The LATVIAN IS CLUSTER: CASE OF INDUSTRY – UNIVERSITY COOPERATION
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The LATVIAN IS CLUSTER: CASE OF
INDUSTRY – UNIVERSITY
COOPERATION
Valdis Avotins, Latvian Investment & Development Agency
WB KE Forum III, Budapest, March 23-26, 2004
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CONTENTS1. what did we have
• starting point• reforms completed• industry clusters
2. what we do have• Government role• innovation policy
3. what do we want to have
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LATVIA: CRISIS, STABILIZATION, REFORMS AND DEVELOPMENT (but what kind of?)GDP/per capita
Inflation
1st phase - 1st phase - degradationdegradation (till 1991)(till 1991)
2nd phase - 2nd phase - riddanceriddance(1991-1993)(1991-1993)
3rd phase - 3rd phase -
stabilizationstabilization(1993-1994)(1993-1994)
4th phase - 4th phase - recoveryrecovery(institutional (institutional reforms:reforms: 1994-2000)1994-2000)
5th phase –5th phase –exogenous exogenous innovative innovative economicseconomics (2000 -2005)(2000 -2005)
6th phase –6th phase –endogenouendogenous s innovative innovative economicseconomics (2005 - …)(2005 - …)
Prof. U.OSIS
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-12,6
-32,1
-11,4
2,2
-0,9
3,7
8,4
4,82,8
6,8 7,9 6,7 7,5
-35
-30
-25
-20
-15
-10
-5
0
5
10
1991 1993 1995 1997 1999 2001 2003*
GDP at constant prices GDP at constant prices (changes in % of previous period) (changes in % of previous period)
Price liberalizationPrice liberalization
Stabilization policyStabilization policyLVLLVL
Latvian Privatization AgencyLatvian Privatization AgencyRiga Stock ExchangeRiga Stock Exchange
Latvian Development AgencyLatvian Development Agency
Fiscal and monetary Fiscal and monetary policypolicy
Privatization of large Privatization of large enterprisesenterprises
Long-term strategy
Prof. U.OSIS
LATVIA: GROSS DOMESTIC PRODUCT
Reforms in Latvia
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TODAY TODAY ......
• Innovation Policy at the top of policy agenda at national level
• Macroeconomic stability: macro-economic reforms completed
• impressive FDI inflow; acquisition of new technology and skills
Still weaknesses ...• The economy depends on low tech and low value added
goods• Low level of national savings, high current account deficit• Outworn infrastructure• Poor quality of education and research system• Regional and social disproportions
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INNOVATION POLICY INNOVATION POLICY (2003)(2003)KEY OBJECTIVE - to enhance national innovation capacity : formation of the society open to innovative activity Creation of a harmonized and innovation-friendly environment; Creation of innovative SMEs base and promotion of their further
growth efficient cooperation between all elements of the innovation system
LONG TERM ECONOMIC STRATEGYLONG TERM ECONOMIC STRATEGY (2001)(2001)
Objective : to achieve the EU average GDP per capita level in the next 20-30 years
•intensive utilization of knowledge and high technologies, transition from labour-intensive economy to knowledge-intensive economy
•by renovating traditional sectors of economy on modern technology basis and by developing new post-industrial knowledge-intensive sectors
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GOVERNMENT INITIATIVE – INDUSTRIAL CLUSTER PROJECT
Project funded by EU Phare in 2001 Project objective – strategic economy restructuring based on the Clustering idea: improvement of competitiveness of Latvia’s export potential through collaboration between cluster participants based on the shared vision
Covered four industrial sectors - IS, Forestry, Composite materials, Engineering (Optic Fibres)
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EXPERIENCE OF FORESTRY CLUSTER
• Members: Wood working companies, large sawn mills, SMEs, furniture industry and University of Agriculture
• Fueled by Latvian Forest Industry Federation• Cluster Concept approved by Government (2002)• Forest Development Fund (MoA, Federation)• Woodworking Development Institute at University
of Agriculture Certification, standards, tests, measurement techniques,
chemical technologies, cross-sectoral education and R&D supply
• Forest Cluster Information Centre Information, market analyses, timber usage promotion
• Regional Centres of Competence (Jekabpils, Ventspils)
• Design of long – term Forestry Industry Strategy
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ROLE OF INFORMATION ROLE OF INFORMATION SYSTEMS SECTOR IN SYSTEMS SECTOR IN LATVIAN ECONOMYLATVIAN ECONOMY Fastest growing export sector (55%), 3000
engineers In 2002, gross sales of packaged software: 0,76% of GDP The most potential sector for future development
Ernst & Young, 1999; Arthur Andersen, 2001; ITC, 2003
Sector is supported by several government strategic documents: National Program: Informatics; National Development Plan Industrial Development Plan, Long Term Strategy for National Economy Product characteristics :
high value added“Clean” productno need for energy resources
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Software developmentIT consultations
Hardware architectureNetworking & data
transmission solutions
Banking & financeData transmission & storage IS,Transaction software, Financial
applications, WAP solutions, Clienthandling systems
Wireless & cablecommunications
Data transmission & storage IS, Largecustomer registers, WAP solutions, Call
Centers, ASP solutions
Public institutionsBusiness process re-engineering,
Integrated networks, ASP, Databases &data storage, Specific applications
TransportEDI systems, warehousing, distribution &
transport software, aviation software
HealthcarePatient & case-record registers, medical
equipment support software, telemedicine
Education & scienceLAN, Internet & Intranet solutions, Digital
signal processing
Service & manufacturingClient handling systems, Accounting &
financial software, Network architecture,WEB solutions, office software, ASP
services
LATVIAN ICT SECTOR The main specialisations and products
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LATVIA: A PART OF THE NEW ECONOMYVision of Latvia’s IS cluster by 2010Latvia would be a leading software services
exporter in Eastern EuropeCluster of more than 10 000 qualified specialistsAnnual export of services over 1 billion USDSourcing of additional HR from Russia and
BelarusProvision of ASP services, know-how and
productsCurrent expertise in implementing large-scale
projects would be enhanced by 2010Establishment of an R&D center for the
development of IS projects
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GOVERNMENT SUPPORTS DEVELOPMENT OF KNOWLEDGE BASED SECTORSIS cluster Articulated and agreed cluster strategy (vision, mission and values) IS Cluster Code of Ethics signed by all involved companies Back – office: Cluster resources pool and costs assessed Several legislative initiatives started with government of Latvia Communication network created - www.is.lv
Role of Government : State aid to export marketing and export training Development of IT education and professional standards Support to IT University College network Development of Postgraduate IT&T professional training centre Participation in process of improvement of business environment (through identification of the main problems and legislative initiatives)
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•EU and US IT course programs have been adopted, certified and are used in Riga Technical University, the University of Latvia, and the Institute of Transport and Communications
•Significant support / donations: Siemens, CISCO, FESTO, IBM, Samsung Electronics
•Practical IT skills are acquired in Latvian software houses
•Local firms provide significant contribution (research prizes, scholarships, donations, etc.)
