The European Commission s science and knowledge service Joint Research Centre Mapping and identification of the regional potential of the Republic of Moldova Hugo Hollanders, Lina Stanionyte
Launching Smart Specialisation in Moldova Smart specialisation has become a key instrument for placebased development in the EU JRC's S3 pilot project brings this instrument to Moldova for: advancing economic reforms benefiting from good practise and knowledge transfer improving dialogue between research and business discovering competitive strengths reinforcing links with the EU partners in the Danube region Training Analysis EDP 2
S3 Pilot Project in Moldova Main project phases Preparatory Organising resources Analytical Mapping R&I priorities EDP Governance, monitoring and evaluation Preparing for implementation Organising dialogue with business sector, research community and public authorities Setting governance system and system to monitor and to assess to progress Defining organisational structure to deliver implementation 3
Mapping of economic, innovative and scientific potential of Moldova Aiming at: identifying industrial, business innovation, scientific strengths and potentials as a starting point for launching discussion among business, research, and government on the potential competitive strengths of Moldova which would lead to identification of smart specialisation priorities 4
Outline Differences between regions Mapping economic potential Mapping innovation potential Mapping scientific potential Main challenges & opportunities 5
Differences between Chisinau and other regions Chisinau: capital region, highly urbanized, lowest unemployment rate, highest average wages accounts for 60% of employment (excluding selfemployed ), 73% of turnover, 68% of wages North, Centre, South, Gagauzia: 60%-80% of population lives in rural areas, above average unemployment rates, below average wages North and Centre each account for about 15% of employment, 11% of turnover, 12.5% of wages South and Gagauzia each account for about 5% of employment, 2.5% of turnover, 3.5% of wages 6
Different economic structures Gagauzia South Centre North Chisinau Moldova 6% 6% 6% 5% 3% 4% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% A Agriculture, forestry and fishing B Mining and quarrying C Manufacturing D Electricity, gas, steam and air conditioning supply E Water supply; sewerage; waste management and remediation activities F Construction G Wholesale and retail trade; repair of motor vehicles and motorcycles H Transporting and storage I Accommodation and food service activities J Information and communication K Financial and insurance activities L Real estate activities M Professional, scientific and technical activities N Administrative and support service activities O Public administration and defence; compulsory social security P Education Q Human health and social work activities R Arts, entertainment and recreation 7
Different specialisation patterns Q P O N M R Chisinau S3.5 A 2.5 1.5 0.5-0.5 L K J B I C D E F G H A: Agriculture, forestry and fishing; B: Mining and quarrying; C: Manufacturing; D: Electricity, gas, steam and air conditioning supply; E: Water supply; sewerage; waste management and remediation activities; F: Construction; G: Wholesale and retail trade; repair of motor vehicles and motorcycles; H: Transporting and storage; I: Accommodation and food service activities; J: Information and communication; K: Financial and insurance activities; L: Real estate activities; M: Professional, scientific and technical activities; N: Administrative and support service activities; O: Public administration and defence; compulsory social security; P: Education; Q: Human health and social work activities; R: Arts, entertainment and recreation; S: Other services activities Q P O R North S3.5 3 2.5 2 1.5 1 0.5 0 A B C D E F Q P O R Centre S3.5 3 2.5 2 1.5 1 0.5 0 A B C D E F Q P O R South S3.5 3 2.5 2 1.5 1 0.5 0 A B C D E F Q P O R Gagauzia S3.5 3 2.5 2 1.5 1 0.5 0 A B C D E F N G N G N G N G M H M H M H M H L K J I L K J I L K J I L K J I 8
Methodology The mapping assesses three main dimensions for smart specialisation and innovation policy: economic, innovative and scientific potential For mapping economic potential, regional data have been used In absence of regional data on scientific and innovation potential, mostly national data have been used 9
