Public–private partnerships helping to take public agendas forward
SpaceX CEO Elon Musk revealed on Monday 27 February that two customers had booked a private flight around the Moon. The journey has been tentatively scheduled for late next year.
This project could be the face of things to come, with commercial partners taking over from the National Aeronautics and Space Agency (NASA) in developing the space economy, while NASA focuses on deep space exploration.
NASA said as much in a statement published on 28 February. After commending SpaceX on its initiative, NASA explained that it was ‘changing the way it does business through its commercial partnerships to help build a strong American space economy and free the agency to focus on developing the next-generation rocket, spacecraft and systems to go beyond the moon and sustain deep space exploration.’
NASA currently pays the Russian space agency, Roscosmos, to fly American astronauts to the International Space Station. With NASA’s research budget being smaller now (in constant dollars) than 20 years ago, according to the UNESCO Science Report, NASA has been obliged to shift its focus ‘away from human spaceflight, as part of a cost-cutting drive’.
SpaceX has stepped into the breach. It acts as a contractor to NASA. A milestone in this unconventional partnership was reached in 2012, when SpaceX’s ‘Dragon became the first commercial spacecraft to fly cargo to and from the International Space Station (ISS)’. SpaceX has not been able to transport astronauts to ISS up until now but its new spaceceaft, Dragon 2, has been designed to carry passengers. It is scheduled to make its maiden flight to ISS later this year but without any astronauts on board. Dragon 2 would also be used to fly the two tourists around the Moon.
Billionaires like Elon Musk are exerting a growing influence on US research priorities, observes the UNESCO Science Report, with some privately funded groups having ‘stepped in when political will is weak’.
Whereas, in the case of SpaceX, erstwhile federal priorities have now been taken up by billionaires, things have sometimes happened the other way round. ‘Before President Obama announced his initiative in favour of Brain Research through Advancing Innovative Neurotechnologies (BRAIN)’ in April 2013, recounts the UNESCO Science Report, ‘Paul G. Allen and Fred Kavli had established privately funded brain institutes in the State of Washington and at the three Universities of Yale, Columbia and California’. It was scientists working at those institutes who helped the government to develop its own BRAIN Initiative, which involves federal agencies, industry and philanthropy.
A way to overcome austerity budgets
Between 2013 and 2016, executive efforts to increase allocations to US federal research were repeatedly thwarted, with Congress withholding approval of the federal government's budget several times as part of an austerity drive. It was largely thanks to partnerships forged by the government with industry and the private non-profit sector that the Obama administration was able to take its agenda forward in its priority areas of public health and climate change.
One such partnership is developing up to five pilot projects by 2019 for three common but difficult-to-treat diseases: Alzheimer’s disease, type 2 (adult onset) diabetes and the autoimmune disorders of rheumatoid arthritis and lupus. At the launch of the Accelerating Medicines Partnership in February 2014, National Institutes of Health (NIH) director Francis S. Collins said that ‘currently, we are investing too much time and money in avenues that don’t pan out, while patients and their families wait’.
In addition to the NIH, the Accelerating Medicines Partnership involves the Food and Drug Administration, as well as several non-profit organizations and 10 major biopharmaceutical corporations. Three of these are not US corporations, namely GlaxoSmithKline (UK), Sanofi (France) and Takeda (Japan). Laboratories share samples, such as blood or brain tissue from deceased patients, to identify biomarkers. They also participate in NIH clinical trials. ‘One critical component is that industry partners have agreed to make the data and analyses arising from the partnership accessible to the broad biomedical community’, observes the UNESCO Science Report. ‘They will not use any discoveries to develop their own drug until these findings have been made public’.
Another public–private partnership acknowledges that the USA will only be able to reach its emissions reduction targets with the involvement of industrial stakeholders. On 27 July 2015, the White House announced that 13 large US companies had committed to investing US$ 140 billion in low carbon emission projects, as part of the American Business Act on Climate Pledge. For instance, Bank of America undertook to increase its investment in favouring the environment from US$ 50 billion at present to US$ 125 billion by 2025. Coca-cola agreed to reduce its carbon footprint by one-quarter by 2020. Google, the world leader for the purchase of renewable energy to run its data centres, pledged to triple its purchases over the next decade. Walmart promised to double the number of its supermarkets running on renewable energy by 2020. Berkshire Hathaway Energy (Warren Buffett group) announced plans to double its investment in renewable energy to US$ 30 billion and Alcoa, the aluminium manufacturer, to halve its carbon emissions by 2025.
