Innovation as a Lever for Picking Up on Development

Robson Braga de Andrade

President of CNI

The recent improvement of innovation policies in advanced economies

The Science, Technology and Innovation (ST&I) systems of advanced industrial economies have responded impressively to the violent impact of Covid-19. Public and private actors promptly joined forces to come up with solutions to urgent and unexpected challenges. This partnership led to the development of vaccines and antiviral drugs in record time and allowed for accelerated adoption of digital technologies, which kept the economy moving. Without these, the large-scale application of remote and home office work would have been impossible, as one of the main forms of reducing the massive transmission of the virus.

With the pandemic, the relevance of ST&I to the future of humanity has become crystal clear. This has inspired governments in advanced countries to strengthen their industrial and technological strategies as a lever for reversing economic crisis and achieving a new pattern of sustainable growth, in order to better cope with contemporary global challenges.

In addition to ensuring health and social inclusion, which are currently threatened by unemployment and increasingly contagious and aggressive variants of Covid, governments need to address climate change more effectively. Moreover, exponential innovations such as 5G telecommunications, advanced manufacturing, artificial intelligence, and genomic editing cannot be neglected, as they will significantly impact society and industrial systems.

Aware of these challenges, governments and business leaders in developed economies have already engaged in new ST&I strategies as a key to the competitiveness of their industrial systems. This tends to increase the competition for space in global value chains.

In fact, since the mid-2010s, the United States, Germany, China, South Korea, France, Japan, and the United Kingdom have all launched ambitious long-term industrial strategies centered around ST&I programs. However, the pandemic, and the worsening problems caused by climate change have prompted them to expand the scope and reach of such strategies.

For example, China recently launched its 14th Five-Year Plan (2021-2025)¹, focusing on qualitative goals, and giving a high priority to investments in ST&I which are aimed at reaching the frontier in seven key technologies, including semiconductors, quantum computing, artificial intelligence, genomics, and neuroscience². By doing so, China aims to become a high-tech industrial superpower in 10 years.

The recently elected President of the United States, Joe Biden, granted ministerial status to the Science and Technology Secretariat, with a substantially increased budget and, not by chance, has placed emphasis on artificial intelligence, quantum computing, and advanced semiconductors. Challenged by the Chinese ambition, the US, with its largest and most equipped ST&I system in the world, wants to accelerate its own progress and maintain world leadership in the field³. The fact that it is done with broad cross-party support, confirms that ST&I enjoys solid endorsement in society and in Congress⁴.

Recently, some of the leading states of the European Union (EU) have also expanded and enhanced their ST&I strategies. Germany, for example, has introduced the High-Tech Strategy 2025, a comprehensive plan far beyond Industry 4.0. This new policy focuses on designing “solutions to global future challenges” through mission-oriented research and policy, focusing on health, environmental sustainability, mobility, urban and rural social development, security, economy, and work 4.0⁵.

In the same way that the pandemic made the relevance of scientific and technological capacity in health undisputed, the recent incidence of disasters caused by climate change has become a top concern for societies and governments. Such disasters have catalyzed changes in strategies focused on environmental sustainability. In recent months, the European Union, China, and several other advanced industrial countries have spontaneously assumed ambitious environmental commitments, particularly regarding decarbonization of the energy matrix. These initiatives were crowned by the Biden administration’s vigorous re-boosting of the US environmental policy⁶.

Overall, the Covid-19 pandemic and the urgency of the climate challenge have added new dimensions to the recovery of the economic growth agenda with particular emphasis on environmental sustainability and quality jobs generation. Additionally, it reinforced the commitment of governments, urged by society, to take the lead in stimulating ST&I development through public investment and a range of incentives.

Despite sharing the vision that ST&I leads to a sustainable and socially inclusive future, this perspective is not feasible for all developing economies due to the weaknesses of their industrial systems and S&T bases, as well as fiscal difficulties worsened by the Covid-19 crisis.

Unfortunately, this is the case for Brazil. In recent years, financial constraints have reduced the resources available to the S&T national system. These circumstances have been further exacerbated by the effects of Covid-19.

CNI-MEI’s struggle to advance innovation in Brazil

The Entrepreneurial Mobilization for Innovation (Mobilização Empresarial pela Inovação, MEI) is a movement of business leaders established in 2008 by the initiative of the Brazilian National Confederation of Industry (CNI). It aims to encourage private sector engagement in research, development, and innovation (RD&I) activities. About 300 leading national and foreign companies are actively participating in this movement. Besides mobilizing the business sector, MEI has contributed to public policy on ST&I, becoming the main forum of dialogue between private enterprises, academia, government, and the National Congress.