Mapping economic potential To assess economic potential the mapping identifies industries with both proven strengths and a potential to drive economic transformation Using 3-digit industry level data, the economic mapping identifies industries where regions have a critical mass of activities and specialisation for employment and turnover and where wages are sufficiently high Using 4-digit industry level data, a cluster analysis using the definitions from the European Cluster Observatory data and methodology was added to verify the mapping of economic potential 10
Mapping innovation potential For the mapping of the innovative potential ideally innovation survey data should be used As innovation survey data were not available, the following available indicators have been used: Geographical distribution of national inventors Geographical distribution of applicants Patent applications for 35 technology fields Share of firms that introduced a new product/service Share of firms whose new product/service is also new to the main market Share of firms that introduced a process innovation Share of firms that spend on R&D Share of firms using technology licensed from foreign companies 11
Mapping scientific potential The mapping of the scientific potential uses a descriptive analysis of the following indicators linking these to the results of the economic mapping: Distribution of scientific publications by domain Researchers by R&D activity Share of PhD holders by R&D activity Admissions, students, and graduates: secondary vocational education / post-secondary vocational education / tertiary education Graduates tertiary education, by cycle and fields of study Number of education institutions Specialisation of: post-secondary vocational education institutions / tertiary education institutions 12
Economic mapping: selection of industries An industry is selected if it fulfills at least two of the following three selection criteria: For 1) Employment and 2) Turnover, an industry should have a minimum critical mass (size) and degree of specialisation: Size: industry share in region above threshold (w%) Specialisation: ratio between industry share in region and industry share in country (Location quotient) above threshold (x) For 3) Wages, average wages per employed person should be above y% of the average wage level in the region and above z% of the average wage level of that industry in the country 13
Two-step procedure Step 1: all industries will be included. An industry will be selected, either at the NACE two-digit or three-digit level, if at least two of the three activities pass their thresholds Given the importance of the Manufacturing sector for the economy, but its relatively small share in the economy, the thresholds used in Step 1 are biased against selecting industries in Manufacturing. A second step is therefore introduced, which allows the selection of relevant manufacturing industries: Step 2: only Manufacturing industries will be included. The same thresholds will be used for all regions 14
Economic mapping: thresholds Employment & Turnover Wages All industries Manufacturing Relative to average wages in Size w% LQ x Size w% LQ Chisinau 1.5% 1.25 2% 1.5 North Centre South Gagauzia 2% 1.5 2% 1.5 x each industry in the country y% At least as high (y=100%) At least as high as 90% (y=90%) all industries in each region z% At least 10% higher (z=110%) At least 10% higher (z=110%) 15
Selection of industries: Chisinau 16 Employment Turnover Wages Rel. to Size LQ Size LQ country Rel. to region Step 1 - All industries G464 2.15% 1.547 5.46% 1.308 104 97 H52 1.52% 1.313 1.94% 1.216 114 144 H522 1.44% 1.415 1.83% 1.260 111 147 J 6.58% 1.575 5.46% 1.358 104 201 J61 2.11% 1.560 3.56% 1.363 105 233 J612 0.44% 1.620 2.00% 1.371 102 425 J62 1.96% 1.597 0.93% 1.347 102 226 K 1.12% 1.414 3.53% 1.344 111 142 K662 0.27% 1.551 2.59% 1.369 105 127 M 4.58% 1.485 1.67% 1.261 105 119 P 3.98% 1.475 0.68% 1.253 103 121 P854 3.23% 1.489 0.55% 1.252 101 129 Step 2 - Manufacturing C17 2.39% 1.666 3.46% 1.718 108 85 C172 2.38% 1.665 3.46% 1.718 108 85 C20 3.42% 1.638 5.46% 1.570 112 149 C203 2.40% 1.874 4.71% 1.700 102 172 C231 2.50% 1.634 5.20% 1.648 110 184 C26 4.70% 1.624 3.01% 1.743 109 112 C265 3.84% 1.568 2.34% 1.727 112 115 C28 3.64% 1.546 2.82% 1.540 106 123 C31 6.98% 1.558 4.92% 1.579 108 75
Chisinau: Economic priority areas ICT industry C26 Manufacture of computer, electronic and optical products (C265 Manufacture of instruments and appliances for measuring, testing and navigation; watches and clocks) J61 Telecommunications (J612 Wireless telecommunications activities) J62 Computer programming, consultancy and related activities C17 Manufacture of paper and paper products C20 Manufacture of chemicals and chemical products C231 Manufacture of glass and glass products C28 Manufacture of machinery and equipment (not elsewhere classified) C31 Manufacture of furniture H52 Warehousing and support activities for transportation (H522 Support activities for transportation) G464 Wholesale of household goods 17
