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SEMINAR

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									                    Transcript of Question and Answer Session


PHILIP CHEN, HKUST: This question is targeted to Dr Berry regarding the R&D
programme, the grants support to industry. I heard from your talk, you mentioned
that the programme has about 70 staff and of the 70, 50 were borrowed from outside
from non-government sources, is that correct?

DR ORNA BERRY:          Can you repeat what you were quoting from the programme.

PHILIP CHEN, HKUST: You just mentioned the office, the staff, the size of the
office that managed this grant.

DR ORNA BERRY: Yes, it has about 70 people.

PHILIP CHEN, HKUST:          And of the 70, 50 were from industry and outside your
company.

DR ORNA BERRY: No, not from the 70. In addition to that we have 50 people
who are experts from the industry who are doing the technological evaluation and the
economical evaluation.

PHILIP CHEN, HKUST:        I have two questions regarding this. First, how do you
select these 50 people? The second question is, in the programmes that you select –
and obviously there are many applications – how do you select these programmes,
which ones to pick?

DR ORNA BERRY: First of all, each one of the programmes, the incubators, the
product development and the MAGNET programmes, as well as the international
programmes has different criteria. In the international programmes there has to be
an Israeli company and a company from the other nation, and in that case there is an
evaluation of the technology proposed and the business potential, and there is ranking.
In the multinational programmes, the evaluations are done on our side by the
programme manager and on the matching office on the other side. In the case of the
United States there is the National Institute for Science and Technology that is
reporting to the Under-Secretary of State for Science and Technology, that is doing
the matching evaluation. So in the board meetings that we have twice a year for
each one of the programmes, the international programmes, we rank the proposals and
we allocate a budget to the winning one.

In the programmes in Israel, the incubators, there is a two tier organization. There
are 26 technological incubators that are not for profit organizations. The
entrepreneurs come to the incubators and they submit their proposals. The incubator
is helping them to prepare the proposal. Often enough, the incubator will tell them
that they need either much more money than we are willing to give in this
programme, or that it is a continuous research programme or something of that sort.
At the end of the day, the incubators select about 10% of the proposals that they
receive and bring them to a committee that I chair. We have a bi-weekly meeting
and we approve about four new projects per incubator per year.



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In the high-risk product development we have about 1400 requests and we approve
about 1000 of them. The fall-out is after this, so the numbers that you will see in the
table that is in the slide, it is about 1300-plus submissions and 1000-plus admissions
but they are not admissions with the budget required. They are admissions and after
that, in many of them, about 30% of them, there are milestones that have to be met as
preconditions for their worth. So all in all we have about 65% award of the requests
that are coming after they have already met the criteria because we don’t count those
submissions that fell off technically.

In the MAGNET programme which is the main infrastructure technology programme
where we insist on having academic institutions and industrial partners that are
collaborating on advancing technology in various areas – we have it in alternative
energy, we have it in communications, we have it in biotech, a multitude of
programmes, we have 16 different programmes – about 20% of the submissions are
being awarded. The grants there are much larger and we prefer to award the grant to
those that have the capability of working together and have an interesting technology,
and the record of the people who are doing the technology is somewhat promising
because we are talking much bigger budget to much smaller number of projects there.

The people that we elect as the valuators are elected. Every three years we publish a
call for proposals from the industry and basically we are going through screening of
experts in different fields, be it the fields that we know already that we have projects
in, and occasionally – for example, we recently had some new projects in the area of
satellites, so in the interim we published a call and we evaluated a number of experts
and we selected one who was best suited to serve with us. Those people appear in
front of the Grants Committee and they basically review the projects, because
remember that if we have to review over 1300 projects a year, it is pretty much a mass
production. So the companies themselves do not come in front of the Grants
Committee, unless we have a dispute or a complicated case and we call them back. I
see many of those individual companies separately but for the committee that meets
weekly for six hours, we do not bring them in. The evaluators have to present the
case and sometimes they evaluate the technical and the economical evaluators that are
coming in front of the committee. And that is pretty much the mechanism. Did I
answer your question?

PHILIP CHEN, HKUST:             I have one question. So, basically, the proposals are
solicited by a call for proposals. You don’t dictate the areas, for example biotech?

