PROJECT INFORMATION DOCUMENT (PID)
CONCEPT STAGE
Report No.: PIDC67
Public Disclosure Copy
Project Name Second Phase Innovation for Competitiveness APL (P126838)
Region LATIN AMERICA AND CARIBBEAN
Country Mexico
Sector(s) General industry and trade sector (40%), Tertiary education (30%), Central government administration
(20%), Sub-national government administration (10%)
Lending Instrument Adaptable Program Loan
Project ID P126838
Borrower(s) Secretaria de Hacienda y Credito Publico
Implementing Agency CONACYT
Environmental Category B-Partial Assessment
Date PID Prepared 19-Dec-2011
Estimated Date of Appraisal Completion 05-Mar-2012
Estimated Date of Board Approval 24-Jul-2012
Concept Review Decision Track II - The review did authorize the preparation to continue
I. Introduction and Context
Country Context
# Mexico, has recovered from a brief but very deep recession. After the steep 6.1 percent drop in GDP experienced in 2009,
a consequence of the global economic crisis, Mexico#s GDP grew 5.4 percent in 2010 and is expected to grow at a more moderate
rate of 3.8 percent in 2011. Nevertheless, renewed weakness in the U.S. economy could significantly affect Mexico once again.
# Well targeted social programs have helped the country to decrease poverty levels by 15 percentage points since 1998.
However, 46.2 percent of Mexicans still lived below the poverty line in 2010, highlighting the need to considerably raise growth
rates in order to make more significant advances in poverty reduction. Moreover, regional disparities remain large: for example,
income per capita in Mexico City is more than 5 times greater than that in the southern state of Chiapas, while poverty levels in the
more prosperous northern state of Nueva León are only about a quarter that of Chiapas.
# Increasing productivity will be key to raising growth rates and decreasing poverty levels. Growth in Mexico in the past 50
years has been mostly driven by accumulations in capital and labor and not by improvements in how efficiently the country makes
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use of its resources. Improving the national innovation system, through the strengthening of its research capacities, the
commercialization of research generated technologies and the skills of the human capital are essential to increasing firm
productivity and hereafter economic growth.
Sectoral and Institutional Context
# Mexico#s overall investments in R&D remain low by international standards and private sector investments, though
increasing, still account for less than 50 percent of R&D expenditures. Overall R&D expenditures in Mexico represented 0.39
percent of GDP in 2009, well below other regional countries such as Argentina (0.59 percent) and Brazil (1.18 percent).
# The number of researchers has been steadily increasing over the last decade, a result of sustained government efforts to
fund the training and graduate education in technical areas. However, the number of Mexican researchers per labor force is still
well below that of some comparator countries.
# Mexico suffers from a scarcity of private intermediary institutions such as #technology brokers# to facilitate research
commercialization. CONACYT has identified the need to establish organizations that can better guide the protection and
commercialization of new technologies.
# Regional disparities in capabilities are large. Almost half of affiliated researchers are concentrated in the Federal district,
46 percent of scholarship recipients are concentrated in 5 states and 4 states concentrate 64 percent of the patent applications.
Relationship to CAS
The proposed operation will build on the World Bank#s Country Partnership Strategy (CPS) of 2008 and the CPS Progress Report
of 2010 and strongly complement other initiatives to enhance competitiveness and accelerate growth. The CPS provided a flexible
framework to support the Government#s strategy set out in the National Development Plan (2007-2012) that focused on five
strategic pillars including competitiveness. Enhancing productive innovation is an important element of the overall competitiveness
strategy. Laying the foundations for higher medium-term growth and increased competitiveness (including the strengthening of
Mexico#s innovation system) also constituted key support areas of the CPS Progress Report. The innovation focus of the proposed
operation will be a strong complement to other knowledge and financial services that have or are supporting improvements to
Mexico#s competition policy framework, streamlining of business regulations, access to finance as well as basic, secondary and
tertiary education.
The proposed operation will build on the first phase of the Innovation for Competitiveness APL. The first phase of the Innovation for
Competitiveness APL, which was satisfactorily completed in December 2010 sought to enhance the innovative capacity of the
private sector, advanced human capital, and the integration with the international innovation system. The second phase will
provide the opportunity to scale up initiatives piloted during the first phase to foster business innovation, deepen the formation of
advanced human capital and support new areas of Mexico#s innovation system that are in need of development and capacity
building.
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II. Proposed Development Objective(s)
Proposed Development Objective(s)
The Innovation for Competitiveness program, supported by an Adaptable Program Loan (APL) structured in three phases, seeks to
assist the Government#s efforts to improve competitiveness of the Mexican economy by enhancing its innovation system.
The proposed second phase of the APL will seek to reinforce key pillars of the Mexican innovation system by:
# improving the performance of sub-national innovation systems;
# accelerating technology transfer to the productive sector;
# continuing to support the formation of advanced human capital; and
# strengthening research capacity through investments in research infrastructure.
Key Results
Based on lessons learned during the first phase, outcome indicators will focus on those that can be influenced through project
interventions. Preliminary indicators for the proposed second phase of the APL are:
# Regional Innovation System:
o Increase in the percentage of projects approved under FORDECYT.
o Implementation of M&E systems for STI in select states.