•University and company collaboration to promote the interest of youth in IT
•Centre of Competence: MII, University of Latvia and DATI Group
•Collaboration for advanced mainframe studies: Exigen, UoL, ITC
INDUSTRY – UNIVERSITY COLLABORATION
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25382940
3876
4804 4961
0
1000
2000
3000
4000
5000
6000
1998/99 1999/00 2000/01 2001/02 2002/03
Number of IT students
Source: Ministry of Education and Science
RAPIDLY GROWING AMOUNT OF IT STUDENTS
Priorities in 2004
•Keep No of graduates
•Doctor level students
•Quality of education
•Life-long learning
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CREATION OF IT UNIVERSITY COLLEGE NETWORK IN LATVIA
Universities
Professional education (colleges & adult training)
Regional Centres of Competence
•Valmiera Cybercity project
•Ventspils ITTE
•Jelgava Bioinformatics Centre
Baltic network of Private Baltic Computer Academy
2500 students – HP, IBM, Microsoft, Novell, CIW
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Cycle of Reform
1. Identification of
problems
2. Government/
business dialogue
3.Implementation
by decision-makers
4. Monitoring and evaluation to assess impact
Political Champion - Deputy Prime MinisterInstitutional Partners:Institutional Partners:
Foreign Investors Council in Latvia Foreign Investors Council in Latvia (FICIL)(FICIL)
Latvian Chamber of Trade and Latvian Chamber of Trade and IndustryIndustry
Foreign Chambers of CommerceForeign Chambers of Commerce
National Economy Council National Economy Council
Industrial Clusters (ICT)Industrial Clusters (ICT)
Small and Medium Business CouncilSmall and Medium Business Council
Other Industry Business AssociationsOther Industry Business Associations
UPGRADING OF INNOVATION CLIMATE
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Friendly Business Environment for ICT
• “Green Card” scheme for highly qualified IT professionals Simplified immigration and employment conditions for
up to 90 days for up to 100 ICT professionals per calendar year Short-run remedial solution: designed and implemented by
LIDA
• Fiscal (Tax) Incentives for Diploma Education• Non-application of salary tax for employer’s expenses for
diploma education of employees in ICT areas• Long-run stimulus: researched by Ernst&Young by LIDA
commission• Responsible institution: Ministry of Finance• Planned to come into effect June 2004
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SOFTWARE OUTSOURCING IN LATVIA - BACKGROUND AND TRENDS
Today•Subcontracting activities, dependent on few
contractors•Lack of critical mass for large projects•Skill sets are fragmented•Key selling factor is still a cost efficiency
Future sector trends•Provision of additional value added services that
are based on core competencies•Capabilities to undertake and manage large scale
projects, need for scalability•Corporate marketing effort, knowledge of key
customers•Developing and maintaining unique knowledge
OPPORTUNITIES
need to innovate and move up the value chain where cost and price
sensitivities are not as
critical
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BALTIC IS CLUSTER INITIATIVE• Initiative of Latvia’s IS cluster• Creating Baltic IT Brand• Provision of joint Baltic
competences to sizeable projects• Collaboration for Global markets• Create Baltic IT Forum / Network
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SYNERGY BETWEEN UNIVERSITY AND INDUSTRY
University
Basic research expertise
Scientific exposure &
project acquisition
Solution of fundament
al problems
Market driven ideas
Highly trained staff
IP, revenue
Education of applied
scientists
Research into
innovative products
SuccessFor university
stimulate
needs
provides
generates
For industrypositively affects
necessary for
providesprovides
may
require
benefits
benefits
generates
Based on Ulm university model
Determines key areas
IndustryStudy Programs,
Professional standards
designesorders
Sci. publication
Joint projects
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LESSONS LEARNED• Macro:
Innovative, but mostly exogenous, innovation absorbing – specific to transitional economy, in the process of restructuring
Exogenous development is time, capital and space limited The alternative for the future – endogenous innovative
development
• Micro Achieved needed growth of IT graduates (>1000 Y) Network contributes to IT growth Standards implemented Confidence achieved Growth by members and volume (export 55%)
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LATVIAN INVESTMENT & DEVELOPMENT AGENCY
Ministry of EconomyBrivibas 55, RigaLV 1519, Latviawww.em.gov.lv
Perses iela 2, Riga, LV 1442, LatviaPhone: +371 7039400Fax: +371 7039401 E-mail: [email protected]://www.liaa.gov.lv