North: Economic priority areas Agriculture and Food processing A01 Crop and animal production, hunting and related service activities A011 Growing of non-perennial crops C10 Manufacture of food products C104 Manufacture of vegetable and animal oils and fats C105 Manufacture of dairy products C108 Manufacture of other food products C235 Manufacture of cement, lime and plaster C27 Manufacture of electrical equipment C273 Manufacture of wiring and wiring devices D Electricity, gas, steam and air conditioning supply H49 Land transport and transport via pipelines 18
Centre: Economic priority areas Agriculture and Food processing A01 Crop and animal production, hunting and related service activities A014 Animal production A02 Forestry and logging A021 Silviculture and other forestry activities C101 Processing and preserving of meat and production of meat products Textiles C13 Manufacture of textiles C139 Manufacture of other textiles C143 Manufacture of knitted and crocheted apparel C152 Manufacture of footwear C21 Manufacture of basic pharmaceutical products and pharmaceutical preparations C212 Manufacture of pharmaceutical preparations C23 Manufacture of other non-metallic mineral products C235 Manufacture of cement, lime and plaster 19
South: Economic priority areas Agriculture and Food processing A01 Crop and animal production, hunting and related service activities A011 Growing of non-perennial crops C106 Manufacture of grain mill products, starches and starch products C107 Manufacture of bakery and farinaceous products C11 Manufacture of beverages D352 Manufacture of gas; distribution of gaseous fuels through mains G471 Retail sale in non-specialised stores 20
Gagauzia: Economic priority areas Agriculture and Food processing A01 Crop and animal production, hunting and related service activities A011 Growing of non-perennial crops C106 Manufacture of grain mill products, starches and starch products C11 Manufacture of beverages C19 Manufacture of coke and refined petroleum products C192 Manufacture of refined petroleum products C231 Manufacture of glass and glass products D352 Manufacture of gas; distribution of gaseous fuels through mains G475 Retail sale of other household equipment in specialised stores 21
Limitations of existing classifications Current classifications built upon the observation of economic activities that exist at the time Current classifications built upon categories of activities that are meant to be homogeneous and mutually exclusive, and therefore cannot constitute appropriate tools to identify and classify new activities that emerge from the combination and cross-fertilization of different types of activities and sectors Emerging industries result from cross-sector spillovers between related but distinct sectors that transform, evolve and combine or sometimes even merge into new industries Emerging industries are seen as the establishment of an entirely new industrial value chain, or the reconfiguration of an existing one, driven by a disruptive idea (or convergence of ideas), leading to turning these ideas/opportunities into new products/services with higher added value 22
Clusters and emerging industries The European Cluster Observatory (ECO) uses 51 traded cluster categories using combinations of NACE 4- digit industries These clusters were originally defined for the US by Delgado et al. (2014) using data at the 6-digit industry level (NAICS) ECO has transferred the US definitions using a concordance table between NAICS and NACE with the restriction that data for EU Member States is available for NACE 4-digit industries only The European Cluster Observatory has identified 10 (cross-sectoral) emerging industries using a combination of methods as explained in Ketels et al. (2014) Emerging industries are defined as industrial sectors which are in early stage development and are characterised by high growth rates and market potential 23
Clusters (as defined in ECO) Chisinau: Business Services, including J62 Computer programming, consultancy and related activities (ICT) Education and Knowledge Creation Marketing, Design, and Publishing North: Apparel Lighting and Electrical Equipment, including C27 Manufacture of electrical equipment Food Processing and Manufacturing almost passed the specialisation threshold and, given its size, is added to the list of clusters (Agriculture and Food processing) 24