# Technology Transfer:
o Number of patents filed with UVTC support and new enterprises supported by UVTCs that receive external funding.
# Formation of Advanced Human Capital:
o Increase international participation in CONACYT#s certification process of graduate programs in Mexico.
# Research Infrastructure:
o Number of research groups that benefited per research equipment investment project.
In addition, the team will monitor the evolution of a broader set of indicators of the Mexican innovation system that are difficult to
influence within a short period of time (such as the four-year period of the proposed second phase) but can be influenced over the
longer implementation period of the three-phased APL. These indicators include: percent of firms conducting innovation, R&D as
percentage of GDP, percentage of R&D conducted by the private sector, and international publications of researchers.
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III. Preliminary Description
Concept Description
The proposed program would include the following components:
Component 1: Regional Innovation Systems: The component would support subnational innovation systems by strengthening the
capacity of subnational governments throughout Mexico to formulate, implement and evaluate policies and programs to foster
innovation. This would involve three types of support: (i) the implementation of core capacity building programs that will reach all
states, and the development of a monitoring and evaluation framework and capacity building for states to apply it; (ii) more targeted
support to a smaller group of states (3-4) to strengthen their subnational innovation strategies and implement new programs on the
basis of the revised strategies, which will serve as a demonstration effect for other states; and (iii) the implementation of programs
that will bring together the capacities of several states in the resolution of a common development challenge.
Component 2: Accelerating Technology Transfer: The component would help transform technological developments into viable high
value products and services. The component would support the establishment and early deal flow of Technology Transfer Offices
(OTTs), whose primary objective is to help generate a market for new technologies and assist researchers/entrepreneurs to bring
their technologies to a productive purpose through partnerships with industry, licensing and/or establishment of a new venture.
More specifically, the program could support capacity building activities for the OTTs, including formal training and on-the-job
learning through exchanges with their international partners and other institutions and potentially the program could also support
stimulating the demand for OTTs services through a cost-sharing scheme to generate the first demonstration effects.
Component 3: Formation of Advanced Human Capital: The component would build on the first phase of the APL and will continue
to support the formation of advanced human capital for the knowledge economy. More specifically, the component to would work to
enhance the relevancy and quality of domestic and foreign scholarship programs and to consolidate mechanisms to monitor and
evaluate their performance. In terms of relevancy, the efforts would be targeted at further strengthening linkages between
scholarships programs and the priorities of the PECiTI and the National Innovation Plan. In addition, the component would support
strengthening of CONACYT#s certification process of graduate programs by, inter alia, promoting the inclusion of international
experts in the certification panels.
Component 4: Upgrading of Research Infrastructure: The component would support the implementation by CONACYT of its new
program on large research equipment and the financing of research equipment in line with identified priority needs. Institutions
acquiring the equipment will be responsible for their maintenance and will become #open hubs# making it accessible to other
research groups. New guidelines and evaluation procedures for allocating the equipment and ensuring adequate maintenance and
sharing with other institutions will be put in place.
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Component 5: Monitoring and Evaluation: support the strengthening of monitoring and evaluation efforts at CONACYT, including
the activities supported under Components 1-4 of this proposed operation, as well as other initiatives and programs to be defined
during project preparation.
IV. Safeguard Policies that might apply
Safeguard Policies Triggered by the Project Yes No TBD
Environmental Assessment OP/BP 4.01 ✖
Natural Habitats OP/BP 4.04 ✖
Forests OP/BP 4.36 ✖
Pest Management OP 4.09 ✖
Physical Cultural Resources OP/BP 4.11 ✖
Indigenous Peoples OP/BP 4.10 ✖
Involuntary Resettlement OP/BP 4.12 ✖
Safety of Dams OP/BP 4.37 ✖
Projects on International Waterways OP/BP 7.50 ✖
Projects in Disputed Areas OP/BP 7.60 ✖
V. Tentative financing
Financing Source Amount
Borrower 0.00
International Bank for Reconstruction and Development 100.00
Total 100.00
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VI. Contact point
World Bank
Contact: Cristian Quijada Torres
Title: Private Sector Development Spec.
Tel: 458-8738
Email: cquijadatorres@worldbank.org
Borrower/Client/Recipient
Name: Secretaria de Hacienda y Credito Publico
Contact: Jose Ortiz Gomez
Title: Subdirector de Financiamiento Bilateral al Sector Publico
Tel:
Email: jose_ortizg@hacienda.gob.mx
Implementing Agencies
Name: CONACYT
Contact: Enrique Goldbard
Title: Project Coordinator
Tel: 555322-7700
Email: egoldbard@conacyt.mx
VII. For more information contact:
The InfoShop
The World Bank
1818 H Street, NW
Washington, D.C. 20433
Telephone: (202) 458-4500
Fax: (202) 522-1500
Web: http://www.worldbank.org/infoshop
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