Panel: Policy Answers Needed To Boost Technology Transfer To LDCs

By Catherine Saez
Technology transfer to least-developed countries has been hampered by many factors, including the reluctance of developed country companies to engage in trade or foreign direct investment, inability to absorb technology locally, and an inefficient reporting system, according to members of a recent panel discussion.

Developed country members of the World Trade Organization (WTO) are required to provide incentives to companies and institutions to encourage technology transfer to least-developed country (LDC) members under Article 66.2 of the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS).

The issue was addressed at a 16 June panel in Geneva organised by the International Centre for Trade and Sustainable Development (ICTSD) along with the United Nations Conference on Trade and Development (UNCTAD).

ICTSD’s Pedro Roffe said that the issue of technology transfer and implementation of Article 66.2 had been under discussion for some time.

The probability of developing countries benefiting from technology transfer seems to differ depending on whether they are middle-income or low-income, according to Dominique Foray, professor at the Ecole Polytechnique Fédérale de Lausanne, who gave a presentation at the event.

There is a higher probability of middle-income countries having access to technology transfer because they are more attractive to developed countries for foreign direct investment (FDI) or trade, as they offer lower costs and better profit prospects. The absorptive capacity of those countries also makes possible the spillover, or the dissemination, of the knowledge transferred through FDI or trade, Foray said.

“There are some virtuous circles between the increasing attractiveness of these countries for FDI and the improvement of their absorptive capacities,” he said.

However, there is an increasing gap between middle-income and low-income countries, Foray said.

Developed Nations Misrepresenting Tech Transfer?

Suerie Moon, a research fellow at Harvard University, presented an analysis of country submissions to the TRIPS Council under Article 66.2, trying to measure the implications for technology transfer to LDCs. The exercise was difficult, she said, because of the lack of an agreed-upon definition of technology transfer and differences in the reporting formats of WTO members.

In the absence of an official definition of “developed countries” in the WTO, she used data from the Organisation for Economic Co-operation and Development (OECD) and the World Bank, and found that of the 30 OECD countries and 60 countries from the World Bank classification (some overlapping), only 21 countries submitted individual country reports.

She found that of the 292 programmes and policies that developed countries reported as fulfilling their Article 66.2 obligations, only 22 percent were actually targeted at LDCs and involved technology transfer. “That raises the question of to what extent have countries really fulfilled their obligations,” she said.

“Based on the evidence from country reports, the picture of developed-country compliance with 66.2 is rather weak,” Moon said, although she said she has noticed an improvement in country reports over time, especially after the 2003 TRIPS Council decision, demanding that developed country members submit annual reports on actions taken or planned to fulfill their commitments under Article 66.2.

Policy Response

As technology is mainly in the private sector, incentives from governments seem necessary. For example, Foray told Intellectual Property Watch, “When [technology transfer] accompanies FDI, it is likely that private companies do not need more incentives. A multinational company specialised in food is, for example, interested in improving the efficiency of a process to prepare and package cacao, since productivity will increase and cost will fall.” But, he added, when technology transfer is “addressing local entrepreneurial demand for technologies and oriented toward local innovations, additional incentives are needed because the transaction will not be profitable for the technology holder.”

Foray said that in the case of LDCs, the number, scale and domain of technology transfer cannot be allowed to depend only on general economic operations such as FDI, trade or infrastructure construction. Some policy response is needed, he said, such as providing additional incentives to undertake projects in which technology transfer is the main product.

Addressing local needs implies incentives, mainly through subsidies and tax credit, as the cost of technology transfer and capacity building in LDCs is very high. However, creating incentives for technology-owning firms is a clear opportunity for governments of developed countries to fulfil their obligations under Article 66.2, he said.

“TT [tech transfer] should respond to local demand,” said Foray. But so far, he said later, “most TTs have responded to multinationals’ needs, not to local demand.”

However, when TT is not part of FDI or trade, a set of problems arise relating to efficiency and effectiveness. Those difficulties could be addressed by public-private partnerships, playing a central role and compensating for institutional deficit in both the developed countries and the LDCs, Foray said. Partnerships could identify the local demand for technology, find technology holders, structure the incentives, contain costs, monitor contract obligations of each party and manage IP rights issues, he said.

LDCs’ absorptive capacity also should be increased. “Past experiences from Japan, South Korea, and Singapore show the importance of investing in human capital – education, training – and basic technology infrastructure,” Foray told Intellectual Property Watch.

Elly Kamahungye of the Mission of Uganda said that there is a lack of practical results on the ground and that the annual country reports were not providing adequate information. He advocated the creation of a toolkit with different mechanisms that would include definitions (such as technology transfer, incentives) and an evaluation of real achievements in technology transfer.

For Sergio Balibrea of the European Commission, reporting technology transfer is seen as complex. He said that targeting specific projects was important but more feed-back from projects would be useful. Most technology transfer is in the private sector, he said, and sometimes incentives are not enough to overcome uncertainties about the market.

TRIPS is not the only agreement that refers to technology transfer, said Dalindyebo Shabalala of the Center for International Environmental Law. It also arises in multilateral environmental agreements, climate change negotiations, and in bilateral free trade agreements, he said.

However, he said later, “There are insufficient institutional mechanisms, due to lack of political will and conceptual uncertainty for ensuring technology transfer. The question is whether such institutional mechanisms will be multilateral or bilateral, or even regional.”

In order to enable transfer of technology to developing countries “We need developed countries to do the patent status work and contact points, and developing countries need to generate information to enable them to make demands,” Shabalala told Intellectual Property Watch.

Catherine Saez may be reached at csaez@ip-watch.ch