A way to foster economic recovery
The European Union (EU) is fostering public–private partnerships to take its own agenda forward. The Factories of the Future partnership was launched in 2008 under the European Economic Recovery Plan, at a time when all but three EU countries (Bulgaria, Poland and Slovakia) were in recession. Some 150 projects involving top industrial companies and research institutions in Europe were funded within the Factories of the Future partnership under the Seventh Framework Programme for Research and Innovation (2007–2013).This partnership is being pursued under the current framework programme, Horizon 2020 (2014–2020).
One research focus of the Factories of the Future partnership has been the digitalization of industry, considered essential for revigorating European competitiveness in manufacturing. In Germany, for instance, the digitalization of industry has been central to the country’s High-tech Strategy since 2011. A new Industry 4.0 platform – a reference to the new Fourth Industrial Revolution – called Made in Germany was launched in April 2015. It is operated by the federal government (economic affairs and research ministries), firms, business associations, research institutes and trade unions. Although some Industry 4.0 technologies are already becoming a reality, with smart factories like that of Siemens already in existence, a lot of research remains to be done.
Europe has been a major producer of new knowledge but it has performed less well in turning new ideas into commercially successful products and processes. Science and innovation face a more fragmented market than large economies comprised of a single nation state, such as the USA or Japan . The EU thus needs a common research policy to avoid duplicating research efforts in different member states.
EU research policy has had a strong focus on innovation since 2010, when the Innovation Union flagship project was introduced. This name covers 34 commitments and related deliverables designed to remove the obstacles to innovation, such as expensive patenting, market fragmentation, slow standard-setting and skills shortages. The Innovation Union is also revolutionizing the way in which the public and private sectors work together, notably through innovation partnerships between European institutions, national and regional authorities and businesses.
This approach is reflected at the national level, with the policies of the Czech Republic, Italy, Poland, Romania and others all stressing a shift in focus towards public–private partnerships.
A way to link industrial policy to innovation
In Latin America, the face of public–private partnerships has changed in recent years. In a region where industry makes only a modest contribution to research and development – just 0.12% of GDP in Argentina and 0.17% in Mexico in 2013 –, Brazil and, to a lesser extent, Argentina, Chile, Mexico and Uruguay, have all sought to link industrial policy to innovation through the creation of sectorial funds.
Brazil was the first to channel taxes levied on specific state-owned companies towards fostering industrial development in key industries and services; it established as many as 14 sectorial funds between 1999 and 2002, in fields such as oil and gas, energy, space and information technology. More recently, both Brazil and Uruguay have launched sectorial funds promoting public–private partnerships in the agro-industry. Mexico adopted 11 sectorial funds in 2003 and a twelfth targeting sustainability research in 2008.
The Argentine Sectorial Fund (FONARSEC, est. 2009) uses public–private partnerships to improve competitiveness in the following sectors: biotechnology, nanotechnology, information and communication technologies (ICTs), energy, health, agribusiness, social development, environment and climate change. Argentina has also created a Sectorial Fund for Software (FONSOFT, est. 2004).
On 30 November 2016, Argentina passed a law on Public–Private Partnership Contracts to regulate and stimulate private investment in key sectors of the economy such as infrastructure development, production, housing, services, applied research and technological innovation. The law comes just two months after Argentina approved an ambitious national transportation infrastructure plan valued at US$35 billion.
Industry contributed 0.52% of GDP to Brazilian research in 2012, the highest share in the region, equivalent to almost half (45%) of the national research effort. Despite this, Brazil has not yet managed to harness innovation to economic growth. Labour productivity has stagnated since the 1980s and Brazil’s share of world exports has receded in recent years to 1.4%. Innovation still tends to involve technology transfer from the public to private sector.
