The World Bank Innovation Program for Smart Growth (PINCRI) (P175143) Project Information Document (PID) Appraisal Stage | Date Prepared/Updated: 06-Jun-2022 | Report No: PIDA32580 May 12, 2022 Page 1 of 13 The World Bank Innovation Program for Smart Growth (PINCRI) (P175143) BASIC INFORMATION OPS_TABLE_BASIC_DATA A. Basic Project Data Country Project ID Project Name Parent Project ID (if any) Argentina P175143 Innovation Program for Smart Growth (PINCRI) Region Estimated Appraisal Date Estimated Board Date Practice Area (Lead) LATIN AMERICA AND CARIBBEAN 30-May-2022 21-Jul-2022 Finance, Competitiveness and Innovation Financing Instrument Borrower(s) Implementing Agency Investment Project Financing Argentine Republic Agencia Nacional de Promoción Científica y Tecnológica Proposed Development Objective(s) The project development objective is to increase innovation-led sustainable growth by strengthening the national innovation system and facilitating access to capital. Components Foster innovation-led private sector growth Promote entrepreneurship and innovation financing ecosystems Support the strengthening of institutions and policies that promote entrepreneurship, innovation and digital transformation PROJECT FINANCING DATA (US$, Millions) SUMMARY -NewFin1 Total Project Cost 280.00 Total Financing 280.00 of which IBRD/IDA 200.00 Financing Gap 0.00 DETAILS -NewFinEnh1 World Bank Group Financing International Bank for Reconstruction and Development (IBRD) 200.00 May 12, 2022 Page 2 of 13 The World Bank Innovation Program for Smart Growth (PINCRI) (P175143) Non-World Bank Group Financing Commercial Financing 80.00 Unguaranteed Commercial Financing 80.00 Environmental and Social Risk Classification Moderate Decision The review did authorize the team to appraise and negotiate Other Decision (as needed) B. Introduction and Context Country Context 1. Argentina was the third largest economy in Latin America in 2020 with a Gross Domestic Product (GDP) of US$383 billion. It has a large middle class, with economic and social indicators generally above the regional average. In 2020, GDP per capita in Argentina was 1.4 times higher than the regional average, and also higher in comparison to the two largest economies in the region. Likewise, for different measures of poverty, Argentina has performed better than other countries in the region. In 2020, the percentage of the population with less than US$ 5.50 per day was 18.2 percent, while this indicator was higher than 23 percent in the region. However, economic performance has been lackluster over the past fifty years. Relative to advanced economies, such as the United States, GDP per capita in Argentina was 5 times lower in 2020. More strikingly, due to its poor economic performance trend, Argentina’s standard of living has diverged relative to the United States (in 1970 Argentina’s GDP per capita was 0.37 percent of the US’s) and converged in comparison to the region (in 1970 Argentina’s GDP per capita was twice a large than the regions’). 2. Even prior to the pandemic, Argentina’s economy has been crisis-prone and overly dependent on a few commodity exports, underscoring the need to implement a long-term growth strategy. Before the pandemic, Argentina has spent one third of the last 60 years in recession, 14 episodes in total, each one of which lasted close to 2 years on average and resulted in negative growth. Unsophisticated products, primarily in the agricultural sector, continue to make up more than 60 percent of the Argentine export basket, leaving the country vulnerable to fluctuations in these resources. This contributes to reduced global market confidence in the Argentine economy. Going forward, it is important to view and focus on innovation and its contribution to growth, and thereby increased domestic value-add, with a longer term, stable vision even at times of crisis. May 12, 2022 Page 3 of 13 The World Bank Innovation Program for Smart Growth (PINCRI) (P175143) Sectoral and Institutional Context 3. Innovation1 can play a key role in transforming Argentina’s growth trajectory by creating new sources of sustained growth and jobs and exploiting its comparative strengths in human capital and high-end research capabilities. Sustained growth is dependent on productivity growth, in which innovation is a key ingredient (Schumpeter 1949 [2008]). Empirical cross-country studies demonstrate that productivity improvements account for half of GDP growth across countries (Easterly and Levine 2001). Thus, transitioning Argentina’s growth model toward one that is innovation-fueled is critical to escaping the recurrent boom and bust cycles that have plagued the economy for so long. This transition requires a holistic approach, among which is strengthening Argentina’s innovation system by tackling multiple factors that impact Argentina’s knowledge production and application, and the ability to improve firm - level productivity and diversification outcomes. 