Clusters (as defined in ECO) Centre: Livestock Processing, including C101 Processing and preserving of meat and production of meat (Agriculture and Food processing) Textile Manufacturing (Textiles) South: Environmental Services (Renewable energy) Food Processing and Manufacturing, including several industries identified as Agriculture and Food processing Gagauzia: Apparel Environmental Services (Renewable energy) Food Processing and Manufacturing, including several industries identified as Agriculture and Food processing Hospitality and Tourism 25
Emerging industries (as defined in ECO) Chisinau: Advanced Packaging Creative Industries Digital Industries Experience Industries North: Medical Devices Mobility Technologies For the other regions there one emerging industry of sufficient size or degree of specialisation 26
Preliminary economic priority areas Industries Agriculture and Food processing Cement, lime and plaster Electrical equipment Wiring and wiring devices Electricity, gas, steam and air conditioning supply Clusters: Apparel Lighting and Electrical Equipment Food Processing and Manufacturing Emerging industries: Mobility Technologies Industries 27 North South Agriculture and Food processing Gas; distribution of gaseous fuels Clusters: Environmental Services Food Processing and Manufacturing Gagauzia Industries Agriculture and Food processing Coke and refined petroleum products Refined petroleum products Glass and glass products Gas; distribution of gaseous fuels Clusters Apparel Environmental Services Food Processing and Manufacturing Industries Industries ICT Centre Agriculture and Food processing Forestry and logging Textiles Basic pharmaceutical products and pharmaceutical preparations Other non-metallic mineral products Cement, lime and plaster Clusters Livestock Processing Textile Manufacturing Chisinau Paper and paper products Chemicals and chemical products Machinery and equipment Furniture Clusters Business services Marketing, Design and Publishing Emerging industries Advanced Packaging Creative Industries Digital Industries Experience Industries
Mapping innovation potential: innovation data No proper innovation survey Data from the World Bank s Enterprise Survey show that the share of firms in Moldova involved in innovation is comparable to that of other countries in Europe and Central Asia, but there are regional differences Moldova Central North South South East Firms that introduced a new product or service (%) 27.7 26.4 32.6 22.1 66.7 Firms whose new product or service is also new to the main 78.0 77.8 77.6 69.6 100 market (%) Firms that introduced a process innovation (%) 27.2 26.0 31.2 23.3 75.7 Firms that spend on R&D (%) 9.9 10.3 10.6 2.8 9.9 Firms using technology licensed from foreign companies (%) (manufacturing firms only) 19.3 15.3 40.8 2.3 45.0 28
Mapping innovation potential: patent data High patent activities in Agricultural and Food related patent fields in both national and international patent applications, match the results of the economic mapping for those regions having an economic specialisation in Agriculture and Food processing National patent data International patent data Top-patent fields: Horticulture; cultivation of vegetables, flowers, etc. Wine; other alcoholic beverages; preparation thereof Foods, foodstuffs, or nonalcoholic beverages Planting; sowing; fertilizing New plants or processes for obtaining them 29 Top-5 technology fields with most patent applications: Medical technology Pharmaceuticals Food chemistry Other special machines Engines, pumps, and turbines
Mapping scientific potential: publications National publications Top scientific domains: Justice Medicine Economy Philology Pedagogy History Physics and Mathematics Most of these domains do not seem very relevant for the preliminary priority areas identified in the economic mapping International publications Largest domain is Physics and Astronomy, followed by Materials Science, Engineering, Chemistry, Mathematics and Medicine The output of international publications is more relevant for the preliminary priority domains identified in the economic mapping with relatively more publications in e.g. Agricultural and Biological Sciences, Energy, and Environmental Sciences 30
Preliminary priority areas: Chisinau Industries ICT: Computer, electronic and optical products; Telecommunications; Computer programming, consultancy and related activities International publications in Computer science Paper and paper products Chemicals and chemical products International publications in Chemistry, Chemical engineering Machinery and equipment Furniture Clusters Business services Marketing, Design and Publishing Emerging industries Advanced Packaging Creative Industries Digital Industries Experience Industries 31