Recently, this power of liaising has been extensively used in attempt to overturn setbacks in federal budget execution and the consequent weakening of the Brazilian ST&I policy. While ST&I investments have increased across innovative countries, government spending on ST&I in Brazil has consistently been reduced since 2014. Budget compression has worsened even further in 2020 and 2021, putting the ST&I ecosystem at risk of an unprecedented crisis.

In this hard fiscal context, MEI/CNI has attempted to maintain dialogue with the Executive Branch, particularly the Ministry of Finance and the Ministry of Science, Technology and Innovations (MCTI) without leaving the Legislative Branch aside. All of this was carried out in close alliance with representative entities of the scientific and technological communities in Brazil⁷. As a result, MEI managed to get broad support in Congress and pass a special bill prohibiting the Executive Power to limit budget allocations to the National Fund for Scientific and Technological Development (FNDCT) – the main source of funding for ST&I in Brazil.

Unfortunately, the economic authorities have been flagrantly ignoring this legal provision, citing fiscal constraints as a justification for non-compliance. This bizarre circumstance poses a real threat that may cause irreversible damage to the core activities of the national ST&I system. This has promoted MEI, alongside scientific and technological associations, to redouble their efforts to reverse this threat.

Despite having been forced to focus its energies on the tough struggle to preserve the national ST&I system, MEI has not abandoned its long-term propositional agenda. Supported by technical studies, in collaboration with the science and technology community and its leading companies, MEI has persistently presented proposals for the improvement of ST&I policies.

These proposals are gathered in the MEI Agenda, which consolidates key suggestions for the advancement of the Brazilian innovation ecosystem, considering successful international experiences and their benchmarks, notably the Global Innovation Index (GII)⁸.

The MEI Agenda

The Agenda is structured in eight thematic axes, as follows:

1) regulatory framework;

2) financing;

3) human resources;

4) global markets insertion;

5) open innovation;

6) sustainability;

7) digital transformation;

8) ST&I policy and governance.

Next, we highlight the main contributions and proposals on each axis of the agenda.

Ensuring the stability and growth of ST&I funding

Due to the consistent decline of public spending on ST&I over the last six years, with dramatic losses in 2020 and 2021, MEI’s top priority has become the protection and expansion of resources for ST&I. After reaching 1.3% of the GDP in the middle of the past decade, the ST&I/GDP (spending on ST&I/GDP) ratio has fallen to 1.14% in 2018, and arguably dropped below 1% in the last couple of years.

MEI is committed to not only increasing public and private funding for ST&I, but also to ensuring sustainability and predictability of these sources. We bear in mind the challenges presented by the urge to maintain economic growth without ignoring the environmental responsibilities. Thus, we aspire to create jobs by increasing the added value of our industry and services, and to support better health and more social inclusion within the population. In other words, our vision is to mobilize ST&I to tackle the most important challenges of Brazilian society, using them as guides to create mission-oriented policies.

An Innovation Investment Working Group was established by MEI to come up with feasible proposals on expanding the use of public purchasing power with the aim of promoting innovation and finding alternative sources of funding. The group is composed of prominent leaders and highly qualified representatives from the academy and tech groups, among others. They are tasked with evaluating initiatives on inducing new sources of funding that match private investment with public money, such as blended finance and endowment funds.

Improving the regulatory framework

Despite the progress achieved through the new regulatory framework for ST&I, startups and angel investors, and improvements in deadlines for analysis of patent and trademark applications, the Brazilian regulatory environment is still suffering from gaps and ambiguities that cause legal uncertainty. For this reason, MEI proposes to: a) improve the legal and infra-legal norms concerning the use of the public sector’s purchasing power, including the development and scaling up of technologies; b) simplify and eliminate inconsistencies by establishing clear rules for companies, especially micro and small ones, to access the Lei do Bem, the main Brazilian tax incentive for private investment in research and development. Another important initiative is to keep state laws on ST&I regularly updated.

Strategic Human Resources for Innovation

Given the ongoing technological transformations, Brazilian human resource training should advance more rapidly, especially in terms of digitalization-related skills. The desired training modules should cover competencies in STEAM (Science, Technology, Engineering, Arts and Mathematics), as well as creative skills, teamwork, critical thinking, holistic or systemic vision, and a continuous learning attitude. The goal is to empower people to learn, generate solutions, solve problems, and be versatile enough to handle different roles.

MEI established a working group for Engineering and STEAM, which significantly contributed to modernizing the curricula and pedagogical practices in engineering courses, bringing them closer to the best international practices. Recently, another group was created for Professional and Technological Education. The group focuses on vocational training in high school, aiming to fill the existing gaps among high school graduates, and help them overcome the challenges of the increasingly digital economy⁹.