4. Argentina’s innovation inputs include several important assets: human capital and research capabilities, which can contribute to diversification with smart policies and targeted investments. It has high scores in two out of the seven Global Innovation Index (GII) 2020 pillars: Human capital and research sophistication, which are above average for the upper middle-income group. Argentina has the highest share of researchers per capita in Latin America and some of the top research organizations in the world. Between 2004 and 2016, Argentina expanded its research base by 36 percent (to 3 researchers per 1,000 employees)—the highest increase in the region. In 2019 it ranked among the top 30 countries in the world in terms of the excellence of its research organizations—in both cases significantly ahead of regional comparators such as Chile and Mexico. Meanwhile, knowledge-intensive sectors such as biotechnology, nanotechnology, and software - while still small - emerged for the first time or grew substantially since 1990s; in some related business segments, Argentina became globally competitive. For example, today, Argentina is the world’s third biggest producer of biotech crops, after the United States and Brazil. Argentina produces 14 percent of the world’s biotech crops, making it one of the most prolific producers of new technologies in this sector. 5. Despite sector specific strengths and policy progress, Argentina’s innovation function underperforms with regards to its expected impact on growth. Since the early 1990s, the government increasingly recognized that innovation is a key source of inclusive growth and reoriented efforts to achieve sustainability-linked objectives. The Agency for the Promotion of Science and Technology was established in 1996, now referred to as Agencia (Agencia Nacional de Promoción para la Investigación, el Desarrollo Tecnológico y la Innovación) and administers a wide number of programs to support science, technology and innovation (STI) aligned with inclusive growth principles. These programs include the Argentine Sectoral Fund (FONARSEC), which supports innovation initiatives and public-private research partnerships (currently the backbone of Argentina’s S&T policy); EMPRETECNO, which focus on strategic knowledge areas and sectors, as well as tech-based entrepreneurship; and FONSOFT, which focuses on ICT, among others. Despite these efforts, the impact of innovation in Argentina has been limited and heterogeneous (Cirera et al. 2020). Argentina’s innovation outputs in terms of new products, processes, and businesses continue to lag significantly behind both regional and structural peers and are not 1Defined as the introduction of new products, technologies, business processes, and ideas in the market, as well as the invention of new ideas, innovation drives Schumpeter’s creative destruction process (Schumpeter [1942] 2008), underlies modern growth theory, and is the critical ingredient in historical accounts of how countries achieve prosperity. May 12, 2022 Page 4 of 13 The World Bank Innovation Program for Smart Growth (PINCRI) (P175143) commensurate with the quality of some of its inputs. Moreover, a disconnect remains between private sector needs and public research, as well as a misalignment between national priorities and resource allocation. Although scientific production is relatively strong compared to peers, technology transfer and adoption by firms and investments in innovation at large (public and private) remain low. 6. A set of factors serving as innovation inputs - low R&D, inadequate firm capabilities, and limited channels for knowledge transfer, as well as challenges related to macro-micro complementarities (foundations) explain innovation’s subpar contribution to growth outcomes in Argentina. Gaps across the innovation function, such as i) subdued entrepreneurship dynamics, ii) low private sector R&D, iii) inadequate firm capabilities (including digital aspects), and iv) limited channels of knowledge transfer through FDI and trade, equipment, foreign technology, and software investments can explain some of the innovation inefficiencies experienced in Argentina. In addition, the underlying conditions that impede the accumulation of innovation-related capital—such as access to credit, limited availability of risk financing, the cost of doing business, trade regime, and competitiveness framework, as well as those seen as particular to innovation, such as intellectual property rights protection—affect the returns and hence the quantity of innovation investment. 7. Limited access to finance significantly hinders firm creation, investments in innovation, and ultimately growth. Despite the economic recovery of 2021, credit to the private sector fell further from already low levels – 14 percent in 2020 to 12 percent in 2021. Credit to the private sector is extremely limited – very low not only in comparison to middle income peers, but also Latin America and the Caribbean average (60 percent average in 2020). At the same time lending interest rates have been historically high, rising to 67 percent in 2019 and falling to 29 percent in 2021. Consequently, financing for innovation and entrepreneurship is especially hard to get, as it faces higher thresholds than accessing other types of financing, due to the inherent information asymmetries and relatively higher transaction costs. These capital markets limitations affect the allocation of capital across firms, generating allocative inefficiencies at large. 