DR ORNA BERRY:            No, we are talking about the technical evaluators. For the
international programmes we solicit proposals. For the national programmes, the
programme is very well known and we do not need to solicit anything. Only in the
case of the MAGNET we are advertising before we are evaluating a proposal because
there we want to give a chance to companies who are interested in the field and can
contribute to join in. But for the incubators and for the product development grants
we don’t advertise at all. We have a queue that is coming in all year long.

PHILIP CHEN, HKUST: So, do you steer the proposals into specific areas such as
biotech or information technology? You don’t?

DR ORNA BERRY: No. We qualify each one of the proposals according to its


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relevant quality in the area and we just keep ourselves to a running budget and that is
it. We are not suggesting to the industry what to do. The industry, we believe,
knows better than we do.

PHILIP CHEN, HKUST: The first part of my question was how do you select those
50 non-government people?

DR ORNA BERRY: Yes, this is what I tell you, that every two years we publish a
call for participation by experts and we reassess their capabilities and their skill set,
and if we are lacking, if suddenly we have a new area and we don’t have an expert in
the area, we are specially calling for additional submissions.

PHILIP CHEN, HKUST: So these people who help you, these people are borrowed
hands? These people are not permanent?

DR ORNA BERRY: No, they are employed as consultants on an hourly basis and
we can fire them as soon as they have committed poor judgment for two or three
times.

TONY EASTHAM, HKUST: Just a short follow on question. You kept using the
word ‘grant’ there. Is it really a grant that you are providing to the companies, rather
than a loan or taking an equity position in the companies? It’s a grant?

DR ORNA BERRY: In the MAGNET programme it is absolutely a grant. In the
other programmes it is a conditional grant. Namely, if the project fails, no return.
If the project is successful then a certain percentage of the revenue is returned to the
government up to the ceiling that is equal to the grant plus interest.

DAVID KWAN, HK STOCK EXCHANGE: My first question is also to Dr Berry,
and I read with interest about the Israel-Singapore Bi-national Fund. Can you please
elaborate on the industry and to what extent Singapore’s involvement is in that
project? And the second question is, to what extent the banks and the securities
market Marshall resources to the development of hi-tech in Israel, as well as in Mr
Pawar’s case. India?

DR ORNA BERRY: Basically, the Singapore-Israel Industrial R&D Foundation,
the manager of the foundation is sitting in Singapore on the National Science and
Technology Board; and part of my office is a non-government office so he has
assistance for soliciting projects in my non-government part of the office. The
multinational programmes are operated from a non-profit branch of my office that is
non-government because to match between the countries and to allow for
management that is not government of the foundation, yet to monitor the foundation
financially by government too. So there is a person who sits on the National Science
and Technology Board in Singapore. He has an aide in my non-government office
in Tel Aviv. There is a board twice a year. Each one of the governments is
contributing one million dollars a year. The grants are covering up to 50% of the
cost of the project. There are a number of projects in multimedia. All of them, by
the way, are commercial. All of them are non-military because we are not dealing
with the military side whatsoever. And all of them are for commercial purposes, so
it is normally an Israeli company and a Singapore company.


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The foundation has existed for about two years, so until about a year ago there was no
PR for the foundation, so companies did not know about it unless they were solicited.
Now the programme is reasonably well recognized, particularly for those who are
looking for collaboration between the two countries, and though it is a small one it
operates quite well and it has promoted a significant number of investments in
addition to the research and development money.

The biggest annual budget for research and development in an international
programme is for the 5th Framework where we spend about $45 million a year. Then
goes the BIRD Foundation which accounts for a budget of about $17 million a year.
And it goes down. The British Foundation that was just established will be $25
million for five years on the two sides.

MR RAJENDRA S. PAWAR:            In terms of supporting start-ups and funding, is that
the dimension of the question?

QUESTION:       Banks and securities market.

MR RAJENDRA S. PAWAR: Banks and securities market, okay. The Indian
banks have been somewhat risk averse, I think, public sector banks. And the
software industry, as I was explaining, till the early part of this decade has been
predominantly focused on services – on-site services where the funding requirements
are rather low, just some working capital which was never funded because it is a very
risky investment.

Now, two phenomena are taking place. One is that the offshore software factory
concept has taken shape in this decade, so companies in fact have raised funds – like
our company, NIIT, we went public in 1993 – and all those funds were raised to set
up software factories. So companies with a track record who have been around for
some time have been able to raise funds. The early part of this decade has been very
good, as you know. Our stock market has been good.