To compound matters, the current slowdown in the Brazilian economy has revealed the limitations of sectorial funds. With profits down in many quarters, the government is funding it harder to collect this revenue from industry.
Most Brazilian firms still show little interest in developing new technologies. There are, of course, some notable exceptions, such as Embraer, the aircraft manufacturer, Petrobras, the state oil company, Vale, the large mining conglomerate, and Natura Cosméticos, Brazil’s market leader for personal hygiene products, cosmetics and perfumes. Brazilian companies are also innovative in the field of agriculture.
Natura Cosméticos ploughs about 3% of its revenue back into research and development. As a result, two-thirds of revenue from sales in 2013 involved innovative products released in the previous two years.
Natura has established a number of research partnerships with public bodies. The company uses plant extracts to create new products, a process which requires interaction with Amazonian communities and partnerships with research institutions like the Brazilian Agricultural Research Company (Embrapa) and the Federal University of Santa Catarina. This collaborative research generates new patents. In 2015, Natura also partnered with the São Paulo Research Foundation (FAPESP) to establish the Applied Research Centre in Wellbeing and Human Behaviour. The new centre includes research facilities based at the state’s public universities.
Partnerships that take government priorities forward
In sub-Saharan Africa, government spending on public health varies widely, from 0.8% of GDP in South Sudan and 1.1% of GDP in Guinea-Bissau and Nigeria to as much as 9.1% of GDP in Lesotho. A number of governments have engaged in public–private partnerships to supplement public expenditure. For instance, in 2012, the Government of Gabon partnered with Shell Gabon to establish a ‘fun’ approach to learning about HIV which targets youth, called Gaming for HIV Prevention, at a time when tuberculosis is becoming more prevalent. In 2013, Gabon devoted 2.1% of GDP to public health.
There are more than 200 inhabited islands in the Maldives. Here, the government is encouraging public–private partnerships by offering land and other incentives to private companies to set up institutions on some of these islands. One such partnership dates from 2014 and involves the Indian company Tata, which has agreed to set up a medical college and develop a regional hospital on Lamu Atoll.
Technology incubation hubs are springing up across Africa in the field of information technology, in particular. In Kenya, one pioneer is iHub. Set up in Nairobi in 2010 by an independent technologist called Eric Herson, iHUB provides an open space for young tech entrepreneurs, programmers, investors and companies. IHUB has since forged partnerships with several multinational corporations, including Google, Nokia and Samsung, as well as with the Kenyan government’s ICT Board. In December 2013, the government announced that it would be establishing technology incubation hubs in all 47 counties.
In Uganda, meanwhile, the government is prioritizing the development of a backbone infrastructure network, such as the deployment of fibre-optic cables, through the Uganda Investment Authority. This parastatal agency works with the government to facilitate private sector investment in ICTs and other areas.
In September 2013, the government launched a Business Process Outsourcing Incubation Centre at the Uganda Bureau of Statistics. The centre is run by three private companies. The aim is to stimulate investment in services enabled by information technology, in order to reduce youth unemployment.
The government also hopes to create new businesses and jobs in the agribusiness industry, through a public–private partnership targeting young innovators. A non-profit company called the Consortium for Enhancing University Responsiveness to Agribusiness Development Limited was launched in May 2014 and is based at Makerere University.
Many projects target industrial development
As demonstrated by many of the aforementioned projects, industrial development is a key focus of public–private partnerships. In February 2013, the Gabonese government partnered with Ireland Blyth Limited to develop the Gabonese seafood and maritime industries.
Kenya’s ‘Silicon Savannah’, as the government has branded the Konza Technology City currently under construction, is financed through a public–private partnership. The government provides basic infrastructure and supporting policy and regulatory frameworks, leaving private investors to build and operate the industrial development. It is hoped to create 200 000 jobs in information technology by 2030.
In Sri Lanka, a group of domestic corporate giants have partnered with a public body to build a national innovation platform for technology-based economic development through the commercialization of nanotechnology. The Sri Lanka Institute of Nanotechnology (SLINTEC) was established as a joint venture in 2008 by the National Science Foundation and Sri Lankan corporate giants that include Brandix, Dialog, Hayleys and Loadstar. SLINTEC aims to raise the proportion of high-tech exports from 1.5% to 10% of total exports by 2015 by bringing nanotechnology research and business together.