Participation in the global innovation system

The leaders of MEI are aware of the importance of international cooperation in the field of ST&I, especially in the sectors most exposed to international trade and foreign investment. That is why MEI encourages educational and research institutions and innovative Brazilian companies to connect to innovation ecosystems abroad, especially those that are reference centers in their respective industries. This active interaction between the agents of the Brazilian innovation ecosystems and their counterparts abroad tends to be very fruitful for supporting strategic partnerships and new business initiatives between Brazilian and foreign companies, including startups, accelerators and incubators, venture capital funds, as well as with laboratories and scientific, technological and innovation institutions (ICTs).

MEI has worked intensively towards promoting Brazilian cooperation amongst international innovation ecosystems through its successful Immersion Program. By August 2021, the Program was carried out 16 times abroad, in reference centers of eight countries.

Expansion of open innovation partnerships

Open innovation entails collaborative work between several agents bringing companies and ST&Is of different backgrounds together, to achieve shared results and develop new technologies. Besides innovations in products and processes, opportunities for establishing permanent partnerships (including corporate), trading contracts, technology transfers and other advantages are being created. This open and cooperative approach was strengthened during the pandemic by the intensive use of online conferencing and cooperation tools. By bringing together the skills and expertise of different actors, open innovation accelerates the pace of innovation development.

To this end, the CNI/MEI established a partnership with Sosa, a global open innovation company that brings together 15,000 startups from 10 different countries. The partnership intends to link Brazilian companies to startups and technological solutions from cutting-edge innovation ecosystems in advanced countries.

The Brazilian contribution to environmental sustainability

MEI considers the adoption of a comprehensive environmental sustainability policy in line with the UN Sustainable Development Goals (SDGs). Brazil has noticeable advantages to become an exemplary case of sustainable development – and the country must urgently demonstrate its potential in this field. Current environmental policies in Brazil have been strongly targeted abroad. As a result, there is a growing danger of non-tariff barriers against our products, as well as discrimination from investors and funds against our companies, in response to what is perceived internationally as a lack of environmental commitment on the part of our current national administration.

 

Our environmental strategy needs to be aligned with ST&I policy to be effective, creative, and generate socio-economic opportunities. It should encompass the preservation of biomes and biodiversity, face urban pollution with efficient sanitation policies, preserve water sources and air quality, promote selective garbage collection (including solid waste) with treatment and recycling. In the energy plan, we have the possibility to increase the application of renewable energy, especially solar and wind, and to minimize the use of fossil sources. We have conditions to expand the supply of sustainablebiofuels through significant increases in productivity. The industry and ST&I could have significant contributions by means of saving energy, reducing emissions, and adopting circular economy technologies. Advances in bioeconomy create alternatives in a variety of industry sectors, compatible with the sustainable use of biodiversity.

MEI’s engagement in digital transformation

The digital integration of industrial chains has increased in developed economies; therefore, corporate business models are evolving to become connected, following the 4.0 paradigm¹⁰. Industrial chains will become increasingly smarter as large volumes of economic and technical information will be captured and reviewed online. Through artificial intelligence algorithms, decisions on production and marketing can be delegated to digital systems, optimizing the management of the entire value chain, from suppliers to end customers.

Under the competitive pressure imposed by smart digitalization, companies will need to transform quickly, as market structures are becoming more accessible to digitally skilled competitors. Delays in absorbing digital innovations can be costly to laggard companies and their chains, putting the future of the Brazilian industry at risk. For no other reason, advanced industrial countries have been adopting active policies to support digitalization, especially in micro and small companies and strategic sector-specific chains. In Brazil, the absence of a long-term development project makes it more difficult to move towards the 4.0 paradigm, except for a small group of leading innovative companies that practice R&D and are exposed to international competition.

Considering the relevance and urgency of the topic, MEI has incorporated it into its priorities to closely follow the industry digitalization and to contribute with proposals based on successful experiences from Brazil and abroad.

The improvement of ST&I policy and governance in Brazil

Advanced industrial countries have strengthened their national policies for innovation, with long-term vision and objectives and strong support from their respective societies and representative institutions. The following characteristics shared by these policies are worth to be noted: a) prioritization at the highest governmental level and shared goals with the business sector; b) substantial investments in the training of qualified human resources; c) implementation of pro-innovation regulations and incentives; d) modernization of the State’s capacity for assessment and response; and e) execution of policies through programs and instruments coordinated and aligned with the needs of business. By enjoying high priority, persistence, and future vision, budgetary support to these policies has been preserved even during unfavorable cyclical phases.