The venture capital movement has not been very impressive, if I may use that term.
We do have a financial institution called ICICI. They set up a separate fund for
technology development but the results have been somewhat indifferent. I think the
risk management dimension or the ability to deal with a high level of risk is
something which has not developed yet in the financial system in India. And as part
of the task force there is a committee which is working on how to change the norms to
enable the non-banking financial companies to come into the venture capital area and
we expect some significant reform in the near term.

So, banks continue to fund the manufacturing sector and more recently the software
sector which is doing on-site work which today has become close to half the total
amount. Software product is still a very nascent phenomena and that will get done,
only, I believe, by venture capital. So in a sense that is waiting for some venture
capital to happen.

QUESTION: Mr Ryan, you mentioned that Ireland has been progressing through
this hi-tech corridor for 30 years already. Now, in the old days when Ireland was


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still not well known as a hi-tech country and then, I presume, there was possibly not
much demand for hi-tech at all even on a global or a local basis, how and why was the
government convinced this is the right direction to go for? Perhaps in the early 10
years your return on investment is none or even negative, why was the government
convinced?

MR FRANK RYAN: A good question. It may have been foresight on behalf of
the government but what we did around the early sixties was to look at the sectors that
we thought were going to enjoy high growth over the next 20 or 30 years, and
sectors that did not involve a huge capital investment. The information technology
industry is primarily not capital intensive. Certainly the pharmaceutical industry is,
but the health care industry isn’t. So we knew that because of the banking or
funding mechanisms that were available in the state at the time, that it would not be
possible to fund high capital investment, so we decided to put the training into the
people.

We have reviewed that on a number of occasions. Like most organizations, we
review our strategy on an evolving basis. About ten years ago we added
international services to it, which is the type of centralized customer support or
technical support activities. And also financial services – we are a very newcomer to
the financial services business and we cannot rival London, Frankfurt or Paris, as
regards financial services in Europe. What we can do is be very good at some sub-
segments of that, like treasury management, like reinsurance. So we have taken out
some small sub-sectors and decided to be good at that. But at all times we have had
to be very selective based on the resources that we can bring to it. But that was it
and we have stuck with that policy for the last number of years.

QUESTION: Mr Ryan, in your speech as well as the answer you just gave, you
emphasize very strongly the need to take a position, to make a decision, basically
because of your limited size and the limited resources of your country. Now,
obviously you have been very successful in making that decision. Starting from the
same premise we have reached a totally different conclusion. We are also limited in
size, we are also limited in resources, but we believed in the past very strongly in
market-driveness and I think our bureaucrats are far more modest in saying that they
would rather leave the decision to the market than to pretend they are experts in
making some very wide choices. Now, we have also been rather successful in the
past. How would you reconcile these two rather different philosophies?

MR FRANK RYAN: I think, in truth, what we have done is to back both sides of it.
We leave it to the market to decide what is to be in demand. The role of the
government is to provide an infrastructure which allows that to take place, whether it
is telecommunications or E-Commerce or roads or bridges or airports or anything
else. Our view is that in looking forward – it is easy to look backwards as we can
quantify very easily – in looking forward our belief is that when the industrial history
of the 21st century is written it will be regarded as the century of information
technology and biotechnology, so that is the premise we are operating on right now.
To that extent we are of course increasing the output of people with skill sets in the
area. And then organizations like IDA will go out and identify key technology
companies that we would like to influence to locate activities in Ireland. But I think
you have to do both. I think you have to have the infrastructure there to actually


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enable it to take place, otherwise it is almost impossible now.

Twenty years ago industry was not that experienced at investing regionally, never
mind globally. We deal, today, now with most of the best companies worldwide,
very, very, experienced companies in investing globally, never mind regionally or
locally. So I would say it is a combination of government policy – but it is not
possible for government to pick the winners, but it is possible for government to put
an infrastructure in place that allows for the market place to actual develop in it.

QUESTION:         If I may address the question to all three speakers. How did your
respective countries successfully initially attract foreign companies, predominantly
US ones but not necessarily exclusively, to locate and to invest as opposed to just run
sales offices or what have you?