Preliminary priority areas: North Industries Agriculture and Food processing: Crop and animal production, hunting and related service activities; Growing of non-perennial crops; Manufacture of food products (Vegetable and animal oils and fats; Dairy products; Other food products) International publications in Agricultural and biological sciences International patents in Food chemistry; National patents in Wine, Foods, Planting 32 Cement, lime and plaster Electrical equipment Wiring and wiring devices Electricity, gas, steam and air conditioning supply Clusters Apparel Lighting and Electrical Equipment Food Processing and Manufacturing Emerging industries Mobility Technologies
Preliminary priority areas: Centre 33 Industries Agriculture and Food processing: Crop and animal production, hunting and related service activities; Animal production; Processing and preserving of meat and production of meat products International publications in Agricultural and biological sciences Forestry and logging Textiles: Manufacture of textiles; Other textiles; Knitted and crocheted apparel; Footwear Basic pharmaceutical products and pharmaceutical preparations International patents: Pharmaceuticals Other non-metallic mineral products Cement, lime and plaster Clusters Livestock Processing Textile Manufacturing
Preliminary priority areas: South Industries Agriculture and Food processing: Crop and animal production, hunting and related service activities; Growing of non-perennial crops; Manufacture of grain mill products, starches and starch products; Manufacture of bakery and farinaceous products; Manufacture of beverages International publications in Agricultural and biological sciences International patents: Food chemistry ; National patents: Wine, Foods, Planting Gas; distribution of gaseous fuels 34 Clusters Environmental Services Food Processing and Manufacturing
Preliminary priority areas: Gagauzia 35 Clusters Apparel Industries Environmental Services Agriculture and Food processing: Crop and animal production, hunting and related service activities; Growing of non-perennial crops; Manufacture of grain mill products, starches and starch products; Manufacture of beverages International publications in Agricultural and biological sciences International patents: Food chemistry; National patents: Wine, Foods, Planting Coke and refined petroleum products Refined petroleum products Glass and glass products Gas; distribution of gaseous fuels Food Processing and Manufacturing
Conclusions & Recommendations The mapping exercise has relied on economic data for 2014-2016. Due to a reclassification of the statistical definitions of industrial activities, data before 2014 cannot be combined with data from 2014 and after. Longer time series will be needed, e.g. at least for five years, to be able to include growth as an additional selection criterion in the mapping analysis For the mapping of innovation potential it is essential to obtain more detailed data measuring innovation activities. The recommendation is to implement an innovation survey at the firm level, using the questions from the Community Innovation Survey which is used by all EU Member States and most other European countries For the mapping of scientific potential available data seem to be sufficient. What would be needed is to link the output of the national science system to the demands of domestic industry, to identify if science delivers the new knowledge needed by Moldovan firms to increase their competitiveness 36
Priority domains Chisinau ICT is the most important economic priority domain Confirmed by the cluster analysis using definitions from the European Cluster Observatory High publication shares in Computer science Other areas of importance include: Manufacture of paper and paper products Manufacture of chemicals and chemical products High publication shares in Chemistry and Chemical engineering Manufacture of glass and glass products Manufacture of machinery and equipment not elsewhere classified Manufacture of furniture 37
Priority domains North, Centre, South, Gagauzia Comparable priority areas for smart specialization have been identified for these four regions Agriculture and Food processing is important for all regions High shares of patent activities in Food chemistry, Wine, Foods and Planting High publication shares in Agricultural and Biological Sciences Textiles, Apparel, Footwear and Leather (TAFL) is a priority areas in several of these regions The cluster analysis has confirmed several of these priority areas, e.g. Food processing for North, South and Gagauzia, Livestock processing Centre 38