In MEI’s perception, the major Brazilian challenge is to build conditions for the consolidation of an ambitious and stable national ST&I policy, with a long-term vision and efficient and shared governance. In this sense, the National Innovation Policy (Política Nacional de Inovação, PNI), announced by the government in 2019 and instituted in 2020 by the presidential decree, presents an opportunity for improvement. The PNI’s highest instance, the Chamber of Innovation – chaired by the Civil House of the Presidency of the Republic, with the MCTI serving as secretary, and composed of additional nine ministries – did not include the business sector or representatives of the ST&I system. MEI believes that, given their status and experience as part of all innovation, it is essential to ensure the participation of private entities and civil society in this Chamber.

Aware of the need to monitor trends and results, MEI established a working group on Innovation Indicators, with the following objectives: to measure business results of innovation; to support the monitoring and improvement of policies; and to identify initiatives to improve Brazil’s position in international rankings on innovation. Regarding this last objective, MEI/CNI highlights the partnership with the Portulans Institute, which provides relevant data and information, such as Brazil’s performance in the GII, comparative analyses with other economies, studies and reports useful for the improvement of Brazilian policy and governance of the ST&I system.

Final remarks

Despite cultural differences, historical legacies and future ambitions, a comparative analysis of countries that have a strong ST&I strategyreveals common objectives: sustaining international competitiveness, developing innovation ecosystems, creating jobs and qualifying people, supporting smaller businesses, paying attention to the quality of life, health and aging of the population and environmental sustainability. These strategies for building the future are coordinated by legitimate long-term national visions, led by the highest executive authorities in each country. Their actions are grounded in public-private understanding, and the multi-year allocation of significant and predictable resources.

The great challenges and demands of Brazilian society require an ambitious ST&I strategy, built in a consensual manner, anchored in the national reality, supported by adequate resources and driven by planning with defined timeframes. For CNI/MEI, ST&I is in the foreground. Despite ongoing budget limitations, worsened by the pandemic crisis, it is essential to prioritize science, technology and innovation as strategic vectors of sustained development, making the industry more dynamic, generating jobs and promoting social inclusion.

Iedi.org.br. 2021. O 14º Plano Quinquenal Chinês: transformando a China em potência industrial e tecnológica. [online] Available at: <https://iedi.org.br/cartas/carta_iedi_n_1094.html> [Accessed 14 September 2021].

The White House. 2021. A Letter from Eric Lander upon starting as Director of the Office of Science and Technology Policy | The White House. [online] Available at: <https://www.whitehouse.gov/ostp/news-updates/2021/06/02/hello-world/> [Accessed 14 September 2021].

Nicholas, V., 2021. U.S. STI Policy Landscape 2016-2021, presentation to MEI Leaders.

Federal Ministry of Education and Research (BMBF). Division for Innovation and Transfer Policy Issues, 2021. High-Tech Strategy 2025: Talents, skills, innovations.

¹ Please visit http://www.gov.cn/xinwen/2021-03/13/content_5592681.htm.

² Please refer to Letter IEDI n. 1094 – The 14th Chinese Five-Year Plan: transforming China into an industrial and technological power.

³ Please visit https://www.whitehouse.gov , Office of Science and Technology Policy – A Letter to Dr. Eric Lander.

⁴ VONORTAS, NICHOLAS S., U.S. STI Policy Landscape 2016-2021, presentation to MEI Leaders, CNI, Brazil, June 2021.

⁵ The Federal Government. Federal Ministry of Education and Research (BMBF). Division for Innovation and Transfer Policy Issues. High-Tech Strategy 2025: Talents, skills, innovations. Available at: https://www.bmbf.de/upload_filestore/pub/Research_and_innovation_that_benefit_the_people.pdf

⁶ President Biden promoted a successful Climate Summit in April 2021. The meeting consolidated bold decarbonization goals adhered to by the 40 most important economies for the world environmental balance. The next UN Climate Conference, the COP26, to be held next November in Glasgow, United Kingdom, is expected to achieve effective advances by adopting bolder targets and increasing the number of countries with credible decarbonization goals.

⁷ Namely, the Brazilian Society for the Advancement of Science (SBPC), the Brazilian Academy of Science (ABC), and the National Association for Research and Development of Innovative Companies (Anpei).

⁸ The methodology of the GII quantitative indicators is renowned for its usefulness to detect weak (or strong) points in the national ST&I system. Therefore, it is a relevant contribution to the formulation and prioritization of proposals associated with the MEI Agenda.

⁹ Only 11% of young people attending secondary education in Brazil are also dedicated to technical and professional training, a proportion that reaches 47% in the European Union, according to the Education at a Glance report (OECD, 2020)

¹⁰ Please take a look at “Construindo o Futuro da Indústria Brasileira. Indústria 2027. Riscos e oportunidades para o Brasil diante de inovações disruptivas”. SINTESE DOS RESULTADOS, Volumes I e II.”https://drive.google.com/open?id=1wKWgvIwO_m6-ytB0PWpGI75IOjE7NdKu