MR Rajendra S. PAWAR: In India, I think I can just cite a recent example which is
that the state of Andra Pradesh, one of the southern states – I think I made a remark in
passing reference – the Chief Minister is one of the most proactive, pro IT ministers
we have seen in our history and he does what a corporate executive would do which is
that he goes on intense trips to the West Coast, calls on the chairmen of companies,
whether it is Bill Gates – last time he visited 13 chairmen in one visit over a 10 day
trip – and he makes a pitch as to why it makes sense for the chairman to invest in
Andra Pradesh and now we have development centres for Microsoft, for Oracle, a
whole host of companies. But this is unusual, this is not how we have seen it happen
before. Earlier, we would have seen some proclamation of policy and then some
events and things like that. But I guess his initiative now is leading to many other
chief ministers wanting to do the same thing. They have a very intense sense of
competition just coming up.

Till now we have not really sought out – like we saw, for example, in the case of
Ireland, a very systematic approach to both number one and number two and bring
them in - we have not seen that view because we were coming from a closed economy
where there was a strong division in the point of view of whether we should do things
ourselves or get people in. But recently, the mid nineties onwards, we are seeing
very focused proactive initiatives of political leadership and bureaucracy during that
time, but it is a beginning.

MR FRANK RYAN: The first wave of high technology investment was really
around the 1960s and at that point it was people like Prime Computer and Digital,
Data General, Concurrent, all those mini-computer manufacturers. Now they came
for one thing in that Ireland had a low corporate tax rate. Now if you consider a
situation where those companies were trying to fund their growth in the United States
at the same time - okay, there was strong demand for mini-computers then – and at
the same time they were trying to fund growth globally. So if you put your
operations in Ireland, you get at least 90% plus, or at that time it was 100% of the
corporate tax. So you are basically amassing substantial cash-flow which to a high
growth, high technology company is absolute heaven on earth. So that’s why. So
in many cases the retained earnings in Ireland would have paid for Apple Computers
operations in Singapore when they were there. And companies used it as a funding
mechanism as well as a location to produce products.



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DR ORNA BERRY:             Three mechanisms. One is the authority for investment that
was giving either incentives for making capital investments or tax holidays for a
period of up to 10 years. The other one was returning Israelis. The last item was
the R&D incentives and this built up, so the first companies that came in to Israel
were companies like Intel, IBM, Motorola. IBM, today, has only research and
development facilities separate from the sales facility, they don’t have really
manufacturing in Israel. Intel and Motorola have both R&D and manufacturing in
Israel. And there are other companies that I decided not to account for but they
exist in Israel for a duration that exceeds 30 years now.

QUESTION – CHINESE UNIVERSITY OF HK: This question has to do with the
IP ownership and income, and I want to specifically ask you about whether you have
thought out or you find it necessary to provide special incentives for the inventors
themselves. Those inventors that choose to participate in incubators and all the
projects. At present this is something I am very interested in, so if each of you could
address it.

DR ORNA BERRY:              Intellectual property is a very important issue. In the
incubators most of the equity goes to the founder or to the inventor. In general we
put limits on exporting know-how and particularly intellectual property that was
funded with a government grant. Basically, the resolution is that since we do not
take equity holdings, then if intellectual property is to be exported it is paying either a
settlement or increased royalties in the continuation. But in terms of the ownership
of the intellectual property, the inventors own it, we do not own it. In the case of the
incubators, most of the equity goes to the inventor and beyond the incubator time it is
up to the inventor to keep his or her rights.

MR FRANK RYAN: In relation to Ireland, Irish entrepreneurs, the state will only
take a maximum of 10% of the equity. And in fact we prefer not to take any of the
equity but in order to facilitate it to happen we will take up to 10% of it. Once it
becomes a patented item of technology and royalties are then incoming on it, there is
no taxation whatsoever in relation to the receipt of royalties. Just to link that to the
earlier question about how these things are financially resourced, we have had a
problem in Ireland in this area, in getting the banks and the financial institutions to be
risk taking. Most of the Irish companies that have been successful have had to go on
to the North American Exchange, particularly the NAZDEC Exchange, in order to
raise the capital, where that type of risk profile is much more acceptable than it would
be probably across all Europe I would say.