8. Argentina has a small, growing, yet an underdeveloped venture capital (VC) and private equity (PE) financing ecosystem. Venture capital and seed capital investments – key for innovation and early-stage financing, have been limited but steadily growing, albeit from a very low base, with annual investments below US$200 million prior to 2019. For the size of the economy and the income level, VC/PE landscape remains small; investments only amount to 0.001 percent of GDP; by contrast, the average OECD country invested 0.08 percent of GDP on VC in 2019, while large investors such as the US invested as much as 0.6 percent through VCs.2 Still, in recent years, VC funding portrayed a significant increase, as 2019 had the highest historical investment amount in US$ 403 million, while investments fell to 347 US$ million in 2020. Moreover, VC/PE in Argentina have weathered the recent economic contraction relatively well, and increased in terms of both deals and volume of investment notwithstanding Argentina’s shrinking GDP in 2019-20. In 2019, there were 92 private investment transactions in the country, summing up to US$ 1.1bn, almost doubling with respect to the amount of 2018 (US$600m). Of this, VC, PE, and seed capital3 contributed with 60.4 percent, 36.6 percent, and 3.0 percent, respectively. The sectors which 2OECD Data. 3Seed capital indicates earlier stage financing necessary to start a business—often the first source of funding that an entrepreneur receives. Venture capital refers to capital required for larger businesses, generally sourced from a pool of investors. Private equity is capital invested in a business or other entity which is not publicly listed or traded, while venture capital is a subset which tends to May 12, 2022 Page 5 of 13 The World Bank Innovation Program for Smart Growth (PINCRI) (P175143) had the highest amount in venture capital investment were Enterprise Software, EdTech, Commerce, FinTech, and BioTech, accounting for 33.3 percent, 18.5 percent, 11.1 percent, 7.4 percent, and 7.4 percent of VC investments, respectively. 9. Overall, information asymmetries and high transaction costs result in a lack of financing and appropriate risk assessment capabilities; this hurts Argentina’s ability to take full advantage of its strengths in research and human capital to deliver market-driven solutions for climate mitigation and adaptation. By 2030, the circular economy is estimated to yield up to US$4.5 trillion in economic benefits globally. The EU funded initiative Low Carbon and Circular Economy Business Action (LCBA) identified specific opportunities in Argentina for green-low carbon technologies to have transformative impact in areas such as: solar, wind power, thermal efficiency solutions, efficient lighting, energy efficiency, agriculture, water management, and waste management. 10. Furthermore, a lack of access to risk finance is an even larger constraint for women owned and led businesses. Women who opt for an entrepreneurial career face higher constraints in accessing finance, with only 36.5% of female-led firms counting with access to a line of credit (compared to 42.6% of firms managed by men)4, while only 4% of investments in female-managed firms come from banks (as opposed to 24.9% in male-managed firms)5. One of the reasons behind this gap has to do with discrimination against women who request loans, which in turn makes them rely less in the financial system and therefore submit fewer requests. In effect, 42% of female solicitants had their credit requests rejected in 2017, as opposed to only 2.5% of men6. Further, the Argentine Association of Private, Entrepreneurial and Seed Capital (ARCAP) identified that only 17% of the firms that received seed and entrepreneurial capital in 2019 had at least one female counterpart in their founding teams, while only 3% were fully constituted by women. In addition, only 10.7% of the startups had a female CEO. 11. Regulatory agencies operate under outdated or insufficient regulations yet are supposed to assess innovative products. There is currently no standardized methodology for assessing the risks and benefits of new products or processes, especially those with high-tech content, including in agencies such as SENASA (Servicio Nacional de Sanidad y Calidad Agroalimentaria), ANMAT (Administración Nacional de Medicamentos, Alimentos y Tecnología Médica). Disruptive innovation poses particular challenges not only to developers but also to regulatory bodies and potential adopters, and may require the establishment of specific multidisciplinary areas or groups for its proper management. Early engagement