Science and Mathematics are important to support innovation and technology. In 2015, the gross enrolment ratio in tertiary reached 38.5% and the students enrolled in tertiary education in engineering, manufacturing, construction or science programmes were 23.2% in 2014, compared to the regional average (25.259%). 400.0 390.0 380.0 370.0 360.0 Quality of Education 389.3 386.5 366.4 396.2 375.7 26% of students enrolled in secondary education opted for a vocational track in 2015 According to the PISA Study, Lebanon is under the regional average of the mean performance on the reading scale and the science scale. However it is higher than the regional average in the mean performance on the mathematics scale. 350.0 340.0 330.0 320.0 346.5 PISA: Mean performance on the reading scale Lebanon PISA: Mean performance on the science scale Regional Average PISA: Mean performance on the mathematics scale
4. Investment in Human capital Almost half of the workers are skilled compared to an average of 60% in the region. However, 26.6% of firms offer formal training to their employees compared to 17% for the regional average. In April 2010, Lebanon approved a national education strategy framework and a development plan for Education for general education Challenge: migration outflows have increased. Latest figures show that 13% of the Lebanese are living aboard, many with high level of education and skills. However the diaspora remits about 15% of the country s GDP in addition to knowledge, skills and technology transfers The Lebanese Ministry of Foreign Affairs and Emigrants started in 2014 the Lebanese Diaspora Energy conference (LDE) in Lebanon. "DiasporaID" in August 2017 in cooperation with the US Agency for International Development (USAID
5. Access to ICT infrastructure 100% of the population has access to electricity in 2016 even in the rural areas. The time required to get electricity in 2018 is 75 days and it is similar to the regional average. The investment in telecoms in 2014 with private participation was low, 0.9% of GDP, compared to 3.3% for the regional average. The number of Internet users in 2016 reached 76.1 per 100 population, the growth rate from 2005 till 2016 was 86.7%. However, the internet speed is bad. The mobiles users increased from 2005 by 69.4% in 2016, mobile cellular subscriptions reached 81.4 per 100 people, compared to the regional average (103.4). Almost 80% of total households had computers in 2016, compared to 53.723% for the average of the countries of the region, but 69% only have internet access. Time required to get electricity (days) Access to electricity (% of population) ICT Infrastructure Indicators Access to electricity, rural (% of rural population) Households with Internet Access (% of total households) Lebanon Regional Average Number of Internet users per 100 population 120.000 100.000 80.000 60.000 40.000 20.000 0.000 Growth rate of number of internet users per 100 Pop Households with Computers (% of total households) Mobile cellular subscriptions (per 10 people) Growth rates Mobiles users (per 100 population)
5. Access to ICT infrastructure At the firm level, 64% of firms having their own Website and 82.3% using e-mail to interact with clients and suppliers in Lebanon in 2016, the second is considered high compared to the regional average which is 72.6%. 10.1% only of firms were classified under high tech and medium to high tech firms and 4.3% of total firms using technology licensed from foreign companies, however the regional average was 10.0% for the first and 8.3% for the second. Firms using technology licensed from foreign companies (%) Technology at firms level Lebanon Firms having their own Web site (%) 90 80 70 60 50 40 30 20 10 0 Regional average Frms using e-mail to interact with clients/suppliers (%) Firms classified under high Tech and Medium to High Tech (% firms) Firms with an internationallyrecognized quality certification(%)
5. Access to ICT infrastructure The IT related services contributes by 3% GDP in 2013. The share of exports from computer, communication and other related services is 27.3% of commercial services. The Share of ICT service exports in total service exports from the Balance of Payment is 21.6% is highest than the regional average. Share of High Technology exports as % of Manufactured exports is 2.3% and it is the highest one between the other countries New Business parks and clusters are being developed to host companies in the digital industry. 35.0 30.0 25.0 20.0 15.0 10.0 5.0 0.0 27.3 31.1 Computer, communications and other services (% of commercial service exports) ICT Infrastructure Indicators 21.7 18.9 2.4 2.2 High-technology exports (% of manufactured exports) Lebanon 4.7 4.2 Regional Average 3.3 0.9 Investment in telecoms with private participation (% of GDP) There are many financial and technical support.
