Incentives for the Development and Application of Science and Technology

Dist. Limited ARCST/1/5.b March 6, 1996 ENGLISH UNITED NATIONS Original: ENGLISH ECONOMIC COMMISSION FOR AFRICA

First Meeting of the African Regional Conference on
Science and Technology

Yaounde, Cameroon 6-10 November 1995

Incentives for the development and application of science and technology

One of the reasons why African technology has not developed as much as in other parts of the world and has not contributed much to development is that the African incentives regimes, in general, are not as effective as in other non-African countries.

Incentives are measures put into place to induce people and organizations to behave in a certain way. In matter of science and technology, the different types of incentives can be classified in the following categories:

~ Fundamental incentives ~ Institutional and infrastructural incentives ~ Financial incentives ~ Fiscal incentives ~ Budgetary incentives ~ Legal and regulatory incentives ~ Public procurement incentives ~ Honorific incentives ~ Knowledge base incentives

The fundamental incentives for socio-economic development, for example, such as those provided by a market economy (market incentives), free competition, private property, openness to the global economy, efficient bureaucracy and a stable democracy, are still lacking to a great extent in a large number of African countries. Much of the backwardness in African development can be attributed to the obvious deficiencies in these respects. Fortunately, many countries have embarked on political and economic reforms during the last few years and future prospects look better.

Institutional and infrastructural incentives could be made more efficient, particularly those for technological innovation ( such as science parks), transfer, extension, diffusion, popularization, information, networking (including professional associations) and international cooperation, while institutions and infrastructures for R & D need to be modernized, strengthened and better linked to industry. Infrastructures for information and communication technologies are particularly important for any developing countries since these technologies can substantially improve productivity and efficiency in all sectors of the economy and support technology transfer and networking. Hence the need to put into place incentives for their application and diffusion.

The financing of technological change is of paramount importance for African countries which lack a fully fledged financial system and which attract little foreign direct investment and commercial credit. The strengthening, privatization and diversification of the financial system should be a high priority in order to increase the availability of venture capital and of small credit to farmers and the informal sector. Financial incentives in general and incentives for foreign direct investment in particular need to be reinforced in view of the globalization of the economy, by removing or reducing constraints in respect of percentage of local equity, local inputs and repatriation of dividends. A more positive approach to multinational corporations is needed if they are to contribute to endogenous technological capacity building.

The use of fiscal incentives, such as tax exemptions, rebates, reliefs, holidays, and accelerated depreciations, can be used to promote R & D, linkages with industry, application of technology, training, the return of national expatriates, use of foreign consultants, strategic technology import, etc. Many African countries have established or are in the process of setting up Export Processing Zones, essentially with tax incentives and facilities for the transfer of technologies, such as more freedom to hire expatriate experts. The Mauritius success in this respect should be an inspiration and an encouragement to other African countries.

Budgetary incentives, except sholarships, are more and more regulated by the new Gatt agreement, particularly investment allowances, modernization grants, industrial subsidies and export compensations. This should be to the advantage of African countries which cannot compete with the industrizlized countries in subsidizing industry.

Legal and regulatory incentives are essential to protect intellectual properties and technologies, to enforce minimum technological standards, to facilitate the hiring of essential foreign experts (residence and work permits, tax holidays) and to discriminate technology imports. In Africa this type of incentives has also been used to enhance the status of researchers. Legal and regularoty incentives need to be reviewed from time to time to adjust to changing circumstances. For instance, technology flows are more and more regulated by the market than by bureaucratic regulations although some regulations are needed.

Public procurement can provide important incentives to local industries to upgrade their technological capacity. Although this policy instrument is constrained by the new Gatt agreement, it can still be used for the benefit of indigenous enterprises.

Honorific incentives, such as prizes and awards, are public recognition of excellence and have proved to be particularly cost-effective in promoting innovation and technological improvement. These incentives should be adopted by every African country.

Incentives to strengthen the knowledge base, such as basic education, encouragement to girls to take science disciplines, technical training, apprenticeship, sabatical leaves, study tours, participation in international seminars, etc. are extremely important for any socio-economic development. In many parts of Africa, education has deteriorated during the last few years due to a rapidly increasing population and declining resources. It should be one of the highest priority to raise to level of education of Africans during the next decade.

In a training seminar held in Accra from 26 to 30 of June 1995 African countries were invited to review their incentives regimes for science and technology development to make them more efficient. The proceedings of the seminar will soon be published and will be available to policy makers on the continent.

Incentives are the tools which can be used to manage technological change and are vital for socio-economic development. For ease of reference the table provided in annex shows the main categories of incentives and the policy instruments which can be used.

Questions which could be discussed include:

~ Is the incentives regime now in place in each African country sufficiently known to science and technology policy makers ?

~ What are the main strengths and weaknesses of these
regimes ?

~ Are the regimes sufficiently competitive compared with
regimes in place in other non-African developing countries ?

~ What can be done to improve the regimes and enhance
the role of science and technology in development ?

~ Is assistance required to design a better incentives
regime, and if yes can ECA be instrumental in this respect through advisory services or other means ?

INCENTIVES FOR SCIENCE AND TECHNOLOGY DEVELOPMENT

TypesExamplesRemarksSystemic / organisationalIncentives provided by: - a market economy - competition - private property - openness to the global economy - a stable democracyThese are the fundamental incentives for science and technology to make a full contribution to socio- economic developmentInstitutional / infrastructuralInstitutions / infrastructure for: - R & D - Technological innovation - Technology transfer - Techno diffusion / extension / demonstration /
exhibition and popularization - S & T information - S & T professional associations - international cooperation (twinning arrangements) - Export Processing Zones - Science and technology parks - Modern public transport and communications
technologiesIn general institutions and infrastructure for S & T development in Africa have deteriorated during the last fifteen years and need to be strengthened.FinancialAvailability of: - small credit - low interest lending - venture capital - stock market - foreign direct investment - technology fundThe financing of technological change is of paramount importance for African countries which lack a fully fledged financial system and which attract little foreign direct investment and commercial creditFiscalTax advantages taking the form of exemptions, rebates, reliefs, holidays, accelerated depreciations, etc. Can be used to promote R & D, linkages with industry, application of technology, training, the return of national expatriates, use of foreign consultants, essential technology import, etc.HonorificPublic recognition of excellence taking the form of prizes and awardsThese incitatives are very cost-effectiveManpower developmentFacilities and programmes to strengthen science and technology in: - basic education - higher and specialised training - apprenticeship - sabatical leave - study tours - participation in intern. seminarsEncouragement to take up sciences and scientific disciplines, particularly for the girls, is very important. Training should be a life long activity.BudgetaryScholarships, grants, allowances and compensations given to indivituals, organizations and subsidies to enterprises for the advancement of science and technologySome of these, such as investment allowances and export compensations are regulated by the new Gatt agreementLegal & regulatoryLaws and regulations on: - patents - standards - status of researchers - expatriates consultants - technology import regulationsLaws and regulations need to be reviewd from time to time to adjust to changing circumstancesOthersStreamlining of bureaucracy

Public procurement (Preferential treatment of local technological producsts and services)

One important disencentive on the African continent is the cumbersome bureaucracy which impedes development

Although constrained by the the Gatt agreement it can still be used to promote the development of endogenous technological capacity

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