between developers and interdisciplinary teams established to that end at regulatory agencies may become a critical tool for shortening evaluation and registration timelines and establishing appropriate focus on younger more tech-focused companies. In more practical terms, those investors categorized solely as private equity investors tend to invest in mature firms to restructure financials and/or improve efficiency at large, while VC investors take risks with young and new companies and work through the early stages of enterprise formation. With seed capital (and early-stage VC financing), typical investments usually range in the tens of thousands to hundreds of thousands of dollars. Venture capital and private equity investments often range into millions of dollars. Growth constraints for young innovative businesses can often be addressed with seed and venture capital investments. 4 Ibid. 5 The World Bank Group. 2018. Argentina: Escaping crises, sustaining growth, sharing prosperity . The World Bank. Washington DC, United States of America. Page 100. 6 S. Auguste, B. Galetto. 2020. Género y Acceso al Financiamiento Empresario en Argentina . Banco Interamericano de Desarrollo. Washington DC, United States of America. Page 33. May 12, 2022 Page 6 of 13 The World Bank Innovation Program for Smart Growth (PINCRI) (P175143) systems for new products and processes such as innovations in the health sector7 (e.g. new cancer treatment drugs). In addition to these challenges, recent studies in Argentina8 have also shown that many private firms are unaware of the general regulatory process to obtain approvals to take new products or processes to market, causing additional delays and disruptions C. Proposed Development Objective(s) Development Objective(s) (From PAD) The project development objective is to increase innovation-led sustainable growth by strengthening the national innovation system and facilitating access to capital. The higher-level project objective is to diversify and strengthen Argentina’s sources of long-term growth to create jobs, raise incomes, foster inclusivity and support climate mitigation and adaptation efforts. Key Results 12. The following key performance indicators will be used to measure achievement of the PDO: a. Beneficiaries (percentage of firms, labs and/or research consortia supported by the project) that introduced new/improved products/protocols/services (of which were projects that contribute to climate change adaptation and/or mitigation impacts) (Percentage); b. Number of technology-based start-ups registered and/or strengthened (of which were owned or run by women) (of which were projects that contribute to climate change adaptation and/or mitigation impacts) (of which were formally registered as new start-ups) (Number); c. Increased growth in average annual revenue within beneficiary firms (increased growth in average annual revenue within beneficiary firms owned or run by women) (of which were projects that contribute to climate change adaptation and/or mitigation impacts) (Percentage); d. Private capital mobilized for entrepreneurial and innovation financing9 (of which were projects that contribute to climate adaptations and/or mitigation impacts) (US$ Amount). D. Project Description 13. This project focuses on the innovation aspect to support Argentina’s diversification of sources of 7 Belloso, W. 2019. El Desafío de la Innovación desde la Perspectiva Regulatoria . Revista Ciencia Reguladora de la ANMAT. Buenos Aires, Argentina. URL: https://docs.bvsalud.org/biblioref/2019/11/1025018/crn5_p05_2019.pdf 8 Lewi, D. and Vicién, C. 2020. Argentina’s Local Crop Biotechnology Developments: Why Have They Not Reached the Market Yet? Frontiers in Bioengineering and Technology. Lausanne, Switzerland. URL: https://www.frontiersin.org/articles/10.3389/fbioe.2020.00301/full 9 Includes all forms of equity and private sector financing (VC, PE, seed capital, owner funds, credit to firms etc.) May 12, 2022 Page 7 of 13 The World Bank Innovation Program for Smart Growth (PINCRI) (P175143) growth against its persistent experience with volatile and commodity dependent growth cycles, an issue that is highly relevant in Argentina. The PDO is consistent with the current World Bank Group’s Country Partnership Framework (CPF) for Argentina (FY 2019-2022), discussed by the Board of Executive Directors on September 9, 2014 (Report No. 81361-AR). CPF Focus Area 1, Supporting Argentina’s access to long-term private financing, specifically references the importance of leveraging private financing for development. A key objective of activities under Components 1 and 2 is to leverage SME and public- private research partnership support instruments to attract additional private financing into business growth, and subsequently to promote stronger entrepreneurship and innovation finance ecosystems and directly aligns with this focus area. The policy support to strengthen the regulatory framework for innovation under Component 3 also aligns with Objective 2 of the CPF – “fostering stronger market institutions, productivity-led growth, and increased exports�. The activities supported under this component will provide support to strengthen institutional capacity and policy fundamentals for private sector-led growth and an enabling business environment. Activities to support innovation, entrepreneurship, digital skills and capabilities in growth-oriented firms (in components 1 and 2) line up with Objective 6 of the CPF, Building Skills for the Future, along with the activities to improve the research and quality infrastructure under Component 3. This component also aligns with this objective’s emphasis on the use of evidence-based public policy making, with its support to cross-governmental M&E infrastructure in innovation policies and investments in regulatory capabilities. Finally, project activities directly align with CPF Focus Area 1, Supporting Argentina to implement its NDC. In particular, it contributes to Objective 8 - transitioning to a cleaner energy matrix, and Objective 10 – building resilient and low carbon cities, with project’s emphasis on promoting private sector innovations in alternative energy, low-carbon technologies, climate resilience in agriculture, and circular economy, and project’s support to regulations that promote eco-industrial parks. 14. The “Innovation Program for Smart Growth� Project contributes to the Education and Future of Jobs pillar of the Economic and Social Council (CES) via its support to young firms and frontier sectors, institutions and policies that promote entrepreneurship, as well as technology adoption and skills building. It aims to respond to Argentina’s accelerated growth imperative in the post-pandemic environment by focusing on private sector-lead growth that yields high economic rates of return, promotes diversification and exports, and creates opportunities for green and inclusive development and better jobs. Accordingly, the proposed Project will be structured around three components that: 1) foster innovation-led private sector growth; 2) promote entrepreneurship and innovation financing ecosystems; and 3) support the strengthening of institutions and policies that promote entrepreneurship, innovation and digital transformation. 15. The project aims to contribute to diversification of sources of growth through its support to the private sector, entrepreneurship, and the surrounding regulatory and institutional enabling environment, and it is structured around 3 components. Component 1 – “foster innovation-led private sector growth� aims to push the private sector to a more productive frontier and increase innovation’s contribution to growth with specific emphasis on knowledge transfer and improvements in firm capabilities for SMEs. It also promotes ecosystem support and managerial capabilities to create knowledge-based firms, and develop, upskill and scale up new cohorts of entrepreneurs. Component 2 meanwhile aims to “promote entrepreneurship and innovation financing ecosystems� by leveraging and supporting market -based innovation financing, primarily to crowd-in additional private financing and develop skills in early-stage equity financing. As such, components 1 and 2 together, by both upgrading as well as promoting creation of new productive firms, contribute to “diversification within and across sectors�. It is envisaged that those firms and beneficiaries supported under component 1 would over time help build the pipeline of May 12, 2022 Page 8 of 13 The World Bank Innovation Program for Smart Growth (PINCRI) (P175143) firms that would be served by the market-led financing instruments that are promoted under component 2. Consequently, the project design seeks to bolster the business and growth cycle across a continuum to maximize impact on long-term, sustainable growth. Finally, component 3 works on the cross-cutting regulatory and institutional infrastructure to strengthen the foundational underpinnings of the national innovation system. 16. Across all three components, the Project addresses market failures which are binding constraints to unlocking wider private financing and to firm creation and growth via innovation. Limited financing/capabilities and poor linkages between public research institutions and opportunities for commercialization will be addressed under component 1 through support to public private partnerships, SME upgrading and entrepreneurial support networks. Component 2 provides targeted support to bridge market gaps in equity/innovation financing. As a result, activities under both components address the capital markets failures of insufficient risk financing, information asymmetries, and coordination failures that hamper innovation investments and business growth, while constraining the flow of capital towards innovative firms. Component 3 provides financing to strengthen the institutional and policy environment for entrepreneurship and innovation, thus aiming to alleviate the transactional barriers to accumulating knowledge capital. Financing mechanisms under Components 1 and 2 are designed to: (i) support the de-risking of private investments in innovation and entrepreneurship where justified; and/or (ii) allow the internalization of externalities, e.g., through support to the development and use of technologies and innovative practices and support to improved research infrastructure. May 12, 2022 Page 9 of 13 The World Bank Innovation Program for Smart Growth (PINCRI) (P175143) Figure 1: Gaps in the innovation function in Argentina and how PINCRI will contribute to addressing them . . Legal Operational Policies Triggered? Projects on International Waterways OP 7.50 No Projects in Disputed Areas OP 7.60 No Summary of Assessment of Environmental and Social Risks and Impacts . 