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Human Capital and the National Innovation Strategy for Competitiveness / The Case of Chile


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  • 1. Human Capital and the National Innovation Strategy for Competitiveness The case of Chile Hernán Araneda Head, Centre for Innovation in Human Capital Fundación Chile Santiago, April 26th, 2010
  • 2. About Fundación Chile Who we are: Fundación Chile is a non-profit, privately owned corporation, created in 1976 by an agreement between the Chilean Government and ITT Corporation (U.S.A.).In 2005 BHP Billiton became a co founder. Our Mission: To increase the competitivity of human resources and productive sectors and services, by promoting and developing high impact innovations, technology transfer and management for the country.
  • 3. “There are three proven models worldwide that are examples for emerging economies: The industrialization model of China, The outsourcing model of India and the model of Fundación Chile” (OECD) “…by 1982, Fundación Chile had its first salmon farm up and running. Seven years later it sold it to a Japanese company for $22 million” (Businessweek) “In 2004, its first year, the laboratory turned out 1.7m partially fattened lilly bulbs, using up-to-date biotechnology. Vitro Centre is a joint venture between local investors, Fundación Chile and a Dutch firm… (The Economist)
  • 4. Strong Brand Name Recognition
  • 5. Chile’s background 16 million people, native language spanish Upper Middle income country, per capita GDP US$ 12.000 (purchasing power parity) Average GDP Growth 1990-2005: 5,5 % Global Competitive Index 2007: 26 Significant progress in poverty reduction: 44% to 18% (1986-2006). Unemployment rate: 7.3 (best in 8 years) High coverage in primary and secondary education Participation in Tertiary Education has tripled in the last 15 years.
  • 6. Chile is performing fine in several rankings… GDP : Annual Growth POVERTY 1987 2006 Rates Selected % of population 44% 18% Countries: average Source: ECLAC 1990-2005 China 9.0 Singapore 6.1 South Korea 5.9 Chile 5.5 Indonesia 4.5 Corruption Perception Mexico 3.1 Index Ranking Poland 2.6 OECD 2.5 Among Latin 1st Argentina 2.4 Brazil 2.0 American Hungary 1.3 Countries Overall 20th Czech Republic 0.6 Ranking Among 146 Countries Source: Transparency International (, 2005
  • 7. But… Percapita income still lacks behind the OECD (40% of OECD average income level) Unequal income distribution (0.55 Gini; 0.75 excluding the highest income decile) Economy too dependent on commodities: more R&D investment required Relatively low labour productivity Low quality of learning outcomes across the education system (Simce, TIMMS, PISA, IALS) Uneven distribution of opportunities in higher education and training Low participation of women in the labour force
  • 8. The country’s most important goal: doubling percapita income in the next 15 years to become a developed country IMF: per capita GDP (US dollars, Sept. 2006) USA (43,236) Canada (35,779) Hong Kong (35,396) Singapore (29,743) Taiwan (29,244) Spain (27,542) Finland (32,822) N. Zealand Australia (32,127) (25,655) UK (31,585) Sweden (31,264) France (30,150) Estonia (17,802) CHILE Lithuania (15,443) Argentina Slovenia (23,159) (14,838) Korea (21,887) Latvia (13,875) … and this is a major Malaysia (11,915) challenge. Only once in our history have we managed to double our per capita GDP in 16 years: 1988-2004.
  • 9. Business as usual is not sufficient; We must decisively move towards a Knowledge Based Economy Growth depends less on capital and labour accumulation than on efficient use of these factors (Total Factor Productivity). We need to move from static comparative advantages linked to natural resources to a stage where the incorporation of more knowledge into products and services is crucial. In brief - the capacity to transform knowledge into wealth, the capacity to INNOVATE.
  • 10. Are we prepared? Over the last decade TFP contribution has fallen dramatically…and forecasts are frightening. TFP would account for less than 25% of Chile’s growth in the 2007-2011 which compares poorly with the figure for competing economies (40% to 50% according to The Economist Intelligence Unit) TFP contribution to growth 2007-2011 Growth TFP Capital Labour 1984- 7.1 2.8 2.1 2.2 1997 1998- 3.6 0.9 2.4 0.4 2005 Selected CHILE countries* * Bálticos, Europa del Este y países de rápido crecimiento de Asia.