MR RAJENDRA S. PAWAR: The concept of incubators has really not started off
yet and therefore whatever IP (intellectual property) has been created, much of it has
happened in medium to large size software companies, so it is funded from within and
it tends to be more of a corporate investment. We do have some interesting products
which have been set up, created by small teams but that again tends to be
entrepreneurs who create those things themselves. So there is not a systematic
method for grants or financial help to a person with an idea, that structure does not
exist.

JOSEPH LIAN, CENTRAL POLICY UNIT: I have two questions and both of them
are directed to each one of the speakers. And the first one is the role of the small and


                                                                                         7
medium enterprises in the development of hi-tech in your countries. It seems to me
that in Ireland and in India the big guys are taking most of the limelight, whereas in
Israel I hear about incubators. What is the role that the small and medium
enterprises are playing in each of your countries in hi-tech? And the second is,
whereas we have been hearing mostly your success stories, can each one of you share
with us some of the blunders committed by your government in this hi-tech area?

MR RAJENDRA S. PAWAR: It is correct to say that the hardware sector has been
medium to large. Large by Indian definitions may be different from large in the
American context. But corporate investments are made to set up the manufacturing
facility. But in the software sector, in the last five to six years, we are finding that
literally every year as many companies are getting formed as existed at the end of last
year and most of these are small enterprises. So in the last five years we’ve seen a
phenomena of people form large companies, a small group, three or five or ten or
twenty, not more than twenty people, start something new. And when we see the
number of companies which are getting formed but there is still a momentum of the
large 10 or 15 companies which has given them growth in the earlier period, the pre
90’s period which gave them a certain size. But if one were to plot and see the
percentage contribution coming from start ups, that is shooting up very quickly.

So in the software area we see a very significant – in fact that will be the growth
engine. In the early eighties we were concerned that there weren’t too many
members in the software associations. Today the concern is the reverse, that every
day people pour in and say they would like to get started. And they are coming into
the software technology parks which is a kind of an incubator in the sense that …
(blank tape) security, air-conditioning, those things are in place. And some of them
are also giving equipment, computer equipment, terminal equipment. So in that
sense we are finding that a large number of small enterprises are coming into the
software area, and that is happening today, and the STP concept, when you look at the
number of units, is showing that.

To answer your second question. In the eighties we saw the first effort of co-
operation between government and industry beginning to happen.              This year it is
very different but last year it was quite an effort to get policies modified and when we
look at the proceedings of the meetings of our association in the lasts two decades, a
phenomenal amount of effort went into the 80s, which at that time we had no choice
to do but today we would consider it completely necessary when we had to work and
prove to the government what an inconsistent set of policies have been created
through legacy. And a lot of the leaders in the industry were just wasting their time
– if I may use that term now – trying to modify it. So, very frustrating, very
difficult. But with this liberalization process there is the mind-set to open up, we
find that things are different. So in the eighties it was very frustrating.

Current difficulties, current kinds of problems, I think are more to do with the depth
to which reform had gone in India. So you can be in the large cities and a lot of
change has taken place, there are single window plans, there are technology parks and
so on, but the core structures are also rising proportionately. So if you want to go to
smaller towns, the bureaucracy there has not changed, the reform has not reached
there. So there is still a lot of difficulty in going from one department to the other to
get a clearance for the electricity connection, and sometimes the phone connection.


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So the reform is not deep enough at this time to enable entrepreneurs living in smaller
cities to do things there, and that is the concern, because the real growth will have to
come in low cost structures so that people do not have to migrate to larger cities.

So that is still an issue, I think, and the way that we are responding to it is that, from
the further Task Force point of view, the concept of IP habitats has been proposed,
that unlike the idea that go to the suburbs of a large city and set up something, which
has happened in the last few years. But we are trying to force government to change
the legislation and not let that kind of phenomenon take place, where 10 miles out of
the centre of a city you have a hi-tech city or something. We’re saying take them out
and create a whole habitat, much like you will see Route 128, things like that in the
US, where you spread out the whole area so that housing can happen, schooling can
happen and so on. That is one very big challenge because when I look at 2008 and
we are making projections to be $50 billion, whichever way we do the calculation it is
mind-boggling and unless we change very fundamentally the way that these cities will
have to be set up, we are in for trouble. So that is one of the big challenges in front
of us which has not been fully addressed yet.