Renewable energy is another key focus of public–private partnerships. In Morocco, the government has partnered with a consortium led by the Saudi Arabian company Acwa Power and its Spanish partner Sener to help create the world’s biggest solar farm in Ouarzazate.
In Kenya, where almost half of electricity comes from hydroelectricity and the growing frequency of drought is causing water and power shortages, the government plans to develop its geothermal fields in the Rift Valley. The Geothermal Development Company was formed in 2009 under the Energy Act (2006). The state company cushions investors from both public and private power companies from the high capital investment risks associated with drilling geothermal wells. However, in its fiscal year budget for 2012–2013, the government allocated just US$20 million to the Geothermal Development Company out of a total budget for the exploration and development of geothermal power and coal of US$340 million.
In January 2013, the Rwandan Ministry of Education established the Knowledge Transfer Partnership programme, in collaboration with the African Development Bank, to foster industrial development. By 2015, the programme had sponsored five partnerships between private companies and the University of Rwanda’s two Colleges of Science and Technology and Agriculture and Veterinary Medicine. The company contributes its idea for product or service development and the university provides the appropriate expertise.
University–industry partnerships do not seem to be as common as one would expect, despite the fact that they are considered important by public policies. A 2014 survey by the UNESCO Institute for Statistics found that, in most of the 65 countries surveyed, fewer than one in five manufacturing firms that were active innovators chose to partner with universities. Among low-income countries, Kenya stood out, as almost half of firms in this country (46%) reported partnerships with industry. Firms in Rwanda did not respond to the survey.
Partnerships that train personnel in strategic economic sectors
The UNESCO Science Report extolls the virtues of partnership with foreign multinationals to train personnel. Developing countries that host these multinationals can ‘draw on the knowledge and skills embedded in the activities of large foreign firms, in order to develop the same level of professionalism among local suppliers and firms’, it explains. ‘By encouraging foreign high-tech manufacturers to run training programmes in the host country, governments will also be drawing manufacturers into national training strategies, with positive spin-offs for both producers and suppliers’.
Synopsys Inc. is a good example of this approach. In October 2014, the multinational corporation celebrated ten years in Armenia. It specializes in the provision of software and related services to accelerate innovation in chips and electronic systems. Today, it employs 650 people in Armenia. In 2004, Synopsys Inc. acquired LEDA Systems, which had established an Interdepartmental Chair on Microelectronic Circuits and Systems with the State Engineering University of Armenia. The Chair, now part of the global Synopsys University Programme, supplies Armenia with more than 60 microchip and electronic design automation specialists each year. Synopsys has since expanded this initiative by opening interdepartmental chairs at Yerevan State University, the Russian–Armenian (Slavonic) University and the European Regional Academy.
In Malaysia, a group of ten multinationals based in Malaysia established a platform in 2012 to promote collaborative research among industry, academia and the government to satisfy the research needs of the country’s electrical and electronics industries, which employ nearly 5 000 research scientists and engineers. Agilent Technologies, Intel, Motorola Solutions, Silterra and other multinational corporations generate close to MYR 25 billion (circa US$ 6.9 billion) in annual revenue and spend nearly MYR 1.4 billion on research and development. They have extensively utilized government research grants ever since the government decided in 2005 to extend the reach of the grants beyond domestic firms to multinational beneficiaries. Besides research, the focus is on talent development, the ultimate aim being to help industry add greater value to its products.
Through public–private partnerships, governments can ensure that training keeps pace with employers’ evolving needs, a preoccupation for countries of all income levels. In the USA, for instance, the government announced the American Apprenticeship Grants competition in December 2014. This competition encourages public–private partnerships between employers, business associations, lawyers associations, community colleges, local and state governments and non-governmental organizations to develop high-quality apprentice programmes in strategic areas, such as advanced manufacturing, information technology, business services and health care. The scheme has been implemented by the Department of Labor with an investment of US$100 million.
Source: adapted from UNESCO Science Report: towards 2030, published in 2015
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