According to a recent World Bank study on global competitiveness published in 2012, Lebanon ranks very poorly on its capacity for innovation and the quality of its research institutions, in addition to low private sector spending on research and development (R&D). Having said this, there is consensus among international financial organizations that Lebanon has the potential to utilize inflow money from its global diaspora to promote and sustain economic growth through investment. Despite efforts made by the Banque du Liban (BDL) to encourage investments, very little is being achieved in this respect. There are of course several facets to this issue, one of them being the absence of an innovation based growth strategy.
The Lebanese government has taken some steps through the National Council for Scientific Research (CNRS) which has already coordinated an initiative with universities, private sectors and relevant organizations or associations for the enhancement and development of science, technology and innovation through the STIP Plan (Science, Technology & Innovation Policy). The results in the industrial sector did not meet expectations possibly because the focus was on projects that have an immediate social benefit, and because research projects were not linked to private sector requirements. It has, however, contributed to the creation of the Lebanese Industrial Research Achievements Program (LIRA) project between the Association of Industrialists (ALI) and the CNRS.
[pullquote]Lebanon has the potential to utilize inflow money from its global diaspora to promote and sustain economic growth through investment[/pullquote]
On the semi-public level, the Industrial Research Institute (IRI), in addition to its already existing infrastructure (analytical labs and pilot plants), in 2010 created the Center for Innovation and Technology (CIT) whose main role is to secure sustained support and innovation for the manufacturing industry. Recent activities of the CIT in 2014 included the cofinancing and management of the innovation voucher project, consisting of €10,000 ($12,465) awards provided by the EU to support industry applied innovative research. The project, which ended in 2014, provided grants to over 20 candidates working on applied research. Another of CIT’s activities is organizing and hosting regional matchmaking sessions to pair researchers with investors, in collaboration with the UN’s ESCWA organization, to promote innovative ideas among potential investors. It also conducts workshops and seminars related to innovation and the commercialization of innovative products. These are crucial steps in triggering the momentum for linking research with industry — which takes us to the role and contribution of the private sector in harnessing innovation.
The Euro–Lebanese Center for Industrial Modernization (ELCIM) is another project hosted at IRI since 2005, contributing to the improvement of competitiveness within the industrial sector in Lebanon. ELCIM plays a significant role in the development of innovation and knowledge transfer within the industrial sector, through the multifaceted technical assistance provided to small and medium-sized enterprises (SMEs) in the form of process development, R&D and implementation of quality management systems. ELCIM also created the agro-food advisory unit whose main role is to manage technical projects linking Lebanese agro-food entities with research and pilot plant resources throughout Lebanon and abroad. ELCIM was behind the Lebanon Soft Shore (LSS) cluster, grouping together a number of IT companies whose mission is to assist those companies in accessing new markets abroad.
At the private sector level there are three major players: universities and research institutes, industrial SMEs, and financial and venture capital institutions. Financially, the BDL as well as Kafalat are playing an important role in providing seed money, and in many cases investment schemes, to facilitate the implementation of startups and innovation projects. Several venture capital organizations, such as MVEP, Berytech and Byblos Ventures focus on providing private equity funds for innovative projects.
On the academic aspect, Lebanon ranks well in the availability of scientists and engineers, but this does not seem to be well exploited either by the Lebanese business community or the academic institutions themselves, which are not very active in the development of the country’s industrial sector. A lot of the Lebanese scientific brain is drained abroad or is occupied with research topics that are not applied to local industrial demand. Furthermore, the weakness of intellectual property rights protection and of the legislation for patent protection in Lebanon is an impediment to innovation because the economic rewards for the efforts of innovators (both domestic and foreign) are not guaranteed.
[pullquote]Many Lebanese companies prefer importing technology and knowledge rather than relying on local researchers[/pullquote]
On the SME level, there is an obvious reluctance to investing time and money on R&D. Many Lebanese companies prefer importing technology and knowledge rather than relying on local researchers. As much as this seems practical in terms of taking less risk and a sense of ensuring easy compliance with international standards, its commercial impact is reflected in paying for expensive non-customized, imported technology, which is in many cases obsolete or cannot be updated. Very few Lebanese companies allocate budgets for the creation of their own R&D departments or to develop their companies to meet international standards. Surprisingly enough, very few also resort to subcontracting R&D services from local institutions or researchers. There is an urgent need to promote a culture of funding our own research, depending on local resources for innovation and knowledge transfer and strengthening the link between research (academia) and industry.
One of several ways to promote the innovation culture starts by simultaneously creating strong awareness among stakeholders of the importance of such an economic pillar and of motivating local researchers, through readily available funds and grants to work on business applied projects, or alternatively through matching industry needs with the research capabilities that universities and research institutions provide. Here, IRI, through its research and industrial roles, can and will play an important role in promoting innovation. A re-launch of the innovation voucher is anticipated as soon as the required funds are secured. On the other hand, an improvement in property rights protection might impact the composition of foreign inflows by stimulating ‘technology-driven’ FDIs. For that purpose, ELCIM in collaboration with TAIEX will be organizing a comprehensive workshop on this issue.