  • 11. Three decisions to move forward Innovation 1. Increasing public funding to support the strategy (new mining tax). 2. R & D tax incentive for companies. 3. Creation of a National Innovation Council for Competitiveness – National Innovation Strategy To propose a roadmap for a development process based on competitiveness supported by human capital and knowledge. To look after policy coherence Defining strategic objectives Defining the roles of agents Resource allocation aligned with the strategic priorities
  • 12. INNOVATION STRATEGY HUMAN BUSINESS R&D CAPITAL INNOVATION strategycally (value creation) oriented EFFICIENT INSTITUTIONALITY COMPETITIVENESS (long term vision, “accountability”, regionally focused) SELECTIVITY Focus on economic clusters
  • 13. Selectivity: focus on clusters Serv.medio Outsourcing 0.17 ambiente 0.16 Crecimiento PIB en 10 a ños Industrias 0.15 creativas 0.14 1 billón de pesos Alto Alimentos Acuicultura 0.13 Sectores que se procesados de consumo humano Servicios 0.12 destacan financieros 0.11 Vitivinicultura Fruticultura crecimiento (%) Plástico primaria Potencial de 0.10 Comunicaciones Horticultura Plataforma de negocios para LA 0.09 primaria Porcicultura y avicultura Educaci ón superior 0.08 Medicina Minería no met álica Medio Farmac éutica especializada Logística y Construcci ón 0.07 Consultor ía transporte Bovino Alimentos proc. para 0.06 y ovino Comercio minorista consumo animal 0.05 Industria Lácteo Miner ía del química cobre y 0.04 Productos Turismo 1 subproductos de madera Silvicultura 0.03 Celulosa Bajo y papel 0.02 Metalurgia 0.01 0.00 Alto Medio Bajo 1.3 1.5 1.7 1.9 2.1 2.3 2.5 2.7 2.9 3.1 3.3 3.5 3.7 3.9 4.1 4.3 4.5 Esfuerzo para lograr la competitividad necesaria (1) Dentro del sector de Turismo fue considerado el subsector de Turismo de Intereses Especiales, que tiene un dinamismo much o mayor que el sector de Turismo tradicional
  • 14. Consolidate a business system aimed at the creation of value by means of innovation – in all its BUSINESS forms and aspects – as a competitiveness strategy INNOVATION in global markets. Strengthen a platform for the creation, dissemination and application of knowledge in a permanent and consistent research Science with strategic effort coherent with the country’s orientation productive and social problems. To establish an accessible and top-quality life-long-learning system which allows the Human country to rely on the relevant human Capital capital the Knowledge Economy requires
  • 15. Nz 0 2 4 6 8 10 12 14 ea la nd Ko re Ch a ec Fin Re lan p d Ch ec Ho a lla nd Ire la n Hu d ng ar G y re Human Capital Stock ec Ar e ge nt in a Ch M ile al 7,89 ay sia Sp ai M n ex Average years of schooling (ages 25-65) Co ic o lo m b P o ia rtu ga l Br az il
  • 16. Tertiary education graduates in the workforce Prof. and techn. as a % of the current workforce 50 40 30 20 10 0 d Co re a ec d Hu in il Ko y ile I re d M ia Nz Re p Ho d M ic o ia az Ch lla n lan ar n n a b ys Ch nla la Sp lom ng ex Br ea ala Fi