17. Environmental and Social (E&S) risk classification is considered to be Moderate. From the environmental side, and given the nature and scale of activities, low to moderate environmental, health and safety risks and potential impacts are expected under project, mainly associated with applied research (both in research institutions and the field), technological development, and equipment activities. These include, among others: punctual environmental degradation/pollution events in case of an inadequate waste (including e- waste), water and air emissions management; increased risk of occupational incidents and accidents during research activities; minor community health and safety issues related to research and technological development activities; punctual environmental degradation events and health and safety issues during field work. Environmental risks and potential impacts are expected to be: (i) temporary and/or reversible; (ii) not significant nor complex/large; (iii) site-specific; and (iv) easily mitigated in a predictable manner. These risks and potential environmental impacts will be managed through the development and application by the UGSA of a set of Environmental and Social (E&S) instruments (Environmental and Social Management Framework, ESMF; Labor Management Procedures, LMP; and Stakeholder Engagement Plan, SEP). Draft versions of the May 12, 2022 Page 10 of 13 The World Bank Innovation Program for Smart Growth (PINCRI) (P175143) ESMF and the SEP were disclosed in country and in the WB external website on May 27, 2022, and May 20, 2022, respectively, prior to appraisal. The project would also finance a Strategic Innovation and Growth Fund (SIG) that would involve Financial Intermediaries (FIs); the FIs would monitor and manage the E&S risks and impacts of the eligible investments to be financed by the Fund through Environmental and Social Management Systems (ESMS), which would clarify the roles, responsibilities and requirements that the FI along with the beneficiaries will need to commit to in order to tap into project funding. 18. From the social side the Project is expected to have only positive impacts and no negative social effects. Its main objective is to support inputs required to diversify and unleash sources of growth, via productivity and innovation-led growth, and with a focus on SMEs, efficiency and financial sustainability. It is expected that project activities will promote innovation that can play a key role in transforming Argentina’s growth trajectory and creating new sources of sustained growth and jobs. The main social risks are associated with the potential exclusion of women and/or vulnerable groups from participating in the benefits of the Project, and challenges associated with the stakeholder engagement processes, including social communication and beneficiaries feedback mechanisms, that may require to be strengthened during Project preparation and implementation in order to reach targeted groups across the country. The ESMF identifies any potential barriers that groups like Afro descendants, people with disabilities, persons within the LGBTI community, and migrants, among others, may face to have access to the activities financed by the Project and establishes measures to ensure that: (i) these groups are afforded opportunities to participate in planning and/or implementation of activities financed by the Project; (ii) opportunities to provide such groups with culturally appropriate benefits are considered; and (iii) any potential impact that may adversely affect them are avoided, or otherwise minimized and mitigated. In addition, the Project also prepared a National Indigenous Peoples Plan (NIPP) that carried out a similar assessment with specific focus on Indigenous Peoples, in accordance with ESS7; its draft version was disclosed in country and in the WB external website on May 27, 2022, prior to appraisal. The SEP includes actions to strengthen Agencia’s current social communication and stakeholder engagement procedures and existing grievance mechanism (GM) and establishes the project´s specific GM. The preparation of the draft ESMF, NIPP and the SEP have been informed through consultations with the government agencies that are focused on the vulnerable groups identified above and other interested parties. Broader consultations with key stakeholders, civil society organizations and other interested parties will be held in early stages of implementation to enrich E&S instruments based on their feedback. 