MR FRANK RYAN: In relation to high technology companies, we have had two
different results. If you break high tech firms – I am talking now about small and
medium enterprises – into hardware and software companies in Ireland, our success in
growing small and medium hardware companies has not been good; our success in
growing small and medium software companies has been very good. One of the
difficulties we have had is that in the ones where we were successful, it is very hard to
keep them in Irish ownership because it is a global industry and other companies
come in and acquire them. So after a time, what you are left with in Irish ownership
are the ones that aren’t doing so well. The ones that are doing well are actually part
of overseas companies. And this was a debate that raged for quite some time, many
years, in Ireland, and eventually we had to go back and redefine what we are trying to
do.

First of all, we had to get it through our minds that we weren’t a Germany, we were
an Ireland, and that what we had was a small platform from which you could do
certain activities, and it did not really matter at the end of the day, who actually
owned the companies that were doing it, provided the value added was taking place
within the state. So we had to go back and rethink the issue.

As regards blunders, the big blunder we made about three to four years ago, and it has
been written up in the newspapers, was that we got the supply and demand side out of
balance, where demand was starting to exceed supply. And that was a perfect
example of the left hand in government, such as the IDA and other state organizations
being out there stimulating the economy as quickly as possible, and the other hand,
people in the Department of Education being kept in the dark about what the follow
on impact was going to be for them. So when you move forward in this sort of an
integrated programme it needs to be all hands on deck amongst the state agencies.
Everybody has to know what you are trying to do, and everybody has to understand it
in a pretty simple, clear message, not a very complex statement but a simple clear
statement of what the mission statement is and what we intend to do.

DR ORNA BERRY: Basically, we have only small and medium enterprises in


                                                                                        9
Israel. Most of the revenue comes from the bigger among the medium enterprises.
Most of the investment goes to the small and the smaller among the medium sized
enterprises. So, basically, this is the picture and as I mentioned earlier, I would like
to see a few companies growing bigger. There is one pharmaceutical company that
has just grown beyond a billion dollars worth of sales and there is one
communications company that has grown beyond this. But this is very far from
having, say, three Nokias in Israel and we call it the glass-ceiling. This is the next
barrier that we have to outgrow.

In terms of failures, in high-risk investment there are always failures. And what a
failure is, it varies. A failure is a project in an incubator that when it has completed
its time in the incubator was not capable of raising venture capital. A failure is a
product that was developed and did not sell or did not complete successfully its
research and development or did not meet the pricings that were designed for it. A
failure can be a technology that was developed and nobody needed it by the time it
was developed. And a failure may be a company that the government assisted at
various times and the company eventually does not manage to grow and dissolves in
some way.

So, when we look at the hi-tech industry we are looking at the rate of growth – and it
has been compound growth of 15% a year - we are looking at the components of the
exports because a critical issue for us is the exports, since we do not have other
sources of foreign currency and we are in a deficient state, namely that we have a
negative trade balance. So the rate of exports in the hi-tech industry has grown
tremendously in the last decade. It was less than 30% and it is over 70% of the
industrial output. The level of employment, the productivity level, there are many
issues that we can look at them as parameters of success.

And at the end of the day when we are looking at the macro economical view, not at
the individual company, we are looking at the competitive edge of the country – I
think it grows; we are looking at the level of export – it grows; we are looking at the
level of employment, including employment not only of research and development
people but the general employment around this industry – it grows. So if we agree
that those are the three parameters to measure the impact of the government’s
policies, I think it is definitely on the positive side. We can always show many
failures but some of those failures it was not physical to anticipate them, and that is
part of the issue of investing in high-risk capital.

ALAN CHONG, HKU: I enjoyed very much the presentations this afternoon of all
three speakers. Each one has presented a success story of your respective countries
and also plus some failure examples. Now, Hong Kong has also it seems decided to
establish hi-tech or high value added technology. Right now, all three of you
mentioned the globalization, that the business is not localized in a particular country.
Now, Hong Kong people are very good at buying and selling. Would it be better for
Hong Kong to buy some successful companies instead of going the hard way to
develop its own? That is my first question.

My second question is a more serious one. It seems the base of all three of you, to
be successful it takes a co-ordinated effort among industry, government, as well as
academia. I come from academia, so let me ask you a question. How important are


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the contributions of academia towards the success of a hi-tech development? Or,
another way I need your advice, how could academia contribute to the development of
a successful hi-tech industry in Hong Kong more efficiently and effectively?