  • 17. Educational attainment of the adult population: the stock problem Distribution of the Population aged 25 to 64 years by highest level of education completed, 2003 100 90 80 70 60 50 % 40 30 20 10 0 Thailand Paraguay Peru 2002 Brazil 2002 Indonesia Jordan Chile 2003 Argentina Uruguay Malaysia Russian OECD WEI mean 2003/04 2002 2002/03 2002/03 2002 2002 2002 Federation mean 2003 2003 2002/03 Primary Lower secondary Upper secondary Tertiary (type B) education Tertiary (tipe A) education Source: Education Trends in Perspective – Analysis of the World Education Indicators. UNESCO-UIS/OECD 2005
  • 18. Basic competence (prose): 50% of the population in performance level 1 Adult Functional Literacy Survey (1998) 100% 90% 80% 70% 60% PERFORMANCE LEVEL 50% 40% Level 4/5 30% Level 3 20% Lever 2 10% 0% Level 1 y es ile en a ry lic l m ga an do ub Ch tat ed rt u ng rm ing ep dS Sw Po Hu Ge cR dK ite e Un ite Cz Un
  • 19. % of Enrollment in Higher Education 90 80 70 60 50 1991 40 2004 30 20 10 0 Chile S.Korea Estonia Ireland Latvia Lithuania
  • 20. Primary & Secondary Education: high coverage, low quality of learning outcomes (TIMSS, PISA, SIMCE). PRIMARY EDUCATION COVERAGE BY INCOME QUINTILE, 1990 - 2003 95,6 98,5 96,9 99,1 97,7 99,5 97,5 99,5 98,9 99,5 100 90 80 70 Percentages 60 50 40 30 20 10 0 I II III IV V Income Quintiles 1990 2003 SECONDARY EDUCATION COVERAGE BY INCOME QUINTILE, 1990 - 2003 96,9 98,8 100 92,0 94,2 94,5 87,7 87,1 90 80,8 80 77,2 73,9 70 Percentages 60 50 40 30 20 10 0 I II III IV V Income Quintiles 1990 2003
  • 21. Tertiary education enrollment by income quintiles 80,0 70,0 60,0 50,0 40,0 30,0 20,0 10,0 - 1990 1992 1994 1996 1998 2000 2003 2006 I 4,4 7,9 9,1 8,8 8,7 9,6 14,7 19,8 II 7,7 9,8 10,2 15,4 13,3 17,7 21,4 25,1 III 12,4 13,0 17,4 21,5 23,2 31,7 33,1 33,3 IV 22,0 23,9 32,1 35,2 38,9 43,0 46,9 47,2 V 40,7 41,2 54,8 60,0 65,4 67,4 73,6 67,1
  • 22. Participation in training ADULT PARTICIPATION IN TRAINING (15 to 60 years people) 16 13,9 13,6 14 12 Percentage 10 9,1 8 6 4 2 0 CASEN Survey 1998 CASEN Survey 2000 CASEN Survey 2003
  • 23. Most participants in training come from big companies… PARTICIPATION RATE IN TRAINING PROGRAMS BY ENTREPRISE SIZE 45,0 40,0 38,6 35,0 30,0 26,0 25,0 Rate 20,0 18,3 15,0 10,0 6,0 5,0 0,0 1 to 9 10 to 49 50 to 199 200 or more Number of workers Source: SENCE and CASEN Survey 2003
  • 24. LLL drivers and issues (1) High coverage in initial education but low quality of learning outcomes (TIMMS, PISA, etc.) A significant % of adult population without initial education lacking basic skills Students lacking academic and employability skills for a friendly school-to-work transition Increasing demand for post-secondary learning opportunities: education seen as the vehicle for social mobility (high private returns, etc.) Expansion of the market of post-secondary ed. and training providers (esp. private universities) but no public information about graduates labor market outcomes Concern about quality and relevance of programs, accreditation frameworks still to be piloted
  • 25. LLL drivers and issues (2) Disjointed “systems” providing LLL and training opportunities, Public effort on training limited to a tax incentive for companies; no funding arrangements for individual workers. Vocational education not well funded by government: poor quality and relevance for industry A significant amount of (competent) workers without formal recognition for their skills Lack of a shared vision and agenda among ministeries relevant for LLL: education, labour, economic development.