Charge to the use of IPR is low compared to the region $34.3 million. Research and Development Indicators 6. Research and Development R&D a main component in process of innovation GERD in Lebanon is about 0.2% of GDP which is considered low compared to countries in the region 0.4%; The participation of the private sector is good, 13.4% of firms spend on R&D (regional average is 10%), investments in telecom with Private Sector represents 0.9% of GDP (regional average is 3.3% of GDP) 50.0 45.0 40.0 35.0 30.0 25.0 20.0 Lebanon Regional Average 34.4 89.6 Collaboration between Universities and Industries is on average (3.6 points/7 ) 15.0 10.0 IP laws in Lebanon are well-developed, more than 13 laws regulates copyright, trademark law, patent, industrial designs, trade secrets and unfair competitions; as well as the related ministerial regulations and instructions. (WIPO, 2018) 5.0 0.0 0.2 0.468 Gross Domestic Expenditures on R&D (GERD) % of GDP 3.6 University-industry collaboration in R&D, 1-7 (best) 3.083 3.305 0.9 Charges for the use Investment in of intellectual telecoms with property and private participation patents (BoP) (% of GDP)
7. Firms Performance Firms Performance Indicators Lebanon firms performance is relatively better than the regional average particularly in terms of percentage of firms introducing a process or a new products of innovation and those using emails. The positive features: % of firms classified under high tech or medium to high tech % of firms with a process of innovation % of firms with new product/service % firms using emails or having a website % of firms spending on R&D The negative features: % of firms using technology licensed from foreign companies Firms classified under high Tech and Medium to Firms offering formal training (%) Firms that spend on R&D( %) Firms that introduced a process Lebanon Ease of doing Business (DTF) 90 80 70 60 50 40 30 20 10 0 Firms that introduced a new product/service (%) Regional average Firms whose new product/service is also new to the Firms having their own Web site (%) Frms using e-mail to interact with clients/suppliers Firms with an internationallyrecognized
8. Innovation And Knowledge Diffusion In terms of patents and trademarks applications: the number of both patents is higher than the regional average. However the industrial designs applications are less than the regional average; The number of trademarks applications is very low (190) compared to (369) No of ISO certifications are quite low for environment management and high for quality management However in terms of publications; compares favourably to the regional average in terms Overall Published documents and number of citations Innovation and Knowledge Outputs Indicator Lebanon Regional Average Published Documents per mn of pop 439.345 291.737 No. of Citations per mn of pop 476.138 232.087 No. of trademark applications per mn of pop 190.037 369.780 Citations per document 1.080 0.870 No. of Patents' Residents applications per mn pop 19.000 9.167 No. of design applications per mn pop 18.457 21.758 No. of ISO 14001 environmental Management Certificates per mn pop 5.000 8.698 No of ISO 9001 quality Management certificates per per mn pop 80.333 43.850 Growth in total number of patents' applications (resident and non residents) -57.412 36.991 Growth in total number of trademark applications (direct and via the Madrid system) 38.137 35.147 Growth in total number Number of design applications -5.263 1.617
IV. Challenges, Achievements and Way Forward 1. Challenges Limited financial resources are the most prominent barrier that organizations in Lebanon face in their journey to become a successful digital business. lack of reliable data that is important to facilitate speedy decisionmaking. Lack of flexible rules and regulations that encourage innovation, entrepreneurship and research (Some of them increase the coste and waste time). Research centers and researchers face many problems in the import of tools and equipment for research purposes Lack of workforce readiness and absence of skilled and qualified labour force to work at the speed of business and compete internationally
IV. Challenges, Achievements and Way Forward 2. Achievements
IV. Challenges, Achievements and Way Forward 3. Way Forward Awareness of the importance of innovation, R &D, entrepreneurship, and rights and duties of each one. Educating and empowering Lebanese youth with the necessary tools to allow them to compete and excel in the new knowledge economy Engaging the Diaspora and creating a better environment for their return and/or participation, sharing knowledge and investment opportunities Enabling and collaborating with the private sector and the civil society and defining the roles and responsibilities of each. The local ICT sector is characterized by a competitive advantages and business opportunities in different sectors: gaming, E- Health, Enterprises software, Media streaming, financial and e-payment solution. Better infrastructure (Technology, internet, equipment etc..) Policies and regulations that encourage research, innovation and entrepreneurship (laws, incentives, support)
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