MR FRANK RYAN: I suppose my answer would change depending on what
industry we are talking about but today we are talking about the information
technology industry. Within that industry it is both a local and global industry, so I
think you are going to do both. I think it would be a good idea to do what Ireland
has done - what has worked for Ireland need not necessarily work in Hong Kong – but
what we have done is to try to do a bit of both: bring in some foreign direct
investment and grow our local talent as well. The growing of the local talent is very
important and maybe that leads into the second question you asked about the role of
academic institutions in this. In my view, the role of academic institutions is
absolutely of paramount importance. It is probably the success of the academic
institutions in Ireland that have enabled IDA to be successful.

When we get foreign direct investors coming into Ireland to assess the country, they
don’t really want to talk grants or primarily, in the initial stages, tax rates. What
they want to do is visit our universities, talk to the professors and talk to the students;
talk to the students about the type of projects that they are doing. And if they are
doing and studying interesting work, if the academic institutions, as I am sure they
are, here in Hong Kong up to top speed first class universities, then you will get
plenty of business.

One of the things that we have had to contend with in Europe is that within Europe
there are certain universities like Cambridge and Oxford that automatically, because
of history, attract people’s attention. And, again, we would have gone round the
world to find some Irish professors in universities overseas and brought them back,
encouraged them back to be Professor of Micro Electronics or Professor in Laser
Technology at Trinity College in Dublin, in order to create that aura that the work that
is being carried out in, say, laser technology in Dublin is top class. But if the
industry is to be successful, then the foundation of it is the educational institutions.

DR ORNA BERRY: I think that first of all academia has educated us to the level of
professionalism that we are in. Also, I think that the relationship between academia
and industry in several areas is more than mandatory. I mentioned biotechnology;
biotechnology, the level of professionalism that is required continuously is strictly
academic and the interpretation of the material through to commercialization is done
at the topmost and with many exchanges with people who take sabbaticals and go to
promote, initially, they discover and they come back to academia to continue research
work while their peers carry on the development.

It applies to many other areas and the programmes that I described earlier. And
though industry is involved in creating the elements that actual translate the energy,
the head of the project is an academician. And I have many other examples for
experimental and less experimental technologies, like the visit that I had last week
with the people from Technion I presented the Technion research in communication
and have been presenting their work in fibre optics for quite a long time - this is also
my area of expertise – and any development that they have performed, we have
immediately carried to implement in a number of industries in Israel. So I think the


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relationship, the level of education, the openness, the feedback, review, many tools
that exist between the industrial community and the academic community are of
essence.

Now, how to work it out continuously. It depends, I think. The example that they
gave and I will go back just to one institution in Israel, this institution has
reorganized, restructured its research in the matrix way. So you have the
departments with the academic evaluation of the research that is done, and the whole
research funding and the administration of intellectual property and access to it is
done through a different angle. So, basically, you have a research administration,
the vice president that heads the research administration is a known professor from
the university itself, and in addition to that you have each department in its
specialization. So this also allows us to take one trip and present the research that is
done in the institute to a wider audience because otherwise we would have to have a
department head for each one of the topics. So there are many tools to think about
and to implement in different institutions and I think that the openness on the two
sides, industry and academia, is of essence.

I can also report to you failures because sometimes there is a researcher in academia
who thinks that the sun has to turn around the world and basically he is the world and
industry has to comply to the order of suggestions that he or she is making. Too
bad! It doesn’t work. And I had to step in a couple of times to tell the people that I
am stopping the funding because the purpose is commercialization and not ego. But
there is no replacement for human judgment and if we have a programme and we set
rules, the rules are not to be rigid but basically the focus is to be set. And I think we
work it out quite well. Without a good educational system – and I think that Frank
mentioned this earlier - there is no hi-tech industry and there is no science and
technology.

MR RAJENDRA S. PAWAR: I have rather strong views on this subject, so please
take them with a pinch of salt. My experience in the last 17 years has been in setting
up what we can call perhaps a private education enterprise because half the business is
software and half is this. So I have had occasion to study higher education,
particularly in India, very closely, and it is built on the Commonwealth model so that
model is quite common in this part of the world. I think the Commonwealth model
of education has constrained higher education to become completely theoretical with
great disrespect for private enterprise and this has become a vicious circle where ideas
are thrown at industry which are impractical, industry does not find them valuable and
rejects them as meaningless, and the chasm has become deeper and deeper.