  • 26. LLL drivers and issues (3) Adult education, technical-vocational education, workforce training and career guidance systems seen as missing pieces in the 90’s reforms Learning outcomes and not only “inputs” and “processes” as the best approach once universal coverage is achieved Lack of a coherent public policy on vocational education (both secondary and postsecondary)
  • 27. Strategy Main purpose: design and piloting new arrangements, capacities and funding mechanisms supporting LLL Multisectorial: Min of Education; Min Labour & Social Affairs; Min of Economic Development; Industry Associations; companies Combination of remedial actions; learning innovations; institutional innovations; ”demostrative projects” Diverse clientele: adults with low educational attainment (unemployed / bad jobs); young people attending VE; Workforce
  • 28. A systemic view from the National Competency System Labour Market Intermediation / Information Services Industry Competency HR Management Endorsed Assessment & (recruitment, selection, National Competency Certification performance appraisal, Training System training, sucession plans, Standards System rewards, etc.) NATIONAL LABOUR COMPETENCY SYSTEM Technical Vocational Education (secondary, postsecondary)
  • 29. Where we stand 15 industry specific associations, 150 leading companies 500 occup MOBILIZE 2.STAKEHOLDERS Movilizar Actores DEFINE standards, + 15 economic Claves OCCUPATIONAL employability skills sectors 3.Definir Estándares SELECT AND 1.Seleccionar e AND EMPLOYABILITY models (8 SKILLS IDENTIFY Identificar Sector STANDARDS competencies) + INDUSTRY Productivo entrepreneurship skills UPDATE 8. Actualizar Estándares VALIDATE STANDARDS según Necesidades STANDARDS AS NEEDED 4.WITH Validar PROMOTE STAKEHOLDERS Estándares -Web site competency AND con Actores standards 7.Promover y DISSEMINATE KEEPING Claves -New regulation Difundir MANTENIENDO LA THE VENTAJA COMPETITIVE -Media coverage COMPETITIVA EDGE ADAPT CURRICULA EVALUATE AND 5.Adaptar Currículum y AND TRAINING TO 6.Evaluar y Certificar Formación según CERTIFY WORKERS / STANDARDS Methodology Trabajadores STUDENTS Estándares transfer to 40.000 workers certified 300 VET Employability skills for providers 7.000 students
  • 30. A case of best practice in Competency Development: the chilean Mining Sector ESTUDIO DE CREACIÓN ÁREA IMPACTO ECONÓMICO COMPETENCIAS CERTIFICACIÓN DE LABORALES COMPETENCIAS EN FUNDACIÓN CHILE MINERÍA PROMULGACIÓN LEY DE CERTIFICACIÓN DE Gerencia de Depto. Administración COMPETENCIAS Capital Humano Universidad de Chile 1998 1999 2000 2001 2002 2003 2008 2009 GIRA Acuerdo EXPERIENCIAS DEMOSTRATIVAS TECNOLÓGICA EN EMPRESAS PRIVADAS Y PÚBLICAS Fundación Chile España - Inglaterra Consejo Minero Codelco Chile – Francia Bid-Fomin Enami INTEGRACIÓN Consejo Minero Collahuasi LANZAMIENTO CATÁLOGO EMPRESAS Fundación Chile Barrick – Zaldivar COMPETENCIAS (Estandarización) Collahuasi Anglo American SECTOR MINERO 2009 Escondida Codelco Codelco Collahuasi Antofagasta Minerals Escondida Barrick INTEGRACIÓN PILOTO GUBERNAMENTAL EVALUACIÓN Chilecalifica 1371 Trab. Sence Codelco Collahuasi Escondida
  • 31. Where do we stand against the LLL agenda? Several pilots and demostrative projects articulating supply and demand at a regional level. Impact evaluation going on (WB). Some of the regulations needed in place or in final stage of approval (ie National Competency System) Competency “movement” underpinning curriculum development in most higher institutions across the country. “Modules” and “Competency Based VET Programs” being developed. National Agenda for Innovation and Competitiveness, a new driving force for LLL in the country, as far as it supports human capital in strategic economic clusters
  • 32. Current issues Competing policy agendas still a problem: M.Education too busy with the unfinished school reform and M.Labour with the pension reform and persistent youth unemployment A new policy for secondary and postsecondary TVET Qualifications framework informing pedagogical innovation and new learning materials Quality framework for QA and accreditation Diversifing funding mechanisms for learners beyond initial education Innovation in education & training.