19. Timeline for finalizing project E&S instruments as well as details on E&S requirements for the SIG and FIs are established in the Environmental and Social Commitment Plan (ESCP) of the project. E. Implementation 20. The Agencia will be responsible for overall project coordination and implementation. Over the last 25 years, Agencia has developed the capacity to successfully implement large-scale projects financed by multilateral donors. In particular, these projects include the implementation of five major IDB programs and the previous World Bank project Unleashing Productive Innovation Project (P106752). More recently, the Agencia has also worked with other multilateral lending organizations such as the Central American Bank for Economic Integration (BCIE in Spanish) and CAF Development Bank of Latin America. Agencia will be in charge of the technical design of the project interventions, the preparation of the general and specific project operations manuals (including any changes to the manuals), the preparation of the TORs, impact evaluations, and the technical supervision of all project activities. May 12, 2022 Page 11 of 13 The World Bank Innovation Program for Smart Growth (PINCRI) (P175143) 21. The different programs under component 1 will be implemented under existing Agencia programs. The project will build on established competencies of the Agencia’s programs (including continuity of technical staff): FONARSEC, EMPRETECNO, ANRs and Technolabs, among others, to implement the project activities. All the management teams within the Agencia associated with the previous World Bank project (EMPRETECNO, FONARSEC, etc.) remain functional, with well-developed capacity to support firms, universities, and other beneficiaries. Activities under sub-component 1.1 will be implemented through Agencia’s FONARSEC program, while activities under sub-component 1.2 will be implemented through their existing ANR-TEC and EBT/EMPRETECNO programs. The ESO and early-stage start-up grant programs under sub-component 1.3 will be managed by Agencia’s EMPRETECNO/EBTs program, while technolabs will be implemented by Agencia’s Technotecas/FONTAR program. 22. Component 2 will be managed by professional and experienced fund managers selected through international and competitive processes. Potential fund managers will be selected based on proposals on the technical design of the fund (including composition of the fund across all potential partners), quality of management team, and financial proposals for management fees and operational aspects, commitment to PINCRI development objectives, and a clear understanding/familiarity with the corresponding (local and thematic) investment landscape, among others. Funds under all sub-windows will include an advisory committee (strategic investment advisory committee) with key investors to maintain the strategic direction of the fund, and an investment committee (operational investment committee), constituted by the fund manager, as well as independent members/professionals, to undertake investment-related decisions. There will not be any government participation on the investment committee or affiliation to the fund manager. However, the Agencia will appoint an advisory committee member. Further detail is provided in the Component 2 description. 23. The General Direction of Projects and Sectorial and Special Programs of the Agencia (Dirección General de Proyectos y Programas Especiales y Sectoriales) would be responsible for coordinating projects activities and project administration aspects including Financial Management (FM) and procurement. This includes presentation of semi-annual progress reports to the World Bank on the implementation of all project components, progress on achieving project indicators, and all other aspects of project administration and coordination. 24. The Socio Environmental Management Unit (Unidad de Gestión Socio-Ambiental, UGSA), would be responsible for the project environmental and social risk management, also coordinating its functions with the rest of the substantive areas of the Agencia. . CONTACT POINT World Bank Tugba Gurcanlar Senior Private Sector Specialist Alejandro Espinosa-Wang Senior Private Sector Specialist Borrower/Client/Recipient May 12, 2022 Page 12 of 13 The World Bank Innovation Program for Smart Growth (PINCRI) (P175143) Argentine Republic Implementing Agencies Agencia Nacional de Promoción Científica y Tecnológica Fernando Peirano President fpeirano@mincyt.gob.ar FOR MORE INFORMATION CONTACT The World Bank 1818 H Street, NW Washington, D.C. 20433 Telephone: (202) 473-1000 Web: http://www.worldbank.org/projects APPROVAL Tugba Gurcanlar Task Team Leader(s): Alejandro Espinosa-Wang Approved By Practice Manager/Manager: Country Director: Paul Procee 07-Jun-2022 May 12, 2022 Page 13 of 13