Unless higher education – I am saying only higher education because primary
education needs to be strictly within the domain of government, it is too complex a
subject, you cannot ascribe market value to primary education or school education –
but higher education is a marketable commodity and unless we subject higher
education to intense market forces, the reform will be very slow, which is exactly the
case. And this is true in most countries in the world where curricular reform in
higher education is so slow that by the time a curriculum is offered, very often the
subject is irrelevant. As I said, I am exaggerating the point a little just to make a
point.



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If you want to become a big player in hi-tech – and we are here because we are
interested to share our ideas that you do become so – then you have to remember that
buying technology will not be a solution. One professor in India used a very nice
sentence, he said: When you buy technology you get the banana-peel, the banana
has already been eaten. You have to create. You have to be a net creator of
technology.

In the industrial area, technology means something else; in the knowledge area,
technology means something completely different. In the industrial area, technology
meant dealing with materials and transforming them through machines; in the
knowledge area, the machine is the mind and the material is the bridge that comes in
thoughts and feelings. Now, I think there is a tremendous opportunity for nations to
become net producers of technology if they invest in the minds of their people, in
higher education, in a very market savvy way. So what am I saying? What I am
saying is that higher education should be subjective to intense reform. Let it me
market driven, let it survive if it gives valuable education. So we have to, in a sense,
do away with degrees.

In our Parliament, 12 years ago, one of the prominent leaders got up and said: We
have to de-link degrees from jobs. Can you imagine? And this is not only relevant
for India. At least in 23 countries where we are present in education, everywhere the
same thing is true. Higher education has an economic value. If I do a particular
course I get a job of a certain type. So the funding can easily be coming through
banks. Government need not fund higher education. That is, again, pushing the
argument to its limit.

If higher education is driven by the market place, then survival will depend on
whether there is value being created in education which means the company on the
other end finds a skill they can use today. Ask any company whether they can use a
graduate or a post-graduate who comes out of education the day he arrives. We all
have to invest a substantial amount of money and time and effort to retrain people,
which means there is a real disconnect between the needs and the supply from the
formal higher education system.

So, coming to academia, what can academia do? It is fundamental. The ideas, the
capability to create ideas is sitting in the university system. There is no question
about that. Industry lacks that. A connection as to be built. And if you are
talking of the knowledge industry, which is what we are all talking about because I
don’t think you want to go back into manufacturing, it is a retrograde step – again, I
am pushing the argument a little bit too fast – so what is the role? What could be the
interim steps? One interim step is the training industry as a concept, which means
that we have to encourage initiatives in the private sector and we have to open the
connection between the formal sector and the non-formal sector in education.

It is beginning to happen in some of the developed economies in very interesting ways
but they are devious ways, they are not direct ways. The government comes on and
says: Okay, this university and this company can work together and you do half the
education there and half the education there, terms for the credits, and get your degree
or whatever else you want at the end of the process.



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The second is that academia has to build very different kinds of connections with
industry. We still have some mechanism where students are sent to do one month or
two months of training in a company and we call it whatever alliance programme. It
has to change. Perhaps half the education should be in industry and half should be in
the classroom and it should be to and fro.

And the concept of incubators, this has been tested quite successfully. In the
university system in some universities in the world – and I am sure there are good
experiments in Israel as well – that is a very good thought and should be pushed very
hard, where there should be a stake for the university. The institute I graduated
from, IIT Delhi, is trying to do a very radical thing. Inside the campus they are now
letting people set up research cells – which is not new – but instead of charging them
things like rent, they are saying you give us part of the equity. Which, again, for
India, is very radical. It has been done in other parts of the world. And professors,
researchers, are being given part of the stake.

Such experiments, in your country, can be done I think at this point in time, perhaps
far more easily than in a country like ours, so that is why I am trying to push this idea
to say that break some of the structural bonds in which higher education is stuck.
Put the pressure on survival based on market needs. Bring industry into your
university and take your university into the industry, both in terms of stake of
professors, teachers and the university, as well as getting industry into your settings.
So that is the idea that I would like to …

CHAIRMAN: We are out of time. Sorry. I have to catch a flight. You can ask
them later. I would like to thank the speakers for really sharing their experience with
us and giving us a lot of food for thought. Thank you very much.




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